Good afternoon, ladies and gentlemen, and welcome to Masimo's First Quarter 2012 Earnings Conference Call. The company's press release is available at www.masimo.com [Operator Instructions] I am pleased to introduce Sheree Aronson, Masimo's Vice President of Investor Relations.

Hello, everyone. Joining me today are Chairman and CEO, Joe Kiani; and Executive Vice President of Finance and CFO, Mark de Raad. This call will contain forward-looking statements which reflect Masimo's best current judgment. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Risk factors that could cause our actual results to differ materially from our projections and forecasts are discussed in detail in our SEC filings, including our most recent Form 10-K. You will find these in the Investors section of our website. With that, I'll pass the call to Joe Kiani.

Good afternoon, and thank you for joining us for Masimo's quarterly review update. Before I get started with our comments on the quarter, I wanted to share with you the importance of today's date, which is the 23rd anniversary of our incorporation. From our very humble beginnings in 1989, I believe we have truly revolutionized pulse oximetry, making it a clinically useful tool and a foul-weather friend and, in so doing, provided the best technology in the world to both our hospital customers and the patients they serve. Of course, we remain focused on expanding the pulse oximetry business, as well as continuing to push for new equally revolutionary rainbow parameters. We still have much to accomplish, but we are proud on what we have delivered over the past 23 years. So if we sound chipper this afternoon, this is part of the reason. In Q1 2012, we achieved 11% growth in product revenue compared to Q1 2011. We have double-digit growth in both our direct U.S. acute care and international business coupled with a 14% rise in worldwide rainbow sales. We shipped 33,300 new Masimo SET and Masimo rainbow SET Pulse Oximeters and Pulse CO-Oximeters in the quarter and now estimate our worldwide installed base for the first time ever to be just over 1 million units, representing 13% year-over-year growth and obviously achieving a significant Masimo milestone. Other major developments include: the debut of our rainbow and clinician-centric Radical-7 bedside device, which we sometimes call the 2012 Radical-7; the addition of GE, the world's second largest patient monitor provider, to the ranks of OEM partners, converting the Masimo rainbow SET; the acquisition of the assets of Spire Semiconductor, a foundry for custom LEDs and photodetectors; the completion of our 3 million share buyback program; a regulatory clearance and commercial launch of Pronto-7 in the U.S. and China and South Korea; and the introduction of novel health care initiatives called "Better Care," designed to demonstrate SpHb's clinicals and cost-saving benefits to hospitals. In a few minutes, I'll talk more about how each of these is advancing our growth strategy. But first, Mark will review the first quarter financial performance. Mark?

Thank you, Joe, and good afternoon, everyone. Masimo's first quarter 2012 total revenue rose 6% to $119 million versus $113 million in the year-ago period. We achieved this growth despite a 39% decline in royalty revenue from $11.5 million to $7 million, reflecting the reduction in the Covidien royalty rate from 13% to 7.75% effective March 15, 2011. First quarter product revenue rose 11% to $112.2 million as recent installed base growth translated into higher consumable sales to hospitals. A rise in Pronto-7 and consumable sales drove rainbow sales higher, up 14% in the first quarter to $8.5 million. In addition, the March 12 acquisition of the assets of Spire Semiconductor, now known as Masimo Semiconductor, added approximately $300,000 to product revenue in the quarter. Our worldwide end-user or direct business, which includes sales through just-in-time distributors, grew 12% in the quarter to $95.9 million versus $85.3 million one year ago. In total, our direct business represented 85% of product revenue versus 84% in the year-ago quarter. First quarter 2012 OEM sales were virtually unchanged at $16.3 million from -- excuse me, from $16.2 million in the same prior last year period. By geography, total U.S. product revenue rose 12% to $80.8 million in the first quarter compared to $72.4 million in the first quarter of 2011. This growth reflects primarily strong U.S. care sensor sales, coupled with U.S. OEM sales increases and higher sales to physician offices following our Q1 launch of Pronto-7. Product revenue outside the U.S. totaled $31.5 million, up 8% compared to the first quarter last year. Excluding OEM revenue, our direct o-U.S. product revenue grew 15%, with higher sales in both Europe and Asia. This growth was offset by a 15% decline in our o-U.S. OEM business. International product revenue represented approximately 28% of total…

Thanks, Mark. Our performance in the quarter showed the positive momentum that continues to form behind the Masimo growth strategy, which is to build a strong, proprietary, recurring revenue franchise with breakthrough products that solve unsolvable clinical problems, advance the standard of care and lower health care costs. The foundation of this strategy is our core Signal Extraction Technology Pulse Oximetry business, which again, this quarter, posted revenue and installed base growth rate significantly above competitor and market levels, giving us confidence that our global market presence is hitting new highs. The accuracy, reliability and cost-effectiveness of our Masimo SET pulse oximetry technology, along with our efficient and intuitive Patient SafetyNet solution for the general ward, are helping us to strengthen existing hospital customer relationships and win new businesses. This was apparent in the brisk pace of long-term sensor contract bookings with new prestigious hospitals in the first quarter, which were up significantly from one year ago and followed the record-setting booking levels we delivered in the fourth quarter of 2011. The prime motivator for hospitals to choose Masimo over competing systems is to be at the standard-of-care level for pulse oximetry monitoring and the ability to access our upgradable rainbow SET platform, the first and only technology to noninvasively and continuously monitor total hemoglobin, carbon monoxide, methemoglobin, fluids responsiveness and respiration rate. Consequently, an increasing number of our customer relationships now include deployment of one or more rainbow measurements. While rainbow grew less than we had expected, the slower growth was not due to SpHb, which grew 70%, or to RAM, which more than doubled compared to Q1 2011. Rather, it was due to softer sales of SpCO and SpMet, which is predominantly purchased by EMS customers. Unfortunately, ever since the 2008 great recession, municipalities have not had the…

[Operator Instructions] Your first question comes from the line of Bill Quirk with Piper Jaffray.

First off -- first question for Mark. Really nice gross margin from here over the last couple of quarters. Mark, you mentioned that a fair amount of that was mix. Can you give us a little extra color here? Obviously, there's fewer drivers, and you've been pushing a few initiatives. So can you walk us though a little bit, I guess mix of lower drivers versus some of the new initiatives.

Sure. Let me start by saying that the impact of the new initiatives was still very, very minor in the first quarter. As you'll recall, Bill, we spoke about those improvements throughout the second half of last year. And in fact, we're expecting those improvements to really become more visible towards the second half of this coming year. So not a lot of the current quarter improvements were related to that. In terms of the mix issue, that simply is a reflection of the amount of total revenues as a percent -- the total amount of sensor revenues as a percent of the total revenues. We obviously make certain assumptions when we're building our plans for the year. And in this particular quarter, we actually did very much -- a much higher percent of our total revenues through the actual sensor -- adhesive sensors than some of the other product lines that we had assumed. And because those -- that specific product line actually does, in general, come in at a higher gross margin, that had the positive impact that we referred to in the comments today.

And then secondly, just thinking about the competition, they noted a couple of days ago, they felt that the market share was starting to stabilize within the space. And just coincidentally, looking at your driver's numbers which are obviously off year-over-year, any truth to that? Where do you guys think you are in terms of share within the pulse oximetry market?

Well, Bill, I don't think there's -- I don't think that's accurate. And I think we saw the statements, and I think if you look at it carefully, they said that their pulse ox business really was flat. So if you remember, we generally used to be shipping 25,000 to 30,000 drivers a quarter. And the past year or two has been moving up to be a little bit over that, maybe more like 30,000 to 40,000 drivers. And last year, it was a year where we did a lot of installations this time with places like Kaiser and Banner, which were 2 major installations. But no. In fact, to the point I made earlier, we've been growing at this $40 million to $60 million for several years, and that's been the organic growth mainly out of the pulse oximetry business, and it continues to grow that way. And in Q1, we converted I think almost a record for the company for the first quarter. Maybe it was the second or third biggest ever in terms of new bookings for the quarter, new customers. So I don't think that's accurate.

Okay. No, good to hear. And then lastly for me, we're starting to see any traction, I realize it's still early days, but we're starting to see any traction on the bulk $30 hemoglobin sensors, Joe?

Well, as I mentioned, hemoglobin grew more than 70% this quarter, and a lot of that was due to Pronto-7 shipping, as well as increase in adhesive sensors. But what I can tell you is that I personally have had many conversations recently with CEOs or COOs or CFOs and CMOs of different hospitals, and there's a lot of excitement about hemoglobin, more than I have sensed before. We hope those will materialize in major conversions and the kind of explosion we like to see to fall in that steep part of the S-curve.

Your next question comes from the line of Gregory Hertz with Citi.

Just one quick one. Obviously, the results out of the U.S. were solid, but it was certainly one of the weaker quarters for o-U.S. Sales. And you mentioned that the OEM channel was weaker in the o-U.S. versus U.S. I'm just wondering if you could maybe provide a little bit more detail there on the direct channel, as well as -- were there any particular areas within the o-U.S. where things were soft? Were there any initiatives there? Did you maybe pull out of any particular countries?

What actually threw it off a little bit compared to last year was a lack of repeat of a big one-time cash order we got in Canada last year that didn't happen this year. And most of the world, that's not our model, these one-time cash deals. We usually place devices for sensor contracts. So if you take that out, actually we had really robust growth, similar to the numbers that we'd seen in the past.

Okay, that helps. And just -- also, just another question as it relates to X-Cal. I'm just wondering if you've noticed any reduction in reprocess sensors use within your customer base to date. And also, I just want to make sure that I have a proper understanding of how the technology works and -- does it require a software upgrade to the drivers as well to activate the technology and the sensor? And where does that process stand if that's the case as far as upgrading that?

Well, this is a topic that I don't want to get too deep into because it can be misconstrued. I can just tell you that we've planned this for several years, and no, there will be no software upgrade necessary. And the purpose of this whole X-Cal is to protect the system integrity of our solutions and minimize the copycat products that are being sold mostly into international markets. But it will also impact the processors, which we're not too upset about, given the testing we've done with reprocessed sensors and seeing how poorly they behave. I mentioned, I think, on the last call that we brought in 1,000 reprocessed sensors and found, I think, if I'm not mistaken, about 90% of them not meeting our functional test requirements.

Your next question comes from the line of Joanne Wuensch with BMO Capital Markets.

You noted that X-Cal weighed on gross margins by about 100 basis points. Is that sort of a consistent level? Or is this sort of a balance of volume mix of that -- that damage should sort of be minimized as the quarters go by?

Joanne, in general, that number, as a percent of total gross margin, will obviously move as the total amount of sensor ship volumes increase in the future. The good news is that the cost that we've seen so far, relative to this new technology, we believe today are essentially at the peak of their cost. We will be working over the next year, as we always do, to continue driving costs out of that incremental component related to X-Cal. So over time, we expect it to be a smaller impact as a percent of total. But if you look over the next year or so, that's probably a pretty good gauge, except for whatever may happen to volume. As volume increases, there's a potential that, that -- the overall impact will actually be larger.

Okay. And then Covidien purchased during the quarter Oridion. And my memory is that you guys either had or have some kind of agreement with them. Is that something that you can comment on?

Sure. Yes, we do have an agreement with Oridion. They do have our technology in their products. And we also connect their device to Patient SafetyNet. We don't believe -- from our perspective, there's no reason for us to not continue that, but we'll need to see how the company behaves after the integration.

Okay. And then my final question is that -- my memory was that your Pronto-7 into the physician's office was going to require some type of agreement, a distributor to help do that, that you didn't have a sales call point? Has that changed? Or is there some type of an announcement that would lead to a contribution from physician offices this quarter?

No, that has not changed. We still would like to have distribution help us with reaching over 200,000 physicians' offices in the country. We clearly can't cover them with 20 or even 40 or 50 sales people. So we expect to forge a relationship like that. But it also doesn't mean the day that we sign up with them is the day that they'll get the product and run with it. Because we also want to make sure -- with our own sales force, we have answered a lot of questions that are going to come up so that the larger sales force who will be carrying thousands of products will have a smoother sales cycle.

Your next question comes from the line of Brian Weinstein with William Blair. Brian Weinstein - William Blair & Company L.L.C., Research Division: A question -- I think you answered the one on the o-U.S. OEM, but the revenue growth or lack thereof in the U.S. with OEM, that's been a kind of an ongoing situation for the last several quarters, and I think you reported it roughly flat this quarter. Can you just give us some explanation, just kind of what's going on with the revenues through the OEM channel? Because I don't think I'm completely clear on what the rationale is behind the trend there.

Well, I think, Brian, as -- last year, actually, as you'll recall, we typically were talking about sequential year-over-year declines as we were seeing some of the OEMs continue to transition away from the reselling of the consumables as part of their business model. That trend changed a little bit, depending upon whether or not you're talking U.S. or o-U.S. On the U.S side, we actually saw that decline begin to mitigate a little bit more, whereas on the o-U.S in the first quarter at least, we saw a continuation of it, and that helped contribute to the lower year-over-year o-U.S OEM revenues that we mentioned before. The good news really is that I think, for the first time in a long time, at least on a sequential basis, we've actually seen sort of a flattening of that decline. And we're actually hopeful that as we look forward over the next 3 quarters this year, that we've seen the bottom and that, from this point forward, we should be beginning to see a slight upward tick in total OEM revenues. So that year-over-year decline we were experiencing last year we don't think is going to reappear this year. Brian Weinstein - William Blair & Company L.L.C., Research Division: Okay. And then if you can comment at all on what the pricing environment looks like on the base of that technology at this point. Are you experiencing anything other than kind of the typical kind of -- down a couple of percentage points year-over-year and what your outlook is for pricing going forward?

In general, I would say yes. We've not seen any dramatic change relative to this quarter versus, say, what we saw in 2011. Having said that, it still is a very competitive pricing environment, but not any more dramatically than what we've seen over the last 3 or 4 quarters. Looking forward, as you know, Brian, we always make some assumptions as to the overall direction of the pricing environment. And historically, for us, that has meant, on average, modeling ASP reductions of somewhere in the range of about 3% to 5% per year. That's what we've assumed for this year, and there's nothing in the first quarter that we've seen that would change that as we look through the rest of this fiscal year.

Your next question comes from the line of Matt Dolan with Roth Capital Partners.

This is Chris Lewis on the line for Matt. First question is around your rainbow guidance for the year. You came in at $8.5 million. I know there's some seasonality here at the beginning of the year, but it still leaves you a little work to do to get to the $45 million that you've guided to. Just wanting to know how you see rainbow sales tracking throughout the year and what you need to do to get to that $45 million?

Well, as we mentioned in -- or Joe mentioned in the prepared remarks, the $8.5 million of the first quarter was a little bit lighter than what we had hoped for internally. Having said that, our planning all along assumed that the first quarter of the year would be the lowest quarterly revenue for rainbow. And even though rainbow in general has only been around for a couple of years now, we certainly believe that the seasonal pattern that seems to be developing is that the first quarter of every fiscal year seems to be the low point for our total rainbow revenues. So to your point, we do expect sequential increases in rainbow revenue, essentially for each quarter as we look through the rest of 2012. And if we're able to achieve that, then we certainly think the $45 million that we've provided as guidance at the start of the year is certainly still achievable. And there's no reason sitting here today why we don't think that is achievable, especially in light of the distribution agreement that Joe was just mentioning.

And in your last earnings call, you had mentioned that you had a long -- a long-time OEM partner had a large drop in the revenues and driver numbers that you weren't anticipating. Can you provide an update on that and what you've seen thus far from that OEM partner for this year?

Sure. Part of what made the OEM numbers look better in the U.S., I believe, is that particular OEM coming back. And we're still investigating what is going on. And it's not an issue that we're done with, but we'll keep you posted.

Great. And then my last question, can you just provide any more color around the Halo FDA status and what type of feedback you're getting from your o-U.S. customers?

With FDA, unfortunately we don't know when we're going to get clearance. It's been, I think, now, a year since we submitted Halo. So it's kind of getting on the long side of things. But that had become typical these years. As far as feedback we're getting internationally, we've had some notable customers using Halo, and we're -- one of them, in particular, in Singapore, we're getting a lot of great feedback on how they're using it to improve their process of care, both in identifying patients at risk, as well as using Halo to know how to best spread out the resources. For example, you don't want one nurse to have several high-Halo number patients. If you can, you want to spread the high-Halo patients evenly amongst the nurses. So we're quite excited about Halo, and we can't wait to get FDA clearance because we think the U.S. market is probably most ripe for something like Halo and there's some pent-up demand for us. But we're going to have to wait.

Your next question comes from the line of Larry Keusch with Raymond James. Lawrence S. Keusch - Raymond James & Associates, Inc., Research Division: Joe or Mark, I'm wondering if you could -- and this is sort of touched on earlier relative to the drivers and the OEMs. But you had targeted 150,000 for the year, and I just wanted to check in and see how you're feeling about that target. And if it is still intact, what causes the acceleration from the levels that we saw in the first quarter?

Larry, the answer is yes. We still believe the number is intact. We believe -- as you recall, we said approximately 70,000 was our best estimate for the first half of the year, followed by 80,000 in the second half of the year. Looking at our activities so far this quarter, we think we're in a good position to be able to support that 70,000 number for the first half of the year. And the acceleration in the second half of the year, to your question, is actually primarily related to an acceleration of OEM rainbow board adoption. Again, speaking to some of the comments that Joe mentioned earlier, as we begin to see some of these additional OEM partners begin to actually deliver our technology within their new product cycles. So still feeling very good about the 150, 000 number. Lawrence S. Keusch - Raymond James & Associates, Inc., Research Division: Okay, great. And then relative to the gross margin, I think if my memory serves me correctly, you had 100 basis points sort of one-time in the fourth quarter. So you kind of sequentially went up 40 basis points and certainly, I understand the impact of Spire in there. I guess my question is, with a full quarter, Spire coming in on the second quarter, I think you mentioned it's only in on 3 weeks in the first quarter, how should we think about the sequential change in that product gross margin with the Spire lower gross margin now in the mix?

Good question. You're correct. We obviously indicated with the numbers today that we had about 3/10 or a 30-basis-point impact for this third quarter. When we provided the annual guidance for the year, there was actually about a 50-basis-point reduction in our overall gross margin. If you do the math, of course that suggests that our best estimate right now is that we will probably be looking at a reduction anywhere in the range of about 6/10 to maybe 7/10 of actual -- or 60, 70 basis points on a future-quarter basis. So in other words, another sequential 30 to 40 basis points is what we would expect as we look forward to Q2, Q3 and Q4. And when you add that collectively, you get very close to the 50 basis point that we assumed in our guidance back on March 12. Lawrence S. Keusch - Raymond James & Associates, Inc., Research Division: Okay. So does that imply that, that gross margin on a sequential basis should be flat to up? Is that the right way to think about it?

Well, as I said today, we haven't changed our overall annual product gross margin guidance number, which, as you recall, in March, we reset that from 65 to 64.5. So we still are looking at over the next couple of quarters, even though there will be a higher negative impact as a result of the Masimo Semiconductor activity, there were other gross margin improvements that we expect and still expect to be seen over the next 3 quarters that should offset that negative impact so that the annual guidance that we suggested earlier is still appropriate. Lawrence S. Keusch - Raymond James & Associates, Inc., Research Division: Okay, I understand. And then one last one for you guys. And again, maybe for Joe or yourself, Mark. But obviously, you've now completed the share repurchase and you, as indicated, still have significant cash levels. And I anticipate you'll generate additional cash throughout the year. The stock price hasn't moved in any major fashion in that time period with the share repurchase. So I guess what I'm really sort of curious about is how are you guys thinking about your capital allocation at this point. And quite frankly, why not buy back more stock?

Well, that's a good question, and we've actually discussed this recently with the board. We have a couple of acquisitions that we are looking at. And if we can come to terms with either or both, we're going to need our cash for those acquisitions. And there's other things we were thinking of doing. So right now, we think there's better things to do with cash. If that changes and stock price does not move much, obviously we'd probably jump in and buy more shares.

Your next question comes from the line of John Putnam with Capstone Investments.

I was wondering if you could give us an update on your OEM relationships in China? And I was wondering, is X-Cal a major tool for, I guess, combating piracy of your technology, particularly in a place like China?

It is of pirating of the sensor technology. We do have now with rainbow, encryption that should minimize pirating of the rainbow technology itself, not just the sensors. So we hope that a combination of X-Cal and the rainbow platform, the things we've been doing since 2005 will be hard for people to just knock off in China.

Okay. And have you signed any other additional OEM agreements over there, Joe?

I believe we have a handful of OEM agreements there. I think they're all rainbow-related. And I believe even 1 or 2 have begun selling rainbow-based devices in China. At least one has. And really, the major player there are Philips, Mindray. And with Philips, we already have a rainbow agreement. But Mindray, we're going to have to see.

Your next question comes from the line of Sara Michelmore with Brean Murray. Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division: I guess just 2 very unrelated ones if I could. Just back on rainbow. Joe, on your prepared comments, you did say that the SpCO and the SpMet continued to be a little slower than your expectations. And I was just wondering if you could contextualize for us what you had assumed for the full year, certainly relative to 2011? If you can just kind of give us directionally what had been in your assumptions just so we can have an idea of how that's tracking? And then since you brought it up, I would be curious just to hear your thoughts on M&A framework. Obviously, Spire was a small deal, but did include a little dilution, it sounds like. You have some other things you're looking just in terms of -- if you can give us any, just big picture context for how you're thinking about these things, what your priorities are when you're looking at these deals, et cetera.

Sure, sure. With SpCO and SpMet, we started selling those as rapidly [indiscernible] And then in a matter of 2 or 3 years, 4 out of the 5 major associations recommended monitoring of carbon monoxide. In fact, the National Fire Protection Agency, NFPA 1584, recommends it. So it should become a standard in every firetruck and paramedic vehicle to make these measurements. Unfortunately, one negative thing occurred and -- not unfortunate, but another thing occurred, which minimizes the revenue of CO and met. The unfortunate thing that is definitely all bad is the recession. And it has basically reduced local revenues so the -- so really, a lot of the sales that are happening right now out there with our devices are through grants that are provided by either federal or private institutions because the fire departments are facing layoffs and much, much bigger issues, and they're really not paying attention to the standards. Then the fortunate but maybe somewhat unfortunate for revenues short term is both our good partners, Physio and Zoll, integrating rainbow for CO and met measurement into their defibrillators. So immediately, that took our revenues down by 1/2 at least. But fortunately, they increased the number of units that people were purchasing, because many do prefer the integrated approach. So you asked, what do we predict? We'll do -- we predicted more out of, not just our own sales force that calls on EMS, but our OEM partners. And unfortunately, in the U.S., we fell short of it. O-U.S. we didn't, but the numbers are much smaller to begin with outside the U.S. So all in all, Mark, correct me if I'm wrong, but I think CO and met grew what, 7%? Or some very small level? Yes, 7%. And that's kind of -- because it's what we started off with in 2005, which is kind of the base of rainbow, it's -- even though hemoglobin grew 70%, rainbow in general grew only 14%. Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division: Okay. But it is -- yes, just -- so it is up. And then when you just talk deviation, off the line, Joe, I mean, you obviously knew what the environment was coming to the year. And I'm just trying to get a sense of how far -- I mean, the numbers sound like they're fairly small. But just how far are you off? That's, I guess, what I'm trying to get at.

Well, we're not that off much. We're -- I think we're maybe -- total dollars, maybe $1 million tops. So it wasn't like we predicted much more, given that we understood the environment that we're in. But I think that led to less than what we had estimated in our forecast for our shareholders. Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division: For this quarter?

For this quarter.

Right.

Sara, I think -- I mean, you probably already realized it, but I do think the important part of the comment that Joe had made earlier was that the 2 new, call them, elements in the rainbow family, both the SpHb and RAM, the growth rates in those particular parameters were very, very strong year-over-year. So we're actually very encouraged with what's going on in those new areas. And as Joe alluded to, those really are going to be the drivers for rainbow revenues over the next 5 years. So the fact that CO and met are not growing at the levels we'd like, it's certainly a fact, but it's also not a complete surprise, to your point. But the real important point, I think, of the comment that Joe made before is that the other components of rainbow really are growing very nicely now. Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division: Okay, that's great. And then, Joe, if you can just address my question on kind of how you guys think about M&A and what you're hoping to achieve.

Well, our philosophy on [indiscernible] is 2 things. One, acquisitions like cash versus acquisitions that are either sourced and cash that we have to borrow or buy stock. When it comes to acquisition by big amounts that you know we have to borrow or give our stocks for, we will only look at clients that we think is better than our current business model, something that we have already. And so far, we haven't seen anything like that, because I don't want to make a big bet like that and not love what we're acquiring more than what we have today. Because otherwise, I fear that it'll be not a prudent investment, since we may not integrate it properly. So that's how we think about big acquisitions. So really, for us, the other category where we're acquiring technology, like we did recently with Spire or we did with Andromed, or we did before with the Vital Insight, we -- the hurdle is smaller, but it's got to be an acquisition for either -- for mainly for technology that's got to be a revenue -- something that we can pay with our own cash that we have generated. So right now, the 2 acquisitions we're looking at, both should be things we can do with our cash. So they're not big acquisitions that are going to be game changing, but things that we think are good to have for the long-term.

Your last question comes from Lennox Ketner with Bank of America.

I guess, Joe, I'm just trying to reconcile on the driver's place. You talked last quarter and this quarter about seeing record contract bookings and yet, as people mentioned, the driver shipped were down fairly meaningful year-over-year. So I'm just trying to reconcile that. Are you saying basically that you guys booked a record number of new hospitals in the quarter, but they're maybe smaller than some of the large contracts that -- the Kaiser and the Banners that you booked before? Is that the right way to think about it? Or how can we reconcile those 2 things?

Well, first of all, a couple of ways. One, 80% of our drivers come from the OEMs. So our OEMs had a softer quarter than we had expected, but we don't think that's going to continue for the year. We think we're going to get more of in the second half and even the second quarter. The second part is our own direct business, and we don't want to get too detailed. But we had some major installations that unfortunately got delayed. So a few thousand of our devices that normally would have been installed in Q1 got pushed into Q2. So that's a big part of it. But then to answer more specifically your question regarding the new contract we converted in the new year in Q1, there weren't actually a lot of contracts. There were some major contracts with some really significant names, top hospitals in the country and some outside the U.S. So we're very happy with the quality, as well as the quantity of the new customers we're attracting, if that answers your question.

Okay. So it's more just a timing issue at some of those installations -- some of the contracts that were booked got pushed out?

Yes.

And then last question, just -- are you guys still planning to launch a line of ReSposable sensors for the pulse ox business? And if so, is there any update on the timing for that?

Yes. So we are -- that's a great question. We've been in a prolonged -- what we call a premarket release. Make sure everything is good before we run with it. We're really close. So I hope, if not in the second quarter, I expect in Q3 we're going to launch a very exciting ReSposable lines of sensors for pulse ox and some additional ones for rainbow that's going to really create a better environment for hospitals that are, a, trying to go green; and b, trying to both use rainbow and SET in different departments yet want to have the same adhesive kind of goal with the patient no matter where they go. I want to thank you all for joining us. We really appreciate the support. Of course, yes, we are excited about our 23rd anniversary, one that started us with at a garage. And while we feel like we have a lot of places to improve and a lot of places to go, we're happy about the history. And hopefully, in the next 5, 6 years, we'll dwarf where we've come from over the last 23 years. So with that, I want to thank you and wish you all a great week and weekend.

Thank you. This concludes today's conference. You may now disconnect.