Good day, ladies and gentlemen, and welcome to the Masimo Corporation Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this call is being recorded. I would now like to turn the call over to Eli Kammerman. You may begin.

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 current judgment, including certain of our expectations regarding fiscal 2016 financial performance. 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 and Form 10-Q. You will find these in the Investors section of our website. We will also discuss certain non-GAAP financial measures. A description of each non-GAAP financial measure and a reconciliation of each non-GAAP financial measure to the most comparable GAAP financial measure can be found in our earnings press release. I'll now pass the call to Joe Kiani. Joe E. Kiani - Chairman & Chief Executive Officer: Good afternoon, and thank you for joining us for Masimo's fourth quarter 2015 earnings call. We finished 2015 exceeding our targets, as our diversified product portfolio and geographic reach generated good growth despite one less shipping week in Q4 2015 versus Q4 2014; a continuation of the significant year-over-year FX headwind, as well as a weak flu season. Our Q4 2015 core product revenues grew to $159.8 million, including a 35% year-over-year increase in rainbow revenues to a new quarterly record of $19.1 million. Some other important highlights from our fourth quarter included: we shipped a record 48,500 oximeters, yielding 2015 shipments of nearly 183,000 oximeters, including – excuse me, excluding our handheld and finger pulse oximeters; and increasing our global installed base by nearly 8% year-to-year to more than 1.4 million. Our international sales grew by approximately 18% on a constant…

Our first question comes from Larry Keusch of Raymond James. Your line is open. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. Thank you. Good afternoon, everyone. Joe E. Kiani - Chairman & Chief Executive Officer: Hi, Larry. Lawrence Keusch - Raymond James & Associates, Inc.: Joe, I'm hoping we can just start with the guidance for 2016 and specifically the royalty and the inclusion of it. Back in 2014, obviously, you at that point when facing a situation where there was some uncertainty decided to provide a range of scenarios and obviously you did not do that this time around. So can you walk us through, again, why you are assuming at this point that the royalty does stay in (33:06) for the year? Joe E. Kiani - Chairman & Chief Executive Officer: Since the earnings call we had last quarter, we've had constructive dialogue with Medtronic. And while there's no certainty that a new agreement will be reached, today, at this hour, we believe that it's more likely than not that the royalties will continue till October 2018. Now, as Mark mentioned, if that changes, we will immediately notify our shareholders. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. That's very helpful. And then just two other quick one's for you. In terms of the operating margin outlook over the next several years, again, you've been talking about mid-20% range. And, again, I just wanted to see if that's still the right way to think about it and what the appropriate timeframe is? And then on Root, you obviously indicated that you had successful product sales this year. I just want to make sure I understand the business model behind that. Are you actually selling that product, that monitor, or are you placing it or is…

Our next question comes from Tao Levy of Wedbush. Your line is open.

Great. Thank you. Good afternoon. Joe E. Kiani - Chairman & Chief Executive Officer: Good afternoon.

So, I guess, maybe we could start with... Joe E. Kiani - Chairman & Chief Executive Officer: Tao, (36:18)?

Hi, guys. So in terms of the record shipment of new oximeters, I understand the record shipment in terms of the absolute numbers, but then you obviously take some out of the installed base. So you end up with essentially a similar number in your installed base as last year. And I guess the question is, I know part of it is an estimate on your guys' part in terms of how long current systems will be used in the field. But I'm trying to figure out whether the new monitors that are being pushed out – or the new drivers, whether they generate more revenue than some of the older products that you have out there? If that makes sense (37:21). Joe E. Kiani - Chairman & Chief Executive Officer: Okay. So those are all really good questions, Tao. Let me try to answer them as best as I can. First of all, you're right. The growth rate, not the number, but the growth rate is the same despite record shipments; and that's because we're assuming that anything that's 10 years old or older has been retired. Obviously, it's a theoretical assumption. And, in fact, most likely we're incorrect about that assumption. Information about the OEM partners of ours is that their products last about 15 years. And as you know, more than 80% of our drivers are OEMs products. But then the second part of your question do also the newer shipments drive more sensors or drive more revenue? And the answer to that question is yes as well, because, early on, our OEM partners were not in the OR or the critical care beds, they were in the less acute sides; and the new drivers also have revenue associated with rainbow parameters, as well as rainbow sensors. So I think I have answered both of your questions.

Yeah. Yeah, thank you, it's very helpful. And in terms of as you transition to the RED DIAMOND, I guess, platform, anything that's going to add potentially to noise in future quarters, whether it's additional inventory write-downs or maybe some disruption and how quickly product can get out the door to some of your customers? Joe E. Kiani - Chairman & Chief Executive Officer: Well, I think we did a conservative job of really taking care of any of those potential write-downs, as Mark noted, $9.7 million of it. So I think we should be covered. Obviously, as the installed base converts, there will be patient cable issues. We think we've got a good strategy and we think we're covered for that given some of the other parameters surrounding our business. So, no, we don't expect negative surprises. Hopefully, from here on, it will be the same or positive.

Got you. And nothing from like the sales force distraction, if they're spending more time changing out or making sure a customer is happy instead of going after a new business? Joe E. Kiani - Chairman & Chief Executive Officer: That's possible, that's possible. Although, so far the customers that have switched to the RD sensors have been very pleased. So usually you get the distraction if something goes wrong, if there's a hiccup. And, certainly, there's potential, as we scale from low volumes to high volumes, a hiccup might occur. But we're not projecting distraction. And, in fact, in the way we have set our business this year, we've accounted for some of that with some of our expectations in what they're going to be doing. And also, don't forget, we have a really large clinical specialist team, which are very nicely aligned with our sales force team in the field. So we think some of that customer service will fall more on the CS team than on the sales force.

Okay. Okay, perfect. Great. Thanks a lot. Joe E. Kiani - Chairman & Chief Executive Officer: Thanks, Tao. Mark P. de Raad - Chief Financial Officer & Executive Vice President: Thanks, Tao.

Our next question comes from Brian Weinstein of William Blair. Your line is open. Matt R. Larew - William Blair & Co. LLC: Hey. Good afternoon. Joe E. Kiani - Chairman & Chief Executive Officer: Hi, Brian. Matt R. Larew - William Blair & Co. LLC: Yeah. Hey. This is Matt Larew in for Brian this afternoon. How are we doing? Joe E. Kiani - Chairman & Chief Executive Officer: Hi, Matt. Mark P. de Raad - Chief Financial Officer & Executive Vice President: Hi, Matt. Matt R. Larew - William Blair & Co. LLC: Hey. Just a quick one here on rainbow. Obviously, a strong quarter. I'm just wondering if you can help, outside of that large Middle East order, was this primarily or more driven by new customers coming in or existing customers really ramping up or adding indications? Joe E. Kiani - Chairman & Chief Executive Officer: Little bit of both, a little bit of both. We not only had new customers; we had existing customers expand; we had more sensor consumption. So I think it seems healthy out there. And I think this study from Limoges that studied 6,000 patients and showed really good results – some of it isn't published yet, so I can't talk about it. But the one part that got published in an abstract is 30-day mortality was down by 35%. I think that's huge. And I think as that study gets more attention from full manuscript release, I think the strength will continue. Matt R. Larew - William Blair & Co. LLC: Okay. Thanks, Joe. And then just thinking about capital allocation here in 2016, can you give us an idea of anything you're seeing on the M&A front, whether there are different opportunities or if valuations have changed at all…

Our next question comes from Chris Lewis of ROTH Capital Partners. Your line is open. Joe E. Kiani - Chairman & Chief Executive Officer: Hi, Chris.

Hi, guys. Good afternoon. Thanks for taking the questions. Joe E. Kiani - Chairman & Chief Executive Officer: Thank you. Nice day out here.

It sure is; always is. Joe, wanted to follow up on the previous M&A question. In terms of some of those potential assets you're looking at, can you elaborate a bit on the ones, particularly that are already generating revenues? Give us a sense of the type of size of asset that you think the company is fit to take on at this point, maybe type of technology and any potential timing details you may have on that? Joe E. Kiani - Chairman & Chief Executive Officer: I'd rather not given that we're not done with our due diligence, and I can't tell you if they're going to come through. But what I can tell you is that we've acquired several businesses in the past decade from pure technology with no revenue, like Andromed in Canada which we turned into rainbow Acoustic Monitoring, to Phasein who had significant revenue, although small, but real revenue and profit coming up in Sweden that gave us our capnography and airway gas monitoring. And every one of these acquisitions, knock on wood, we have really done a great job of integrating. So I think we have a formula, we have a good team of people. And if we were about to acquire a company our own size, I'd say we don't know how to do that and we may mess it up. But the sizes we're looking at are not much bigger than what we've bought before. And so I think we should be able to handle it.

Okay. Appreciate the color there. And then in terms of the guidance and kind of the guidance methodology you've used for this year, I think a few quarters ago you talked about excluding some of these larger one-time orders that have historically been choppy from quarter-to-quarter when they come in, in terms of the timing and such. Have you taken that same type of conservative kind of guidance approach to the 2016 outlook in terms of some of those international tender orders coming in? Joe E. Kiani - Chairman & Chief Executive Officer: Yes. Yes, we have. We've liked how everything felt last year. So we decided to repeat the same process and strategy.

Okay. And then in terms of just end market, you talked about 2%, 2.5% type patient admissions, a little bit of a weaker flu season in the quarter. Can you just give us a sense of what you're seeing so far this year about two months into 2016? How have those end markets trended relative to your expectations? Thanks. Joe E. Kiani - Chairman & Chief Executive Officer: Mark, do you want to take that? Mark P. de Raad - Chief Financial Officer & Executive Vice President: Sure, sure. I think it's interesting in the sense that as we alluded to before, this year's flu season was definitely light as we completed Q4 and, frankly, as we started into the new year. But I also think over the last couple of months there has been sort of a resurgence of flu activity. Most of the recent data we've seen suggests that this year is mirroring very closely 2011, which was a year in which the flu season was late. So we've actually seen a bit of an up-tick in the last, I would say, four weeks or five weeks of activity; and that seems to be corroborated by some of the external data that we've seen as well. So that could bode well for what – at least versus most people's assumptions, I believe, which was that this rather weak flu season was going to continue. So right now it's actually looking a little bit more positive maybe than it was, say, in December and January. Joe E. Kiani - Chairman & Chief Executive Officer: But I do want to say no one is coughing around Masimo. So it might be ending. Mark P. de Raad - Chief Financial Officer & Executive Vice President: That was a month ago. Joe E. Kiani - Chairman & Chief Executive Officer: That was a month ago.

One of the perks of living in Orange County, I guess. All right. Thanks, guys. Joe E. Kiani - Chairman & Chief Executive Officer: Thank you. Mark P. de Raad - Chief Financial Officer & Executive Vice President: Thanks, Chris.

Our next question comes from Bill Quirk of Piper Jaffray. Your line is open. William R. Quirk - Piper Jaffray & Co (Broker): Hi. Great, thanks. Good afternoon, everybody. Joe E. Kiani - Chairman & Chief Executive Officer: Hi, Bill. Mark P. de Raad - Chief Financial Officer & Executive Vice President: Hi, Bill. William R. Quirk - Piper Jaffray & Co (Broker): So, first question, I just wanted to go back to an earlier one, Joe, on Root. You guys have obviously had a really nice success with this here in the still relatively early stages of launch. Help us think a little bit about it – because it carries a relatively low capital cost, help us think about where you guys think this could generate in terms of incremental pull-through revenue with some of the adjacent products over the, call it, three-year and five-year timeframes? Joe E. Kiani - Chairman & Chief Executive Officer: Well, based on what we've seen, people are buying Root for three areas: the OR, the ICU and the general floor; and the general floor is mainly the main monitor and it does act like a connectivity hub with the rest of the devices in the room to take to the EMR. In the OR, it becomes a specialty monitor that's really pulling in SedLine. And in countries where we have approval, O3 and other parameters and the capnography, but also people are beginning to look at that device in the OR again as a connectivity hub and a cockpit fashion with some of the technologies we have like (50:59) that allows everything in the room to get aggregated and displayed how the clinician wants it. And in the ICU, it's a combination of additional parameters and a connectivity device for the devices in…

Our next question comes from Ben Haynor of Feltl & Company. Your line is open. Ben C. Haynor - Feltl & Co.: Good afternoon, gentlemen. Joe E. Kiani - Chairman & Chief Executive Officer: Hey. Thank you. Mark P. de Raad - Chief Financial Officer & Executive Vice President: Hi, Ben. Ben C. Haynor - Feltl & Co.: Just a couple of quick ones for you. On the sales force realignment, what proportion of the sales force did that impact? I assume it's relatively small? Joe E. Kiani - Chairman & Chief Executive Officer: Yes. We had nearly 40 salespeople and 20 plus – 30 maybe clinical specialists out of about 300 to 400 people total that this impacted. And, yeah, so it's relatively small. Ben C. Haynor - Feltl & Co.: Okay. That's exactly what I was looking for. And then, Mark, on the $6.1 million accrual that impacted Q4, I believe you said that got reversed here recently. Presumably that would hit the Q1 numbers and be factored into guidance or did I misunderstand that? Mark P. de Raad - Chief Financial Officer & Executive Vice President: Yeah. (56:03) I don't think so. That was one of the adjustments, the $6.1 million I think you're talking about the legal accrual – the re-accrual that I mentioned that's a combination of $5.4 million plus about $700,000 in at least the currently accrued interest. So the total of that $6.1 million, that's reflected as part of the four adjustments that I alluded to that were booked in Q4 2015. So there's no carry-forward impact of that into 2016. Ben C. Haynor - Feltl & Co.: Okay. So I misunderstood that that legal decision got reversed and would be impacting Q1? Mark P. de Raad - Chief Financial Officer & Executive Vice President: Yeah. No, the decision as I said was finalized late last week, which, as you probably know, put us in a position where because that exposure existed at the end of the year, we actually were required to take the accrual for it in our fourth quarter numbers. Ben C. Haynor - Feltl & Co.: Okay. That makes sense. So I misunderstood that. That's all I had a gentlemen. Thank you very much. Mark P. de Raad - Chief Financial Officer & Executive Vice President: Thanks, Ben. Joe E. Kiani - Chairman & Chief Executive Officer: Thank you so much. We appreciate all of you joining us for the call today. Look forward to our next call, which is not that far away. Have a wonderful spring soon. Thank you. Bye-bye.