Good afternoon, ladies and gentlemen, and welcome to Masimo's Second Quarter 2018 Earnings Call. The company's press release is available at www.masimo.com. At this time, all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I'm pleased to introduce Eli Kammerman, Masimo's Vice President of Business Development and Investor Relations.

Thank you. Hello, everyone. Joining me today are Chairman and CEO, Joe Kiani; and Executive Vice President of Finance and Chief Financial Officer, Micah Young. This call will contain forward-looking statements, which reflect Masimo's current judgment, including certain of our expectations regarding fiscal 2018 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 periodic filings with the SEC. You'll find these in the Investor Relations section of our website. Also, this call will include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. In addition to GAAP results, these non-GAAP financial measures are intended to provide additional information to enable investors to assess the company's operations in the same way management assesses operations. Management uses non-GAAP measures to budget, evaluate, and measure the company's performance, and sees these results as an indicator of the company's ongoing business performance. The company believes that these non-GAAP financial measures increase transparency and better reflect the underlying financial performance of the business. Reconciliation of these measures to the most directly comparable GAAP financial measures are included within the earnings release and supplementary financial information on our website. Investors should consider all of our statements today, together with our 10-Q for the second quarter to be filed with the SEC in order to make informed investment decisions. In addition to the earnings release issued this morning, we have posted a quarterly presentation within the Investor Relations section of our website to supplement the content we will be covering today. I'll now pass the call to Joe Kiani.

Thank you, Eli. Good afternoon, and thank you for joining us for Masimo's Second Quarter 2018 Earnings Call. We once again achieved double-digit growth for product revenues, which reached $202 million, a 12.4% increase compared to the same quarter a year ago. Our non-GAAP earnings per share grew by 33% to $0.73. Our results reflect rising adoption of our innovative clinical solutions and execution of our new long-term plan. For the second quarter, our worldwide shipments of noninvasive technology boards and monitors rose to 58,700 units, which reflects an increase of approximately 18% over the prior year quarter. The growth is attributable to strong demand in both our direct and our OEM business. We launched exciting new technologies and formed strong partnerships with key healthcare providers. I'll discuss these topics later in the call today. Now, I'll ask Micah to review our second quarter results in more detail and provide you with an update to our 2018 financial guidance. Micah?

Thank you, Joe, and good afternoon, everyone. Before we get started, let me remind you that many of the financial measures covered in today's call are on a non-GAAP basis, unless noted otherwise. Please refer to today's earnings release, supplemental financial information, and the quarterly investor presentation on masimo.com for further information regarding our non-GAAP reconciliations. As Joe noted, we are very happy with the strength we are continuing to experience in our business. Our results for the second quarter of 2018 reflect strong momentum, with another quarter of double-digit top line growth, continued expansion of our operating margins, and over 30% growth in our non-GAAP earnings per share. Also, we shipped a record 58,700 oximeters and brain function monitors during the second quarter, which reflects growth of approximately 18% over the prior year quarter. That's exceptional year-over-year growth in the quarter. Our driver growth is accelerating and on a year-to-date basis, our growth is a very strong 15%. This growth reflects broad demand for our technologies, both direct as well as OEM-based. For the second quarter of 2018, we reported total revenue, including royalty and other revenue, of $211.6 million, which reflects growth of 10% over the prior year quarter. Our product revenues were $202 million for the quarter, which reflects growth of 12.4%, or 11.2% excluding the impact of FX. We continued to see strong performance from our rainbow platform, as well as our newer products, including NomoLine Capnography, SedLine Brain Function Monitoring, and O3 Regional Oximetry. Royalty and other revenue was $9.6 million for the quarter, compared to $12.6 million for the second quarter of 2017. The current quarter results included $9.1 million in royalties, compared to $9.2 million in the prior year quarter. In addition, the current quarter included approximately $600,000 of NRE revenue, compared to…

Thank you, Micah. We're happy with our second quarter results, which reflect our success with the expanding portfolio of breakthrough products that make real differences in clinical care. We're continuing to realize sales growth for our SET pulse oximetry product that exceeds the market growth rate due to the proven performance of our Measure-through Motion and Low Perfusion SET pulse oximetry, with unique expanding monitoring capabilities of our rainbow technologies, such as SpHb, Oxygen Reserve Index, and PBI (00:16:37). In the second quarter, we were happy to gain more noteworthy new customers and to renew other important customers, including NYU Winthrop Hospital in New York, Brigham and Women's Hospital and Mass General Hospital, part of Partners HealthCare. During Q2, we launched important new products, including UniView. We're making great progress in implementing hospital automation for our customers, who desire to institute systems and processes to minimize cognitive overload and maximize team communication. We're seeing strong positive response by hospital executives of the potential benefits of automation using Root with UniView, Replica and Patient SafetyNet. In addition, we have recently announced Vital Signs Check App for Root, which should improve patient safety and clinician productivity, as well as reduce transcription errors. UniView is a good example of the innovative solutions offered by Masimo, as it embodies an integrated display of real-time data and alarms from multiple Masimo and third-party devices designed to reduce clinician cognitive overload and improve patient safety. The UniView can consolidate data from a variety of sources, such as patient monitors, ventilators, anesthesia gas machines, and IV pumps, and provides a supplementary display for that data on one or more large, central monitors, so that all clinicians can simultaneously view and act upon the same real-time data and visible historical trends. Also with Replica, data from UniView is…

Thank you. And our first question comes from the line of Rick Wise from Stifel. Your line is now open. Rick Wise - Stifel, Nicolaus & Co., Inc.: Good afternoon, Joe, Micah, Eli. Thank you for another excellent quarter. Maybe I'll start off with the obvious, on the monitors and boards number, 58,700, gosh, that was something like 6,000 or so better than we looked for. You mentioned in the prepared comments that demand was strong, both direct and OEM, but maybe help us understand that number in little more detail. The seeming outperformance or the strong performance, was it particularly driven by the Philips relationship and maybe faster, bigger early successes there as they convert or upgrade, if you will, to Masimo? Was it one aspect or another, and how do we think about these numbers looking ahead to the second half? Thank you.

You're welcome, Rick. Thank you so much for your question. Rick, it really was, first of all, a very positive surprise. We had not anticipated that level of demand, but it really was mixed all throughout the business. Philips, while it's been a wonderful new agreement and it's working really well, there was no big surprises from Philips. It was just really across all of our OEMs, across all of our direct business. And the vast majority of it was SET Rainbow (sic) [Rainbow SET], very little of it came from SedLine or O3. So it just shows the incredible strength our SET Rainbow (sic) [Rainbow SET] business is seeing, the uptick is really good. We also had a very nice – on top of our usual business, the Department of Defense is redeploying or renewing all of their monitors, and Zoll one of our OEM partners, has gotten that business, and as the Department of Defense is doing that, they've decided to standardize on Rainbow. So while again those volumes [ph] weren't been reasonably (00:24:35) we had this breakthrough, again, it's one of the new things that's adding to the strength of the business. Rick Wise - Stifel, Nicolaus & Co., Inc.: Thank you, Joe. Looking at the – again at the product revenue, excellent product revenue performance. Help us think about the second half, and maybe, Micah, I should be asking this of you. You have an easier comp with – a relatively easier comp in the third quarter, a relatively tougher comp in the fourth quarter. But you've got all these new products, demand is strong, you're saying. Why wouldn't we see actually sort of similar if not stronger second half? Why or why not, just again, any color or perspective would be welcome.

Well, with that question, I'm really glad that Eli did the forward-looking statement. I'm going to let Micah get to the details, but at the high level, it should be as strong as you've seen it in the first half. I don't see anything slowing down, in fact, the new products are seeing success, and I think they're even having customers that didn't think they should be looking at us for oximetry, while they're looking at that, they're also looking at our oximeter, so it's becoming a nice push-pull type of opportunity for us.

Yes.

Micah, do you want to add anything to that?

Yeah, Rick, I think the best way to explain our second half is, as Joe pointed out, we are actually on a constant currency basis and constant currency growth. We're actually accelerating our growth rate in the second half. The challenge we're having is, we have 160 basis point tailwind in the first half that's contributing a benefit to our growth rate. In the back half of the year, we have a 40 basis point headwind. So if you back the foreign exchange...

Foreign currency.

...yeah, so it's a foreign currency headwind. So if you back that out, you actually see a step-up of about 30 basis points of growth in the back half of the year. So I think that just shows the acceleration, the strong momentum of our business, but we are definitely facing some headwinds. As I mentioned a little bit ago on the prepared remarks, we assume the $7 million benefit for the full year in our prior guidance, and now we're assuming a $4 million benefit, and that's because exchange rates, the dollar has strengthened against our major currencies by anywhere from 3% to 5% over the last 90 days. So, just want to provide some clarity, but it's really around FX, and you should be able to back into a step-up in our organic growth. Rick Wise - Stifel, Nicolaus & Co., Inc.: Yeah. That's great color. Two last quick ones for me. Is there a message in the share repurchase – I appreciate your prior authorization is expiring, but is there, Joe, any less – does it signal that maybe – is there a message on M&A less urgency given the core business momentum and strength? And the last one for me, just any updates – speaking of looking ahead, Joe, any updates on the pipeline and what we might expect and when we might expect something? Could we still see some new product announcements this year? Thank you for all the questions and the quarter.

Thank you. Thank you. Well, I think maybe the message is we haven't found something that requires a lot of cash, and therefore we are thinking we should probably redeploy the cash in the stock repurchase. We had anticipated or had hoped we could acquire one or two businesses that were going to help us broaden Masimo, but it wasn't because we thought even then our growth rate wouldn't be as strong. We just thought it's a prudent thing to do. But as you know, the things we're looking for are a hard combination to find. And because of that, we are not at this point seeing an opportunity. We're looking at couple of strong acquisitions, small acquisitions that will not require that much cash, and therefore we think we can do the share buyback. As far as the pipeline forward, we have, as you know, a new seven-year plan. We have products that we have in the pipeline that are out about five years from now to products that should come out this year. We have some exciting new products that are pending FDA clearance, and we have some exciting new products that are pending launch. So, I'm hoping towards Q3, Q4, some of those new products will be announced, and they should continue helping fuel our growth. Rick Wise - Stifel, Nicolaus & Co., Inc.: Thanks again.

Thank you.

Thank you, Rick.

Our next question comes from the line of Larry Keusch from Raymond James. Your line is now open. Lawrence Keusch - Raymond James & Associates, Inc.: Thank you. Good afternoon, everyone. Joe, I was wondering, you guys had a release a month or so ago about the UAE initiating a screening protocol for our all newborns, and I was hoping you might be able to quantify that opportunity, and then more importantly, how close do you think you are in other countries realizing the importance of this and potentially implementing a similar program? I suspect just given the size of the UAE, this is relatively small, so I'm much more curious about where it could go.

Sure. Sure. Well, I think you're right. UAE has a total of about 30 hospitals. So it's not that it's going to kind of rock the world in terms of revenue for us. But I thought it was a wonderful thing to see for their patients, for their people, as well as this continued adoption of our technology for CCHD screening. I think, as you know, our technology enabled CCHD screening because of its accuracy and reliability, there's been three very large-scale studies, the biggest probably from China with 110,000 patients that shows what our technology can do reliable CCHD screening that not only saves lives but is cost-effective. Now, the second part of your question as far as do we see the momentum increasing, the answer is absolutely yes. We just got word yesterday that China has decided to screen all of their newborns for CCHD screening, which of course, as you can imagine, probably are the biggest population of newborns in the world, and U.S. has already standardized and doing CCHD screening across all states. I believe Sweden has, Switzerland has, many countries have, but probably China will have a huge impact. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. And on China specifically, is that business that you have to go after at this point now that they've decided to standardize that?

Yes. Yes, it is. Now all of their studies had been with Masimo technology, up until this point even their local state to see how nursing and others would be able to deploy has been done with our technology. No other technology has been proven to offer reliable CCHD screening, and there have been tests with them that have either been abandoned or have been inconclusive about efficacy. So while we'll have our work cut out to take advantage of the new announcement by China, if they want to get the results that is what's causing them to want to go do CCHD screening, they really do have to use Masimo. There's really no other choice. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. That's terrific. Just couple then I'll just rattle them off (32:51) and perhaps you can just tick them off on your end. Obviously, you have lots of products that use various circuit boards and such. I was just wondering about any thoughts around any potential headwinds from tariffs and some of these trade discussions going on, so that's question one. Question two is, is the driver definition consistent with what that was a year ago? I know that you had the word monitor in there, and I just wanted to make sure that there was no change in the definition of what's in that number, obviously doesn't diminish from this year, but I'm just trying to understand the year-over-year comparison. And then lastly, just on the share repurchase and the language you're describing it, do you have the ability to do an ASR under that repurchase authorization?

Okay. Well, let me try to answer all of those questions. First of all, on the driver numbers, it's still a driver. The reason we broadened the way we describe it, because it's no longer just SET and rainbow oximetry, it includes SedLine and O3. Now, of the 58,700 units that we reported recently, about 1,000 was SedLine and O3, so it's not a – not the reason you're seeing the increase, but it's just we don't know how to put it together because obviously those will include consumer sensors as well. They have their own sensors to go. As far as the ASR, yes, we might do an ASR. It was certainly not precluded from doing it, but we haven't yet decided whether we're going to do something like that or not. And I think your first question was...

On tariffs. Lawrence Keusch - Raymond James & Associates, Inc.: Just on the tariffs, yeah.

Yeah. We have not seen any impact yet on tariffs. We manufacture our products in Sweden, New Hampshire, Irvine, and Mexicali. We have very little to do with China, so hopefully that should not be a problem as long as we don't have a tariff war with Europe and Mexico. Lawrence Keusch - Raymond James & Associates, Inc.: Okay, terrific. Thank you, Joe. Appreciate it.

Yeah. Thank you.

Sorry, Larry, I just want to add to Joe's comment on the drivers. Just to clarify, the SedLine numbers and the O3 were also in prior year same quarter. So we – it's consistent up year-over-year. But to Joe's point, it's a very small portion of the driver number. But I just want to clarify that we are comparing apples to apples. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. Perfect. That's helpful. Thank you.

Thank you, Larry.

Our next question comes from the line of Bill Quirk from Piper Jaffray. Your line is now open. William R. Quirk - Piper Jaffray & Co.: Great. Thanks. Good afternoon, everybody.

Hi, Bill. William R. Quirk - Piper Jaffray & Co.: Hi, Joe.

How are you doing? William R. Quirk - Piper Jaffray & Co.: So a couple of questions – very well, thank you. Very well. Just a couple of, I'd argue, probably follow-ups from the earlier ones. So, Joe, you sound really enthusiastic about the business, and obviously strong quarter raising guidance. But to go back to the driver number, obviously this is an outlier as compared with recent quarters, an outlier in the good sense, of course. And can you talk about the sustainability of this 58,700 driver number?

Well, I guess what I can tell you, if you remember couple years ago, we're doing about 35,000 boards a quarter. We've gone up to 50,000, which we thought was the sustainable number. This quarter, we saw the demand, it doesn't look like it's going to slow down. But my recommendation is to assume the 50,000 type of numbers, and hopefully if we overachieve, we'll let you know. William R. Quirk - Piper Jaffray & Co.: Okay. Fair enough. And then secondly, with respect to the new Chinese screening program, could you help us think about what the implementation timelines look like for that? Are they ordering product already? Is this going to be phased in over several years? Just trying to get a handle on that. Thank you.

Sure. The announcement just came in yesterday from a group of stakeholders that have been working on this for a few years, so I don't know yet what timeframe this is going to take place under. Typically, when announcements like this are made, it's done within 12 months. Now, China is a big country. I don't know how they're going to do everything in 12 months, but we're certainly not going to slow it down. So hopefully we'll work with them, and I think to keep in mind, most of the time when people do CCHD screening, they do it with reusable sensors. They don't use single-patient-use sensors. So for that reason, it's not going to be a huge uptick on revenues. They'll be buying the devices and they'll be buying reusable sensors every other year or so, but it's just really good to see the impact, because as you know, about 1% of these newborns have CCHD, about 0.8% to be precise. And if they don't get detected, they go home and many of them die. So just, I think, it's going to be pretty cool. William R. Quirk - Piper Jaffray & Co.: Got it. Thank you. And then lastly for me, just maybe a little color on the rainbow side of the business, Joe?

Yeah, rainbow is going really strong. I think if you take out our Saudi business, you just looked at it as a holistic, all other customers we're seeing a positive growth in the parameters, which is a good predictor of additional consumables that go along with it. If you include Saudi, we just got our renewal order, or I guess, went (00:38:49) for the next two years, and it came out actually better than the prior year. So we expect even with Saudi Arabia to see increase in rainbow consumption. William R. Quirk - Piper Jaffray & Co.: Very good. Thank you.

Thank you, Bill. I think that was last question. So if there's no other questions, we're going to sign off, and wish you all a wonderful rest of your summer. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes today's program, and you may all disconnect. Everyone, have a great day.