Masimo Corporation (NASDAQ:MASI) Q1 2024 Earnings Call Transcript

Micah Young: I don’t have the driver installed base right in front of me, I apologize, Jason. Again, we’re really laser-focused right now on the true incremental and how we’re viewing the contracting and how that’s playing into our forecast.

Mike Polark: Okay. Can I maybe ask then like the 50,000 driver shipments, would you — at a high level, I don’t need the precision number but what is the mix of replacements versus net new in that figure?

Micah Young: On the replacements versus net new? We typically [indiscernible].

Joe Kiani: So I think the best way to think about it, Mike, is that whatever our market share is today, that’s probably replacement and the rest is new. We’re not here to tell you what that market share is but what we can tell you is that we think today, the minority of the drivers are new shipments. And a lot of the shipments that we look towards an increasing our business in the future come from what we do as true incremental when we sign up new hospitals to switch from our competitor to Masimo.

Mike Polark: For my second topic, I want to just ask a follow-up on Malaysia and the gross margin update. I’m curious what — when this is fully transitioned, I heard the comment about the change to ’24 60 bps but it’s obviously phasing in throughout the year and ramping throughout the year and then 350 bps on the longer-term margin bridge from gross margin. I’m just curious, the mechanical shift of Mexico to Malaysia kind of from, say, last year to when you think it’s optimized, how much in total is that impact?

Micah Young: Yes, Mike, if you look at the initial impact and we’re reflecting some of that and as you can see in our guidance as we raised it by 60 basis points. But for this year — or for the early start of the transition, the benefit is going to be more in terms of the direct labor benefit and that should be — we’re estimating that to be about 60 basis points of improvement per year. And from that point, we expect to drive increased efficiencies in our manufacturing there as we have improved rates of attrition, turnover in the workforce. We expect it to be a much more stable workforce for us and more efficient workforce based on what we’re seeing so far. So that can definitely get us well above that 60 basis points that we’re seeing. And we’ll see how that plays out. But I would expect that we’re going to be probably over 100 basis points of improvement just from that once we start to see all the efficiencies.

Joe Kiani: Thank you so much, everyone, for joining us for our Q1 earnings call. We look forward to presenting our Q2 with you very soon. Have a wonderful rest of your spring and summer. Thank you.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation and you may now disconnect.