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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, ladies and gentlemen and welcome to Masimo's Third Quarter 2021 Earnings Conference 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 question-and-answer session.
I am pleased to introduce Mr. Eli Kammerman, Masimo's Vice President of Business Development and Investor Relations. Sir, the floor is yours.
Thank you and hello, everybody. Joining me today are Chairman and CEO, Joe Kiani; and Executive Vice President and Chief Financial Officer, Micah Young.
This call will contain forward-looking statements, which reflect management's current judgment, including certain of our expectations regarding fiscal year 2021 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 will 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 operating results in the same way management assesses such results.
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 reports filed with the SEC, including our most recent Form 10-K and 10-Q, in order to make informed investment decisions.
In addition to the earnings release issued today, we have posted a quarterly earnings presentation within the Investor Relations section of our website to supplement the content we will be covering this afternoon.
I'll now pass the call to Joe Kiani.
Thank you, Eli. Good afternoon, everyone, and thank you for joining us for Masimo's third quarter 2021 earnings call. While COVID last year brought us record-breaking growth, we are happy to see COVID-related hospitalizations recede and hospitals return to traditional practices.
Our revenues increased by 10% due to many factors, including a 27% increase in single-patient-use sensor volume. In addition, our shipments of technology boards and monitors were very strong, as we saw strong demand from hospitals for our monitors, especially our SET, pulse oximeters and rainbow Pulse CO-Oximeters. I'm also happy to report that third quarter's double-digit revenue growth helped us achieve an 18% increase in our non-GAAP earnings per share.
Now, I'll ask Micah to review our third quarter results in more detail and provide you with an update on our 2021 financial guidance.
Thank you, Joe, and good afternoon, everyone. Our third quarter results came in above expectations, as we shipped a record-breaking volume of single-patient-use sensors and our driver shipments significantly exceeded our pre-COVID run rate by more than 20%.
These results demonstrate the high regard for our differentiated technologies and the consistent demand from hospitals to expand patient monitoring into additional care areas. These new monitors going into lower acuity settings are driving increased sensor volumes that contributed to our strong revenue performance this quarter.
During the quarter we shipped 74,600 technology boards and instruments, which exceeded expectations. As a result, we have now shipped approximately 2.3 million technology boards and instruments over the last 10 years.
As of the end of the third quarter, we estimate that our installed base has grown 7% over our installed base at the end of the third quarter of 2020 which is a notable increase considering the surge in our installed base a year ago.
For the third quarter of 2021, we reported product revenue of $307 million, representing growth of 10.5% on a reported basis and 10.1% growth on a constant currency basis. You may recall from our earnings call last July that we delivered 21.5% product revenue growth in the third quarter of 2020 due to higher-than-usual demand for our technology boards and instruments, as hospitals address the potential shortage of monitored beds for COVID patients.
Despite this very tough year-over-year comparison, we delivered double-digit revenue growth that exceeded expectations. For the third quarter of 2021, our worldwide sales of technology boards and instruments were higher than in normal years, but down 17% versus the prior year period due to COVID-related purchases in 2020 that I just mentioned.
Fortunately, this decline was more than offset by a strong rebound in sensor sales. In fact our worldwide sales of single-patient-use sensors were up 27% versus the prior year period, driven by strong demand for our sensors.
Most encouragingly, our sensor revenues increased by 2% sequentially versus the second quarter of 2021 in contrast to the typical seasonal decline we've experienced for the same sequential periods and prior years.
This represents another sign of a rebound in sensor volumes associated with the ongoing recovery in hospital sensors in combination with increased sensor utilization coming from our large and growing installed base.
Moving down the P&L, our non-GAAP gross margin for the third quarter increased, 200 basis points to 66.5% compared to 64.5% in the prior year period.
The year-over-year improvement was primarily driven by a more favorable revenue mix, as we delivered strong revenue performance from our higher margin sensors in combination with the anticipated decline in sales for our lower margin technology boards and instruments.
Our non-GAAP selling, general and administrative expenses as a percentage of revenue decreased 20 basis points to 32%, compared to 32.2% in the prior year quarter. And our non-GAAP research and development expenses as a percentage of revenue increased 110 basis points to 11.5% compared to 10.4% in the same quarter last year.
As a result, our non-GAAP operating margin improved 110 basis points to 23% compared to 21.9% in the prior year period. Moving further down the P&L, our non-GAAP tax rate was 23.5%. And our weighted average shares outstanding for the quarter was 57.7 million.
For the third quarter, our non-GAAP net income was $54.3 million or $0.94 per diluted share. In comparison, third quarter 2020 non-GAAP net income was $46.8 million or $0.80 per diluted share. This reflects non-GAAP EPS growth of 18% over the prior year quarter.
Turning to our GAAP results, GAAP net income for the third quarter of 2021 was $57.8 million or $1 per diluted share. In comparison, third quarter 2020 GAAP net income was $49.4 million or $0.85 per diluted share.
To summarize, the third quarter we delivered strong performance across the business that exceeded expectations with double-digit revenue growth, operating margin expansion of 110 basis points and EPS growth of 18%.
And our driver shipments exceeded our pre-COVID run rate by 20% even after the large surge in driver shipments we experienced last year.
Most importantly, our recurring revenue stream of single-patient-use sensors has increased significantly over the last two years, as a result of record new customer wins increased utilization across our installed base and the expansion of patient monitoring in hospitals.
To provide some perspective on the increased driver utilization, we estimate that our installed base has grown by 25% over the past two years, from the third quarter of 2019 to the third quarter of 2021, while our single-patient-use sensor revenues have increased by 35% over the same two-year period.
As a result, our sensor growth has outpaced our installed base growth leading to higher revenues per driver. And related to the expansion of patient monitoring in hospitals, the adhesive sensor growth rate for our top 30 U.S. customers who have the highest number of monitor installations last year has continued to outpace the adhesive growth rate for our overall customer base over the last two years.
It's clear that we are realizing higher utilization across our installed base as monitoring practices have expanded within hospitals. We're realizing success with our hospital automation business as well. Our solutions for increasing productivity and streamlining workflows have been well received by hospitals with overextended staff, especially where there are shortages of available nurses. In fact, our hospital automation revenues contributed 0.5 percentage points to our revenue growth this quarter.
I'm also happy to report that the number of beds connected via Patient SafetyNet and Iris Gateway has grown by 50% over the past two years from the third quarter of 2019 to the third quarter of 2021. And our installed base growth for our Root connectivity platform has more than doubled over the same two-year period.
Now, I'd like to provide an update on our full year 2021 financial guidance. As a result of our strong performance in the third quarter, we are increasing our revenue guidance to $1.230 billion, which reflects year-over-year growth of 7.5% on a reported basis and 6.8% on a constant currency basis. This represents an increase of $14 million above our prior guidance, which is comprised of a $15 million increase due to stronger sales performance partially offset by a $1 million reduction in foreign exchange benefits.
It is also important to note that our revenue guidance implies a growth rate of 8% in the fourth quarter of 2021. If you recall from last year our fourth quarter 2020 results included an extra week of revenue which added roughly three percentage points to our growth rate for that period. Therefore, if you exclude the extra week from last year, our guidance implies a double-digit revenue growth rate in the fourth quarter of 2021. Further, we are now projecting to ship at least 280,000 technology boards and instruments this year.
Our non-GAAP gross margin guidance remains unchanged at 66% and our non-GAAP operating margin guidance remains unchanged at 23.8%.
Moving further down the P&L. For the full year, our non-GAAP non-operating income is expected to be negligible, our non-GAAP tax rate remains unchanged at 23.4%, and our weighted average shares outstanding is unchanged at 57.7 million. Based on all of these assumptions, we are increasing our non-GAAP EPS guidance to $3.88, which represents an increase of $0.03 above our prior guidance of $3.85.
And from a GAAP perspective, we are projecting a GAAP tax rate of 18% and GAAP earnings per share of $3.88 for the year, which represents an increase of $0.05 above our prior guidance of $3.83.
For additional details on our full year 2021 financial guidance for GAAP and non-GAAP earnings per share, please refer to today's earnings release and supplemental financial information within the Investor Relations section of our website at masimo.com.
With that I will turn the call back to Joe.
Thanks Micah. Thank you. An important topic on many people's mind is the ongoing impact of the COVID pandemic on businesses in general and for Masimo from disruptions in the supply chain to hospital admissions and our sensor volumes.
Our team has done a superb job mitigating supply chain disruptions and the recent hospitalization due to COVID have been geographically concentrated and therefore have had a smaller effect on our sensor volumes than what we experienced in 2020.
In addition the temporary reduction of sensor volumes due to postponed surgeries in certain geographies has been offset by increased utilization in other geographies. You can see this in our results for the third quarter our performance exceeded expectations.
After securing record new contracts for any first half year period in our history, we won sizable new contracts this quarter and also secured contract renewals from many of our existing customers, nearly setting new records and for the first nine months setting new records.
Another noteworthy milestone for us in the third quarter was the commercial release in Europe of our rainbow super sensor which incorporates 12 light-emitting diodes to simultaneously monitor all blood constituent parameters non-invasively; SpO2, SpHb, SpCO, SpMet, ORi, PVi, RPVi, PR, RRp, Pi, Spf02, and SpOC.
Previously, our customers could have either SpCO or SpMet in our rainbow sensors. By making SpMet, SpCO, and SpO2 available on the same sensor, we are able to measure fractional oxygen saturation known as SpfO2. SpfO2 provides a more complete picture of arterial blood oxygenation in the presence of this hemoglobins.
When this hemoglobin levels are elevated due to carbon monoxide poisoning or methemoglobinemia fractional oxygen saturation is more representative of the total oxygen carrying capacity of hemoglobin than standard functional SpO2. Masimo is the only company in the world that offers fractional oxygen saturation as well as 11 other parameters on one sensor.
In the current pandemic environment, methemoglobinemia poisoning is more prevalent due to some of the drugs that are being given to treat COVID such as inhaled nitric oxide therapy. Without Spf02 and SpMet this deadly poisoning may go unnoticed.
Also by having SpHb and SpfO2 we can now provide clinicians with a view of not just saturation of oxygen in the blood, but the amount of oxygen in the blood SpOC or oxygen content. Oxygen content SpOC and fractional occupancy saturation SpfO2 can help identify the source of diminished oxygen delivery whether it's due to dyshemoglobins that can result from methemoglobinemia or carbon monoxide poisoning or low hemoglobin that can result from blood loss or anemia.
The rainbow super sensor has not received FDA clearance, but is now available in CE countries such as France, UK, Germany, Italy, Switzerland, Sweden and Spain. With CE clearance we also launched Masimo SafetyNet Alert for opioid overdose and COVID monitoring at home in eight countries in Europe. France, UK, Germany, Italy, Switzerland, Sweden, Netherlands and Spain.
Here in the US, we submitted the FDA de novo application for Masimo SafetyNet for opioid and it is currently under review at the FDA. From the studies we conducted on post-op patients on opioids and on people who were taking opioids illicitly, we expect Masimo SafetyNet Alert to be a life-saving system for those experiencing an opioid overdose.
Also in the third quarter, we announced the release of the MX-7 board our latest and most advanced rainbow SET board designed for integration into the more than 200 multiparameter monitors available from our more than 90 OEM partners. MX-7 has the ability to support all 12 of rainbow super sensor parameters and additionally Rainbow Acoustic Monitoring and an advanced module reengineered to reduce power needs.
Our new product pipeline is strong. Our engineering and clinical development teams have been very productive despite the challenges presented by the pandemic and we are excited about the future. I'd like to take this opportunity to thank our entire team at Masimo. Our team has been working passionately to ensure that we deliver our life-saving products to our customers and patients despite supply chain interruption and delays.
In closing we expect a strong finish to 2021 as the pandemic-related hospitalizations subside and hospitals provide more elective surgeries. We are committed to our mission of improving patient outcomes reducing the cost of care and taking noninvasive monitoring to new sites and applications.
With that, we'll open the call to questions. Operator?
Thank you, sir. [Operator Instructions] Our first question comes from the line of Rick Wise from Stifel. Your line is open.
Good afternoon, Joe. Good afternoon, everybody. Thank you for another excellent quarter. Great to see it. And I'd like to start off a little bit on a big picture perspective with – given some of the themes Joe that you talked about that Micah highlighted about the expanding customer installed base renewals, greater utilization, the flow of technology, the larger installed base, the expansion of monitoring, it's hard for me to – as you're listening to you also talk about sort of the COVID pressures may be easing or stabilizing or improving, it's hard for me not to think about 2022.
I'm hoping maybe just at a high level, not that you'll guide us but that you'll help us set us up level set us to think about 2022 some of the key drivers, key themes. It's still early, but can we expect continued low double-digit top line continued gross and operating margin expansion driven by all these factors you're talking about? Sorry for the long question.
Well, no not at all, Rick. And thank you. It's good to have you on the call. We believe 2022 will be another strong year. We believe it will be driven by not only our core business set, we think it will be driven by also our work in hospital automation and home telehealth monitoring, telemonitoring and also some of the new products that are coming out.
Given that we've been having record contract year both in TI, what we call true incremental and renewals we're feeling pretty good about next year. I think some of the unknowns that may make things maybe even better would be if we get Masimo, SafetyNet for opioid cleared by the FDA before end of the year which we don't know.
And I think some of the potential headwinds could come on our earnings as we want to get more consumers to become aware of Masimo SafetyNet Alert. So on the revenue side everything looks great. On the earnings side we have to see because we've got to kind of decide how much we want to put in and getting the message out for this new missionary sell we have in the never done before opioid safety monitoring at home.
Right. So you're saying continued low double-digit top line but maybe you might invest more in some of these to support some of these potential opportunities if I'm hearing you correctly.
Correct. The good news is a lot of our business is driven by the hospitals even outside to home. But at the same time the only way to reach consumers is through advertisement. We have a wonderful sales force for hospitals but there is no such thing for consumers. So that's where we're going to look at our investment plans and we're going to watch it. But yes top line, we feel really good about it. And on the bottom line, we haven't done the numbers yet, so I can't tell you. But the only difference you're going to see probably next year than what we normally spend is on advertisement.
Got you. Micah on gross margins they certainly came in better than expected but so did revenues and it sounds like mix was positive. Help us think through the go-forward implications? So is this where we sort of stay and again, thinking about next year continue from here?
Yes. I think that's the way to think about it Rick. If you look at our guidance for the year even at 66% for the full year, we had some compressed gross margins in the first half especially Q2, where we had a high record installations under contract of our equipment and that put pressure on our margins in the second quarter.
But if you look at our guidance for the full year, it implies that our 66.5% gross margin in the third quarter, we're going to be somewhere in line with that for the fourth quarter. It's not going to be significant – it shouldn't be significantly off that number based on our guidance. So in fact, it implies about 66.5% for the fourth quarter.
So I think that's how you should think about it. We continue to have some – the COVID-related headwinds that we've experienced over the last 18 months with – as you know with some of the higher freight costs and those types of things that are already incorporated into our guidance for this year. So we're already thinking those through. And that's why we're guiding to 66% for this year. So...
Yes. And just last for me. Joe, you obviously highlighted some of the compelling innovation on the sensor side. Last quarter, I just was -- as I re-read the transcript, you emphasized I think your words were exactly you can expect some exciting innovation in the next 12 months. You highlighted a little bit. It's three months later, what if we going to see and when we're going to see it? Thank you very much.
Thank you. Thank you, Rick. We are indeed excited about the products we're going to announce in the next several months. But if you don't mind, I prefer not to talk about our product pipeline. We have competitors listening as well.
Yes. But still excited I think.
Very excited, very excited. Thank you.
Our next question comes from the line of Jason Bednar from Piper Sandler. Your line is open.
Hey. Good afternoon. Congrats another solid quarter here guys. Thanks for all the details here. A few questions from our end. First Micah, I wanted to ask on guidance. When I look at the typical sequential progression for your business for looking third quarter to fourth quarter, revenue typically rises at about an upper-single-digit pace, but it looks like your guidance implies something closer to low-single-digit growth over third quarter levels. So, is there anything I guess we should consider is like holding you back in the fourth quarter from seeing this normal sequential progression?
No. I mean Jason, if you look at the fourth quarter, and I mentioned in my prepared remarks, I mean if you look at the growth rate year-over-year and you strip out that extra week last year, our growth rate implies double-digits, actually about 10.5% in the fourth quarter. If you adjust for that extra week last year. So, we're still -- we still have confidence in the business. We're seeing good trends in terms of sensor volumes. We expect those trends to continue, and we've implied a double-digit growth rate in the fourth quarter. So as you know, we want to provide guidance that we're confident in that not only we can achieve but we can exceed.
Yes. Yes. And I totally appreciate the year-over-year numbers and everything. I was -- I guess I was asking more like quarter-to-quarter, third quarter to fourth quarter. Just understanding there's like some variability here in the middle of the pandemic. When I look historically, third quarter to fourth quarter just the progression looks a little bigger in past year. So maybe it's just conservatism. But I guess maybe bigger picture and following up on Rick's question there regarding some of that elevated ad spending as we look forward to next year. I mean Joe, Micah, are you willing to say today that you're willing to stay within the LRP for next year at the earnings line?
Look, I was giving a high-level view of things. We have not looked at our numbers for 2022. I think Micah was cringing as I was speaking. So, please let's not continue this dialogue. We'll give you our guidance for 2022 in February.
Yes Jason, we've got a lot of work to do, and we'll -- you'll hear more from us at the end of the year.
Okay. Appreciate that. Got it. All right. Maybe just one last one here. Just, I guess curious just because it's been a topical here this year and maybe even late in 2020. Just wondering if you could maybe expand in a bit more detail on what we can expect from these contracting wins? I mean I guess what does this mean for the business from a growth perspective needs are obviously all really good things longer-term definitely playing into the strategy here. But, when do you think we see the full benefits from all these contracting wins that we've seen for Masimo here over the past year?
Yes, that's a good question, because of course you know that our revenues really are separated from our contracts, because typically our contracts take another six to 12 months for installation and recognition. So, the strong contract here we've been having this year so far will help us a lot in 2022. So yes, so I think that's when you should expect to see the results in 2022.
All right. Very helpful. Thanks so much, guys.
Thank you.
Thanks, Jason.
Our next question comes from the line of Ravi Misra from Berenberg Capital. Your line is open.
Hi. Good afternoon. Thank you for taking the question. Just wanted to kind of prod a little bit on the installed base commentary and driver shipment commentary. Joe, Micah as you get into these lower acuity settings I was hoping you can maybe help frame the opportunity here for us. Where are we in terms of the penetration of the new, kind of, bed opportunity or new monitor opportunity both from a -- what's available out there? And what's your estimate of where you're monitor partners are in those arenas?
And then maybe secondly, you talked about the sensor growth outpacing the installed base growth. And to me I think about okay well a lot of the commentary is focused on the SET pull-through there. But are we also seeing a similar dynamic in rainbow, or maybe you can help qualify how much of that 35% growth is rainbow versus SET?
Yeah. The dust haven't quite cleared yet, but if I was going to make an educated estimate I would say the post-surgical ward has probably gone from 10% penetration to maybe 30% to 40% penetration in the US now. And that increase happened basically last year as people turn pretty much every bed into a monitoring bed.
As far as our SET and rainbow consumers -- consumables, they're walking pretty much hand-in-hand the growth rate. And we're seeing more and more hospitals understand the benefit of continuous monitoring in the post-surgical awards. You may have seen in the press release we did a few weeks ago about our partnership with Ohio health system where they basically have now put -- made every bed into a monitored bed and not only because of the safety of the patient, which they made a video of I think it's on YouTube, but also because it reduce the workload on the nurses they no longer had to go short. They all happen automatically.
In fact one of the things that was happening some of those nurses at UH were leaving UH to go to neighboring hospitals that have our system in for the post-surgical wards. So we're beginning -- I think what happened last year it really helped the wall fall and people began seeing the -- finally the realization of reliable monitoring without all the false alarms in post-surgical ward with Masimo SET.
And then just, I mean just naturally I start thinking about automation as you're getting deeper into these post-surgical floors. I mean is that also leading to a similar level of pull-through of the automation portfolio. I got to assume that's got to be the case.
Not one-for-one, but absolutely it is pulling in more hospital automation. But at this point it's not for every safety in that patient safety system we put out does it turn into hospital automation customer but it is happening.
Great. And then maybe just one last one. On the super rainbow, super sensor that's Europe only, or is that Europe and the US?
Europe only, we're going to be submitting to the FDA for FDA approval or FDA clearance, the super sensor in the U.S. soon.
Thank you very much.
Thank you.
Thanks Ravi.
Our next question comes from the line of Mike Polark from Baird. Your line is open.
Hey good evening. Thank you. Two or three for me. Big picture Joe, curious for your reaction to Baxter Hill-Rom transaction to those companies not really direct competitors, but Hill-Rom especially doing interesting things on monitoring and connectivity and automation. So I'd just be curious to get your first, second and third gut feel or gut thoughts on that combination?
Well, I think it's -- I think that combination seems like a good thing for both companies. We don't really see ourselves competing yet with that entity. Hill-Rom is one of our OEM customers. And Baxter we have a relationship with where their infusion pumps are compatible with our hospital automation. So, yeah, we may have a little bit of a coopetition, but we'll focus on the cooperation more.
Lidco, can you remind me on the timing or plans for the US launch? I haven't heard anything about it yet on today's call?
LiDCO has launched in the US already. We are planning a more streamlined version of LiDCO that goes hand-in-hand with Root, hopefully before end of the year. But LiDCO is available in the US. It has received incredibly strong support from the customer base and we're really happy we brought that team on board.
Do they have -- remind me, did they have their own -- I didn't think they had much of a commercial infrastructure in the US. Is it the Masimo sales reps are now selling LiDCO, or how does the sales structure look for LiDCO in the US?
You're right. They did not have much of a sales force in the US. But more importantly, LiDCO was a superior technology without a backing of a company like Masimo. So I think one of the things that happened is besides us having a strong clinical support team out there is the fact that Masimo's behind LiDCO now has really put the wind in the sales of LiDCO. And the cool thing about LiDCO I mentioned in my comments about the oxygen levels in the blood through SpOC oxygen content. By knowing the cardiac output, we can now even get into oxygen delivery, which is really something that anesthesiologists care greatly about.
Okay. That's it for me. Thank you.
Thank you.
Your next question comes from the line of Marie Thibault from BTIG. Your line is open.
Hi. Great. Thank you. And thank you for taking the questions this evening. I wanted to ask a question on these strong driver demand you saw this quarter. And maybe, if you could parse it out for us, how much of that was driven sort of by the underlying tailwind of expanded monitoring and wanting to have more monitored beds? And how much of it was coming from I guess immediate demand around the COVID spike during the quarter?
It was the first. COVID has not been a big driver this year. I think what we didn't expect is additional funding available to hospitals this year to continue purchasing products that they need, post last year's more than double our normal rate of driver shipments. This -- so far this year, we have out shipped our normal run rate that we'd left in 2019 with, which is incredible given how many drivers we sold last year. So yes, I think it's just -- I don't think it's COVID-related anymore. I think this is really just hospitals expanding in the general floors, hospitals moving to Masimo. I think last year was a great year for Masimo to stand out when SpO2 mattered the most. Not only ours is the most accurate, most reliable, but with availability for Masimo SafetyNet for COVID where we are helping hundreds of hospitals manage their patients remotely some of them weren't even our customers before. I think that has helped us gain new customers, gain new ground. So it's -- I think it's really been a remarkable year on top of a year that we couldn't have anticipated last.
That's very helpful. Thank you for that color. Okay. And then maybe I can ask a two-part sort of on new products. I was intrigued by the rainbow super sensor release you had the other day and then some of your detail you gave Joe on the call. I have to admit that I don't have anywhere near your level of expertise on some of this. So if you could just sort of explain for us who this -- who the target customer would be for rainbow super sensor, which of your current installed base would sort of say, "Hey we want to add this on?" Who is it most ideal for?
We believe it's ideal for the OR, for the ICU and emergency departments. I think you may have seen the announcement the society of advancement of blood management after reviewing 10 years of research on hemoglobin came out in support of continuous hemoglobin monitoring and said it should help improve outcomes. So there's a bigger demand now for hemoglobin, but now that we can deliver hemoglobin without people deciding okay what's more important carbon monoxide monitoring or detection or methemoglobin monitoring or detection, now that they can have all of it in one sensor, I think it reduces the dilemma. It allows hospitals at least down in Europe to have the same products from the emergency department to the OR, to the ICU and step down.
So I think really this is great. We've seen customers who have been using different parts of it like methemoglobin with hemoglobin and everything, discover patients that had methemoglobin poisoning, 40 drugs that are given in hospitals caused methemoglobinemia including all the nitrates, as well as, all the immune deficiency drugs and hydroxychloroquine that was being used for a while.
And then of course CO is usually what people come in with from poisoning from imperfect combustion from either their heaters at home or generators or even their cars. So I think we -- this has been a passionate pursuit of ours. And that's why I want to spell out every parameter. I remember when I first started Masimo with the idea that one day on one sensor, we could measure 12 parameters noninvasively was a vision was a dream, we had and to finally make it available in the commercial volumes which by the way is thanks to the acquisition, we made years ago in New Hampshire when we bought Spire Semiconductor which is now Masimo Semiconductor that allowed us to make all the specialty light emitting diodes, we needed at a price point and mission and all the good stuff that allows us to make this product and make it available at a price that people can afford.
That's wonderful. Congrats on achieving that dream, Joe. Wonderful. One last one if I can, topic is your supply chain. How are things going on that front? I know that we've heard some commentary around kind of electronic componentry and things like that. So would love to hear how MASI is positioned there? Thanks again, for the questions.
Yes. We had the same problems everybody else does, but we have been able to work around it I think in a way that not every company has been able to, again, thanks and kudos to our team, our entire team engineering, manufacturing, distribution everyone who really have pitched in to not let our customers feel any of it. So far knock on wood.
Thank you.
Thank you.
Your next question comes from the line of Michael Matson from Needham & Company. Your line is open.
Yeah, good afternoon. Thanks for taking my questions. I wanted to ask a couple on SafetyNet or I guess, sorry Opioid SafetyNet. So just want to get your thoughts now that it looks like Medicare is trying to repeal this MSET rule and maybe that's why you're seemingly hitting at the need to do some DTC advertising there, when you do launch it?
Yes, yes, yes unfortunately that's regrettable. I thought that was a really good policy to allow breakthrough products that by definition are expected by the FDA to save lives to get reimbursement right away and then analyze it a few years later to decide if it should continue, decrease or increase. So, seeing that fall on the waste side is disappointing. I know they're talking about maybe resurrecting it, I'm not optimistic. But yes, that's unfortunate. And yes that's why we are going to probably have a heavier lift with that until we get reimbursement which normally takes a few years post product availability.
Okay. And in terms of assuming you do end up getting the product approved and you launch some sort of DTC effort. What I've seen with other companies is typically there's some sort of like a pilot, where it's rolled out in kind of limited geographies to evaluate, how it's performing and then scale it up over time. I mean is that kind of how it would work with you guys, or -- because it sounds like you were almost calling out a fairly material impact to your margins from those assuming that you go forward with it?
No, I was not calling a material impact to our margins. I was trying to be truthful on the positive and a negative when Rick asked me, how do I see 2022. We have not yet analyzed this impact on our margins or profit about the level of advertising we have to do. So I just want to be clear with that. But of course, it is a new expense that we haven't really had before. We did it a little bit of it. If you remember, during COVID, where we did that the two commercials Together at Hospital, Together at Home, we feel like we got to do more of that and not just on TV, but social media.
But yes, to kind of go back, we see that we will need to prove the value not just clinically, but economically of Masimo SafetyNet opioid. In just the studies we've done to submit to the FDA, we've already been seeing it. Now, we need to document all of it. Of course, there was that large study from Dartmouth that showed in hospitals, they saved $7 million a year and had no more debt in bed with the group that was being monitored with our technology. We have to repeat those. I don't think it will take 10 years. I think we should be able to get those types of results hopefully much, much sooner than that.
Okay. Thanks for clarifying that margin impact. So then in terms of a couple more on the super sensor as well, I know that's kind of a hot topic here. But is this intended to kind of go be a higher end sensor above like the regular rainbow sensor? I assume that's the case. Or would it replace the regular kind of rainbow sensor?
Yes. We -- actually that's another good question. We do anticipate eventually having only the super sensor. We'll have to see about that. We're evaluating it. As I mentioned, our costs have come down dramatically, since we even made the eight LED version of rainbow sensors versus a 12. So, we're going to pass that savings to our customers and eventually maybe just have one sensor for all the rainbow users.
Okay. And so, I guess that leads to my question just on pricing. I mean, is this something that would have a price premium over your other rainbow sensor, or is it -- it sounds like what you're saying is it will eventually be sort of priced at parity and just replace the old one, but…
Well, we have right now I think just maybe for reference we have our two LED sensors. We have the four LED rainbow light sensor. We have -- we've had the eight LED and now we have the 12 LED. So what I think could -- what I kind of foresee and we haven't yet finalized all this is we'll continue with the two LED, four LED and maybe just have the 12 LED. And as far as pricing is concerned, we believe, we can market the 12 LED around where we would market normally the eight LED. And as volumes allow us to make more of it and make it for less, then we can see a day where we even charge less than what we charge today even for the eight LED.
Okay. Great. Thank you.
Thank you.
Your next question comes from the line of Jayson Bedford from Raymond James. You may ask your question.
Good afternoon. And as much as I'd like to dig deeper on the 2 4 eight and 12 LEDs in terms of the installed base, I feel like my head would be a little busy. So I'll keep it simple here. I think I heard you mention 280,000 boards for the year. Does that implies a bit of a step down in the fourth quarter? I'm curious as to why and if I misheard you on the 280,000 let me know?
Yes. No, Jason, we're still confident in the year. We look at -- our last guidance was about 270,000. We came in about 10,000 above on the driver shipment number for the third quarter and we just kind of passed that through. We expect to be at least 280,000 for the year. So, we're not seeing anything slowing down at all. The demand is strong for all of our technology boards and instruments and we expect that to be kind of the floor for the year.
Okay. But I guess Micah, just based on an earlier comment, it sounds like there was no real bolus due to COVID in the third quarter in terms of boards, which would suggest to me that fourth quarter probably shouldn't go down 10,000 boards is kind of the thought or 8,000?
Well it's -- it implies 68,000 for the fourth quarter. We came in at 74,000. So it's only 6,000 above and we expect to at least be at that 280,000 for the year. So we're not seeing anything out of the ordinary as far as demand in the quarter. As Joe mentioned, it's continued expansion in hospitals that we're seeing. And we're kind of getting back to normal business patterns. So we expect that to be the floor and we would expect to do better than that number for the year.
Okay. Okay. And I apologize if I missed this but did you give a US and international breakout in terms of revenue?
No, but I was about to. So for this quarter two- third was US so about 67% and 33% was OUS.
Okay. And then I think just lastly, SafetyNet Alert, for opioids. Just wondering, if you can give us some of the initial feedback in Europe and I realize it's early but maybe some commentary on say early learnings about the launch and what you would do differently or improve on going forward?
Certainly. Overall the launch in my opinion has been underwhelming. We didn't make Masimo SafetyNet Alert, for Europe. We really made it for the US because of the epidemic that's recognized here. But we know Europe has about the same amount of problems as we do. So we would have expected more. I think if anything it shows reimbursement might be more of an issue than we thought.
As far as the positives, we've seen people didn't ask us for it is for COVID monitoring people at home because they like consumers to be able to buy it for COVID at home. We've also seen people being interested in it for apnea monitoring, at home apnea monitoring. So I think it's been a good experience as we hopefully prepare to launch in the US I hope the US will be more robust as we launch. I think some of the settlements with the opioid companies in the US may help bolster that even before reimbursement but we'll have to see.
So Joe is it more just kind of sticker shock in pricing, or is it just an awareness issue that's probably a little lower in Europe than it is in the US?
I believe it's an awareness issue. I believe there's this mindset in Europe that, if they prescribe it means they're doing something dangerous to the patient. So they're afraid of it. But we're also going to test the pricing. We're going to offer some discounts to see if pricing makes a difference. We are testing our surveys that we did which I don't know how much to believe those.
But in the surveys we did, pricing did not seem to be an issue, at least, at the prices we launched it at. But so I would say, if I had to make a guess right now I think it's lack of awareness and just some fear about recognizing that if it's going to tell a patient they have to be monitored you're telling them that they're in danger that I think they might fear over there.
Okay. That’s helpful. Thank you
Thank you so much everyone, for joining us today. I hope that was treat and the trick and treat season that we're in. Wish you all a Happy Halloween and we'll talk next year.
And that concludes today's conference call. Thank you again for participating. You may now disconnect.