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Operator: Good afternoon, ladies and gentlemen. And welcome to Masimo’s First Quarter 2025 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 speaker’s 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. Please go ahead.

Eli Kammerman: Hello, everyone. Joining me today are CEO, Katie Szyman and CFO, Micah Young. Before we begin, I’d like to inform you that this call will contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our periodic filings with the SEC. 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 or adjusted 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.

It is important to note that the Sound United business is now being classified as held for sale and reported in discontinued operations. As a result, our non-GAAP financial measures have been updated to reflect the continuing operations of Masimo’s Healthcare business for both current and historical reporting periods. Therefore, the financial measures we will be covering today will be primarily on a non-GAAP basis, unless noted otherwise. Reconciliation of these measures to the most directly comparable GAAP financial measures are included within the earnings release, earnings presentation, 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.

I’ll now pass the call to Katie Szyman.

Katie Szyman: Thank you, Eli. And good afternoon, everyone. Since joining Masimo as CEO nearly three months ago, I’ve been focused on immersing myself in our business. I’ve visited customers at 10 hospitals in five cities, met with more than two-thirds of our employees across the U.S. and Europe, toured numerous manufacturing and R&D sites, evaluated our innovation pipeline, and attended national meetings with our sales team. I have three key takeaways from these trips. One, our technology advantage is real. Not only are our existing products market leaders for a reason, but there’s also excitement and a strong commitment to innovation throughout the organization that will be essential to our future growth. Second, we have a stellar team that is enthusiastic about the path forward at Masimo.

Our people believe in our mission and are focused on delivering for our patients. Our team sees the momentum we have, and they want to build on it. Third, we have an opportunity to do better. This shouldn’t come as a surprise to anybody. Improvement is always possible. But there are areas of our business where I believe by pulling the right levers, we can be more effective. Specifically, we can bring a new level of commercial excellence to the organization and how we go to market. Further, as we refocus our innovation, we can also put the right processes and plans in place to ensure we consistently have successful product launches that deliver meaningful results. Now let me turn to the quarterly results. The headline is that this is another strong quarter, and our performance clearly demonstrates the earnings power of our core healthcare business.

We delivered double-digit revenue growth and EPS growth of more than 50%. For the first quarter, our healthcare revenue was $371 million, grew 10% on a constant currency basis. This was paired with meaningful operating margin expansion of 750 basis points. Micah will go through the results more fully, but I did want to make sure to highlight that I’m excited to be joining Masimo at a moment where we can build and improve from a position of meaningful strength as clearly demonstrated by this quarter’s results. Next, I want to highlight some significant milestones from the quarter beyond the financials. First is the announcement we made today that we have reached an agreement to divest our consumer audio business, also known as Sound United. This represents important progress as we continue to refocus on our professional healthcare business.

With this sale process concluded, we are well-positioned to dedicate our time and resources to meeting patient needs while investing in innovation. Our consumer audio business and its talented team will be well-positioned for growth and success under Harman’s leadership. Micah will speak in a bit more detail to the thoroughness of the process that we went through in reaching this agreement and why we believe this was the right transaction for our shareholders and our Sound United team. Second, I’m pleased to announce that Lisa Hellmann has joined our team as our new Chief Human Resources Officer. One of the many benefits of building off such a strong base is the exceptional talent we were able to attract to join the Masimo team to help us on our next chapter of growth.

Lisa is an outstanding addition to our team and is focused on building our culture, fostering strong engagement, and developing our amazing talent. Third, I also want to touch briefly on an incident that has impacted our website and several of our systems beginning last week. The investigation is ongoing, but as of right now, we do not expect that this will have an impact on our guidance. We voluntarily filed a Form 8-K with the SEC around this situation, and you can refer to that for further details. Given the nature of these things, we appreciate your understanding that we will not be commenting more on this event during our earnings call today. Finally, I would like to take a moment to comment on our strategic and financial goals and what we are doing to achieve them.

We are seeking to invest in our core healthcare business in order to accelerate revenue growth over time beyond our longstanding revenue growth target of 7% to 10%. Currently, we see a number of ways we’re going to accomplish this. First, we plan to upgrade our existing sensors and create next-generation monitors enabled with our AI-based advanced algorithms. We will utilize the advanced algorithms that our team has already developed over the years to enable every patient to be continuously monitored in the acute and post-acute care environment. Second, we will continue to leverage our leadership position in pulse oximetry to strengthen our patient impact across our advanced monitoring categories, including Capnography, Hemodynamics, and Brain Monitoring.

Lastly, we will focus on growth and commercial excellence in our global market by shifting the structure of our sales forces from being centralized by product categories to regionally focused groups responsible for selling our broad portfolio. We look forward to sharing more about these efforts at our Investor Day, which we anticipate scheduling in the fourth quarter of 2025, so please stay tuned. Before I wrap up, I’d like to spend a moment on tariffs. Our first priority is to ensure supply of products to our customers globally. We’ve been dedicating time and resources to assessing and planning for potential tariffs under various scenarios given the very fluid situation. Our operations and finance teams have quantified the potential impacts and are working diligently through the situation, including scenario planning and developing mitigation plans.

We will adjust our supply chain strategy and implement specific mitigation plans once we believe there is sufficient clarity to commit to a mitigation path. Micah will cover this in more detail. I do want to call out, however, how impressed I am by the Masimo team and their ability to move efficiently and promptly as new events arise. While tariffs may represent a curveball, the Masimo team has proven itself adept at handling and executing through any variety of situations over these last few years. Additionally, as this quarter only further demonstrates, the high recurring revenue and durable growth profile of our business positions us particularly well to navigate whatever broader macro uncertainties may come our way. I’d really like to thank our entire team for delivering another excellent quarter.

Our products and technologies continue to impact millions of patients around the world. I feel honored to be a part of this team. With that, I’ll pass it back to Micah.

Micah Young : Thank you, Katie. And good afternoon, everyone. For the first quarter, as Katie mentioned, healthcare revenue was $371 million, up 10% on a constant currency basis. Our consumable and service revenue grew 8%, and our capital equipment and other revenue grew 32%. The timing of shipments related to a large tender contract renewal resulted in higher than expected capital sales as well as lower than expected consumable sales this quarter. We expect the timing of these shipments to normalize throughout the year and align with our full year expectations for both consumable and capital sales. We also shipped more than 72,000 technology boards and monitors during the quarter, which is above our expected range due to strength in our core business and also in part to the timing of shipments related to the large tender contract I just mentioned.

Moving down the P&L, our gross margin of 63.1% improved 80 basis points year-over-year, driven by operational efficiencies and product cost reductions. Our operating margin of 28.8% improved 750 basis points year-over-year as a result of the actions we took last year to optimize our cost structure and refocus on our core business. Our non-GAAP earnings per share was $1.36, representing 56% growth versus the prior year. On a GAAP basis, our net income from continuing operations was $47 million, or $0.86 per share. Our net loss from discontinued operations was $218 million, or $4.04 per share. This included an impairment charge of $295 million to intangibles for the audio business. On a consolidated basis, our net loss was $171 million, or $3.17 per share.

Now moving to our updated fiscal 2025 financial guidance. Our revenue estimate remains unchanged at a range of $1,500 million to $1,530 million, reflecting 8% to 11% constant currency growth versus the prior year. Moving down the P&L, for comparison purposes to our previously issued guidance, we excluded the impact of new tariffs. And I’m going to begin with our updated guidance excluding new tariffs, followed by our updated guidance that now includes the new tariffs before any mitigation. Excluding new tariffs, our updated guidance implies operating margins of 28% to 28.5%, reflecting an increase of 50 basis points at the midpoint versus our prior guidance. Further, our guidance implies earnings per share of $5.30 to $5.60, reflecting an increase of $0.20 at the midpoint versus prior guidance.

Now including new tariffs, but before any mitigation, we are updating our guidance for operating margin to be in the range of 25.5% to 26.4%, and earnings per share to be in the range of $4.80 to $5.15. Tariffs represent a 210 to 250 basis point impact to operating margin and a $0.45 to $0.50 impact to EPS. This projected $33 million to $37 million increase to cost of sales for fiscal 2025 assumes at the low end 25% for non-USMCA eligible products, a baseline rate of 10% for products made in Malaysia, and 170% for raw materials and cables sourced from China. The high end of the range assumes that reciprocal tariffs related to our manufacturing in Malaysia are implemented after the current 90-day pause period expires. Given that tariff costs are capitalized into inventory and then recognized as products are sold, we expect the impact of tariffs to increase each quarter over the remainder of the year, starting with a $2 million impact in the second quarter.

Breaking down the tariff impact further, products manufactured in Mexico and not currently eligible for USMCA exemption represent approximately 10% of our total cost of goods sold. Products manufactured in Malaysia that are subject to US tariffs represent roughly one-third of our total cost of sales. Finally, we want to call out that about 5% of our cost of sales represents raw materials and cables sourced from China. Even though these components represent a small portion of our cost of sales, China tariffs represent up to 50% of our total tariff impact due to the high rate being imposed. Therefore, any progress in trade negotiations with China could have a significant impact in reducing our tariff exposure. We understand the current impact will not be acceptable longer-term and will take mitigation steps depending on how the situation evolves.

Importantly, these estimates of tariff impact do not include any mitigation measures that we might implement, nor do they reflect any potential inflationary impact on labor costs or component costs, any offsets from tariff negotiations or product exemptions, or any benefits of a weaker dollar. Therefore, one should not annualize a tariff impact or use it to estimate our 2026 earnings. Moving on to our sale of Sound United. While we at Masimo were certainly a motivated seller so that we could refocus our strategy to areas where we could best deliver meaningful value to our shareholders, shareholders should take comfort that today’s transaction reflects full fair market value. We conducted a thorough, comprehensive process led by Centerview and Morgan Stanley that involved a large group of potential buyers and significant negotiations.

Through this process, we arrived at the most optimal transaction available for shareholders and we are pleased to have this chapter behind us. The transaction is expected to close by the end of the year, subject to obtaining necessary regulatory clearances. Regarding the use of proceeds, we anticipate prioritizing share repurchases. And as a reminder, our 2025 financial guidance does not reflect any benefit from the use of proceeds from the sale of Sound United. In closing, our first quarter results clearly demonstrate the underlying growth potential and earnings leverage we expected to achieve throughout this year. While we wanted to provide clarity on tariffs, it’s important to reiterate that our business is outperforming the expectations we had coming into the year.

And despite the new tariffs, we’re still projecting significant operating expansion, operating margin expansion and EPS growth for fiscal 2025. I also want to take a moment to call out that Katie has been embraced by the Masimo team and we are enthusiastic about her leadership. And in short, Masimo is off to a strong start to the year and I’ve never been more excited to be a part of this team. With that, we’ll open the call to questions. Operator?

Operator: Thank you. [Operator Instructions].One moment, please for your first question. Your first question comes from the line of Fred Wise of Stifel. Please go ahead.

Frederick Wise : Good afternoon. Hi Katie, hi Micah. And I’m not surprised that the entire organization has embraced Katie. It sounds like it’s off to a great start. Exciting quarter, a lot to unpack. Just to start, let’s start with the first quarter. Based on your commentary about the large tender in the quarter, Micah, can you give us a sense of how big was it? What impact did it have on revenues and margins and boards? How do we normalize and, therefore, think about the cadence and implications of the second quarter as we start to extrapolate forward?

Micah Young : Yeah, thanks, Fred. Yeah, if you kind of normalize for the quarter a little bit, I mean looking at it – a view without, when you exclude the large tender contract, the rest of our business is performing very well. We’re seeing consumable and service growth of double digits. We’re also seeing capital and other revenues growing high single digits, and that’s when you kind of back out the timing of that large tender. And keep in mind, we still expect to recognize fully the revenue from that tender that we expected as we were coming into the year, but that’s just going to occur over the next several quarters. So, that is more of a timing issue, but if you kind of strip that back out and look at it, the remainder of the business is performing very well.

Also, our shipments, we’re seeing very good demand early in the year. It’s still very early to get ahead of ourselves with increase in the guidance range, or our expectations, I guess, for drivers for this year. But if you look at it without the tender and kind of normalize for that tender, we’re still at or above the high end of our range on driver expectations for the quarter. So…

Frederick Wise : Okay. And so just, it’s not fair just to ask for a little more. I mean, can sales move up, move higher sequentially, like flat to up despite this excellent, really superb first quarter and the tender? Is there fuel in the tank for that, or we’re going to step lower?

Micah Young : Yeah, I mean the way to think about it is, if you recall from the last quarter, we mentioned that there’s an extra 53rd week in the fourth quarter. That represents about 1% of our revenues this year. If you back that out and then kind of look at historical seasonality, it’s usually about 24.5%, give or take, each quarter in the first, three quarters of the year, and then it steps up to closer to 26.5% in Q4. So, we expect normal seasonality of the business this year. That’s kind of how we’ve set the guidance and the range. So, that should give you an idea of kind of how to think about Q2, but typically Q2 is either flat to, flat to slightly down sequentially.

Frederick Wise: And if I could just sneak in one more on tariffs. I know it’s way too early to talk about 2026, and particularly from a tariff point of view, but we’re all going to have to play with our model from a tariff perspective. We’ve done this over the last couple of weeks with other companies. Do we try to find a fourth quarter number and say times four next year based on what we know, or how should we approach it? Thank you.

Micah Young: Yeah, it’s definitely too early to annualize at this point. I mean, we have mitigation plans that we’re going to start to enact. Some of those plans are no-regret actions that we’re trying to – that we’ve already identified and we’re going to start to execute. The tricky part is, of course, the timing, because this does flow through inventories and throughout the year and we’re in a short period of time to impact 2025. But we’re hopeful that these actions will start to set us and put us in a good position as we exit 2025. And there’s a lot that could change. I mean, this is a very fluid environment. Trade negotiations, we’re expecting to see some of those things come into play here over the next, I guess it was 90 days from about a month ago. So we’ll see a lot more play out, but it’s too early to annualize the impact in the next year given the mitigation plans and the fluid environment we’re seeing.

Katie Szyman: Yeah, and you also see, Rick, just the disproportionate weighting of China in our tariff impact, and so we just think those rates are – have a high likelihood that they may change.

Micah Young: That’s right. And if you recall in China, the baseline rate back in 2020, we already have some of that in our run rate. That was about 25%. I think it was sometime in March that they implemented an additional 20%. So before they added that extra 125 on top, the rate was setting around 45%. So there could be potential that it goes down closer towards that rate. We don’t know.

Frederick Wise: Thanks again.

Operator: Your next question comes from the line of Vik Chopra of Wells Fargo. Please go ahead.

Vik Chopra : Hey, good afternoon. And thanks so much for taking the questions; two for me. So Micah, I appreciate all you said about the tariffs, but I’m just curious whether you expect the impact of tariffs to have an impact on your long-term operating margin goals. Are those still on the table? And then I had a quick follow-up, please.

Micah Young: Yeah Vik, I feel very good about the underlying business, so let’s start there. We’re performing very well this year. You saw 750 basis points of margin expansion in Q1. For the full year we’re estimating that guidance range. It implies over 430 basis points of margin expansion at the low end of the range, so we’re tracking very well. We’re guiding core underlying margins at 28% to 28.5%. We’ve continuously uplifted that over the past few quarters, and I’d say we’re hitting on all cylinders there. Again, it’s early on the tariff side, but we’re standing by with these plans and enacting some of those plans to mitigate the tariff impact, and I think we have – we’ll know a lot more as we move through the year.

Vik Chopra : Okay, thank you. And then my follow-up question is congrats on the announcement to sell Sound United. I’m just curious if the price you received was in line with your expectations, and if the plan is still to repay debt, or are shared buybacks on the table as well? Thank you.

Micah Young: Thank you, Vik. So let me start with the valuation. Given the current macroeconomic environment and kind of where we see the landscape today, this is a very competitive process. It started out with a lot of potential, a large amount of potential buyers. And we believe that we got to a valuation that was the right fair market value. And in terms of how we use those proceeds, we’re definitely prioritizing share repurchases. That will be a focus for us as we look to close out the transaction later this year. Operator, next question please.

Operator: Your next question comes from the line of Jason Bednar of Piper Sandler. Please go ahead.

Jason Bednar : Hey, good afternoon guys. Congrats on a really strong core here to start the year. Apologies for any background noise, traveling here today. But wanted to see if you could first start just talking to us about what you are hearing from OEM partners with respect to hospital CapEx spending, hospital spending, patient monitoring, connected care. Judging by your results, your board numbers, I’m sure I know the answer, but I’d just love to hear any additional color there. And then I appreciate you don’t want to get into the details of your investigation, but just if you can help us a bit at all with how you have the confidence here in saying you don’t expect it to impact your guidance, and then I’ll have one more follow-up.

A – Micah Young: Yeah, thanks Jason. So let me start out with the OEMs and the drivers. So we’re very encouraged by the results we saw in Q1, very solid underlying demand, even when you strip out that timing that we talked about in the tender contract. You know again, we don’t want to get ahead of ourselves, but I think the way to think about this is, we are a high-recurring revenue business. We only have about 10% to 15% of our revenues, give or take on how that kind of fluctuates, are tied to capital equipment and other revenues. So I think that’s one way to look at this. We’re not very highly dependent on capital. Two, the cost of our capital is a lower cost in terms of capital budgets for hospitals relative to some of the higher cost monitors and machines that are out there.

So I think that’s one way to really look at this. And like I said, there’s no – we’re not seeing any signals of softness at this point in the year, and we’re encouraged by where things are heading. We just don’t want to get ahead of ourselves in terms of our guidance. We want to be thoughtful and prudent about that. On the second topic, currently we view the situation; we’re doing everything we can in terms of working through our protocols. We’ve got strong protocols there. Based on what we know today, we have no evidence that there’s any sensitive employee data or patient data that is impacted, and of course, we’ll provide updates as required there. The other thing is, as we work through those protocols, we’re encouraged by the progress we’re making so far in bringing systems back up and running.

And again, just want to reiterate that as we see it today, we do not believe this is impacting our guidance for the year.

Jason Bednar : Okay. I know it’s a sensitive topic, and I appreciate the extra color there Micah. Maybe I’ll throw in with my own tariff question. Just if there’s anything you can give us around near-term, long-term mitigation options that might be in front of you that you are contemplating. It sounds like there’s some things that are here that are fairly real-time that you are going to be implementing soon. And maybe specifically just given the sensitivity on China, can you speak to maybe the ease or difficulty you have in changing your sourcing or moving to dual sourcing with respect to some of your partners there on product?

Micah Young: Yeah, let me start out with, like I said, we have some actions that we can take more in the near-term. We are – some of those actions are altering some of our product sourcing, manufacturing, supply chain. We’re also evaluating pricing opportunities, and that’s both in the kind of the near-term and the longer-term. And we’re also encouraged by the integration we have, the vertical integration we have in manufacturing. We have a semiconductor plant in the U.S., and there may be some things we can do there to expand that capability and evaluate that more on a kind of a product-by-product basis. The other thing I would say is, in terms of China, that’s something that we are working through and evaluating the mitigation plans.

That involves, of course, the raw material there. There are opportunities to move that. That one may be a little bit – it’s not going to be immediate or near-term, but we do believe we have some opportunities to shift that over time. So I think we’re going to know a lot more as we move through these plans this year, and hopefully have more and more updates and put ourselves in a better spot in terms of how we exit the year and head into 2026.

Jason Bednar : Great. Thanks so much.

Micah Young: You’re welcome.

Operator: The next question comes from the line of Mike Matson of Needham. Please go ahead.

Mike Matson : Yeah, thanks. I guess, first, just with the proceeds from the sale of the consumer audio business, I think you said your preference is to do a share repurchase. So just curious why you are opting for that versus repaying some of the debt to maybe allow you more balance sheet flexibility if you want to do M&A or something like that in the future.

Micah Young: Yeah. Yeah, I mean Mike, we’re evaluating all options there right now. That’s an area that we’re prioritizing, but it also depends on as we evaluate the economics, right, it depends on interest rates. It depends on where the share price is as well, among other factors. But we do expect to prioritize share buybacks and return that to shareholders as well, so.

Mike Matson : Okay, thanks. And then just, I want to ask one on the hemodynamic monitoring opportunity. Given Katie’s background, maybe just tell us a little bit more about how big that market is and where your share is and where you think it can go and how you are going to kind of differentiate yourself in hemodynamic monitoring.

A – Katie Szyman: So yeah, thanks for the questions. First of all, relative to the hemodynamic market, as you recall, the maximal position really comes from the acquisition of LiDCO, that was done several years ago, super small presence in that market. So what we’re really doing is just kind of putting the ability to do hemodynamic monitoring onto our mainline monitors. And what we’ve decided to do at this point, is to launch the system fully in 2026 and beyond with our next-gen monitoring system. I can’t really comment, obviously, about the size of the market, but I’d say it’s fair to assume that we have almost very, very small presence today, and that we’re optimistic that when we can get it onto the right platform over time, that there would be the opportunity to have a more significant presence in hemodynamics.

But unlike kind of the competition, ours is really about kind of ease of use and kind of your mid to low acute patients and not necessarily your high-acuity patients in that market. So it’s a little bit of a different strategy. And what we really offer is the strength in Pulse Ox and kind of balance of the hemoglobin-based delivered oxygen measurements that we talked about in the past, about CO2, and being able to kind of combine the Pulse Ox together with hemodynamics, as I said, more towards your mid to low acuity type patients. And so that’s our overall plan over time, but that’s going to be really more fully launched as we get into next year.

Mike Matson : Okay, got it. Thank you.

Operator: Your next question comes from the line of Matt Taylor of Jeffries. Please go ahead.

Matt Taylor : Hi. Thanks for taking the question, and congrats on a good quarter despite the tariff issues here. But I’ve got a couple of clarification questions. So I guess the first one is just to start with the underlying margin expansion. I mean, you did see another step up here. You know, all the actions that you talked about going back a year ago have kind of come to fruition to get close to or ahead of your goal. And I just wanted to know on an underlying basis, is there still more low-hanging fruit to get in terms of operating margin expansion? So that’s the first one.

A – Micah Young: Yeah, thanks, Matt. Yeah, I’d say – I mean, if you look at our business model, I mean, we do have a high-leverage business model, but we are also trying to make sure that we’re making the right investments throughout this year to continue to drive growth on the top line. So some of those investments will start to play in through the second quarter, through the fourth quarter, so we’re trying to strike that right balance this year. I mean, if you look at the full year, again, we’re over 430 basis points of margin expansion, and at the same time making some good investments within our sales and marketing teams, as well as certain R&D projects that we want to kind of refocus back onto. So we’re striking the right balance here, and I think it’s going to set us up well as we move forward.

Matt Taylor: And just on the tariffs, you had a little bit of a different approach to some of the other companies when you gave this updated guidance before any mitigation, and you talked about some short-term mitigation. So, I guess, is there any material difference in what you could actually do this year, all else equal, to some of the mitigation strategies that you could put in place before the end of the year, to have a different outcome than this unmitigated range?

A – Micah Young: Yeah, so Matt, we do have some actions we’re working through. Again, we don’t want to get ahead of ourselves, because we’ve got to make sure that we can execute through those plans on some of the near-term actions we’re taking. But again, because this is hitting us kind of in the middle of the year, it makes it very difficult to come out and get too confident in those actions impacting this year. Like I said, the more we can start to execute some of these mitigation plans, then we also need to see some things settle. Because what you don’t want to do is take one path, and that path gets closed off, and you have to go down another path. So we’re also being conscious of that. But we believe some of these plans can set us up very well as we exit the year, and we’re doing everything we can to impact this year as well.

It’s just, as you know, the turn through, it goes on to the balance sheet, it turns through inventories, and that’s why we’re trying to impact it as quickly as possible, to make sure we’re set up well for next year.

Katie Szyman: Yeah, I think you see kind of the tightening of the ranges of the core business. If you think about it that way, and then just separating out tariffs, if you compare to kind of how other companies are doing it. So people are saying, well, we would have upped guidance, we would have done this, and we’re just being very transparent about saying that we’re kind of showing you the increase or the kind of tightening of guidance on the core, and then saying, but there’s this offset. So it’s sort of a different approach, I agree, but it’s also sort of saying the same thing.

Matt Taylor: Can I sneak in one last one just on Micah’s last point there? You said through the cadence of the year for the tariff impact, $2 million next quarter. Is the impact on Q3 and Q4 about equal, or is it kind of ratchet up through the year? Could you help us on that at all?

Micah Young: Yeah, I’d say if you look at kind of the high end of the tariff impact range, when you are looking from the 33 to 37, you’ll see more of a step up, a pronounced step up in Q4. But it does, within that range, it steps up each quarter, but it’s more pronounced on the high end of the impact range just because we’re assuming that reciprocal tariffs start to come into play for Malaysia at 24% after the 90-day pause period. So that will not start rolling into cost of sales until the fourth quarter.

Matt Taylor: Got it. Thank you very much.

A – Micah Young: You’re welcome.

Operator: Your next question comes from the line of Michael Polark of Wolfe. Please go ahead.

Michael Polark : Good afternoon. I have a follow-up for Micah on the tender call-out in the quarter. I just want to understand this. So I heard timing of it drove higher than expected capital makes sense. But it sounded like it also drove lower than expected consumables. And I guess I don’t – I need the dots connected there. Why were the consumables lower than expected on the timing of a tender?

Micah Young: Yeah, it’s more the lumpiness of tenders. So our consumable orders were lighter in the first quarter. And again, like I said, I mean if you kind of normalize for that, we saw very strong growth across the board for our consumable sales. And we fully believe that that is going to be a timing issue that’s going to start to correct itself in Q2 through Q4. And that’s why we’re not – it doesn’t impact anything to our guidance for the full year. And again, these are large tenders that can be lumpy, but it’s a renewed tender that we continue to renew each year, so.

Michael Polark : Understood. My follow-up, perhaps for Katie. The allusion to changing the sales force model, if I understood the comment correct, today you’re specialized by product. There might be benefit in going to more of a generalist kind of regionally focused model, sell everything instead of just some things. And I want to ensure I understand that correct at a high level. And then, I think, the related question is, is this something – I guess there’s a worry – there’s always a worry around sales force changes that it could be disruptive. So what would be the initial benefits here, upside or how do you manage kind of risk as you do this? And was this something the company was considering for a while, or Katie, is this kind of reflective of your worldview and something you’ve seen out the gates and have conviction in moving forward on?

Katie Szyman: Yeah, thanks. Those are great questions. So I’d say that as you kind of deal with sales forces, you can either have that generalist model, right, or you can have the dedicated teams. What we look at as we evaluate the decision is basically you have very small dedicated teams to some of these specialty areas. So, for example, the Capnography team was a dedicated team of, call it eight to ten people. And instead, you’re actually – instead, by going with the generalist model, you’re able to have all of our sales representatives actually carrying the capnography bag, right. And so it’s basically as you start a new product category, you always want to have dedicated teams, because they can actually provide the focus necessary to get that product going.

But for our advanced monitoring categories of capnography, hemodynamics, and brain, we feel like there’s enough knowledge at this point that we’re going to benefit from having all of the force of our sales reps and clinicals actually able to speak to that, instead of having these small dedicated teams. We just think there will be more leverage from that. So to quantify how it’s going to transition, and obviously any change, there’s always risk, right. But we haven’t specifically quantified it, but we really are optimistic that by retraining and getting our broad sales teams totally engaged in the whole bag, it’s going to be a benefit. Does that make sense?

Michael Polark : Yeah, that’s helpful. If I can sneak one last one in on sound, is there a tax benefit expected in selling at this price relative to the purchase of the asset? Thank you.

Micah Young: Yeah, thanks Mike. At this price point, there is no election benefit here that we’re estimating at this time, so. Operator, that’s our last question. [Multiple Speakers]

Operator: There are no further questions at this time. With that, I will turn the call back over to Katie Szyman for closing remarks.

Katie Szyman : Great. Well, thanks everyone for your interest in Masimo and for participating in the call. I just want to let you know, I look forward to seeing everybody as I head out on the road and start to meet more with ambassadors throughout this quarter. So thanks again, everyone, and we’ll talk to you next quarter.

Operator: Ladies and gentlemen, this concludes today’s conference call. We thank you for participating and ask that you please disconnect your lines.