Masimo Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 9, 2023

Key Takeaways

  • Consolidated Q1 revenues of $565 M, with Healthcare at $347 M (+16% constant currency) driven by record pulse oximetry conversions and Rainbow products now over 10% of segment revenue, while Consumer revenues reached $218 M on robust hearables growth.
  • Non-GAAP profitability remained strong with EPS of $0.87, operating profit up 8% to $76 M and consolidated gross margin at 52% (Healthcare 62%, Consumer 36%), as supply chain stability lifts margins.
  • Full-year 2023 guidance was reaffirmed: revenues $2.415–2.46 B, non-GAAP operating profit $400–405 M and EPS $4.70–4.80, including 8–10% Healthcare growth and 2–5% Consumer growth on a pro forma, constant currency basis.
  • Masimo launched Opioid Halo (FDA cleared) and the Stork baby monitor with strong retailer interest, and plans further rollouts of Denon Pearl AAT earbuds, W1 and Freedom Watch wearables to expand its consumer health ecosystem.
  • In its high-profile litigation with Apple, Masimo awaits a mid-July ITC decision that could block Apple Watch imports, while a retrial is planned after a hung jury in the trade secrets case.
AI Generated. May Contain Errors.
Earnings Conference Call
Masimo Q1 2023
00:00 / 00:00

There are 9 speakers on the call.

Operator

Afternoon, ladies and gentlemen, and welcome to Massimo's First Quarter 2023 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 a question and answer session. I am pleased to introduce Eli Cameron Massimo's Vice President of Business Development and Investor Relations.

Speaker 1

Thank you, and hello, everyone. 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 2023 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.

Speaker 1

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.

Speaker 1

The company believes that these non GAAP financial measures increase transparency and better reflect the underlying financial performance of the business. Therefore, the financial measures we will be covering today will be primarily on a non GAAP basis, unless noted otherwise. Further, we will also be referencing pro form a financial measures, which include historical results for Sound United prior to the acquisition date April 11, 2022. In our presentation today, we will once again be referring to this business as our non healthcare segment. 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.

Speaker 1

Investors should consider all of our statements today together with our reports filed with the SEC, including our most recent Form 10 ks 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.

Speaker 2

Thank you.

Speaker 3

Thanks, Eli. Good afternoon and thank you for joining us for Masimo's Q1 2023 earnings call. We started the year with solid performance and are excited about the many new products coming out of our research and development pipeline this year. Our consistent focus on life improving innovation continues to drive growth in our professional healthcare, consumer health and consumer markets. And now supported by the scale and infrastructure of our Masimo consumer business, our health and healthcare innovation is going to reach people from all walks of life.

Speaker 3

Our consolidated revenues for the Q1 $565,000,000 We delivered healthcare revenues of $347,000,000 and consumer revenues of $218,000,000 New customers in our pulse oximetry business an increasing traction for rainbow and advanced parameter products, strengthened our healthcare revenues this quarter. In fact, this was the best first quarter in our history for new conversions of hospitals to Masimo. In addition to rainbow blood constituent monitoring, which has now become over 10% of our healthcare revenue, We had solid growth in our SedLine and O3 Brain Monitoring and NormalLine capnography and gas monitoring products. Robust growth for hearables led the performance of our consumer business, along with a strong market reception for some recently launched AV products. Despite many consumer facing companies struggling post COVID, our consumer business remains on track.

Speaker 3

Meanwhile, we're leveraging our unique combination of signal processing, physiological monitoring, audio and automation technology capabilities to launch a series of new and innovative products To revolutionize consumer health. On that point, later in the call, I'll update you on the recent launch of our Stork baby monitor and Opioid Halo as well as some of the other new products planned for this year that we expect will contribute to our long term success. With that, I'll pass it to Micah to review our Q1 results in more detail and provide an update on our 2023 financial guidance. Thank

Speaker 4

Thank you, Joe, and good afternoon, everyone. For the Q1, we achieved consolidated revenue of $565,000,000 and non GAAP earnings per share of $0.87 For our Healthcare segment, 1st quarter revenues were $347,000,000 representing 16% constant currency growth. Recall that our Q1 2022 revenues were adversely affected by supply chain challenges that produced a shortfall in that period And resulted in growth of only 3%, which was subsequently recovered in the Q2 of last year. We shipped over 77,000 drivers in the quarter and we are on track to ship over 300,000 drivers this year. At the end of the Q1, we estimated that our installed base has grown by 7% overall installed base at the end of the Q1 of 2022.

Speaker 4

As Joe mentioned, our healthcare revenue growth is driven by strong performance from our rainbow blood constituent monitoring SedLine and 3 Brain Monitoring and Nomaline capnography and gas monitoring products. For our non healthcare segment, 1st quarter revenues were $218,000,000 representing an expected decline of 9% on a pro form a and constant currency basis. This was in line with our guidance as this business faced a tough year over year comparison due to the fulfillment of back ordered products in prior year quarter that drove 22% constant currency growth right before the acquisition closed. Hearables, including headphones and earbuds remain a key category for growth. Hearable sales more than doubled in the Q1 versus the prior year period, While we're pleased with the strong growth we're seeing in this category, We expect the launch of the Denon Pearl AAT earbuds later this year to further elevate our hearables business as we bring Truly Differentiated Technology to our consumer audio brands.

Speaker 4

Now moving further down the P and L. For the Q1 of 2023, we realized consolidated non GAAP gross margin of 52%. This includes gross margins of 62% for our healthcare business and 36% for our non healthcare business. Consistent with our guidance, we expect to see gross margins steadily rise over the course of 2023 as our supply chain continues to stabilize. For our consolidated business, our non GAAP operating profit increased 8% to $76,000,000 which was a solid result despite year over year currency headwinds and the elevated litigation costs associated with the trade secrets misappropriation trial against Apple.

Speaker 4

And our non GAAP earnings were $0.87 per diluted share, which included an increase of $11,000,000 in interest expense over the prior year period related to the debt incurred for the acquisition and share buyback. To summarize, we delivered 1st quarter results at the high end of our guidance as our Healthcare business again Realized steady gains in market share across the portfolio. In our Nayan Healthcare segment, we saw impressive growth from our hearables products despite a difficult year over year comparison. And we have an exciting lineup of new products rolling out this year that will help us advance our strategy, drive long term growth and improve lives whether in the home or in the hospital. Now, I'd like to provide an update on our 2023 financial guidance.

Speaker 4

For the full year 2023, we are maintaining our previous guidance ranges for consolidated revenue of $2,415,000,000 to 2,460,000,000 non GAAP operating profit of $400,000,000 to $405,000,000 and non GAAP EPS of $4.70 to $4.80 As we discussed last quarter, we are taking a disciplined approach to our product launches and leveraging Masimo's consumer Masimo Consumer's capabilities channels to maximize the impact of the incremental 100 basis points of promotional investment we are making. For our Healthcare segment, we are maintaining our previous revenue guidance of 1,450,000,000 $1,465,000,000 representing 8% to 10% constant currency growth. For the non healthcare segment, we are maintaining our previous guidance range of $965,000,000 to $995,000,000 representing 2% to 5% growth on a pro form a and constant currency basis. Please reference the earnings presentation on our investor website for further details. In conclusion, our outlook for 2023 reflects solid growth in our business, While incorporating prudent investments to support the new products we will launch this year.

Speaker 4

With that, I'll turn the call back to Joe. Thank you, Micah.

Speaker 3

I'm delighted to report that we received de novo FDA approval for Masimo Opioid Halo, a revolutionary product for the detection of opioid induced respiratory depression in people taking opioids at home. Illicit opioid related deaths are at an all time high and unexpected deaths from opioids Even in patients who are complying with recommended dosages are a significant problem in the U. S. Over 80,000 people died due to opioid overdose. We intend to play an active role in reducing these deaths by alerting patients and their loved ones when opioid induced respiratory depression occurs.

Speaker 3

The alarm functionality of Opioid Halo provides an early warning of depressed respiratory function that should result in vulnerable patients being woken up and saved from a terrible fate. And if not, then an alarm would location is sent to the nearest ambulance. On May 1st, We began marketing opioid halo to drugstores and addiction treatment centers. We are going to do our best With the transition of naloxone brands to over the counter status, large retailers Are creating display areas that promote opioid safety and awareness within their stores and we expect Opioid Halo, which has over the counter and prescription clearance to become part of that initiative. On May 3, we launched Stork at the 2023 Kids Expo in Las Vegas.

Speaker 3

We had very strong interest from major retailers, including 1 of Massimo Consumer's largest customers, which will carry Stork and give it a very prominent display location in Stork. We're currently selling different configuration of Stork on the massimostork.com website and expect to announce important retail channel presence as well as large online baby registries for Stork over the next 6 months. The marketing team at Masimo Consumer is doing an excellent job of gaining attention for Stork both online and in traditional retail channels. These efforts should accelerate adoption of the product in the second half of this year. As one of our first consumer health product launches, Stork is creating a great template for how our teams can leverage our integrated global brand and marketing framework, which we will rapidly refine and replicate as we learn from the stork rollout and launch more consumer health products.

Speaker 3

We will also soon launch our first hearables based on our adaptive acoustic technology platform. The AAT platform creates personalized listening profiles for each user, customizing the sound spectrum for each person's unique ear architecture and hearing sensitivities to ensure that no instrumental detail or sound quality goes unheard. These next generation earbuds will be marketed as the Denon Pearl and Pearl Pro to leverage Denon's heritage of world class acoustics And we have already received very strong interest from retailers that gives us confidence in a rapid sales ramp. Shifting to wearables, our W1 watch is gaining traction as Cambridge University Hospitals in the U. K.

Speaker 3

And Charite German Health Center in Berlin have expanded their telehealth programs with Masimo W1. Last but not least, Masimo Freedom Watch with Android operating system is slated for sale in the second half of the year. We showed Freedom at the BNP Paribas tennis tournament in March and have begun presales on our e commerce site. In addition, Freedom Sleepband will round out our portfolio of wearables, which addresses a range of distinct consumerhealthneeds@variouspricepointsandcanbedisplaytogetherinretailstoresformarketingsynergy, hopefully prior to the Christmas holiday season. We also continue to make progress building our home based medical data ecosystem that connects our wearables and remote monitoring products and services to Heal's devices, allowing us to feed data from the wearables into our secure health cloud.

Speaker 3

We grew the number of HEOS connected devices by approximately 180,000 end of Q1. We intend to grow Masimo by making a real difference in people's lives and hospitals and home. But we can't do that without the dedication and commitment of our team and support of our shareholders. For the first time since we took Masimo public in 2007, we will be engaged in a proxy contest. We encourage all of our shareholders to vote.

Speaker 3

The outcome will be consequential for our company's mission, strategy and guiding principles, which have been incredibly important to our success. With that, we'll open the call to questions. Operator?

Operator

At Our first question comes from Maria Tibbult with GTG. Your line is open.

Speaker 5

Hi. Thank you so much for taking the questions and congrats on a very strong start to the year.

Speaker 3

Thank you, Maria.

Speaker 5

Yes. I wanted to start here with just a basic question about the Healthcare business. I think last quarter you mentioned that there had been some encouraging pricing trends and contract renewals. Just wanted to hear what drove some of the strength that you saw in Healthcare. I know you mentioned some of the parameters, but wonder if there were other sustainable trends that you can also point to.

Speaker 3

Well, I don't know if we'll sustain this, but Q1 It was our biggest quarter ever in converting hospitals to Masimo SET pulse oximetry new customers. I think it was twice the rate that we normally do. So that's very encouraging. Pricing has stabilized, cost of goods has stabilized and one of the other things that we're encouraged about is the traction that rainbow is getting non invasive hemoglobin, PVI outside the U. S.

Speaker 3

ORI And our capnography 3 and SedLine businesses. So We see that all really, really positive. The only thing is from the best I guess the best estimate that we have, census has returned to 2019 level, but It hasn't grown. It's the 2019 level, where normally each year census growth by 1% to 3%. From the best we can see, we're finally back at 2019 level.

Speaker 3

So all in all, it all bodes well. We hope that eventually COVID related deaths that affected a lot of elderly people that would use hospitals regularly in their last years of life. We'll go through and the new norm will begin. And with the huge conversions we've had this quarter and the past couple of years. We think overall we'll be ahead of things.

Speaker 3

So I hope that helps.

Speaker 5

Yes, it does. Thank you. Sounds like it's heading in the right direction. I wanted to ask my follow-up here then on opioid halo. Congrats very much on getting Through the FDA with that, and great timing with the naloxone going OTC as well.

Speaker 5

Wanted to sort of understand how you think about your go to market strategy. You mentioned that some drugstores will be offering Halo as part of the over the counter naloxone effort. Is there a plot to try to get reimbursement at some point? I think I recall out of pocket of $2.50 which is More than most people spend in the drugstore. So curious about the business model longer term here then?

Speaker 3

Yes. Longer term, we do hope to get reimbursement, but that might take a few years. In the meantime, We are doing a multi pronged sales approach from over the counter drugstores to reaching out to the kind of physician offices that do surgeries in their offices and send people home with opioids to make them aware of it. And we're reaching out to states that have received settlement money from the opioid companies that want to use that money for the greater good of people that are potentially addicted to opioids already. So I think hopefully with all of that Until we do get reimbursement, we should have strong adoption in sales.

Speaker 5

All right. That all makes sense, Joe. Thank you so much.

Operator

Thank you. Our next question comes from Matt Taylor with Jefferies. Your line is open.

Speaker 6

Hey, thanks for taking the question and congrats on a good start to the year here. So I guess I was hoping to ask a little bit about current state of litigation. Obviously, we saw the mistrial. So I was hoping you could update us on what you think ultimately happens there and maybe just remind us about what's coming up here with ITC And the other trials you have in the future.

Speaker 3

Sure, sure. Big picture, we have 5 separate litigations With Apple. It started off with the patent and trade secret lawsuit we filed here in Orange County, which got split into 2, a trade secret case and a patent case that's supposed to resume post PTAB rulings and appellate court decisions. Then we filed the ITC case with the International Trade Commission to stop the importation of foreign manufactured products that infringe patents. Then Apple sued us in Delaware for patent infringement And we counter sued them in Delaware for patent infringement, antitrust and unfair competition.

Speaker 3

So with the first 2 things. Of course, the ITC case, you know we won the first stage of that. We're waiting for the commission to rule. The commission delayed the ruling. Right now, we expect middle of July to get a decision.

Speaker 3

And assuming it's favorable and President Biden doesn't stop it. We could see the exclusion of the Apple Watch with pulse oximetry September timeframe. On the trade secret case we just had in Orange County, it was quite 3 to 4 week process. The evidence came in incredibly strong. The evidence came in that showed in 2012, Apple decided To make a watch, they quickly decided the most important feature of that watch would be health sensing with pulse oximetry.

Speaker 3

They realized they did not know how to do pulse oximetry, so they started a project called Rover To look at all the companies in the world that do pulse oximetry quickly they decided Masimo and SurproCore were the 2 standout pulse oximetry companies both run by me and my trusted technical VP was Marcelo LaMego. So they recommended While they recruit some of my team to Tim Cook to acquire Masimo, they thought Masimo would be a great acquisition, Not just because of our technology and our people, but because I could take over their healthcare business and they also We're shut down. Tim Cook said, this all came in, in front of the jury. Tim Cook said, we don't do acquisitions like this. And Then they looked at doing maybe a joint development with us while still recruiting our people, although their head of BD kept warning them This is not good karma.

Speaker 3

We shouldn't be doing this, but they were doing it. Right around that time when they were looking at joint development, The CTO at Circle Corp, Marcelo Lamega, who they had identified as my confidant, finally responded to Apple and decided, you know what, Yes, maybe I will join you guys and bring all of this stuff to you if you give me a high level technical executive role, Which at that time, it looks like that stopped their business development front with us. And instead, Steve Hoteling, who apparently had 3000 to 4000 engineers reporting to him and the watch started a confidential project To go one layer lower, they had Marcello now, our CTO, they had Michael O'Reilly, our CMO, which by the way evidence came in they both took our trade secrets to Apple. And they also unfortunately decided to go one layer lower and attract our engineers and directors and they did. They hired between 20 to 30 additional people.

Speaker 3

The jury got to see some of that evidence and they also got to see that Apple launched their Pulse Ox in 2020 knowing that it wasn't good enough at But because of the COVID chaos they called it, they thought SpO2 would help them gain market which they launched it. Probably the worst thing is about 100,000,000 people now have Pulse Ox is in the back of their watch. It doesn't really work. Their goal is to just get 2 measurements on 90% of the people each day and they fell short of that. They got it 37% of the time, two measurements each day.

Speaker 3

So all of that stuff was in front of the jury. They saw how they took several of our trade secrets right before the jury went to deliberate. The judge, I think believing we had a jury that was going to go all the way with us, took away our business trade secret case, which we disagreed with, But we're going to have to wait for appeal on that. But despite all of that, unfortunately, the jury hung up. It isn't as though it's been reported that it was 6 to 1.

Speaker 3

I can't get into more details on that, but It wasn't like that, but unfortunately, we did hit that. So at this point, I guess in life you don't get many do overs, we're going to get another do over. So we will be retrying this case and hopefully Given how good the case came and how everyone assumed it would go, we expect next time we'll get very different results.

Speaker 6

Thanks for that great answer. Any thoughts on the timing of that coming back around?

Speaker 3

No, we don't know. It's up to the judge. It could be 2 to 3 months to another year. We don't know.

Speaker 6

Okay, cool. Thanks very much for that answer.

Speaker 3

Thank you.

Operator

Our next question comes from Michael Pollard with Wolfe Research. Your line is open.

Speaker 7

Hey, good afternoon. Thank you for taking the questions. Maybe a guidance question. I see the affirmation For the year, Onshape. As I look through the deck, I see a modest reduction to the consumer gross margin input.

Speaker 7

That's the standout, I guess, for Micah. And any other twists and turns within the guidance affirmation we should be mindful of here?

Speaker 4

No. So Michael, the only thing we held of course guidance on top line, bottom line, EPS and operating profit, but we did have, if

Speaker 6

you look

Speaker 4

at the slightly lower on the full year for the Consumer business on gross margins. That just reflects in the Q1 where we saw some lingering spot buys that impacted that business. And we really didn't change the outlook for the last three quarters, but let that kind of flow through the year. And we also we did Very good job of managing expenses in the Q1 to offset that. So you'll see a little bit softer gross margins, but also improvement on lowering operating expenses for the year reflected in that guidance.

Speaker 4

But we're seeing overall, Michael, we're seeing stabilization of the supply chain. The trends that we're seeing exiting the Q1 are a good signal for us. We still expect a steady rise in gross margins throughout the rest of this year, with Q1 being the low point.

Speaker 7

If I can follow-up, another guidance question or modeling question. 2Q, any feel for 2Q modeling specifically, I guess both segments, but also kind of want to make sure we're all understanding of the in 2Q. So kind of just sequentially, Micah, how do you think about revenue progression? Thank you so much.

Speaker 4

Yes, absolutely. Great question.

Speaker 3

So if

Speaker 4

you think about the first half of the year last year to your point is there's a lot of supply chain disruption in those quarters Or on the consumer side, there is some improvements from the fulfillment of backorders. So the way I think about it, you'll see the second half more normal comps. But in Q1 last year, as I mentioned in my prepared remarks, the healthcare business grew 3%. Q2, it grew 19%. Traditionally, our healthcare business, based on seasonality and the non healthcare, both step back in Q2 and then you start to see progression in Q3 and our heaviest quarters in Q4.

Speaker 4

So just be aware of that comp, the 19% growth comp in Q2 on the healthcare side. We also saw comps for the non healthcare business of 22% growth in Q1 last year and then 10% growth in Q2, which is above trend line just because of the fulfillment of those back orders. So, I think, the first half, you'll see that we're up against some tough comps And still up against tough comps in Q2, but then those comps should ease and normalize out in the back half of this year.

Operator

Our next question comes from Jason Fednor with Piper Sandler. Your line is open.

Speaker 6

Hey, guys. Good afternoon.

Speaker 7

Joe or Mike, I wanted to start on maybe some of the new products. As we think about Halo, Stork, W1, I know this is a funding year for a lot of these new products, really a building year to get these products off the ground.

Speaker 6

But can we talk about

Speaker 7

maybe the intermediate term economics on the hardware, help us with how you're thinking about margins and what volumes need to reach with Halo or Stork or W1 in order for those offerings to be breakeven. And then maybe from a timing perspective, Should we be thinking about breakeven in 2024 or is this more of a multiyear process to get that part of the business profitable?

Speaker 3

Well, we high level, we expect all the business to be profitable from the day we launch them. We're not seeing margin limitation despite manufacturing of W1s right here in Irvine. We expect good margin on those. Michael, do you want to add anything to that?

Speaker 4

Yes. No, I think, Jason, we would expect to Joe's point, I mean, Those gross margins should be or the margins on those products should be supportive of our overall gross margins for the company. So, to Joe's point, they wouldn't we don't expect those to be dilutive. In fact, if we can start to see drive some subscription type revenues around some of those products as well over time. We could see even steady improvement above the corporate average.

Speaker 4

So But we are making some investments. I think I mentioned in my prepared remarks about 100 basis points of promotional investments this year And we're going to be very prudent and thoughtful about that as we invest going forward and we want to see good results and We'll continue to make the right investments to grow that business.

Speaker 7

Okay. I guess just that as we think about And maybe we're thinking about this differently in terms of how we're bucketing the profitability. But To say that they're profitable in year 1, we're talking about like more than $20,000,000 in revenue from these products this year, which I don't think is what you're saying, Mike. I I don't want to put words in your mouth, but sorry, go ahead.

Speaker 4

No, that's not I don't think that's what we're saying. I think, what Joe is referring to is that, It would be supportive of our gross margins. In terms of breakeven, I mean, we're going to have to see how that plays out, but We're making about 100 basis points of investment this year, and we have high expectations for these products, especially We think we'll see some meaningful revenues going into next year that could drive some leverage in that business and hopefully would turn profitability within the next a year or so.

Speaker 3

Yes. And I think also it's important to note that we've done advertisements before and we've done them every year practically since We launched our product and when you advertise even for certain product, it does lift all boats In other areas, for example, during COVID, we were advertising our COVID product. And while the COVID product said, well, it actually helped Massimo. So, yes, I think I don't think we are looking at losing money with any of this.

Speaker 6

Okay. No, fair enough. I mean, I think the one

Speaker 7

thing that's really hard to tease out or tell right now is These are entirely new categories, that you're entirely new channels that you're marketing and selling into, which I think is why I'm just trying to Gage out the sensitivity around spending and then the uptake, but it sounds like that's right now not expected to be an issue or Problem, but maybe shifting to a different follow-up here.

Speaker 3

Well, Jason, let me just maybe that's actually not a bad thing you're raising, maybe there's confusion out there. Remember, that's why we bought SoundUnited. There's 400 to 500 salespeople at SoundUnited that were there when we acquired them That are going to be helping these new products. So while it is a new category for Masimo for the combined entity, We're not hiring people to support these launches. We're that's why we bought the onion either.

Speaker 7

Yes. Understood. Yes, I'll handle some more there maybe in follow ups or up line here. But from a competitive perspective, I guess I'm just wondering if you're seeing any changes in practices or tactics with your main patient monitoring competitor out there Evaluate some alternatives to its business. I'm not asking you to speak ill of a peer, but is there traction with that group or have you seen them turn more aggressive?

Speaker 7

Just any shift in behavior there, just with that asset being up for potentially

Speaker 3

Well, it never helps to underestimate your competitors. But on the healthcare side, I think they tried everything. They can't slow us down. I hope to one day say that about the consumer side.

Operator

Your next question comes from Jayson Bedford with RJ. Your line is open.

Speaker 8

Good afternoon. Just a couple of questions. I guess just on the pipeline here, where do you stand with the timing of FDA clearance for both W1 And Stork, and then just walk through the decision to launch Stork without clearance.

Speaker 3

We don't know And we don't want to guess at when they're going to approve things. We're delighted that we got opioid halo cleared And we hope the rest will clear as well. But the decision to launch Storik is because it's a baby monitor. If you notice, we are not making alarm monitoring claims or things like that. And there's a significant business out there without making or needing to make those claims.

Speaker 3

So we decided to begin the sales of these products given that we were seeing the high interest of the retailers we were talking to without making those claims. But of course, as soon as we get the FDA clearance, We will announce that and I think it should help as well.

Speaker 8

Okay. Just Off topic here or a different topic. Is there any way to parse out the incremental cost related to the Apple suit in 1Q? And then just On the retrial from an expense standpoint, are most of these costs sunk or would you expect a similar spend on round

Speaker 3

We're not new to defending our IP, but we are new to people just exercising the hell out of the court with motions. I think the number of motions Apple filed that was leading up to this trade secret trial We're about 3 times what we're used to. So it's funny you say that because I've been asking Micah, can we non GAAP this extra stuff that's really related to Apple. It's not our standard stuff. Whether he gets comfortable with that or auditors get comfortable with that, I don't know.

Speaker 3

But it is really not normal.

Speaker 8

Is there any way to quantify it?

Speaker 3

I think we have. In the Wall Street Journal article, I think I mentioned we've spent $55,000,000 up until now on the Apple litigation. And of course, it's not just a trade secret case, it's the ITC case and the patent case, but There's a lot more to go. As I said, there's 5 cases. We've just begun on 2 of them.

Speaker 3

So my unfortunately, I think we're going to spend up

Speaker 4

Spend over $100,000,000 on these litigations. And Jason, just to clarify, that's over since the inception of the cases. So it's over multiple years, about 3 years.

Operator

Our next question comes from Mike Matson with Needham and Company.

Speaker 2

Yes, thanks. I just had a few on the Freedom Watch, so and I guess the bands as well for that matter. But I checked out the website. It looks like it's got a $1,000 price tag on it. It seems pretty high compared to the competing products Just wanted to get your take on that, especially since it's I assume it would require a subscription as well.

Speaker 2

And then, what's you said there was a lot of interest from the retailers in store. Have you What's the interest level been in the bands and freedom?

Speaker 3

Yes. We have 3 price points when it comes to the wearables. The most expensive is Freedom at about 1,000. The next most expensive product is a W1 at about $500 and then the Freedom band will probably be around $2.50 So we'll have something that does biosensing, the exact same biosensing for everyone, I believe. So then it's just a matter of what features do they want and are they willing to pay for those features.

Speaker 3

I've seen people get really excited about the privacy switch, which nobody else has. So we'll have to see. But as I've said before, our customers that we're targeting are people that have chronic illnesses and that need a serious monitor, that serious measurement and they wanted in a way that's unobtrusive. So time will tell where we go and as you know We are trying to manufacture these products in the U. S.

Speaker 3

Which makes the cost of goods greater than if we were doing them in China. But We'll see how it goes.

Speaker 6

Unfortunately, due

Speaker 3

to our conservative financial officer, we haven't projected a lot of revenue for these things. So we'll see.

Speaker 2

Yes, fair point. But and then just W1 in the healthcare setting, Are you seeing any signs of traction there with that product and channel?

Speaker 3

Well, W1 right now is being really marketed by our hospital sales force outside the U. S. And the U. S. We're Still waiting for FDA clearance.

Speaker 3

We had not begun putting W-one into the consumer channel Because we didn't want the consumers to think that is the watch we have in mind. We want them to first know Masimo Freedom that is a much more beautiful design and has a lot more features. So now that we Have begun the presales on Freedom. We're giving our consumer business team the ability if they want to begin selling W1 to their channel. So that may start happening towards the second half of the year.

Speaker 2

Okay. And if I can just get one more in on the second quarter. So I know there was an earlier question, but I guess I want to get more specific consensus I'm looking at, Saks, it's $591,000,000 of revenue, dollars 1.11 of EPS. Is that are you guys comfortable with that? Do you think The Street Analysts have modeled it correctly for the Q2.

Speaker 4

Yes. I think, Mike, when I look at the numbers right now, it looks like There wasn't consideration for the seasonality of both businesses where they traditionally stepped down in Q2. And the comps from last year, as I mentioned before, healthcare is up against a 19% comp On the growth rate last year in Q2 and non healthcare is up against a 10% comp in Q2 last year. So I think you've got to look at that, consider that we still will see pretty heavy year over year currency headwinds as well, Similar to what we saw in Q1. And then of course, the it starts to turn, I believe, into more of a tailwind in the back half On currency.

Speaker 4

So make sure that you're thinking through that as well.

Speaker 2

Okay. Got it. Thank you.

Speaker 3

Yes. But we reiterated the full year guidance. So while the quarters might not be exactly the way you guys have put out there, We feel really good about the whole year. Yes. And I think that was our last question.

Speaker 3

We Thank you for joining us today. And I know you guys are going to be spending a lot of time with Micah and Eli. Look forward to talking to you next quarter.

Operator

This concludes today's call. You may now disconnect.

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