Good day ladies and gentlemen, and welcome to the First Quarter 2008 Masimo Corporation Earnings Conference Call. My name is Gracey and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today's presentation, Mr. Nick Laudico from The Ruth Group. Please proceed Sir.

Thanks, operator. Welcome to the Masimo Corporation First Quarter 2008 Earnings Conference Call. Masimo's senior management joining us on the call today will be Joe E. Kiani, Chairman and Chief Executive Officer, and Mark P. De Raad, Executive Vice President and Chief Financial Officer. Before we begin, Masimo cautions you that this conference call includes forward-looking statements. All statements other than statements of historical facts included in this conference call that address activities, events, prospects, or developments that Masimo expects, believes or anticipates or may occur in the future are forward-looking statements. These forward-looking statements are based on current expectations about future events affecting Masimo and are subject to uncertainties and factors relating to its operations and business environment, all of which are difficult to predict and many of which are beyond Masimo's control. Certain factors mentioned in the release look at the risks outlined under forwarding looking statements in Masimo's press release filed today and under risk factors in its periodic reports filed with the SEC will be important in determining future results. Although Masimo believes that the expectations reflected in its forwarding looking statements are reasonable, Masimo doesn't know whether its expectations will prove correct. Our forward looking statements included in this conference call are expressly qualified in their entirety by the foregoing cautionary statements. You are cautioned not to place undue reliance on these forward-looking statements which may speak only of the date here of. Masimo does not undertake any obligation to update, amend or clarify these forward-looking statements the risks outlined in today's press release or its SEC filings whether as a result of new information future events or otherwise except as maybe required under the Federal Securities laws. And with that I would like to turn the call over to Joe Kiani.

Thank you Nick and thank you ladies and gentlemen for joining us on our first quarter 2008 revenue and earnings announcement. As you’ve seen from our press release today we had a strong quarter due to our clinically superior technology offering and business model. To get things started today Mark will provide you a summary of our Q1 finical results. Afterwards I would like to close off with some comments and then Mark and I will answer your questions. Mark? Mark De Raad – Executive Vice President and Chief Financial Officer: Thank you, Joe. Please keep in mind that all my comments today will relate to our financial results on a GAAP basis. And as you will recall prior to August 2007 our IPO Masimo was required to report earnings per share under the two class method. After our IPO we have reported earnings per share under the traditional treasury stock method. To allow for comparability we have continued to provide non-GAAP Pro forma earnings per share for the prior periods to allow our investors to recognize the difference in reported earnings per share under both methods. Therefore, included within today's earnings release is a schedule reconciling the Q1 2007 GAAP earnings per common share for the Q1 2007 non-GAAP earnings per common share. As we reported earlier in our press release toady our total first quarter revenues were a record 71.1 million and consisted of record product revenues of 59.7 million and royalty revenues of 11.4 million. This represented an approximate 30% increase in year-over-year product revenue growth. During the first quarter we shipped over 28,600 new pulse oximetry units or drivers into the market place. And as a result we now believe that our net installed drivers totaled approximately 491,000 units worldwide compared to just 399,000 one year…

(Operator Instructions) And your first question comes from the line of Bill Quirk of Piper Jaffray.

Great, good afternoon and congratulations on very nice quarter guys.

Thanks Bill.

Thank you Bill.

A couple of questions, first off on Rainbow clearly outperformed in the quarter. Joe, were there any one time large purchases here from the distributor or is this simply a cases in building momentum within this product line?

This is a case of building momentum on the product line. I think as you know through Q1 and part of the Q4 of 2007 many Fire Emergency Association started to recommend monitoring carbon monoxide for the first time, and I think you are seeing the momentum. And as far as just to remind you, this is not our distributor buying a lot and putting on the shelf because we only report what has been sold through the distributor to the customer.

Okay very good. So without trying to getting into guidance here Joe, would it be fair to say that we have seen kind of continued momentum here into the second quarter as well?

Well sure, we don’t believe there was any one time event in Q1.

Okay great. And then just one last question I will jump back in the queue. Just specifically thinking about total hemoglobin thank you for the data, when you filed that, would it be fair to assume guys that we should see a May or June approval here in the 510-K. and then I guess separately from that, I guess how would you characterize your discussions with FDA?

Well, we have lot of respect for the FDA and consistent to their guidance, we don’t like to suggest when we are going to get FDA clearance. Hopefully we will get FDA clearance. And I think as far as communication with FDA, we’ve had the normal communication nothing really significant to report at this point.

Very good thank you.

Thank you.

Your next question comes from the line of Tao Levy of Deutsche Bank.

Hey, good afternoon it’s Tao from Deutsche.

Hi, Tao.

Hey. I just want to understand a little bit Mark here the guidance that you provide, you are seeing on changing things, but being clearly exceeded expectations I think Joe put that in his prepared comments. So I am just trying to understand you exceeded Q1 why there, why you are not updating the full year guidance and how relevant is that guidance again with Q1 coming in stronger, how are you expecting something in the back half to slowdown?

Well, Tao I think the way to answer that is as I said in my prepared remarks that the company’s policy which both board and management have agreed to abide by is one in which we will provide annual guidance upfront. When and if we think it’s appropriate throughout the year to update that guidance we will do that. But as of right now, we are consisting, we are going to continue to be consistent with that policy and having been just through the first quarter our policy right now is that we’re not going to comment on any additional guidance.

Okay.

Okay, and just to maybe say a couple more words on that. When we were going to go public, we thought about this and there were three options obviously, one is to provide quarterly guidance, one is to provide annual guidance and one is to provide no guidance at all. We opted for providing the annual guidance and it’s very tempting for us to want to update our guidance but we just want to stick to our plan and when we absolutely feel like we have to, we will provide you more information.

Okay, maybe just it makes it a little bit challenging to the kind of incorporate Q1 results and the out performance there with not changing full year guidance but, that’s fine. And then, Joe, may I would love to get your thoughts on what are the sort of next steps with the FDA is it – do you now sort of just wait for feedback from them maybe they have questions, maybe they don’t on the no news is good news. I was just wondering if there is sort of some specific timeline or next steps with the FDA?

Well, I think yes – we are going to sit tight and wait to here back from the FDA. FDA has been very good and getting back with us within typically around 90 days. And so we are not that far from that window but we have no way of knowing whether that will happen in this case, and but, you know we are hopeful that we will hear from them and we are hopeful that will get clearance one day.

Yes, there is some seasonality on how hospitals order sensors due to the flu season. So typically we see more demand for sensors in the winter month. To-date, however, our growth has far outstripped seasonality change, that’s very, very minor. So, to answer your question yes, there is but I don’t believe it’s a big enough number that will impact Masimo's momentum.

Thanks a lot and a great quarter.

Thank you.

Your next question comes from the line of Philip Legendy of Thomas Weisel Partners.

Hi guys, great quarter.

Thanks Philip.

Hi Philip.

So I have Joe on the speakerphone. First question, back to the -- on the base business, at this point what percent of bids in the market are you invited to compete for and what do you think your win rate is in those bids?

Okay, I guess, its going to be unfortunately a big guess, because it’s hard to know all of the information that we don’t know. I mean, I know what I know, but I don't know what I don't know. My guess is at this point we're probably invited for over 50% of the bids and we'd probably win over 70% of them.

Okay, and what do you think, do you have an updated view of what market growth is today?

Well, I don’t believe anything has come out that changes what we have seen historically and what has been reported, which has been 6 to 8%. We had some quarters exceeded to be maybe – near 10% or may be a slightly above 10%. So I think that trend is probably still going on out there driven by I think the growth, the general floor monitoring area, as well as the demand for single-patient use sensor due to worries of cross infection, in particular the MRSA.

Okay. And then just on a few technical issues here, it looks like the revenue for driver is up again in the quarter. And I was just wondering if you have been seeing a price increases? Is anything changing there, that will cause that change?

Phil, I agree with you; that does seem to be going up. It could be one of two things or maybe both. One, maybe we have been too conservative with seven year lifespan of our Pulse Oximeters and Pulse CO-Oximeters that are excluding handhelds of course. And the other as I said earlier, we are seeing some areas where in the prior years they were using re-usable sensors to now go to a single-patient use sensors to avoid cross contamination between patients.

Makes sense, and now I'll just round it of with another question on hemoglobin. I know that you have some systems out in the field in pilot centers. Can you talk about, kind of the impact that you see in the clinical practice from -- what has the impact of the sensors been on the way doctors are able to practice?

Good question, we have kind of seen accidentally some amazing impact. I think you maybe familiar with the story of one doctor who actually put test unit on himself and found out that he had a low hemoglobin level. He initially didn’t believe it, when they drew blood it was right on. And then he went to find out why and he ended up having bleeding and thoracic due to a cancer he had. So he ended up doing surgery, got to the cancer as quick enough and of course its one of the testaments to this new technology. But in a more general form what we are hearing from customers is that in the OR by having non-invasive and continuous and I underlined the continuous hemoglobin monitor, they are able to give blood transfusion when it’s really necessary instead of overdoing it which seems to be the case today. And the Intensive Care Units, they are able to more confidentially monitor their patients so that they will not be bleeding internally till it’s too late when it’s noticed. I think those are probably the biggest impact points. We also see based on surveys and talking to customers is that there is going to be a big demand in the emergency department because many hospitals release are their protocol is to check hemoglobin on just about every patient that comes in. And secondly in doctors offices we believe there is a high rate of hemoglobin orders or CBC orders which seems to be the vast majority of them or for hemoglobin and since they can be done non-invasively for the patient, there seems to be a lot of interest in that in many of the doctors office settings.

And do you have a sense yet of how significantly you are impacting the transfusions in the OR. I mean, are they reducing transfusions by 10% and 50%? Is there any indication?

No we have anecdotal evidence but not things that I want to put out there. What I can tell you is that all of this data that we’re getting is based on anecdotal data that has come as a byproduct of collecting data for FDA submission and engineering work. Once the product is released we have a huge backlog of very well known clinical researchers who would like to do many kinds of studies including answering some of the question you have laid out there as far as how much efficiencies and hopefully improvement in care we can get from continuous non-invasive hemoglobin.

Well, we will stay tuned. Thanks for taking the questions.

Thanks.

The next question comes from Matthew Dodd of Citigroup.

Hey good afternoon. Joe, a question again on the revenue for driver on annual basis. As it keeps going up, I was wondering is it a pretty important number here for the overall revenue. Are other things influencing that like your move to direct and US, OUS split. I mean, you said, there was a couple of things impacting you, but, how many things can really impact that number, that are meaningful obviously?

Well I think I have probably listed the two most likely things, but I think you’re right there is a probably a third reasons why sensor utilization could improve, and that is that historically when Masimo started we were working with our OEM’s, in fact, initial OEM’s where company’s that were not very strong in the intensive care unit and the OR. So, in the beginning years that did affect our sensor utilization. I think now that we are direct and that many of – all the other OEM’s practically have come forward specially the ones that are strong in the US operating rooms and intensive care units. Naturally the sensor utilization are going to go up. But at the same time, I guess, going against that trend is the fact that we have ramped up pretty large sales force and Europe is predominantly a reusable sensor business. So we’re getting a lot more sockets there now that are not consuming the single patient use sensors. So that kind of going against that trend. But overall I think as you can see the trend has been positive. What we have to decide, and I think we will know more maybe with some more surveys from our customers is really how much of it is because monitors are being used longer versus shifting sensor utilization from reusable to disposable because of the crop contamination and the other things I just mentioned, and then one follow-up on the VC shares there was obviously, quite a bit that went out and I at my senses had some of the impact on the stock, where do you think you are with that, do you think that the VC holdings that have been sold or largely gone and do you feel there still some to go and do you have a lot of visibility on what the…..?

No, this is Mark. The good news is we just recently have the opportunity to speak with a large percentage of our more significant shareholders and their indications to us are that they have no intention liquidating their positions, in many cases they have been long-term Masimo shareholders and they like us continue to look very favorably upon the future and they have no short term desire to liquidate or monetize any of their additional holdings.

And Matt, I would like to add that two of the VCs that did a mold about half of their shares last quarter, both of them had been to be the Masimo for over ten years, one invested in 1996, one in 1994 and both firms we were, we want to know we were the last holding to held and in the other one we were the very first investment and both firms had need for cash, they raised more money. And one case of course, even the fund to won the board members that sits on our board is no longer been in that group, but still remains the general partner of that group.

All right, well thank you Joe and thank you Mark. Congratulations.

Thank you Matt.

Your next question comes from the line of Sara Michelmore, of Cowen & Company.

Great, good afternoon.

Hi Sara.

You know Joe, I was wondering do you have any more recent data on the percentage share are you have of new drivers shipments, I know you had some data on 2006, I was wondering if you had any updated data or updated thoughts on your new driver share for 2007 or where do you think you are currently?

Sara, there are no new analyst store market research report since the one in 2006, that one I think as you remember showed Masimo’s new shipments, percentages, our pulse oximetry was 38% neck and neck with our main competitor. I think you know that last year our pulse oximetry, pulse co-oximetry shipments increased by over 20% compared to the prior year. So, what we don’t really know at this point is how much of any of that our remaining competitors or any other competitors increased or the day decreased. So, at this point really all they can do is provide you a guess lets say we must be over 40% by now.

Okay. And just a followup on hemoglobin, I know when we spoke to you last you had suggested that the post approval rollout plan for total hemoglobin were involved maybe some you know beta site type of use. Can you talk about your latest thoughts there and confirms as it still the plan and, you haven’t talked at all about the OUS filing strategy for that product, I was wondering if you can update us on your thoughts moving forward total hemoglobin internationally? Thanks.

Sure. Thank you Sara, we would be happy to. I guess, first of all yes, we did say that, we thought it was prudent to not launch right away commercially, assumes we do have regulatory approval, regulatory clearance, but instead take 10 to maximum 50 data sites to customer in the US and around the world and make sure that we understand that our customers are satisfied and there is no – there is still cautious before we roll it out totally commercially, but as far as what is our plan internationally, Europe is probably going to be I think the most predictive territory for launching Rainbow since we don’t need FDA clearance there and what we do need to see marketing and given that we advance with the extra burns of ISO certification we can see more of the product sell. So we are expecting the second half of this year to hopefully begin the beta site rollout in Europe, and if by then we have portion enough to have our FDA clearance will of course do it in the US as well. As far as Japan is probably going to see another year or two years after that, Japan's regulatory cycles unfortunately have been very long and China had even been longer than Japan. We don’t do a significant amount of business in China. So really what matters to us most is from a market perspective and reach is the US, Europe and Japan in that order.

Okay. That’s helpful thank you.

Thank you. Do we have any other questions?

Your next question is a follow-up question from the line of Bill Quirk of Piper Jaffray.

Yeah thanks. I have just a couple of follow up or housekeeping questions if you will. Mark on the tax rate, did that have anything to do with frankly the mix of income depending on the geography i. e Europe versus for example?

No, Bill it actually just had directly to deal with the total amount of taxable income.

Okay, very good. And then secondly I assume that you guys stuck with your EMS distributor, there was no change in the quarter, is that right?

Yes.

Yes okay. Very good thank you.

So on the EMS distributor, yes we are still with them and as you can see we had a very good Q1 with them and we hope that trend will continue. Any more questions?

Your next question comes from the line of Douglas Simon of Deutsche Bank.

Hi I am just -- a quick question, I am referring to the cover article on anesthesiology this month about plethysmography. Is there any discussion in terms of standard of care with the societies about using the technology to plant invasive blood gas monitoring and I guess is a sort of follow up slightly different question to that in pre-op evaluation with the hemoglobin, is there any potential for capability to measure platelets as well?

Okay. Unfortunately the answer to both questions is no. We are not aware of any standard of care discussions being set for non-invasive blood constitution monitoring that we have developed and no we are not -- we can -- for now only measure hemoglobin and not platelets or anything else. I think the cover of the anesthesiology that you are referring to I believe is anesthesia and analgesia that talk about Pleth variability index. Is that the one you are referring to?

No. It’s the May issue of anesthesiology from the American society?

Okay.

It’s the utility of the photoplethysmogram in circulatory monitoring?

Okay I have not seen that yet. What I have seen is -- its nice to hear that, the last issue of anesthesia and analgesia the cover was on plus variability index PBI which is one of the measurements that we have introduced in 2007 and there is a lot of excitement around that as a potential way to check for fluid responsiveness on patients non-invasively which today there is no other solution for. Any other questions we have time for one more question.

And your final question comes from the line of Robert Faulkner of (Redmail Group).

Good evening.

Hi Rob how are you doing?

Fine. How are you Joe?

Good. Thank you.

Good. Very nice quarter as ever. And Mark, I am wondering if you could comment on the question that many companies you’re getting as, since some of partners are in the capital equipment business are they seeing any push back or financing issues or any reason for hospital to be reducing their expenditures on the capital equipment?

I think there are two ways of answer that, first of all, the great part of our business model as you know, is the business model that in essence and especially in our long-term US hospital contracts here in the us essentially requires no upfront capital. And so for our customers the concern of capital been a endurance to being able to doctor our technology is frankly no an issue. So in situations like we are today, that yet becomes yet another benefit to our overall business model and selling strategy. In terms of what we have seen, we've really not seeing any similar to what you're describing, the only area that I think maybe a little bit of inside would be on our larger OEM customers. It does appears though which isn't a big surprise I think to anybody that the customers that are actually selling large, and I know that I'm using the word selling, large high-ticket capital equipment, those type of customers do appear to be seeing a little bit of softness, but as you can tell by our results this quarter, the basic core foundation of our model does not require any involvement of capital equipment. And so we're not being impacted by that.

Right, now I just know, you may have unique broad visibility into that kind of other arena?

Well it's just an additional thing to say about that is yes, you are right that the capital equipment sellers seem to have at least in Q1 have had a little bit of slowdown which is not typical in a recessionary period for our business, but I think due to the credit crunch some of the interest I think that they are paying has risen to the point where some of these hospitals are pushing out some of those equipments. But the good news is as Mark said, for Masimo given that over 80% of our business comes from our direct business which does not rely on capital equipment sale in the US but rather the placement of devices for sensor business we're seeing no effect.

Alright. Maybe, could you also just comment on if there is an update on competition in anyway? Are they changing what they are doing? Are they having more or less effect; it certainly a results effectiveness on your part?

Well we always take our competition seriously and unfortunately everyday we wake up and we are dealing with the same competitor.

And did they change what they are doing in anyway that you've seen.

No it’s the unfortunate part. They are behaving the same way, but the good news is the customers here over their noise, their noise typically delays things that does not change the ultimate destination.

Yeah, okay. Great well thank. Nice job.

Thank you. Good to hear from you.

Well, thank you all so much for joining us ladies and gentlemen for our call today. We look forward to our next call and hope to see you guys face to face too. Thank you.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect.