Total stock-based compensation expense for the years ended December 28, 2019, December 29, 2018 and December 30, 2017 was $39.2 million, $27.4 million and $17.2 million, respectively. As of December 28, 2019, an aggregate of 10.8 million shares of common stock were reserved for future issuance under the Company’s equity plans, of which 2.4 million shares were available for future grant under the Masimo Corporation 2017 Equity Incentive Plan (2017 Equity Plan). Additional information related to the Company’s current equity incentive plans, stock-based award activity and valuation of stock-based awards is included below.

On June 1, 2017, the Company’s stockholders ratified and approved the 2017 Equity Plan. The 2017 Equity Plan permits the grant of stock options, restricted stock, RSUs, stock appreciation rights, PSUs, performance shares, performance bonus awards and other stock or cash awards to employees, directors and consultants of the Company and employees and consultants of any parent or subsidiary of the Company. The aggregate number of shares that may be awarded under the 2017 Equity Plan is 5.0 million shares.

The 2017 Equity Plan provides that at least 95% of the equity awards issued under the 2017 Equity Plan must vest over a period of not less than one year following the date of grant. The exercise price per share of each option granted under the 2017 Equity Plan may not be less than the fair market value of a share of the Company’s common stock on the date of grant, which is generally equal to the closing price of the Company’s common stock on the Nasdaq Global Select Market on the grant date.

Effective June 1, 2017, upon the approval and ratification of the 2017 Equity Plan, the Company’s 2007 Stock Incentive Plan (2007 Equity Plan) terminated, provided that awards outstanding under the 2007 Equity Plan will continue to be governed by the terms of that plan. In addition, upon the effectiveness of the 2017 Equity Plan, an aggregate of 5.0 million shares of the Company’s common stock registered under prior registration statements for issuance pursuant to the 2007 Equity Plan were deregistered and concurrently registered under the 2017 Equity Plan.



	Year Ended December 28, 2019				Year Ended December 29, 2018				Year Ended December 30, 2017
	Shares		Average Exercise Price		Shares		Average Exercise Price		Shares		Average Exercise Price
Options outstanding, beginning of period	5,676		$	43.61	6,953		$	36.26	8,521		$	28.56
Granted	545		140.56		564		98.47		928		86.69
Canceled/Forfeited	(158	)	83.14		(233	)	67.45		(250	)	38.59
Exercised	(851	)	33.32		(1,608	)	27.62		(2,246	)	27.63
Options outstanding, end of period	5,212		$	54.23	5,676		$	43.61	6,953		$	36.26
Options exercisable, end of period	3,311		$	33.80	3,273		$	29.63	3,812		$	26.28

Total stock option expense for the years ended December 28, 2019, December 29, 2018 and December 30, 2017 was $14.8 million, $13.8 million, and $12.0 million, respectively. As of December 28, 2019, the Company had $44.9 million of unrecognized compensation cost related to outstanding and unvested options that are expected to vest over a weighted average period of approximately 2.8 years.

The number and weighted-average exercise price of outstanding and exercisable stock options segregated by exercise price ranges (in thousands, except range of exercise prices and remaining contractual life) were as follows:



	Year Ended December 28, 2019			Year Ended December 29, 2018
	Options Outstanding		Options Exercisable	Options Outstanding		Options Exercisable
Range of Exercise Prices	Number of Options	Average Remaining Contractual Life	Number of Options	Number of Options	Average Remaining Contractual Life	Number of Options
$15.00 to $35.00	2,287	3.35	2,240	2,956	4.24	2,560
$35.01 to $55.00	1,189	5.95	724	1,341	6.97	548
$55.01 to $75.00	53	6.69	23	72	7.75	20
$75.01 to $95.00	985	7.76	291	1,076	8.75	141
$95.01 to $115.00	144	8.61	26	160	9.54	4
$115.01 to $135.00	251	9.12	7	71	9.73	—
$135.01 to $160.00	303	9.63	—	—	0.00	—
Total	5,212	5.60	3,311	5,676	6.01	3,273

As of December 28, 2019 and December 29, 2018, the weighted-average remaining contractual term of options outstanding was 5.6 years and 6.0 years, respectively. As of December 28, 2019 and December 29, 2018, the weighted average remaining contractual term of options exercisable with an exercise price less than the closing price of the Company’s common stock was 4.3 years and 4.7 years, respectively.



	Year Ended December 28, 2019				Year Ended December 29, 2018				Year Ended December 30, 2017
	Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value
RSUs outstanding, beginning of period	2,707		$	95.54	2,708		$	95.51	2,706		$	95.40
Granted	100		133.57		7		99.05		33		86.42
Canceled/Forfeited	(3	)	133.50		—		—		(25	)	85.79
Vested	(7	)	99.05		(8	)	88.40		(6	)	43.09
RSUs outstanding, end of period	2,797		$	96.85	2,707		$	95.54	2,708		$	95.51

Total RSU expense for the years ended December 28, 2019, December 29, 2018 and December 30, 2017 was $2.8 million, $0.7 million and $0.5 million, respectively. As of each of December 28, 2019, the Company had $10.4 million of unrecognized compensation cost related to unvested RSU awards expected to be recognized and vest over a weighted-average period of approximately 3.9 years, excluding any contingent compensation expense related to certain RSUs that were granted to the Company’s Chairman and CEO in connection with the amendment and restatement of his employment agreement. See “Employment and Severance Agreements” in Note 21 to these consolidated financial statements for further details on the CEO’s employment agreement.



	Year Ended December 28, 2019				Year Ended December 29, 2018				Year Ended December 30, 2017
	Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value
PSUs outstanding, beginning of period	313		$	88.34	233		$	90.70	—		$	—
Granted	128		133.50		197		86.95		248		90.71
Canceled/Forfeited	—		—		(86	)	90.71		(15	)	90.87
Vested	(29	)	90.69		(31	)	90.70		—		—
PSUs outstanding, end of period	412		$	102.22	313		$	88.34	233		$	90.70

During the year ended December 30, 2017, the Company awarded 248,000 PSUs that would vest in part over time based on the achievement of certain 2017 performance criteria approved by the Compensation Committee of the Board (Compensation Committee). In March 2018, the Compensation Committee determined that 165,000 shares had been earned based on the 2017 performance criteria, at which time 20% of the PSUs granted were vested. The remaining award vests in four equal installments at the beginning of each of the following four years based on continued employment with the Company.

During the year ended December 29, 2018, the Company awarded 197,000 PSUs that would vest three years from the award date based on the achievement of certain 2020 performance criteria approved by the Compensation Committee. If earned, the PSUs granted will vest at the time the achievement level of the performance criteria is determined by the Compensation Committee. The number of shares that may be earned can range from 0% to 200% of the target amount; therefore, the maximum number of shares that can be issued under these awards is twice the original award of 197,000 PSUs or 394,000 shares.

During the year ended December 28, 2019, the Company awarded 128,000 PSUs that would vest three years from the award date, based on the achievement of certain 2021 performance criteria approved by the Board. If earned, the PSUs granted will vest upon achievement of the performance criteria after the year in which the performance achievement level has been determined. The number of shares that may be earned can range from 0% to 200% of the target amount; therefore, the maximum number of shares that can be issued under these awards is twice the original award of 128,000 PSUs or 256,000 shares.

The total PSU expense for the years ended December 28, 2019, December 29, 2018 and December 30, 2017 was $21.6 million, $12.9 million and $4.7 million, respectively. As of December 28, 2019, the Company had $37.7 million of unrecognized compensation cost related to non-vested PSU awards expected to be recognized and vest over a weighted-average period of approximately 1.4 years.

The Black-Scholes option pricing model is used to estimate the fair value of stock options granted under the Company’s stock-based compensation plans. The range of assumptions used and the resulting weighted-average fair value of stock options granted at the date of grant were as follows:



	Year Ended December 28, 2019	Year Ended December 29, 2018	Year Ended December 30, 2017
Risk-free interest rate	1.4% to 2.6%	2.3% to 3.1%	1.7% to 2.2%
Expected term	5.1 years to 5.2 years	5.2 years to 5.6 years	5.5 years to 5.6 years
Estimated volatility	28.2% to 30.0%	26.8% to 32.0%	29.7% to 32.1%
Expected dividends	0%	0%	0%
Weighted-average fair value of options granted	$42.29 per share	$31.85 per share	$27.81 per share

Risk-free interest rate. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with a remaining term approximately equal to the expected term of the Company’s stock options.

Expected term. The expected term represents the average period that the Company’s stock options are expected to be outstanding. The expected term is based on both the Company’s specific historical option exercise experience, as well as expected term information available from a peer group of companies with a similar vesting schedule.

Estimated volatility. The estimated volatility is the amount by which the Company’s share price is expected to fluctuate during a period. The Company’s estimated volatilities for 2019, 2018 and 2017 are based on historical and implied volatilities of the Company’s share price over the expected term of the option.

Expected dividends. The Board may from time to time declare, and the Company may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law. Any determination to declare and pay dividends will be made by the Board and will depend upon the Company’s results of operations, earnings, capital requirements, financial condition, business prospects, contractual restrictions and other factors deemed relevant by the Board. In the event a dividend is declared, there is no assurance with respect to the amount, timing or frequency of any such dividends. The dividend declared in 2012 was deemed to be a special dividend and there is no assurance that special dividends will be declared again during the expected term. Based on this uncertainty and unknown frequency, for the years ended December 28, 2019, December 29, 2018 and December 30, 2017, no dividend rate was used in the assumptions to calculate the stock-based compensation expense.

The Company has elected to recognize stock-based compensation expense on a straight-line basis over the requisite service period for the entire award. The total fair value of all options that vested during fiscal years 2019, 2018 and 2017 was $14.2 million, $13.7 million and $10.5 million, respectively.

The aggregate intrinsic value is calculated as the difference between the market value of the Company’s common stock on the date of exercise or the respective period end, as appropriate, and the exercise price of the options. The aggregate intrinsic value of options outstanding, with an exercise price less than the closing price of the Company’s common stock, as of December 28, 2019 was $548.6 million. The aggregate intrinsic value of options exercisable, with an exercise price less than the closing price of the Company’s common stock, as of December 28, 2019 was $416.2 million.

The aggregate intrinsic value of options exercised during the years ended December 28, 2019, December 29, 2018 and December 30, 2017 was $93.9 million, $127.1 million and $140.3 million, respectively.

The total income tax benefit recognized in the consolidated statements of operations for stock-based compensation expense was $15.7 million, $22.0 million and $39.2 million for the years ended December 28, 2019, December 29, 2018 and December 30, 2017, respectively.



	Year Ended December 28, 2019		Year Ended December 29, 2018		Year Ended December 30, 2017
Cost of goods sold	$	445	$	334	$	351
Selling, general and administrative	30,450		21,391		13,272
Research and development	8,340		5,692		3,564
Total	$	39,235	$	27,417	$	17,187

The increase in total stock-based compensation expense during the year ended December 28, 2019 was due to both the composition of the equity awards granted and a significant increase in the fair market value of the Company’s stock from the prior year, which increased the value of the equity awards granted during such year.