Total stock-based compensation expense for the years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $44.6 million, $42.2 million and $39.2 million, respectively. As of January 1, 2022, an aggregate of 10.6 million shares of common stock were reserved for future issuance under the Company’s equity plans, of which 4.4 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.

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.

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. Upon effectiveness, an aggregate of 5.0 million shares were available for issuance under the 2017 Equity Plan. In May 2020, the Company’s stockholders approved an increase of 2.5 million shares to the 2017 Equity Plan. The aggregate number of shares that may be awarded under the 2017 Equity Plan is 7.5 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.


	Year Ended January 1, 2022			Year Ended January 2, 2021			Year Ended December 28, 2019
	Shares	Average Exercise Price		Shares	Average Exercise Price		Shares	Average Exercise Price
Options outstanding, beginning of period	3,448	$	77.44	5,212	$	54.23	5,676	$	43.61
Granted	85	250.15		400	187.83		545	140.56
Canceled/Forfeited	(171)	149.11		(219)	126.98		(158)	83.14

Exercised	(391)	53.55		(1,945)	32.41		(851)	33.32
Options outstanding, end of period	2,971	$	81.38	3,448	$	77.44	5,212	$	54.23
Options exercisable, end of period	2,175	$	57.09	2,026	$	47.31	3,311	$	33.80

Total stock option expense for the years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $13.0 million, $16.1 million, and $14.8 million, respectively. As of January 1, 2022, the Company had $27.0 million of unrecognized compensation cost related to non-vested stock options that are expected to vest over a weighted average period of approximately 5.1 years.


	Year Ended January 1, 2022			Year Ended January 2, 2021
	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 $50.00	1,426	3.33	1,426	1,696	4.14	1,518
$50.01 to $80.00	31	4.75	29	42	5.80	26
$80.01 to $120.00	805	5.81	544	910	6.83	408
$120.01 to $160.00	356	7.36	124	476	8.41	74
$160.01 to $200.00	226	8.18	41	255	9.17	—
$200.01 to $230.00	29	8.54	5	37	9.50	—
$230.01 to $280.00	98	8.97	6	32	9.53	—
Total	2,971	5.11	2,175	3,448	5.90	2,026

As of January 1, 2022 and January 2, 2021, the weighted-average remaining contractual term of options outstanding was 5.1 years and 5.9 years, respectively. As of January 1, 2022 and January 2, 2021, 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 January 1, 2022			Year Ended January 2, 2021			Year Ended December 28, 2019
	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	2,862	$	99.66	2,797	$	96.85	2,707	$	95.54
Granted	112	257.43		98	193.77		100	133.57
Canceled/Forfeited	(23)	204.33		(6)	165.03		(3)	133.50

Vested	(35)	163.71		(27)	134.78		(7)	99.05
RSUs outstanding, end of period	2,916	$	104.13	2,862	$	99.66	2,797	$	96.85

Total RSU expense for the years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $9.0 million, $5.7 million and $2.8 million, respectively. As of January 1, 2022, the Company had $26.6 million of unrecognized compensation cost related to non-vested RSU awards expected to be recognized and vest over a weighted-average period of approximately 3.5 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 January 1, 2022				Year Ended January 2, 2021			Year Ended December 28, 2019
	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	444		$	120.28	412	$	102.22	313	$	88.34
Granted	148	(1)	250.73		97	179.42		128	133.50
Canceled/Forfeited	(17)		166.84		(7)	122.13		—	—

Vested	(272)		86.95		(58)	90.69		(29)	90.69
PSUs outstanding, end of period	303		$	168.68	444	$	120.28	412	$	102.22

(1) On February 22, 2021, the Audit Committee approved the weighted payout percentage for the 2018 PSU awards (three-year performance period), which were based upon the Company’s actual fiscal year 2020 performance against pre-established performance objectives. Included in the granted amount are those additional PSUs earned based on actual performance achieved. These PSUs were originally awarded at target.

During the year ended December 28, 2019, the Company awarded 128,000 PSUs that will vest three years from the award date based on the achievement of certain fiscal year 2021 performance criteria approved by the Compensation Committee of the Board (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 128,000 PSUs or 256,000 shares. On February 14, 2022, the Audit Committee determined that the performance criteria were achieved within the range.

During the year ended January 2, 2021, the Company awarded 97,000 PSUs that will vest three years from the award date, based on the achievement of certain fiscal year 2022 performance criteria approved by the Compensation Committee. 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 97,000 PSUs or 194,000 shares.

During the year ended January 1, 2022, the Company awarded 69,000 PSUs that will vest three years from the award date, based on the achievement of certain fiscal year 2023 performance criteria approved by the Compensation Committee. 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 69,000 PSUs or 138,000 shares.

Based on management’s estimate of the number of units expected to vest, total PSU expense for the years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $22.6 million, $20.4 million and $21.6 million, respectively. As of January 1, 2022, the Company had $33.5 million of unrecognized compensation cost related to non-vested PSU awards expected to be recognized and vest over a weighted-average period of approximately 0.8 years.

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

Year Ended
January 1,
2022

Year Ended
January 2,
2021

Year Ended
December 28,
2019

Risk-free interest rate

0.3% to 0.9%

0.2% to 1.7%

1.4% to 2.6%

Expected term

5.1 years to 5.6 years

5.1 years to 5.1 years

5.1 years to 5.2 years

Estimated volatility

30.9% to 34.7%

26.9% to 35.5%

28.2% to 30.0%

Expected dividends

Weighted-average fair value of options granted

$75.72 per share

$51.10 per share

$42.29 per share

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 fiscal years 2021, 2020 and 2019 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 January 1, 2022, January 2, 2021 and December 28, 2019, 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, net of forfeitures. Forfeitures of stock-based awards are recognized as they occur. The total fair value of all options that vested during fiscal years 2021, 2020 and 2019 was $15.2 million, $15.1 million and $14.2 million, respectively.

The aggregate intrinsic value of options is calculated as the positive difference, if any, 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 January 1, 2022 was $628.1 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 January 1, 2022 was $512.5 million. The aggregate intrinsic value of options exercised during the years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $84.7 million, $355.3 million and $93.9 million, respectively.

The total income tax benefit recognized in the consolidated statements of operations for stock-based compensation expense was $16.4 million, $30.4 million and $15.7 million for the years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively.


	Year Ended January 1, 2022		Year Ended January 2, 2021		Year Ended December 28, 2019
Cost of goods sold	$	839	$	714	$	445
Selling, general and administrative	31,315		31,462		30,450
Research and development	12,470		10,049		8,340
Total	$	44,624	$	42,225	$	39,235