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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________
FO RM 10-Q
________________________________________________

(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2025
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________
Commission File N umber 001-33642
________________________________________________
MASIMO CORPORATION
(Exact Name of Registrant as Specified in its Charter)
________________________________________________

Delaware |  |  |  |  |  | 33-0368882
(State or Other Jurisdiction of Incorporation or Organization) |  |  |  |  |  | (I.R.S. Employer Identification Number)
52 Discovery |  | Irvine, |  | California |  |  |  |  |  | 92618
(Address of Principal Executive Offices) |  |  |  |  |  | (Zip Code)
|  |  |  |  |  | (949) |  | 297-7000 |  |  |  |  |  |  |  |  |
(Registrant’s Telephone Number, Including Area Code)
Securities Registered pursuant to Section 12(b) of the Act: |  |
Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, $0.001 par value |  | MASI |  | The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |  | Yes |  | ☒ | No |  | ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). |  | Yes |  | ☒ | No |  | ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |  | ☒ |  |  |  |  |  |  |  | Accelerated filer |  |  |  | ☐ |  |  |
Non-accelerated filer |  | ☐ |  |  |  |  |  |  |  | Smaller reporting company |  |  |  | ☐ |  |  |
|  |  |  |  |  |  |  |  |  | Emerging growth company |  |  |  | ☐ |  |  |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) |  | Yes |  | ☐ | No |  | ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: |  |
Class |  |  |  |  |  |  |  | Number of Shares Outstanding as of June 28, 2025
Common stock, $0.001 par value |  |  |  |  |  |  |  | 54,324,812

Table of Contents
MASIMO CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 28, 2025
TABLE OF CONTENTS

PART I. Financial Information
Item 1. | Financial Statements (unaudited): |
| Condensed Consolidated Balance Sheets as of June 28, 2025 and December 28, 2024 | 4
| Condensed Consolidated Statements of Operations for the three and six months ended June 28, 2025 and June 29, 2024 | 5
| Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 28, 2025 and June 29, 2024 | 6
| Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 28, 2025 and June 29, 2024 | 7
| Condensed Consolidated Statements of Cash Flows for the six months ended June 28, 2025 and June 29, 2024 | 9
| Notes to Condensed Consolidated Financial Statements | 11
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 51
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 61
Item 4. | Controls and Procedures | 63
PART II. Other Information |
Item 1. | Legal Proceedings | 63
Item 1A. | Risk Factors | 64
Item 5. | Other Information | 66
Item 6. | Exhibits | 67
Signatures | 68

2

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
3

Table of Contents
MASIMO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except par values)

| June 28, 2025 |  | December 28, 2024 |
ASSETS |  |  |  |
Current assets |  |  |  |
Cash and cash equivalents | $ | 149.6 |  |  | $ | 123.6 |  |
Trade accounts receivable, net of allowance for credit losses of $4.9 million and $3.5 million at June 28, 2025 and December 28, 2024, respectively | 278.0 |  |  | 268.9 |  |
Related party receivables - (Note 3) | 17.4 |  |  | 14.3 |  |
Assets held-for-sale - (Note 8) | — |  |  | 17.4 |  |
Inventories | 318.5 |  |  | 294.8 |  |
Other current assets | 112.5 |  |  | 103.4 |  |
Other current assets, held-for-sale - (Note 18) | 393.8 |  |  | 403.4 |  |
Total current assets | 1,269.8 |  |  | 1,225.8 |  |
Lease receivable, non-current | 53.2 |  |  | 58.7 |  |
Deferred costs and other contract assets | 59.3 |  |  | 61.0 |  |
Property and equipment, net | 337.6 |  |  | 337.0 |  |
Intangibles assets, net | 57.7 |  |  | 61.6 |  |
Goodwill | 100.9 |  |  | 96.7 |  |
Deferred tax assets | 119.3 |  |  | 118.4 |  |
Other non-current assets | 43.0 |  |  | 51.3 |  |
Other non-current assets, held-for-sale - (Note 18) | 361.8 |  |  | 615.2 |  |
Total assets | $ | 2,402.6 |  |  | $ | 2,625.7 |  |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |
Current liabilities |  |  |  |
Accounts payable | $ | 135.7 |  |  | $ | 129.0 |  |
Accrued compensation | 67.7 |  |  | 78.7 |  |
Deferred revenue and other contract liabilities, current | 75.4 |  |  | 76.9 |  |
Other current liabilities | 120.5 |  |  | 115.4 |  |
Other current liabilities, held-for-sale - (Note 18) | 192.8 |  |  | 217.7 |  |
Total current liabilities | 592.1 |  |  | 617.7 |  |
Long-term debt | 598.7 |  |  | 714.3 |  |
Deferred tax liabilities | 0.2 |  |  | 0.2 |  |
Other non-current liabilities | 76.3 |  |  | 70.9 |  |
Other non-current liabilities, held-for-sale - (Note 18) | 92.5 |  |  | 170.7 |  |
Total liabilities | 1,359.8 |  |  | 1,573.8 |  |
Commitments and contingencies - (Note 24) |  |  |  |
Stockholders’ equity |  |  |  |
Preferred stock, $0.001 par value; 5.0 million shares authorized; 0 shares issued and outstanding | — |  |  | — |  |
Common stock, $0.001 par value; 100.0 million shares authorized; 54.3 million and 53.6 million shares issued and outstanding at June 28, 2025 and December 28, 2024, respectively | 0.1 |  |  | 0.1 |  |
Treasury stock, 19.6 million and 19.5 million shares at June 28, 2025 and December 28, 2024, respectively | (1,182.9) |  |  | (1,169.2) |  |
Additional paid-in capital | 903.1 |  |  | 838.3 |  |
Accumulated other comprehensive loss | (49.0) |  |  | (108.2) |  |
Retained earnings | 1,371.5 |  |  | 1,490.9 |  |
Total stockholders’ equity | 1,042.8 |  |  | 1,051.9 |  |
Total liabilities and stockholders’ equity | $ | 2,402.6 |  |  | $ | 2,625.7 |  |

The accompanying notes are an integral part of these condensed consolidated financial statements.
4

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MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in millions, except per share amounts)

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Revenue: |  |  |  |  |  |  |
Revenue - (excluding related party revenue) | $ | 345.1 |  |  | $ | 318.8 |  |  | $ | 685.3 |  |  | $ | 627.8 |
Related party revenue - (Note 3) | 25.8 |  |  | 25.1 |  |  | 57.6 |  |  | 55.7 |
Total revenue | 370.9 |  |  | 343.9 |  |  | 742.9 |  |  | 683.5 |
Cost of goods sold | 137.6 |  |  | 136.6 |  |  | 275.6 |  |  | 269.6 |
Gross profit | 233.3 |  |  | 207.3 |  |  | 467.3 |  |  | 413.9 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 138.9 |  |  | 126.3 |  |  | 258.3 |  |  | 242.0 |
Research and development | 29.9 |  |  | 39.1 |  |  | 63.8 |  |  | 76.8 |
Litigation settlements | — |  |  | — |  |  | 2.7 |  |  | — |
Total operating expenses | 168.8 |  |  | 165.4 |  |  | 324.8 |  |  | 318.8 |
Operating income | 64.5 |  |  | 41.9 |  |  | 142.5 |  |  | 95.1 |
Non-operating loss | (9.1) |  |  | (11.1) |  |  | (18.8) |  |  | (22.7) |
Income from continuing operations before provision for income taxes | 55.4 |  |  | 30.8 |  |  | 123.7 |  |  | 72.4 |
Provision for income taxes | 10.5 |  |  | 6.0 |  |  | 31.6 |  |  | 15.5 |
Net income from continuing operations, net of tax | 44.9 |  |  | 24.8 |  |  | 92.1 |  |  | 56.9 |
Net income (loss) from discontinued operations, net of tax - (Note 18) | 6.4 |  |  | (8.8) |  |  | (211.5) |  |  | (22.0) |
Net income (loss) | $ | 51.3 |  |  | $ | 16.0 |  |  | $ | (119.4) |  |  | $ | 34.9 |
Net income (loss) per share: |  |  |  |  |  |  |
Basic income per share - continuing operations | $ | 0.83 |  |  | $ | 0.47 |  |  | $ | 1.70 |  |  | $ | 1.07 |
Basic income (loss) per share - discontinued operations | 0.12 |  |  | (0.17) |  |  | (3.91) |  |  | (0.41) |
Basic income (loss) per share | $ | 0.95 |  |  | $ | 0.30 |  |  | $ | (2.21) |  |  | $ | 0.66 |
Diluted income per share - continuing operations | $ | 0.82 |  |  | $ | 0.46 |  |  | $ | 1.68 |  |  | $ | 1.05 |
Diluted income (loss) per share - discontinued operations | 0.12 |  |  | (0.16) |  |  | (3.85) |  |  | (0.41) |
Diluted income (loss) per share | $ | 0.94 |  |  | $ | 0.30 |  |  | $ | (2.17) |  |  | $ | 0.64 |
Weighted-average shares used in per share calculations: |  |  |  |  |  |  |
Basic | 54.3 |  |  | 53.1 |  |  | 54.1 |  |  | 53.1 |
Diluted | 54.8 |  |  | 54.3 |  |  | 54.9 |  |  | 54.3 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Table of Contents
MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in millions)

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Net income (loss) | $ | 51.3 |  |  | $ | 16.0 |  |  | $ | (119.4) |  |  | $ | 34.9 |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |
Unrealized gain (loss) from foreign currency translation adjustments | 38.2 |  |  | (27.5) |  |  | 63.0 |  |  | (63.1) |
Net change in in retirement obligations | — |  |  | — |  |  | — |  |  | 0.7 |
Unrealized (loss) income on cash flow hedges | (1.1) |  |  | (0.6) |  |  | (3.8) |  |  | 4.3 |
Total comprehensive income (loss) | $ | 88.4 |  |  | $ | (12.1) |  |  | $ | (60.2) |  |  | $ | (23.2) |

The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Table of Contents

MASIMO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions)
| Three and Six Months Ended June 28, 2025
| Common Stock |  | Treasury Stock |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive (Loss) |  | Retained Earnings |  |  |  | Total Stockholders’ Equity
Shares |  | Amount |  | Shares |  | Amount |
Balance at December 28, 2024 | 53.6 |  |  | $ | 0.1 |  |  | 19.5 |  |  | $ | (1,169.2) |  |  | $ | 838.3 |  |  | $ | (108.2) |  |  | $ | 1,490.9 |  |  |  |  | $ | 1,051.9 |
Stock options exercised | 0.5 |  |  | — |  |  | — |  |  | — |  |  | 43.8 |  |  | — |  |  | — |  |  |  |  | 43.8 |
Restricted/Performance stock units vested | 0.2 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Shares paid for tax withholding | (0.1) |  |  | — |  |  | — |  |  | — |  |  | (11.3) |  |  | — |  |  | — |  |  |  |  | (11.3) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 10.6 |  |  | — |  |  | — |  |  |  |  | 10.6 |
Net (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (170.7) |  |  |  |  | (170.7) |
Foreign currency translation adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 24.8 |  |  | — |  |  |  |  | 24.8 |
Unrealized (loss) on cash flow hedge | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2.7) |  |  | — |  |  |  |  | (2.7) |
Balance at March 29, 2025 | 54.2 |  |  | 0.1 |  |  | 19.5 |  |  | (1,169.2) |  |  | 881.4 |  |  | (86.1) |  |  | 1,320.2 |  |  |  |  | 946.4 |
Stock options exercised | 0.2 |  |  | — |  |  | — |  |  | — |  |  | 12.4 |  |  | — |  |  | — |  |  |  |  | 12.4 |
Shares paid for tax withholding | — |  |  | — |  |  | — |  |  | — |  |  | (0.7) |  |  | — |  |  | — |  |  |  |  | (0.7) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 10.0 |  |  | — |  |  | — |  |  |  |  | 10.0 |
Repurchases of common stock | (0.1) |  |  | — |  |  | 0.1 |  |  | (13.7) |  |  | — |  |  | — |  |  | — |  |  |  |  | (13.7) |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 51.3 |  |  |  |  | 51.3 |
Foreign currency translation adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 38.2 |  |  | — |  |  |  |  | 38.2 |
Unrealized (loss) on cash flow hedge | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1.1) |  |  | — |  |  |  |  | (1.1) |
Balance at June 28, 2025 | 54.3 |  |  | $ | 0.1 |  |  | 19.6 |  |  | $ | (1,182.9) |  |  | $ | 903.1 |  |  | $ | (49.0) |  |  | $ | 1,371.5 |  |  |  |  | $ | 1,042.8 |

7

Table of Contents

| Three and Six Months Ended June 29, 2024
| Common Stock |  | Treasury Stock |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive (Loss) |  | Retained Earnings |  |  |  | Total Stockholders’ Equity
Shares |  | Amount |  | Shares |  | Amount |
Balance at December 30, 2023 | 52.8 |  |  | $ | 0.1 |  |  | 19.5 |  |  | $ | (1,169.2) |  |  | $ | 783.4 |  |  | $ | (45.3) |  |  | $ | 1,795.8 |  |  |  |  | $ | 1,364.8 |
Stock options exercised | 0.2 |  |  | — |  |  | — |  |  | — |  |  | 7.2 |  |  | — |  |  | — |  |  |  |  | 7.2 |
Restricted/Performance stock units vested | 0.1 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Shares paid for tax withholding | — |  |  | — |  |  | — |  |  | — |  |  | (5.3) |  |  | — |  |  | — |  |  |  |  | (5.3) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 9.6 |  |  | — |  |  | — |  |  |  |  | 9.6 |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 18.9 |  |  |  |  | 18.9 |
Foreign currency translation adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (35.6) |  |  | — |  |  |  |  | (35.6) |
Change in pension benefits | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0.7 |  |  | — |  |  |  |  | 0.7 |
Unrealized gain on cash flow hedge | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4.9 |  |  | — |  |  |  |  | 4.9 |
Balance at March 30, 2024 | 53.1 |  |  | 0.1 |  |  | 19.5 |  |  | (1,169.2) |  |  | 794.9 |  |  | (75.3) |  |  | 1,814.7 |  |  |  |  | 1,365.2 |
Stock options exercised | 0.1 |  |  | — |  |  | — |  |  | — |  |  | 2.7 |  |  | — |  |  | — |  |  |  |  | 2.7 |
Shares paid for tax withholding | — |  |  | — |  |  | — |  |  | — |  |  | (0.5) |  |  | — |  |  | — |  |  |  |  | (0.5) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 13.5 |  |  | — |  |  | — |  |  |  |  | 13.5 |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 16.0 |  |  |  |  | 16.0 |
Foreign currency translation adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (27.5) |  |  | — |  |  |  |  | (27.5) |
Unrealized (loss) on cash flow hedge | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (0.6) |  |  | — |  |  |  |  | (0.6) |
Balance at June 29, 2024 | 53.2 |  |  | $ | 0.1 |  |  | 19.5 |  |  | $ | (1,169.2) |  |  | $ | 810.6 |  |  | $ | (103.4) |  |  | $ | 1,830.7 |  |  |  |  | $ | 1,368.8 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)

|  | Six Months Ended |  |  |
|  | June 28, 2025 |  | June 29, 2024 |  |  |
Cash flows from operating activities: |  |  |  |  |  |  |
Net (loss) income |  | $ | (119.4) |  |  | $ | 34.9 |  |  |  |
Loss from discontinued operations, net of tax |  | (211.5) |  |  | (22.0) |  |  |  |
Net income from continuing operations |  | 92.1 |  | 56.9 |  |  |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |  |  |  |  |
Depreciation and amortization |  | 17.0 |  |  | 20.4 |  |  |  |
Stock-based compensation expense |  | 17.6 |  |  | 20.6 |  |  |  |
Loss on disposal of equipment, intangibles and other assets |  | 4.0 |  |  | — |  |  |  |
Provision for credit losses |  | 1.7 |  |  | 0.7 |  |  |  |
Provision for deferred income taxes |  | 5.9 |  |  | — |  |  |  |
Amortization of debt issuance cost |  | 0.9 |  |  | 0.9 |  |  |  |
Changes in operating assets and liabilities: |  |  |  |  |  |  |
(Increase) decrease in trade accounts receivable |  | (10.3) |  |  | (8.2) |  |  |  |
(Increase) decrease in related party receivable |  | (3.1) |  |  | (4.6) |  |  |  |
(Increase) decrease in inventories |  | (31.7) |  |  | (4.7) |  |  |  |
(Increase) decrease in other current assets |  | (8.8) |  |  | 11.7 |  |  |  |
(Increase) decrease in lease receivable, net |  | 5.5 |  |  | 4.9 |  |  |  |
(Increase) decrease in deferred costs and other contract assets |  | 1.9 |  |  | (1.6) |  |  |  |
(Increase) decrease in other non-current assets |  | 5.1 |  |  | 0.5 |  |  |  |
Increase (decrease) in accounts payable |  | 2.7 |  |  | (16.6) |  |  |  |
Increase (decrease) in accrued compensation |  | (12.0) |  |  | 12.8 |  |  |  |
Increase (decrease) in accrued liabilities |  | 8.0 |  |  | 15.3 |  |  |  |
Increase (decrease) in income tax payable |  | — |  |  | (4.9) |  |  |  |
Increase (decrease) in deferred revenue and other contract-related liabilities |  | 1.9 |  |  | 3.7 |  |  |  |
Increase (decrease) in other non-current liabilities |  | 1.1 |  |  | (1.8) |  |  |  |
Net cash provided by (used in) operating activities from continuing operations |  | 99.5 |  |  | 106.0 |  |  |  |
Net cash provided by (used in) operating activities from discontinued operations |  | 1.0 |  |  | 14.3 |  |  |  |
Net cash provided by (used in) operating activities |  | 100.5 |  |  | 120.3 |  |  |  |
Cash flows from investing activities: |  |  |  |  |  |  |
Purchases of property and equipment |  | (6.4) |  |  | (9.7) |  |  |  |
Proceeds from sale of property and equipment |  | 19.6 |  |  | 9.8 |  |  |  |
Increase in intangible assets |  | (2.6) |  |  | (8.1) |  |  |  |
Other strategic investing activities |  | — |  |  | (0.1) |  |  |  |
Net cash provided by (used in) investing activities from continuing operations |  | 10.6 |  |  | (8.1) |  |  |  |
Net cash provided by (used in) investing activities from discontinued operations |  | (9.1) |  |  | (13.1) |  |  |  |
Net cash provided by (used in) investing activities |  | 1.5 |  |  | (21.2) |  |  |  |
Cash flows from financing activities: |  |  |  |  |  |  |
Borrowings under line of credit |  | — |  |  | 64.0 |  |  |  |
Repayments on line of credit |  | (116.5) |  |  | (184.8) |  |  |  |
Proceeds from issuance of common stock |  | 56.2 |  |  | 9.9 |  |  |  |
Payroll tax withholdings on behalf of employees for vested equity awards |  | (12.0) |  |  | (5.8) |  |  |  |
Repurchases of common stock |  | (13.7) |  |  | — |  |  |  |
Net cash provided by (used in) financing activities from continuing operations |  | (86.0) |  |  | (116.7) |  |  |  |

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Net cash provided by (used in) financing activities from discontinued operations |  | (1.7) |  |  | (0.8) |  |  |  |
Net cash provided by (used in) financing activities |  | (87.7) |  |  | (117.5) |  |  |  |
Effect of foreign currency exchange rates on cash |  | 1.4 |  |  | (14.2) |  |  |  |
Net increase in cash, cash equivalents and restricted cash |  | 15.7 |  |  | (32.6) |  |  |  |
Cash, cash equivalents and restricted cash at beginning of period |  | 181.4 |  |  | 168.2 |  |  |  |
Cash, cash equivalents and restricted cash at end of period |  | $ | 197.1 |  |  | $ | 135.6 |  |  |  |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Description of the Company
Masimo Corporation (the “Company”) is a global technology company that develops, manufactures and markets a wide array of patient monitoring technologies, as well as automation and connectivity solutions. The Company’s mission is to improve life, improve patient outcomes and reduce the cost of care, and take noninvasive monitoring to new sites and applications. As of June 28, 2025, the Company operates two reportable segments: healthcare and non-healthcare.
The Company’s healthcare products and patient monitoring solutions generally incorporate a monitor or circuit board, proprietary single-patient use or reusable sensors, software and/or cables. The Company primarily sells its healthcare products to hospitals, emergency medical service providers, home care providers, physician offices, veterinarians, and long-term care facilities through its direct sales force, distributors and original equipment manufacturer (OEM) partners.
The Company’s non-healthcare consumer business incorporates audio and home integration technologies, which are primarily sold or licensed direct-to-consumers, or through authorized retailers and wholesalers.
As of December 28, 2024, the non-healthcare consumer business remained part of the Company’s continuing operations, but was being evaluated for divestiture. Subsequent to year end, the sales evaluation process continued to progress in early 2025, and as of March 29, 2025, the non-healthcare consumer business was classified as held-for-sale, and reported as discontinued operations. On May 6, 2025, the Company announced that it entered into a definitive agreement to sells its non-healthcare business to Harman International Industries, Incorporated, a wholly-owned subsidiary of Samsung Electronics., Ltd. For additional information with respect to the non-healthcare consumer business separation and discontinued operations of this business, see Note 18, “Discontinued Operations”.
The terms “the Company” and “Masimo” refer to Masimo Corporation and, where applicable, its consolidated subsidiaries.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, including normal recurring accruals, necessary to present fairly the Company’s condensed consolidated financial statements. The accompanying condensed consolidated balance sheet as of December 28, 2024 was derived from the Company’s audited consolidated financial statements at that date. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2024 (fiscal year 2024), filed with the SEC on February 25, 2025. The results for the three months and six months ended June 28, 2025 are not necessarily indicative of the results to be expected for the fiscal year ending January 3, 2026 (fiscal year 2025) or for any other interim period or for any future year.
Fiscal Periods
The Company follows a conventional 52/53 week fiscal year. Under a conventional 52/53 week fiscal year, a 52 week fiscal year includes four quarters of 13 weeks while a 53 week fiscal year includes three 13 week fiscal quarters and one 14 week fiscal quarter. The Company’s last 53 week fiscal year was fiscal year 2020. Fiscal year 2025 is a 53 week fiscal year ending January 3, 2026. All references to years in these notes to condensed consolidated financial statements are fiscal years unless otherwise noted.
Reclassifications
Certain amounts for the current and comparative periods in the accompanying condensed consolidated financial statements have been reclassified to conform to the discontinued operations presentation, including certain balance sheets, statements of operations, statements of comprehensive income (loss), statements of stockholders’ equity, and statements of cash flows in the consolidated financial statements for the year ended December 28, 2024, see Note 18, “Discontinued Operations”.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Use of Estimates
The Company prepares its financial statements in conformity with GAAP, which requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include the determination of standalone selling prices, variable consideration, total consideration allocated to each performance obligation within a contract, inventory valuation, valuation of the Company’s equity awards, impairment of long-lived assets, intangible assets and goodwill; derivative and equity instruments, deferred taxes and any associated valuation allowances, deferred revenue, accounting for pensions, uncertain income tax positions, litigation costs, and related accruals. See Note 24, “Commitments and Contingencies” for further details. Actual results could differ from such estimates.
Assets Held-For-Sale and Discontinued Operations
In the third quarter of 2024, the Company announced that its board of directors (the “Board”) remained committed to the previously announced review of alternatives for both the Company’s consumer audio and consumer healthcare businesses, and that the Board had engaged Centerview Partners and Morgan Stanley as financial advisors and Sullivan & Cromwell as a legal advisor. As of December 28, 2024, the non-healthcare business remained part of the Company’s continuing operations. The sales process progressed in early 2025, and during the first quarter of 2025, the non-healthcare business was classified as held-for-sale and reported in discontinued operations. On May 6, 2025, the Company announced that it entered into a definitive agreement to sell its non-healthcare business to Harman International Industries, Incorporated, a wholly-owned subsidiary of Samsung Electronics., Ltd.
The non-healthcare results for the periods presented are reflected in our condensed consolidated statements of operations and condensed consolidated statement of cash flows as discontinued operations. Additionally, the related assets and liabilities are classified as held-for-sale in our condensed consolidated balance sheets, see Note 18, “Discontinued Operations”.
Unless otherwise indicated, the financial disclosures and related information provided herein relate to our continuing operations, which exclude our non-healthcare consumer audio business, and we have recast prior period amounts to conform to this discontinued operations presentation. See Note 25, “Segment and Enterprise Reporting” for additional information about reportable segments.
Fair Value Measurements
The Company accounts for certain financial instruments at their fair values as either assets or liabilities on the balance sheet. The Company determines the fair value of its financial instruments using the framework prescribed by ASC Topic 820, Fair Value Measurements and Disclosures, and considers the estimated amount the Company would receive or pay to transfer these instruments at the reporting date with respect to current currency exchange rates, interest rates, the creditworthiness of the counterparty for unrealized gain positions and the Company’s creditworthiness for unrealized loss positions. In certain instances, the Company may utilize financial models to measure the fair value of its financial instruments. In doing so, the Company uses inputs that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs for the asset or liability and inputs derived principally from, or corroborated by, observable market data by correlation or other means.
Recurring Fair Value Measurement
On a recurring basis, the Company measures certain financial assets and financial liabilities at fair value based upon quoted market prices. Where quoted market prices or other observable inputs are not available, the Company applies valuation techniques to estimate fair value. Authoritative guidance describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
● Level 1—Quoted prices in active markets for identical assets or liabilities.
● Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active; or other inputs that can be corroborated by observable market data for substantially the full term of the assets or liabilities.
● Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
The following tables represent the Company’s financial assets, measured at fair value on a recurring basis at June 28, 2025:

| Total Carrying Value |  | Fair Value Measurement Hierarchy |  |
(in millions) |  | Level 1 |  | Level 2 |  | Level 3 |  |
Assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 70.2 |  |  | $ | 70.2 |  |  | $ | — |  |  | $ | — |  |  |
Money market funds | 79.4 |  |  | 79.4 |  |  | — |  |  | — |  |  |
Pension assets | 24.1 |  |  | 17.7 |  |  | 6.4 |  |  | — |  |  |
Derivative instruments - cash flow hedges(1) | 3.1 |  |  | 3.1 |  |  | — |  |  | — |  |  |
Equity securities | 1.3 |  |  | 1.3 |  |  | — |  |  | — |  |  |
Derivative instruments - warrants | 0.7 |  |  | 0.7 |  |  | — |  |  | — |  |  |
Total assets | $ | 178.8 |  |  | $ | 172.4 |  |  | $ | 6.4 |  |  | $ | — |  |  |
Liabilities |  |  |  |  |  |  |  |  |
Derivative instruments - cash flow hedges | $ | 1.6 |  |  | $ | 1.6 |  |  | $ | — |  |  | $ | — |  |  |
Pension benefit obligation | 28.8 |  |  | 28.8 |  |  | — |  |  | — |  |  |
Total liabilities | $ | 30.4 |  |  | $ | 30.4 |  |  | $ | — |  |  | $ | — |  |  |

The following tables represent the Company’s financial assets, measured at fair value on a recurring basis at December 28, 2024:

| Total Carrying Value |  | Fair Value Measurement Hierarchy
(in millions) |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 51.0 |  |  | $ | 51.0 |  |  | $ | — |  |  | $ | — |
Money market funds | 72.6 |  |  | 72.6 |  |  | — |  |  | — |
Pension assets | 19.2 |  |  | 14.1 |  |  | 5.1 |  |  | — |
Derivative instruments - cash flow hedges(1) | 6.8 |  |  | 6.8 |  |  | — |  |  | — |
Equity securities | 1.3 |  |  | 1.3 |  |  | — |  |  | — |
Derivative instruments - warrants | 0.7 |  |  | 0.7 |  |  | — |  |  | — |
Total assets | $ | 151.6 |  |  | $ | 146.5 |  |  | $ | 5.1 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |
Derivative instruments - cash flow hedges | $ | 0.1 |  |  | $ | 0.1 |  |  | $ | — |  |  | $ | — |
Pension benefit obligation | 24.6 |  |  | 24.6 |  |  | — |  |  | — |
Total liabilities | $ | 24.7 |  |  | $ | 24.7 |  |  | $ | — |  |  | $ | — |

______________
(1) Includes accrued interest.
The Company invests in checking, savings and money market fund accounts, which are classified within Level 1 of the fair value hierarchy as they are valued using quoted market prices. These investments are classified as cash and cash equivalents within the Company’s accompanying condensed consolidated balance sheets, in accordance with GAAP and its accounting policies.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
The Company has certain strategic investments in privately-held companies (non-marketable equity securities) and companies that have completed initial public offerings (marketable equity securities). Th e Company’s marketable equity securities and certain derivative investment, whose price is based on quoted market price in an active market, are classified within Level 1 of the fair value hierarchy. Equity securities are classified as current, short-term investments, or non-current, recorded in other non-current assets, based on the nature of the securities and their availability for use in current operations. The changes in the fair value of those equity securities are measured at each reporting date and changes in the value of these investments between reporting dates are recorded within non-operating income (loss).
The Company’s pension assets consist of Level 1 and Level 2 investments. The fair values of Level 2 assets are based on observable inputs such as prices or quotes for similar assets, adjusted for any differences in terms or conditions that may affect the value of the instrument being valued. The valuation techniques used for Level 2 assets may include the use of models or other valuation techniques, but these methods are all based on observable market inputs.
Non-Recurring Fair Value Measurements
For certain other financial assets and liabilities, including restricted cash, accounts receivable, accounts payable and other current assets and liabilities, the carrying amounts approximate their fair value primarily due to the relatively short maturity of these balances. The Company also measures certain non-financial assets at fair value on a non-recurring basis, primarily goodwill, intangible assets and operating lease right-of-use assets, in connection with periodic evaluations for potential impairment.
Furthermore, the Company did not elect to apply the fair value option to specific assets or liabilities on a contract-by-contract basis. The Company did not have any transfers between Level 2 and Level 3 during the six months ended June 28, 2025.
Cash and Cash Equivalents
Th e Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less, or highly liquid investments that are readily convertible into known amounts of cash, to be cash equivalents. The Company carries cash and cash equivalents at cost, which approximates fair value, and they are Level 1 under the fair value hierarchy.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable consist of trade receivables recorded at the time of invoicing of product sales, reduced by reserves for estimated bad debts and returns. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Credit is extended based on an evaluation of the customer’s financial condition. Collateral is generally not required. The Company records an allowance for credit losses that it does not expect to collect based on relevant information, including historical experience, current conditions, and reasonable and supportable forecasts. Accounts are charged off against the allowance when the Company believes they are uncollectible. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. Based on the risk characteristics, the Company has identified U.S. and international customers as separate portfolios for both segments, and measures expected credit losses on such receivables using an aging methodology.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using a standard cost method, which approximates the first in, first out method, and includes material, labor and overhead costs. Inventory valuation adjustments are recorded for inventory items that have become excess or obsolete or are no longer used in current production and for inventory items that have a market price less than the carrying value in inventory. The Company generally determines inventory valuation adjustments based on an evaluation of the expected future use of its inventory on an item by item basis and applies historical obsolescence rates to estimate the loss on inventory expected to have a recovery value below cost. The Company also records other specific inventory valuation adjustments when it becomes aware of circumstances that result in an expected recovery value below cost. For inventory items that have been written down, the reduced value becomes the new cost basis.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over estimated useful lives as follows:

| Useful Lives
Buildings and building improvements | 7 to 39 years
Computer equipment and software | 2 to 12 years
Demonstration units | 2 to 3 years
Furniture and office equipment | 2 to 15 years
Leasehold improvements | Lesser of useful life or term of lease
Machinery, equipment, tooling and other | 3 to 20 years
Operating lease assets | Lesser of useful life or term of lease

Land is not depreciated and construction-in-progress is not depreciated until placed in service. Normal repair and maintenance costs are expensed as incurred, whereas significant improvements that materially increase values or extend useful lives are capitalized and depreciated over the remaining estimated useful lives of the related assets. Upon sale or retirement of depreciable assets, the related cost and accumulated depreciation or amortization are removed from the accounts and any gain or loss on the sale or retirement is recognized in income.
Lessee Right-of-Use (ROU) Assets and Lease Liabilities
The Company determines if an arrangement contains a lease at inception. ROU assets represent the Company’s right to use an asset underlying an operating lease for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from an operating lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company generally estimates the applicable discount rate used to determine the net present value of lease payments based on available information at the lease commencement date. Many of the Company’s lessee agreements include options to extend the lease, which the Company does not include in its lease terms unless they are reasonably certain to be exercised. The Company utilizes a portfolio approach to account for the ROU assets and liabilities associated with certain equipment leases.
The Company has also made an accounting policy election not to separate lease and non-lease components for its real estate leases and to exclude short-term leases with a term of twelve months or less from its ROU assets and lease liabilities. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.
Intangible Assets
Intangible assets consist primarily of patents, trademarks, software development costs, customer relationships and acquired technology. Costs related to patents and trademarks, which include legal and application fees, are capitalized and amortized over the estimated useful lives using the straight-line method. Patent and trademark amortization commences once final approval of the patent or trademark has been obtained. Patent costs are amortized over the lesser of 10 years or the patent’s remaining legal life, which assumes renewals, and trademark costs are amortized over 17 years, and their associated amortization cost is included in selling, general and administrative expense in the accompanying condensed consolidated statements of operations. For intangibles purchased in an asset acquisition or business combination, which mainly include patents, trademarks, customer relationships and acquired technologies, the useful life is determined largely by valuation estimates of remaining economic life.
The Company’s policy is to renew its patents and trademarks. Costs to renew patents and trademarks are capitalized and amortized over the remaining useful life of the intangible asset. The Company periodically evaluates the amortization period and carrying basis of patents and trademarks to determine whether any events or circumstances warrant a revised estimated useful life or reduction in value. Capitalized application costs are charged to operations when it is determined that the patent or trademark will not be obtained or is abandoned.
Software development costs are accounted for in accordance with ASC Topic 985-20, Software - Costs of Software to be Sold, Leased, or Marketed. Once technological feasibility has been established, qualifying costs incurred in development are capitalized until available for general release to customers, and subsequently reported at the lower of unamortized cost or net realizable value.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Intangibles purchased as part of an asset acquisition or business combination historically have included patents, trademarks, customer relationships, developed technologies and contractual licenses. The useful life for all of these is largely determined by valuation estimates of remaining economic life.
Impairment of Goodwill, Intangible Assets and Other Long-Lived Assets
Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired net tangible and intangible assets. Goodwill is not amortized, but instead is tested annually for impairment, or more frequently when events or changes in circumstances indicate that goodwill might be impaired. In assessing goodwill impairment, the Company has the option to first assess the qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company has two reporting units, healthcare and non-healthcare. The Company’s qualitative assessment of the recoverability of goodwill considers various macro-economic, industry-specific and Company-specific factors, including: (i) severe adverse industry or economic trends; (ii) significant Company-specific actions; (iii) current, historical or projected deterioration of the Company’s financial performance; or (iv) a sustained decrease in the Company’s market capitalization below its net book value. If the qualitative assessment indicates that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, or if the Company elects to bypass the qualitative analysis, then the Company performs a quantitative analysis that compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired; otherwise, a goodwill impairment loss is recognized for the lesser of: (a) the amount that the carrying amount of such reporting unit exceeds its fair value; or (b) the amount of the goodwill allocated to such reporting unit. The annual impairment test is performed during the fourth fiscal quarter.
Similar to goodwill, indefinite-lived intangible assets are not amortized but instead are subject to annual impairment testing, unless circumstances dictate more frequent testing, if impairment indicators exist. Impairment for indefinite-lived assets exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. Determining whether impairment indicators exist and estimating the fair value of the Company’s indefinite-lived intangible assets if necessary for impairment testing require significant judgment. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors.
The Company reviews finite lived intangible assets and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell, see Note 18, “Discontinued Operations”.
Employee Defined Benefit Plans
The Company maintains noncontributory defined benefit plans that cover certain employees in certain international locations. The Company recognizes the funded status, or the difference between the fair value of plan assets and the projected benefit obligations of the pension plan on the condensed consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive income. If the projected benefit obligation exceeds the fair value of plan assets, the difference or underfunded status represents the pension liability. The Company records a net periodic pension cost in the condensed consolidated statement of operations. The liabilities and annual income or expense are determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate and the expected long-term rate of asset return. The Company’s accounting policy includes an annual re-measurement of pension assets and obligations. In addition, the Company r e-measures pension assets and obligations for significant events, as of the nearest month-end date on the calendar. The fair values of plan assets are determined based on prevailing market prices. See Note 21, “Employee Benefits”, for further details.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Income Taxes
The Company accounts for income taxes using the asset and liability method, under which the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for net operating loss and tax credit carryforwards. Tax positions that meet a more-likely-than-not recognition threshold are recognized in the first reporting period that it becomes more-likely-than-not such tax position will be sustained upon examination. A tax position that meets this more-likely-than-not recognition threshold is recorded at the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Previously recognized income tax positions that fail to meet the recognition threshold in a subsequent period are derecognized in that period. Differences between actual results and the Company’s assumptions, or changes in the Company’s assumptions in future periods, are recorded in the period they become known. The Company records potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
As a multinational corporation, the Company is subject to complex tax laws and regulations in various jurisdictions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, evolution of regulations and court rulings. Therefore, the actual liability for U.S. or foreign taxes may be materially different from the Company’s estimates, which could result in the need to record additional liabilities or potentially to reverse previously recorded tax liabilities.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is recorded against any deferred tax assets when, in the judgment of management, it is more likely than not that all or part of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including recent financial performance, scheduled reversals of temporary differences, projected future taxable income, availability of taxable income in carryback periods and tax planning strategies.
Income taxes are highly susceptible to changes from period to period, requiring management to make assumptions about the Company’s future income over the lives of its deferred tax assets and the impact of changes in valuation allowances. Any difference in the assumptions, judgments and estimates mentioned above could result in changes to the Company’s results of operations.
Revenue Recognition, Deferred Revenue and Other Contract Liabilities
The Company generally recognizes revenue following a single, principles-based five-step model to be applied to all contracts with customers and generally provides for the recognition of revenue in an amount that reflects the consideration to which the Company expects to be entitled, net of allowances for estimated returns, discounts or sales incentives, as well as taxes collected from customers that are remitted to government authorities, when control over the promised goods or services are transferred to the customer.
While the majority of the Company’s revenue contracts and transactions contain standard business terms and conditions, there are some transactions that contain non-standard business terms and conditions. As a result, contract interpretation, judgment and analysis are required to determine the appropriate accounting, including: (i) the amount of the total consideration, as well as variable consideration, (ii) whether the arrangement contains an embedded lease, and if so, whether such embedded lease is a sales-type lease or an operating lease, (iii) the identification of the distinct performance obligations contained within the arrangement, (iv) how the arrangement consideration should be allocated to each performance obligation when multiple performance obligations exist, including the determination of standalone selling price, and (v) when to recognize revenue on the performance obligations. Changes in judgments on these assumptions and estimates could materially impact the timing of revenue recognition. Revenue from fixed lease payments related to equipment supplied under sales-type lease arrangements is recognized once control over the equipment is transferred to the customer, while revenue from fixed lease payments related to equipment supplied under operating-type lease arrangements is generally recognized on a straight-line basis over the term of the lease and variable lease payments are recognized as they occur.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
The Company derives the majority of its revenue from four primary sources: (i) direct sales under deferred equipment agreements with end-user hospitals where the Company provides up-front monitoring equipment at no up-front charge in exchange for a multi-year sensor purchase commitment; (ii) other direct sales of noninvasive monitoring solutions to end-user hospitals, emergency medical response organizations and other direct customers; (iii) sales of noninvasive monitoring solutions to distributors who then typically resell to end-user hospitals, emergency medical response organizations and other customers; and (iv) sales of integrated circuit boards to OEM customers who incorporate the Company’s embedded software technology into their multiparameter monitoring devices. Subject to customer credit considerations, the majority of such sales are made on open accounts using industry standard payment terms based on the geography within which the specific customer is located.
The Company enters into agreements to sell its monitoring solutions and services, sometimes as a part of arrangements with multiple performance obligations that include various combinations of product sales, equipment leases, software and services. In the case of contracts with multiple performance obligations, the authoritative guidance provides that the total consideration be allocated to each performance obligation on the basis of relative standalone selling prices. When a standalone selling price is not readily observable, the Company estimates the standalone selling price by considering multiple factors including, but not limited to, features and functionality of the product, geographies, type of customer, contractual prices pursuant to Group Purchasing Organization (GPO) contracts, the Company’s pricing and discount practices, and other market conditions.
Sales under deferred equipment agreements are generally structured such that the Company agrees to provide certain monitoring-related equipment, software, installation, training and/or warranty support at no up-front charge in exchange for the customer’s commitment to purchase sensors over the term of the agreement, which generally ranges from three years to six years. The Company allocates contract consideration under deferred equipment agreements containing fixed annual sensor purchase commitments to the underlying lease and non-lease components at contract inception. In determining whether any underlying lease components are related to a sales-type lease or an operating lease, the Company evaluates the customer’s rights and ability to control the use of the underlying equipment throughout the contract term, including any equipment substitution rights retained by the Company, as well as the Company’s expectations surrounding potential contract/lease extensions or renewals and the customer’s likelihood to exercise any purchase options.
For contracts that contain variable lease payments that are not dependent on an index or rate, the Company classifies as operating leases any lease components that would have otherwise been classified as sales-type leases that would result in a selling loss upon lease commencement. Revenue allocable to non-lease performance obligations is generally recognized as such non-lease performance obligations are satisfied. Revenue allocable to lease components under sales-type lease arrangements is generally recognized when control over the equipment is transferred to the customer.
Revenue allocable to lease components under operating lease arrangements is generally recognized over the term of the operating lease. The Company generally does not expect to derive any significant value in excess of such asset’s unamortized book value from equipment underlying its operating lease arrangements after the end of the agreement.
Revenue from the sale of products and software to end-user hospitals, emergency medical response organizations, other direct customers, distributors and OEM customers, is recognized by the Company when control of such performance obligations transfers to the customer based upon the terms of the contract or underlying purchase order.
Revenue related to OEM rainbow® parameter software licenses is recognized by the Company upon the OEM’s shipment of its product to its customer, as reported to the Company by the OEM.
The Company provides certain customers with various sales incentives that may take the form of discounts or rebates. The Company records estimates related to these programs as a reduction to revenue at the time of sale. In general, customers do not have a right of return for credit or refund. However, the Company allows returns under certain circumstances. At the end of each period, the Company estimates and accrues for these returns as a reduction to revenue. The Company estimates the revenue constraints related to these forms of variable consideration based on various factors, including expected purchasing volumes, prior sales and returns history, and specific contractual terms and limitations.
Shipping and Handling Costs and Fees
All shipping and handling costs are expensed as incurred and are recorded as a component of cost of goods sold in the accompanying condensed consolidated statements of operations. Charges for shipping and handling billed to customers are included as a component of revenue.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Taxes Collected From Customers and Remitted to Governmental Authorities
The Company’s policy is to present revenue net of taxes collected from customers and remitted to governmental authorities.
Deferred Costs and Other Contract Assets
The costs of monitoring-related equipment provided to customers under operating lease arrangements within the Company’s deferred equipment agreements are generally deferred and amortized to cost of goods sold over the life of the underlying contracts. Some of the Company’s deferred equipment agreements also contain provisions for certain allowances to be made directly to the end-user hospital customer at the inception of the arrangement. These allowances are generally allocated to the lease and non-lease components and recognized as a reduction to revenue as the underlying performance obligations are satisfied.
The Company generally invoices its customers under deferred equipment agreements as sensors are provided to the customer. However, the Company may recognize revenue for certain non-lease performance obligations under deferred equipment agreements with fixed annual commitments at the time such performance obligations are satisfied and prior to the customer being invoiced. When this occurs, the Company records an unbilled contract receivable related to such revenue until the customer has been invoiced pursuant to the terms of the underlying deferred equipment agreement.
The incremental costs of obtaining a contract with a customer are capitalized and deferred if the Company expects such costs to be recoverable over the life of the contract and the contract term is greater than one year. Such deferred costs generally relate to certain incentive sales commissions earned by the Company’s internal sales team in connection with the execution of deferred equipment agreements and are amortized to expense over the expected term of the underlying contract.
Warranty
The Company generally provides a warranty against defects in material and workmanship for a period ranging from six months to forty-eight months, depending on the product type. In traditional sales activities, including direct and OEM sales, the Company establishes an accrued liability for the estimated warranty costs at the time of revenue recognition, with a corresponding provision to cost of goods sold. Customers may also purchase extended warranty coverage or service level upgrades separately or as part of a deferred equipment agreement. Revenue related to extended warranty coverage and service level upgrades is generally recognized over the life of the contract, which reasonably approximates the period over which such services will be provided. The related extended warranty and service level upgrade costs are expensed as incurred.
Changes in the product warranty accrual were as follows:

| Six Months Ended
(in millions) | June 28, 2025 |  | June 29, 2024
Product warranty accrual, beginning of period | $ | 2.9 |  |  | $ | 1.8 |
Accrual for warranties issued | 2.1 |  |  | 1.3 |
Changes in pre-existing warranties (including changes in estimates) | (1.7) |  |  | 1.5 |
Settlements made | (0.5) |  |  | (1.6) |
Product warranty accrual, end of period | $ | 2.8 |  |  | $ | 3.0 |

Advertising Costs
Advertising costs include certain advertising and marketing fees, which are expensed as incurred. Advertising costs are included in selling, general and administrative expense in the accompanying condensed consolidated statements of operations. Advertising costs for the three months ended June 28, 2025 and June 29, 2024 were $2.0 million and $3.2 million, respectively. Advertising costs for the six months ended June 28, 2025 and June 29, 2024 were $4.4 million and $9.3 million, respectively.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Litigation Costs and Contingencies
The Company records a charge equal to at least the minimum estimated liability for a loss contingency or litigation settlement when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements, and (ii) the range of loss can be reasonably estimated. The determination of whether a loss contingency, or litigation settlement is probable or reasonably possible involves a significant amount of management judgment, as does the estimation of the range of loss given the nature of contingencies. Liabilities related to litigation settlements with multiple elements are recorded based on the fair value of each element. Legal and other litigation related expenses are recognized as the services are provided. The Company records insurance and other indemnity recoveries for litigation expenses when both of the following conditions are met: (a) the recovery is probable, and (b) collectability is reasonably assured. Insurance recoveries are only recorded to the extent the litigation costs to which they relate have been incurred and recognized in the financial statements.
Foreign Currency Translation
The Company’s international headquarters is in Switzerland, and its functional currency is the U.S. Dollar. The Company has many other foreign subsidiaries, and the largest transactions in foreign currency translations occur in the European Euro and the British Pound.
The Company records certain revenues and expenses in foreign currencies. These revenues and expenses are translated into U.S. Dollars based on the average exchange rate for the reporting period. Assets and liabilities denominated in foreign currencies are translated into U.S. Dollars at the exchange rate in effect as of the balance sheet date. Translation gains and losses related to foreign currency assets and liabilities of a subsidiary that are denominated in the functional currency of such subsidiary are included as a component of accumulated other comprehensive income (loss) within the accompanying condensed consolidated balance sheets. Realized and unrealized foreign currency gains and losses related to foreign currency assets and liabilities of the Company, or a subsidiary that are not denominated in the underlying functional currency are included as a component of non-operating (loss) income within the accompanying condensed consolidated statements of operations.
Derivatives Instruments and Hedging Activities
The Company addresses market risk from changes in interest rates risks through risk management programs, which include the use of derivative instruments. The Company’s exposure to a counterparty’s credit risk is generally limited to the amounts of the net obligation to the counterparty. The Company established policies to enter into contracts only with major investment-grade financial institutions to mitigate such counterparty credit risk. The Company also established a policy to further monitor the counterparty risks throughout the life of the instruments. None of the derivative instruments currently held by the Company were entered into for speculative trading purposes.
All derivative financial instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets and are classified as short-term or long-term based on the tenor of the instrument. The Company has elected not to separate a derivative instrument into current and long-term portions. A derivative instrument whose fair value is a net liability is classified as current in total. A derivative instrument whose fair value is a net asset and whose current portion is an asset is classified as non-current in total. For a derivative instrument that meets the criteria to qualify for hedge accounting, the Company marks the fair value of the derivative instrument to market periodically through other comprehensive income (loss). When the hedged items are recorded to income (loss), the associated deferred gains (losses) of the derivatives in accumulated other comprehensive income (loss) will be reclassified into earnings. Any fluctuation in the fair value of a derivative instrument that does not meet the criteria for hedge accounting is recorded to earnings (expense) in the period it occurs.
Comprehensive Income (Loss)
Comprehensive income (loss) includes foreign currency translation adjustments, changes to pension benefits, unrealized gains (losses) on cash flow hedges and any related tax benefits (expenses) that have been excluded from net income (loss) and reflected in stockholders’ equity.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Net Income (Loss) Per Share
A computation of basic and diluted net income (loss) per share is as follows:

| Three Months Ended |  | Six Months Ended |  |
(in millions, except per share amounts) | June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024 |  |  |  |
Net income from continuing operations, net of tax | $ | 44.9 |  |  | $ | 24.8 |  |  | $ | 92.1 |  |  | $ | 56.9 |  |  |  |  |
Net income (loss) from discontinued operations, net of tax - (Note 18) | 6.4 |  |  | (8.8) |  |  | (211.5) |  |  | (22.0) |  |  |  |  |
Net income (loss) | $ | 51.3 |  |  | $ | 16.0 |  |  | $ | (119.4) |  |  | $ | 34.9 |  |  |  |  |
Basic net income (loss) per share: |  |  |  |  |  |  |  |  |  |  |
Weighted-average shares outstanding - basic | 54.3 |  |  | 53.1 |  |  | 54.1 |  |  | 53.1 |  |  |  |  |
Continuing operations per basic share | $ | 0.83 |  |  | $ | 0.47 |  |  | $ | 1.70 |  |  | $ | 1.07 |  |  |  |  |
Discontinued operations per basic share | 0.12 |  |  | (0.17) |  |  | (3.91) |  |  | (0.41) |  |  |  |  |
Net income (loss) per basic share | $ | 0.95 |  |  | $ | 0.30 |  |  | $ | (2.21) |  |  | $ | 0.66 |  |  |  |  |
Diluted net income (loss) per share: |  |  |  |  |  |  |  |  |  |  |
Weighted-average shares outstanding - basic | 54.3 |  |  | 53.1 |  |  | 54.1 |  |  | 53.1 |  |  |  |  |
Diluted share equivalents: stock options, RSUs and PSUs | 0.5 |  |  | 1.2 |  |  | 0.8 |  |  | 1.2 |  |  |  |  |
Weighted-average shares outstanding - diluted | 54.8 |  |  | 54.3 |  |  | 54.9 |  |  | 54.3 |  |  |  |  |
Continuing operations per diluted share | $ | 0.82 |  |  | $ | 0.46 |  |  | $ | 1.68 |  |  | $ | 1.05 |  |  |  |  |
Discontinued operations per diluted share | 0.12 |  |  | (0.16) |  |  | (3.85) |  |  | (0.41) |  |  |  |  |
Net income (loss) per diluted share | $ | 0.94 |  |  | $ | 0.30 |  |  | $ | (2.17) |  |  | $ | 0.64 |  |  |  |  |

Basic net income (loss) per share is computed by dividing net income by the weighted-average number of shares outstanding during the period. Net income (loss) per diluted share is computed by dividing the net income by the weighted-average number of shares and potential shares outstanding during the period, if the effect of potential shares is dilutive. Potential shares include incremental shares of stock issuable upon the exercise of stock options and the vesting of both restricted share units (RSUs) and performance stock units (PSUs). For the three months ended June 28, 2025 and June 29, 2024, weighted options to purchase 0.8 million and 1.4 million shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per share because the effect of including such shares would have been antidilutive in the applicable period. For the six months ended June 28, 2025 and June 29, 2024, weighted options to purchase 0.6 million and 1.4 million shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per share because the effect of including such shares would have been antidilutive in the applicable period. Certain RSUs were considered contingently issuable shares as their vesting was contingent upon the occurrence of certain future events. Since such events have not occurred and were not considered probable of occurring as of each of June 28, 2025 and June 29, 2024, 2.7 million weighted-average shares related to such RSUs have been excluded from the calculation of potential shares.
On October 24, 2024, following a review by outside counsel, the Board adopted resolutions to terminate the employment of Mr. Joe Kiani, our former Chairman and Chief Executive Officer, effective October 24, 2024. In connection with the Board’s determination, the 2.7 million RSU grant to Mr. Kiani was cancelled and the 2.7 million weighted-average shares related to such RSUs have been excluded from the calculation of potential shares for the year ended December 28, 2024. For additional information with respect to these RSUs, see “Employment and Severance Agreements” in Note 24, “Commitments and Contingencies”.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Supplemental Cash Flow Information
Supplemental cash flow information includes the following:

| Six Months Ended
(in millions) | June 28, 2025 |  | June 29, 2024
Cash paid during the year for: |  |  |
Interest expense: |  |  |
Continuing operations | $ | 16.2 |  |  | $ | 21.0 |
Discontinued operations | 1.1 |  |  | 1.2 |
Income taxes: |  |  |
Continuing operations | $ | 22.5 |  |  | $ | 23.4 |
Discontinued operations | 5.3 |  |  | 2.1 |
Operating lease liabilities: |  |  |
Continuing operations | $ | 5.5 |  |  | $ | 5.4 |
Discontinued operations | 6.9 |  |  | 6.7 |
Non-cash operating activities: |  |  |
ROU assets obtained in exchange for lease liabilities: |  |  |
Continuing operations | $ | (0.2) |  |  | $ | 4.8 |
Discontinued operations | 0.6 |  |  | 18.4 |
Non-cash investing activities - continuing operations: |  |  |
Unpaid purchases of property and equipment | $ | 1.6 |  |  | $ | 2.8 |
Unpaid strategic investments | — |  |  | 0.2 |
Non-cash financing activities - continuing operations: |  |  |
Unsettled common stock proceeds from option exercises | $ | — |  |  | $ | 0.1 |
Reconciliation of cash, cash equivalents and restricted cash: |  |  |
Cash and cash equivalents: |  |  |
Continuing operations | $ | 149.6 |  |  | $ | 93.2 |
Discontinued operations | 43.5 |  |  | 36.4 |
Restricted cash: |  |  |
Continuing operations | $ | 2.7 |  |  | $ | 3.8 |
Discontinued operations | 1.3 |  |  | 2.2 |
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows | $ | 197.1 |  |  | $ | 135.6 |

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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Recently Adopted Accounting Pronouncements
There have been no material changes to the accounting policies discussed in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2024, filed with the SEC on February 25, 2025, other than the following update:
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The new standard is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. ASU No. 2023-07 is effective for annual reporting periods beginning after December 15, 2023 and interim periods in fiscal years beginning after December 15, 2024. Early adoption is permitted with retrospective application to all prior periods presented. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company retrospectively adopted this standard during the fiscal year ended December 28, 2024. See Note 25, “Segment and Enterprise Reporting”, for further details on the impact of the adoption of this standard.
Recently Announced Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new standard requires companies to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU No. 2023-09 is effective for annual reporting periods beginning after December 15, 2024. The Company will reflect adoption of this new standard in its 2025 consolidated annual financial statements.
In November 2024, the FASB issued ASU No. 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The guidance in ASU No. 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included ASU No. 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. In January 2025, the FASB issued ASU No. 2025-01 to clarify the effective date of ASU No. 2024-03. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. The Company is currently evaluating the impact of this new standard on its consolidated financial statements upon adoption.
3. Related Party Transactions
On October 24, 2024, following a review by outside counsel, the Board adopted resolutions to terminate the employment of Mr. Kiani, our former Chairman and Chief Executive Officer (CEO), effective October 24, 2024. See Note 24, “Commitments and Contingencies”, for further details.
Willow Laboratories, Inc. (Willow), formerly known as Cercacor Laboratories, Inc., is an independent entity that was spun off from the Company to its stockholders in 1998. Joe Kiani, the Company’s former Chairman and CEO, is also the Executive Chairman and CEO of Willow. Effective as of January 3, 2016, in connection with changes in the capital structure of Willow, the Company determined that Willow was no longer required to be consolidated with the Company for financial reporting purposes. Although the Company believes that Willow continues to be considered a variable interest entity, the Company has determined that it is no longer the primary beneficiary of Willow as it does not have the power to direct the activities of Willow that most significantly impact Willow’s economic performance and has no obligation to absorb Willow’s losses.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
The Company is a party to the following agreements with Willow:
•Cross-Licensing Agreement - The Company and Willow are parties to a cross-licensing agreement (Cross-Licensing Agreement), which governs each party’s rights to certain intellectual property held by the two companies. The Company is subject to certain annual minimum aggregate royalty obligations for use of the rainbow® licensed technology. Prior to a change in control, which is defined in the Willow Cross-Licensing Agreement to include, among other things, Mr. Kiani ceasing to serve as CEO of either the Company or Willow, the Company’s annual minimum royalty obligation was $5.0 million. On October 24, 2024, a change in control, as defined in the Willow Cross-Licensing Agreement, occurred when Mr. Kiani’s employment as the Company’s CEO was terminated. As a result, pursuant to the terms of the Willow Cross-Licensing Agreement, (i) the option to license technology developed by Willow for use in blood glucose monitoring was deemed automatically exercised and a $2.5 million license fee for this technology was paid by the Company to Willow; and (ii) the minimum aggregate annual royalties payable to Willow for carbon monoxide, methemoglobin fractional arterial oxygen saturation, hemoglobin and/or glucose measurements increased to $15.0 million per year until the exclusivity period of the agreement ends, plus up to $2.0 million for each additional rainbow® parameter (with no maximum ceiling for non-vital sign measurements). See Note 9, “Intangible Assets, Net”, for further details. The change in control does not otherwise impact the scope or duration of the license rights.
Aggregate recorded royalty expenses to Willow by the Company under the Cross-Licensing Agreement were $4.9 million and $4.2 million for the three months ended June 28, 2025 and June 29, 2024, respectively. Aggregate recorded royalty expenses to Willow by the Company under the Cross-Licensing Agreement were $10.6 million and $9.0 million for the six months ended June 28, 2025 and June 29, 2024, respectively.
During the first quarter 2025, pursuant to the terms of the Cross-Licensing Agreement, Willow elected to invoice the Company for the remaining year’s minimum royalty of approximately $12.8 million, which has been paid to Willow in the second quarter 2025. As of June 28, 2025, the unamortized asset balance was $8.5 million.
•Administrative Services Agreement - The Company was a party to an administrative services agreement with Willow (G&A Services Agreement), which governs certain general and administrative services that the Company provided to Willow. Amounts charged by the Company pursuant to the G&A Services Agreement were less than $0.1 million for each of the three months ended June 28, 2025 and June 29, 2024, respectively. Amounts charged by the Company pursuant to the G&A Services Agreement were $0.1 million and $0.2 million for each of the six months ended June 28, 2025 and June 29, 2024, respectively. On March 31, 2025, Willow provided the Com pany with a notice to terminate the Services Agreement under Section 7.2, effective April 30, 2025.
•Lease Agreement - Effective December 2019, the Company entered into a lease agreement with Willow for approximately 34,000 square feet of office, research and development space at one of the Company’s owned facilities in Irvine (Willow Lease). The term of the Willow Lease expired on December 31, 2024, and was not renewed. The Company recognized no lease income for the three and six months ended June 28, 2025. The Company recognized approximately $0.3 million and $0.6 million of lease income for the three and six months ended June 29, 2024.
Net amounts accrued and unpaid to Willow at June 28, 2025 and December 28, 2024 were approximately $2.9 million and $4.9 million, respectively. See Note 24, “Commitments and Contingencies”, under the heading of “Willow Cross-Licensing Agreement Provisions” for further details.
The Masimo Foundation for Ethics, Innovation and Competition in Healthcare (Masimo Foundation) is a non-profit organization that was founded in 2010 to provide a platform for encouraging ethics, innovation and competition in healthcare. Mr. Kiani is the Chairman of the Masimo Foundation. In addition, the Company’s Executive Vice President (EVP), Chief Financial Officer served as the Treasurer of the Masimo Foundation and the Company’s EVP, General Counsel and Corporate Secretary served as the Secretary for the Masimo Foundation. Effective January 9, 2025, the Masimo Foundation Board appointed a new Treasurer and Secretary, and Messrs. McClenahan and Young resigned from their respective roles with the Masimo Foundation.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
During the three and six months ended June 28, 2025, the Company made no cash contributions to the Masimo Foundation. During the three months ended June 29, 2024, the Company made no cash contributions to the Masimo Foundation. During the six months ended June 29, 2024, the Company made cash contributions of approximately $1.0 million to the Masimo Foundation. During the three and six months ended June 28, 2025, the Company made no in-kind contributions to the Masimo Foundation. During the three and six months ended June 29, 2024, the Company made various in-kind contributions to the Masimo Foundation, mainly in the form of donated administrative services. The Company halted all payments to the Masimo Foundation as of the end of the third quarter of 2024, and does not intend to make any future contributions to the Masimo Foundation.
Mr. Kiani is also a co-founder, a member of the board of directors and Chief Executive Officer of Like Minded Media Ventures (LMMV), a team of storytellers that create content focused in the areas of true stories, social causes and science. LMMV creates stories with a multi-platform strategy, bridging the gap between film, television, digital and social media. During the second quarter of 2020, the Company entered into a marketing service agreement with LMMV for audiovisual production services promoting brand awareness, including television commercials and digital advertising. During each of the three and six months ended June 29, 2024, the Company incurred no marketing expenses to LMMV under the marketing service agreement. At December 28, 2024, there were no amounts due to LMMV for services rendered. During the fourth quarter of 2024, the Company terminated the marketing services agreement with LMMV. No payment was due in connection with the termination of this agreement.
The Company maintained an aircraft time share agreement, pursuant to which the Company agreed from time to time to make its aircraft available to Mr. Kiani, in his former capacity as Chairman and CEO, for lease on a time-sharing bas is. The agreement provided that Mr. Kiani would pay the Company for personal use based on agreed upon reimbursement rates. For each of the three and six months ended June 29, 2024, the Company charged Mr. Kiani less than $0.1 million related to such reimbursements.
The time share agreement with Mr. Kiani was terminated upon the termination of his employment with the Company.
On June 26, 2023, at the Company’s 2023 Annual Meeting of Stockholders, its stockholders voted to elect two directors nominated by Politan Capital Management LP and certain of its affiliates (Politan) to the Company’s Board of Directors (Board). On September 19, 2024, at the Company’s 2024 Annual Meeting of Stockholders, two additional directors nominated by Politan were elected to the Board. As of September 24, 2024, the date of the last reported Schedule 13-D/A filed with the U.S. Securities and Exchange Commission (SEC) by Politan, Politan beneficially owned approximately 8.8% of the outstanding shares of the Company. The Vice Chairman of the Company’s board of directors, Quentin Koffey, also serves as Chief Investment Officer of Politan. For the three months and six months ended June 28, 2025, the Company paid zero and less than $0.1 million to Politan. For the three and six months ended June 28, 2025, the Company received a $2.0 million payment from Politan related to legal expenses. There were no related party transactions between Masimo and Politan for the three and six months ended June 29, 2024.
On September 24, 2024, Michelle Brennan, a member of the Board, was appointed to the role of interim CEO of the Company. On February 12, 2025, Ms. Brennan’s role as interim CEO ceased, and she was appointed Chairman of the Board. Ms. Brennan also sits on the board of directors of Cardinal Health, Inc. (Cardinal). For each of the three months ended June 28, 2025 and June 29, 2024, sales to Cardinal were approximately $25.8 million and $25.1 million, respectively. For each of the six months ended June 28, 2025 and June 29, 2024, sales to Cardinal were approximately $57.6 million and $55.7 million, respectively.
As of June 28, 2025 and December 28, 2024, amounts owed from Cardinal were approximately $17.4 million and $14.3 million, respectively.
4. Inventories
Inventories consist of the following:

(in millions) | June 28, 2025 |  | December 28, 2024
Raw materials | $ | 145.1 |  |  | $ | 151.0 |
Work-in-process | 25.0 |  |  | 19.2 |
Finished goods | 148.4 |  |  | 124.6 |
Total inventories | $ | 318.5 |  |  | $ | 294.8 |

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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
5. Other Current Assets
Other current assets consist of the following:

(in millions) | June 28, 2025 |  | December 28, 2024
Prepaid expenses | $ | 27.1 |  |  | $ | 19.7 |
Lease receivable, current | 25.2 |  |  | 26.6 |
Indirect taxes receivable | 19.0 |  |  | 18.5 |
Prepaid income taxes | 18.1 |  |  | 17.6 |
Contract assets, current | 12.9 |  |  | 11.4 |
Prepaid rebates and royalties, current | 4.9 |  |  | 4.6 |
Restricted cash(1) | 2.7 |  |  | 2.7 |
Other current assets | 2.6 |  |  | 2.3 |
Total other current assets | $ | 112.5 |  |  | $ | 103.4 |

______________
(1) Restricted cash includes funds received from the Bill and Melinda Gates Foundation. As the Company incurs costs associated with research and development related to this project, on a quarterly basis, the Company reclasses amounts from the grant to offset costs incurred.
6. Lease Receivable
For deferred equipment agreements that contain embedded operating leases, upon lease commencement, the Company defers and records the equipment cost of operating lease assets within property, plant and equipment, net of accumulated depreciation. These operating lease assets are subsequently amortized to cost of goods sold over the lease term on a straight-line basis.
For deferred equipment agreements that contain embedded sales-type leases, the Company recognizes lease revenue and costs, as well as a lease receivable, at the time the lease commences. Lease revenue related to both operating-type and sales-type leases are included within revenue in the accompanying condensed consolidated statements of operations. For the three months ended June 28, 2025 and June 29, 2024, lease revenue was approximately $8.0 million and $9.0 million, respectively. For the six months ended June 28, 2025 and June 29, 2024, lease revenue was approximately $20.0 million and $25.0 million, respectively. Costs related to embedded leases within the Company’s deferred equipment agreements are included in cost of goods sold in the accompanying condensed consolidated statements of operations.
Lease receivable from sales-type leases consists of the following:

(in millions) | June 28, 2025 |  | December 28, 2024 |  |
Lease receivable | $ | 78.6 |  |  | $ | 85.5 |  |  |
Allowance for credit loss | (0.2) |  |  | (0.2) |  |  |
Lease receivable, net | 78.4 |  |  | 85.3 |  |  |
Less: current portion of lease receivable | (25.2) |  |  | (26.6) |  |  |
Lease receivable, non-current | $ | 53.2 |  |  | $ | 58.7 |  |  |

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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
As of June 28, 2025, estimated future maturities of customer sales-type lease receivables and operating lease payments for each of the following fiscal years are as follows:

| Future Lease Receivables/Payments (in millions)
Fiscal year | Sales-Type Leases |  | Operating Leases
2025 (balance of year) | $ | 13.5 |  |  | $ | 16.5 |
2026 | 22.7 |  |  | 16.2 |
2027 | 17.1 |  |  | 14.7 |
2028 | 11.6 |  |  | 11.8 |
2029 | 8.6 |  |  | 11.6 |
Thereafter | 4.9 |  |  | 9.4 |
Total | $ | 78.4 |  |  | $ | 80.2 |
Less: imputed interest(1) | — |  |  |
Present value of total lease payments | $ | 78.4 |  |  |

______________
(1) The calculation of the rates implicit in the leases resulted in negative discount rates. Therefore, the Company as a lessor used a 0% discount rate to measure the net investment in the lease.
7. Deferred Costs and Other Contract Assets
Deferred costs and other contract assets consist of the following:

(in millions) | June 28, 2025 |  | December 28, 2024
Deferred commissions | $ | 24.9 |  |  | $ | 25.0 |
Unbilled contract receivables | 19.6 |  |  | 20.2 |
Prepaid contract allowances | 13.0 |  |  | 14.5 |
Deferred equipment agreements, net | 1.8 |  |  | 1.3 |
Deferred costs and other contract assets | $ | 59.3 |  |  | $ | 61.0 |

For the three months ended June 28, 2025 and June 29, 2024, deferred commission amortization expense was $2.1 million and $1.8 million, respectively. For the six months ended June 28, 2025 and June 29, 2024, deferred commission amortization expense was $4.2 million and $3.7 million, respectively.
For the year ended December 30, 2023, total deferred costs and other contracts were $57.3 million.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
8. Property and Equipment, net
Property and equipment, net, consists of the following:

(in millions) | June 28, 2025 |  | December 28, 2024 |
Operating lease assets | $ | 170.0 |  |  | $ | 148.6 |  |
Machinery, equipment, tooling and other | 150.0 |  |  | 147.1 |  |
Building and building improvements | 143.5 |  |  | 143.5 |  |
Land | 47.7 |  |  | 47.7 |  |
Computer equipment and software | 38.4 |  |  | 38.7 |  |
Leasehold improvements | 33.3 |  |  | 31.2 |  |
Furniture and office equipment | 16.2 |  |  | 15.8 |  |
Demonstration units | 0.5 |  |  | 0.5 |  |
Construction-in-progress (CIP) | 28.0 |  |  | 29.0 |  |
Total property and equipment | 627.6 |  |  | 602.1 |  |
Accumulated depreciation | (290.0) |  |  | (265.1) |  |
Property and equipment, net | $ | 337.6 |  |  | $ | 337.0 |  |

In October 2024, the Company grounded the corporate aircraft and started exploring disposition strategies. In December 2024, the Company entered into a letter of intent to sell the aircraft, and classified the asset as held-for-sale within the healthcare segment as of December 28, 2024. During the first quarter 2025, the Company completed the sale of the corporate aircraft for $19.5 million.
For the three months ended June 28, 2025 and June 29, 2024, depreciation expense of property and equipment was $6.4 million and $7.9 million, respectively. For the six months ended June 28, 2025 and June 29, 2024, depreciation expense of property and equipment was $12.9 million and $15.3 million, respectively.
For the three months ended June 28, 2025 and June 29, 2024, equipment leased to customers which was amortized to cost of goods sold was $6.2 million and $6.3 million, respectively. For the six months ended June 28, 2025 and June 29, 2024, equipment leased to customers which was amortized to cost of goods sold was $12.8 million and $12.7 million, respectively.
As of June 28, 2025 and December 28, 2024, accumulated amortization of equipment leased to customers was $59.0 million and $46.2 million, respectively.
The balance in CIP at June 28, 2025 and December 28, 2024 related primarily to the capitalized implementation costs related to a new enterprise resource planning software system, costs related to facility improvements and the underlying assets for which have not been completed or placed into service.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
9. Intangible Assets, net
Intangible assets, net, consist of the following:

| June 28, 2025 |  | December 28, 2024
(in millions) | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Intangible assets subject to amortization: |  |  |  |  |  |  |  |  |  |
Patents | $ | 45.2 |  |  | $ | (18.8) |  |  | $ | 26.4 |  |  | $ | 44.0 |  |  | $ | (17.5) |  |  | $ | 26.5 |
Acquired technologies | 28.6 |  |  | (17.1) |  |  | 11.5 |  |  | 27.9 |  |  | (15.8) |  |  | 12.1 |
Customer relationships | 24.6 |  |  | (13.9) |  |  | 10.7 |  |  | 24.6 |  |  | (13.3) |  |  | 11.3 |
Trademarks | 14.0 |  |  | (7.8) |  |  | 6.2 |  |  | 13.7 |  |  | (7.2) |  |  | 6.5 |
Licenses | 2.0 |  |  | (1.4) |  |  | 0.6 |  |  | 2.3 |  |  | (1.2) |  |  | 1.1 |
Licenses-related party | 7.5 |  |  | (7.3) |  |  | 0.2 |  |  | 7.5 |  |  | (7.1) |  |  | 0.4 |
Other | 6.6 |  |  | (4.5) |  |  | 2.1 |  |  | 8.1 |  |  | (4.4) |  |  | 3.7 |
Total intangible assets subject to amortization, net | $ | 128.5 |  |  | $ | (70.8) |  |  | $ | 57.7 |  |  | $ | 128.1 |  |  | $ | (66.5) |  |  | $ | 61.6 |

Finite lived intangible assets have a weighted-average amortization period ranging from eleven years to fourteen years. Total amortization expense for the three months ended June 28, 2025 and June 29, 2024 was $2.0 million and $2.6 million, respectively. Total amortization expense for the six months ended June 28, 2025 and June 29, 2024 was $4.1 million and $5.1 million, respectively.
Total renewal costs capitalized for patents and trademarks for the three months ended June 28, 2025 and June 29, 2024 were $0.4 million and $0.3 million, respectively. Total renewal costs capitalized for patents and trademarks for the six months ended June 28, 2025 and June 29, 2024 were $0.5 million and $0.6 million, respectively. As of June 28, 2025, the weighted-average number of years until the next renewal was two years for patents and six years for trademarks.
Estimated amortization expense for each of the next fiscal years is as follows:

Fiscal year | Amount (in millions)
2025 (balance of year) | $ | 3.9 |
2026 | 7.4 |
2027 | 6.6 |
2028 | 6.2 |
2029 | 5.5 |
Thereafter | 28.1 |
Total | $ | 57.7 |

Indefinite-lived intangible assets are subject to annual impairment testing, unless circumstances dictate more frequent testing, if impairment indicators exist. For goodwill, the Company performs a qualitative assessment during the fourth quarter each year, for its annual impairment analysis. In the fourth quarter of 2024, the Company performed its annual impairment analysis, and concluded that it was more likely than not that the fair value of the healthcare reporting unit was greater than its carrying value. Accordingly, no further testing was required on this reporting unit.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
10. Goodwill
Changes in goodwill were as follows:

(in millions) |  |  |  | June 28, 2025 |  |
Goodwill, beginning of period |  |  |  | $ | 96.7 |  |  |
Foreign currency translation adjustment |  |  |  | 4.2 |  |  |
Goodwill, end of period |  |  |  | $ | 100.9 |  |  |

11. Lessee ROU Assets and Lease Liabilities
The Company leases certain facilities in North and South America, Europe, the Middle East and Asia-Pacific regions under operating lease agreements expiring at various dates through January 2032. In addition, the Company leases equipment in the U.S. and Europe pursuant to leases that are classified as operating leases and expire at various dates through January 2029. The majority of these leases are non-cancellable and generally do not contain any material restrictive covenants, material residual value guarantees, or other material guarantees. The Company recognizes lease costs under these agreements using a straight-line method based on total lease payments. Certain facility leases contain predetermined price escalations and in some cases renewal options, the longest of which is for five years.
The Company generally estimates the applicabl e discount rate used to determine the net present value of lease payments based on available information at the lease commencement date. As of June 28, 2025, the weighted-average discount rate used by the Company for all operating leases was approximately 4.0%.
The balance sheet classifications for amounts related to the Company’s operating leases for which it is the lessee are as follows:

(in millions) |  | Balance sheet classification |  | June 28, 2025 |  | December 28, 2024 |  |
Lessee ROU assets |  | Other non-current assets |  | $ | 26.5 |  |  | $ | 29.2 |  |  |
Lessee current lease liabilities |  | Other current liabilities |  | 7.9 |  |  | 9.7 |  |  |
Lessee non-current lease liabilities |  | Other non-current liabilities |  | 20.6 |  |  | 23.3 |  |  |
Total operating lease liabilities |  |  |  | $ | 28.5 |  |  | $ | 33.0 |  |  |

As of June 28, 2025 and December 28, 2024, accumulated amortization for lessee ROU assets was $34.5 million and $32.4 million, respectively. The weighted-average remaining lease term for the Company’s operating leases was 4.3 years as of June 28, 2025.
As of June 28, 2025, estimated future operating lease payments for each of the following fiscal years were as follows:

Fiscal year |  | Amount (in millions)
2025 (balance of year) |  | $ | 4.6 |
2026 |  | 7.9 |
2027 |  | 6.3 |
2028 |  | 5.5 |
2029 |  | 3.7 |
Thereafter(1) |  | 3.0 |
Total |  | 31.0 |
Imputed interest |  | (2.5) |
Present value |  | $ | 28.5 |

______________
(1) Includes optional renewal period for certain leases.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
During the three months ended June 28, 2025 and June 29, 2024, operating lease costs were approximately $2.4 million and $2.5 million, respectively. During the six months ended June 28, 2025 and June 29, 2024, operating lease costs were approximately $4.0 million and $5.1 million, respectively.
12. Other Non-Current Assets
Other non-current assets consist of the following:

(in millions) | June 28, 2025 |  | December 28, 2024
Lessee ROU assets, net | $ | 26.5 |  |  | $ | 29.2 |
Strategic investments | 6.0 |  |  | 6.6 |
Prepaid deposits and other | 5.3 |  |  | 6.8 |
Derivative assets - non-current(1) | 2.7 |  |  | 6.2 |
Equity investments - fair value | 2.0 |  |  | 2.0 |
Other non-current assets | 0.5 |  |  | 0.5 |
Total non-current assets | $ | 43.0 |  |  | $ | 51.3 |

______________
(1) Excludes accrued interest.
13. Deferred Revenue and Other Contract Liabilities, Current
Deferred revenue and other contract liabilities, current consist of the following:

(in millions) | June 28, 2025 |  | December 28, 2024
Deferred revenue | $ | 65.2 |  |  | $ | 61.9 |
Accrued rebates and allowances | 25.1 |  |  | 23.0 |
Accrued customer reimbursements | 6.7 |  |  | 10.1 |
Total deferred revenue and other contract liabilities | 97.0 |  |  | 95.0 |
Less: Non-current portion of deferred revenue | (21.6) |  |  | (18.1) |
Deferred revenue and other contract liabilities, current | $ | 75.4 |  |  | $ | 76.9 |

Deferred revenue relates to contracted amounts that have been invoiced to customers for which remaining performance obligations must be completed before the Company can recognize revenue. Generally, the Company records deferred revenue when revenue is to be recognized subsequent to invoicing.
Deferred revenue primarily relates to undelivered equipment, sensors and services under deferred equipment agreements, extended warranty agreements, and maintenance agreements. Expected revenue from remaining contractual performance obligations (Unrecognized Contract Revenue) includes deferred revenue, as well as other amounts that will be invoiced and recognized as revenue in future periods when the Company completes its performance obligations. Unrecognized Contract Revenue excludes revenue allocable to monitoring-related equipment that is effectively leased to customers under deferred equipment agreements and other contractual obligations for which neither party has performed. The estimated timing of this revenue is based, in part, on management’s estimates and assumptions about when its performance obligations will be completed. As a result, the actual timing of this revenue in future periods may vary, possibly materially, due to factors such as healthcare facility spending trends, hospital inpatient census and seasonality. As of June 28, 2025, the Company had approximately $1,720.1 million of Unrecognized Contract Revenue related to executed contracts with an original duration of one year or more. The Company expects to recognize approximately $490.4 million of this amount as revenue within the next twelve months and the remaining balance thereafter.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Changes in deferred revenue for the six months ended June 28, 2025 and June 29, 2024, were as follows:

(in millions) | Six Months Ended June 28, 2025 |  | Six Months Ended June 29, 2024
Deferred revenue, beginning of the period | $ | 61.9 |  |  | $ | 48.4 |
Revenue deferred during the period | 27.1 |  |  | 15.9 |
Recognition of revenue deferred in prior periods | (23.8) |  |  | (15.9) |
Deferred revenue, end of the period | $ | 65.2 |  |  | $ | 48.4 |

14. Other Current Liabilities
Other current liabilities consist of the following:

(in millions) | June 28, 2025 |  | December 28, 2024
Accrued legal fees | $ | 24.6 |  |  | $ | 14.6 |
Accrued expenses | 22.3 |  |  | 24.2 |
Accrued indirect taxes payable | 20.7 |  |  | 17.9 |
Long-term debt, current | 15.0 |  |  | 15.0 |
Income tax payable | 12.2 |  |  | 12.4 |
Lessee lease liabilities, current | 7.9 |  |  | 9.7 |
Related party payables | 3.0 |  |  | 5.3 |
Accrued warranty | 2.8 |  |  | 2.9 |
Other current liabilities | 12.0 |  |  | 13.4 |
Total other current liabilities | $ | 120.5 |  |  | $ | 115.4 |

15. Debt

(in millions) | June 28, 2025 |  | December 28, 2024
Term loan - current portion | $ | 15.0 |  |  | $ | 15.0 |
Debt, current portion | 15.0 |  |  | 15.0 |
Term loan - long-term | 251.7 |  |  | 258.3 |
Revolver - long-term | 347.0 |  |  | 456.0 |
Debt, long-term | 598.7 |  |  | 714.3 |
Total debt | $ | 613.7 |  |  | $ | 729.3 |

Credit Facility
On April 11, 2022, the Company entered into a credit agreement (Credit Facility) with financial institutions party thereto as initial lenders (collectively, the Initial Lenders), Citibank, N.A., as Administrative Agent, Citibank, N.A., JPMorgan Chase Bank, N.A., Bank of the West and BofA Securities, Inc., as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A., Bank of the West and BofA Securities, Inc., as co-syndication agents.
The Credit Facility provides for an unsecured term loan of $300.0 million (Term Loan) and $500.0 million of on-going unsecured revolving commitments (Revolver), with an option, subject to certain conditions, for the Company to increase the aggregate borrowing capacity by an additional $400.0 million (plus additional unlimited amounts if certain incurrence tests are met) in the future with the Initial Lenders and additional lenders, as required. Debt issuance costs of $8.4 million were recorded as a reduction to the carrying amount of the Credit Facility and are being amortized to interest expense using the effective interest method.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
The Credit Facility also provides for a sublimit of up to $50.0 million for the issuance of letters of credit.
Borrowings under the Credit Facility will be deemed, at the Company’s election, either: (a) an Alternate Base Rate (ABR) Loan, which bears interest at the ABR, plus a spread of 0.000% to 0.750% based upon a Company leverage ratio, or (b) a Term SOFR Loan, which bears interest at the Adjusted Term SOFR Rate (as defined below), plus a spread of 1.000% to 1.750% based upon a Company net leverage ratio. Pursuant to the terms of the Credit Facility, the ABR is equal to the greatest of (i) the prime rate, (ii) the Federal Reserve Bank of New York effective rate plus 0.50%, and (iii) the one-month Adjusted Term SOFR plus 1.0%. The Adjusted Term SOFR Rate is equal to the Term SOFR Rate (as defined in the Credit Facility) for the applicable interest period plus a spread adjustment of 0.10%, 0.15% and 0.25% for the interest periods ending one, three and six months, respectively. At June 28, 2025, the effective interest rate on the Credit Facility was 5.7%.
The Company is also obligated under the Credit Facility to pay an unused fee ranging from 0.150% to 0.275% per annum, based upon a Company leverage ratio, with respect to any non-utilized portion of the Credit Facility.
The Company is subject to certain covenants, including financial covenants related to a net leverage ratio and an interest coverage ratio, and other customary negative covenants. The Credit Facility also includes customary events of default which, upon the occurrence of any such event of default, provide the Initial Lenders (and any additional lenders) with the right to take either or both of the following actions: (a) immediately terminate the commitments, and (b) declare the loans then outstanding immediately due and payable in full. All unpaid principal under the Credit Facility will become due and payable on April 12, 2027.
On May 16, 2022, the Company entered into the First Amendment to the Credit Agreement (First Amendment) with the Initial Lenders and Citibank, N.A., as the administrative agent, which amended the Credit Facility. The First Amendment provides for an additional $205 million of unsecured revolving commitments, increasing the aggregate amount of the Revolver from $500 million to $705 million.
Borrowing rates, maturity date, financial covenants, affirmative and negative covenants and other restricted terms remain unchanged from the Credit Facility. All unpaid principal under the First Amendment will become due and payable on April 12, 2027.
As of June 28, 2025, we had approximately $355.2 million of available borrowing capacity, (net of approximately $2.8 million of outstanding letters of credit) under the Credit Facility.
The Company was in full compliance with all covenants contained in its debt agreements and Credit Facility at June 28, 2025.
For the three months ended June 28, 2025 and June 29, 2024, the Company incurred total interest expense of $8.2 million and $10.6 million under the Credit Facility, respectively. For the six months ended June 28, 2025 and June 29, 2024, the Company incurred total interest expense of $16.9 million and $21.8 million under the Credit Facility, respectively.
As of June 28, 2025, the aggregate maturities of principal on all healthcare related debt for each of the next five years and thereafter are as follows:

Fiscal year |  | Amount (in millions)
2025 (balance of year) |  | $ | 7.5 |
2026 |  | 15.0 |
2027 |  | 591.2 |
2028 |  | — |
2029 |  | — |
Thereafter |  | — |
Total |  | $ | 613.7 |

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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
16. Other Non-Current Liabilities
Other non-current liabilities consist of the following:

(in millions) | June 28, 2025 |  | December 28, 2024
Unrecognized tax benefits | $ | 27.7 |  |  | $ | 23.7 |
Deferred revenue, non-current | 21.6 |  |  | 18.1 |
Lessee non-current lease liabilities | 20.6 |  |  | 23.3 |
Projected benefit obligation | 4.7 |  |  | 5.4 |
Other | 1.7 |  |  | 0.4 |
Total other non-current liabilities | $ | 76.3 |  |  | $ | 70.9 |

Unrecognized tax benefits relate to the Company’s long-term portion of tax liability associated with uncertain tax positions. Authoritative guidance prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. See Note 23, “Income Taxes”, for further details.
17. Derivative Instruments and Hedging Activities
Derivative Instruments - Cash Flow Hedges
The Company’s cash flow hedges are designed to mitigate the risk of exposure to variability in expected future cash flows of recognized assets, liabilities or any unrecognized forecasted transactions. The Company entered into various interest rate swaps that are designated as cash flow hedges on a substantial portion of the Company’s outstanding debt. The interest rate swaps reduce the variability of cash flow payments for the Company by converting the variable interest rate on the Company’s long-term debt to an average fixed interest rate of 3.26%. These contracts, carried at fair value, have maturities of approximately two years. All hedging relationships were highly effective at achieving offsetting changes in cash flows attributable to the risk being hedged. The Company used a regression analysis at hedge inception to assess the effectiveness of cash flow hedge and periodically thereafter.
The Company records gains and losses from the changes in the fair value of these instruments as a component of other comprehensive income (loss). Deferred gains or losses from these designated cash flow hedges are reclassified into earnings in the period that the hedged items affect earnings. The Company does not offset fair value amounts recognized for derivative instruments in its condensed consolidated balance sheets for presentation purposes. The following table summarizes the fair value of the hedging instruments, presented on a gross basis, as of June 28, 2025 and December 28, 2024.

|  |  |  | Condensed Consolidated Balance Sheets
(in millions) |  | Balance sheet classification |  | June 28, 2025 |  | December 28, 2024 |  |
Interest rate contracts, inclusive of accrued interest |  | Other non-current assets |  | $ | 3.1 |  |  | $ | 6.8 |  |  |
Interest rate contracts, inclusive of accrued interest |  | Other non-current liabilities |  | (1.6) |  |  | (0.1) |  |  |
Total |  |  |  | $ | 1.5 |  |  | $ | 6.7 |  |  |

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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
The following table summarizes the gains reclassified from accumulated other comprehensive (loss) income to the condensed consolidated statements of operations for the three and six months ended June 28, 2025 and June 29, 2024, respectively.

Cash flow hedges |  |  |  | Condensed Consolidated Statement of Operations
|  |  |  | Three Months Ended |  | Six Months Ended
(in millions) |  | Location of gains |  | June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Interest rate contracts |  | Non-operating gains |  | $ | 1.4 |  |  | $ | 4.1 |  |  | $ | 3.0 |  |  | $ | 8.3 |
Total |  |  |  | $ | 1.4 |  |  | $ | 4.1 |  |  | $ | 3.0 |  |  | $ | 8.3 |

The following tables summarize the changes in accumulated other comprehensive (loss) income related to the hedging instruments for the three and six months ended June 28, 2025 and June 29, 2024, respectively.

|  | Three Months Ended |  | Six Months Ended
(in millions) |  | June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Beginning balance |  | $ | 2.5 |  |  | $ | 14.3 |  |  | $ | 6.0 |  |  | $ | 7.8 |
Amount recognized in other comprehensive (loss) income |  | — |  |  | 3.3 |  |  | (1.9) |  |  | 14.0 |
Amount reclassified into earnings |  | (1.4) |  |  | (4.1) |  |  | (3.0) |  |  | (8.3) |
Ending balance |  | $ | 1.1 |  |  | $ | 13.5 |  |  | $ | 1.1 |  |  | $ | 13.5 |

For each of the three months ended June 28, 2025 and June 29, 2024 the unrealized loss, net of tax was $1.1 million and $0.6 million, respectively. For each of the six months ended June 29, 2024, the unrealized loss and gain, net of tax was $3.8 million and $4.3 million, respectively.
For each of the three months ended June 28, 2025 and June 29, 2024, the tax benefit related to the cash flow hedges was $0.3 million and $0.2 million, respectively. For each of the six months ended June 28, 2025 and June 29, 2024, the tax benefit and provision related to the cash flow hedges was $1.1 million and $1.4 million, respectively.
The Company expects to reclassify a net amount of gains of $2.1 million from accumulated other comprehensive (loss) income to non-operating (loss) income within the next 12 months.
18. Discontinued Operations
In the third quarter of 2024, the Company announced that the Board remained committed to the previously announced review of alternatives for both the consumer audio and consumer healthcare businesses, and that the Board had engaged Centerview Partners and Morgan Stanley as financial advisors and Sullivan & Cromwell as a legal advisor. As of December 28, 2024, the Company’s non-healthcare consumer business segment remained part of the Company’s continuing operations. The sale process progressed in 2025, and during the first quarter of 2025, the non-healthcare business was classified as held-for-sale and reported in discontinued operations.
The accounting criteria for reporting the non-healthcare business as a discontinued operation were met when the Board resolved to sell the non-healthcare business during the first quarter of 2025. Furthermore, there was a strategic shift that is expected to have a major effect on the Company’s overall operations and financial results. Accordingly, the accompanying condensed consolidated financial statements for all periods presented, effective as of the first quarter of 2025, reflect the non-healthcare business as a discontinued operation. Applicable amounts in the prior year have been recast to conform to this discontinued operations presentation.
On May 6, 2025, the Company entered into a definitive agreement with Harman International Industries, Incorporated, a wholly-owned subsidiary of Samsung Electronics Co., Ltd., to sell its non-healthcare business for an aggregate purchase price of $350 million in cash, subject to certain adjustments. The transaction is subject to the satisfaction or waiver of certain conditions, and is expected to c lose by the end of 2025, subject to receiving required regulatory approval.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Interest expense from specifically identifiable debt associated with the non-healthcare business has been included in discontinued operations. As a result of the separation of the non-healthcare business, the Company incurred $0.3 million and $0.4 million in direct costs during each of the three months ended June 28, 2025 and June 29, 2024, and $1.1 million and $1.2 million in direct costs during each of the six months ended June 28, 2025 and June 29, 2024, respectively, which are reflected in earnings from discontinued operations, net of income taxes in the accompanying condensed consolidated statements of operations. These costs primarily relate to professional fees incurred in connection with the separation.
The key components of income from the non-healthcare business discontinued operations were as follows:

| Three Months Ended |  | Six Months Ended
(in millions) | June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Revenues | $ | 141.5 |  |  | $ | 152.4 |  |  | $ | 288.2 |  |  | $ | 305.6 |
Cost of sales | 87.2 |  |  | 104.8 |  |  | 186.3 |  |  | 223.0 |
Intangible assets impairment charges | — |  |  | — |  |  | 44.0 |  |  | — |
Gross profit | 54.3 |  |  | 47.6 |  |  | 57.9 |  |  | 82.6 |
Selling, general and administrative expenses | 35.2 |  |  | 51.4 |  |  | 75.2 |  |  | 95.5 |
Research and development expenses | 7.6 |  |  | 9.8 |  |  | 17.0 |  |  | 19.9 |
Intangible assets impairment charges | — |  |  | — |  |  | 251.0 |  |  | — |
Operating income (loss) | 11.5 |  |  | (13.6) |  |  | (285.3) |  |  | (32.8) |
Non-operating (loss) income | (2.3) |  |  | 2.6 |  |  | (6.5) |  |  | 5.2 |
Income (loss) from discontinued operations, before income taxes | 9.2 |  |  | (11.0) |  |  | (291.8) |  |  | (27.6) |
Provision (benefit) for income taxes | 2.8 |  |  | (2.2) |  |  | (80.3) |  |  | (5.6) |
Income (loss) from discontinued operations, net of income taxes | $ | 6.4 |  |  | $ | (8.8) |  |  | $ | (211.5) |  |  | $ | (22.0) |

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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Assets and liabilities of the discontinued operations of the non-healthcare business classified as held-for-sale in the condensed consolidated balance sheets as of June 28, 2025 and December 28, 2024 consist of the following:

(in millions) | June 28, 2025 |  | December 28, 2024
Cash and cash equivalents | $ | 43.5 |  |  | $ | 54.0 |
Trade receivable, net of credit allowances | 98.0 |  |  | 143.3 |
Inventories, net | 206.1 |  |  | 164.4 |
Other current assets | 46.2 |  |  | 41.7 |
Total current assets, held-for-sale | 393.8 |  |  | 403.4 |
Property and equipment, net | 47.4 |  |  | 44.6 |
Intangible assets, net | 240.6 |  |  | 496.6 |
Deferred tax assets | 23.0 |  |  | 25.2 |
Other non-current assets | 50.8 |  |  | 48.8 |
Total non-current assets, held-for-sale | 361.8 |  |  | 615.2 |
Total assets held-for-sale - discontinued operations | $ | 755.6 |  |  | $ | 1,018.6 |
Accounts payable | $ | 107.1 |  |  | $ | 123.8 |
Accrued compensation | 3.7 |  |  | 4.9 |
Deferred revenue and other contract liabilities, current | 13.2 |  |  | 18.6 |
Other current liabilities | 68.8 |  |  | 70.4 |
Total current liabilities, held-for-sale | 192.8 |  |  | 217.7 |
Long-term debt | 13.0 |  |  | 13.6 |
Deferred tax liabilities | 26.5 |  |  | 99.9 |
Other non-current liabilities | 53.0 |  |  | 57.2 |
Total non-current liabilities, held-for-sale | 92.5 |  |  | 170.7 |
Total liabilities held-for-sale - discontinued operations | $ | 285.3 |  |  | $ | 388.4 |

During the first quarter of 2025, the Company determined the non-healthcare business is classified as held-for-sale and is accordingly measured at the lower of its carrying amount or fair value less cost to sell in accordance with ASC 360: Impairment Testing: Long-lived Assets Classified as Held and Used (ASC 360); furthermore, the carrying amount of any assets not covered by ASC 360 included in this disposal group is adjusted in accordance with other applicable GAAP before measuring the fair value less cost to sell of the disposal group. All initial or subsequent adjustments to the carrying amount of a component as a result of such measurement is classified in discontinued operations. During the first quarter 2025, the Company recorded intangible asset write-downs of approximate ly $44.0 million within cost of sales, and approximately $251.0 million w ithin operating expenses.
Determining the fair value of a reporting unit is judgmental and involves the use of significant estimates and assumptions, which include the discount rate and forecasted revenue growth rates and operating margins, to calculate projected future discounted cash flows. The non-healthcare forecasted revenue growth rates and operating margins assume recovery from the current business downturn while also employing strategies to expand in key market segments.
These fair value measurements require significant judgments using Level 3 inputs, such as discounted projected cash flows, which are not observable from the market, directly or indirectly. If future actual results adversely deviate from the forecast, assumptions or probabilities in the analysis, there will be a materially different assessment. As such, the Company will continue to monitor events occurring or circumstances changing which may necessitate further impairment assessments for intangibles and other long-lived assets.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
19. Equity
Stock Repurchase Program
In June 2022, the Board approved a stock repurchase program, authorizing the Company to purchase up to 5.0 million shares of its common stock on or before December 31, 2027 (2022 Repurchase Program). The 2022 Repurchase Program became effective in July 2022. The Company expects to fund the 2022 Repurchase Program through its available cash, cash expected to be generated from future operations, the Credit Facility and other potential sources of capital. The 2022 Repurchase Program can be carried out at the discretion of a committee comprised of the Company’s CEO and CFO through open market purchases, one or more Rule 10b5-1 trading plans, block trades and privately negotiated transactions. Approximately 80,000 shares were repurchased pursuant to the 2022 Repurchase Program during the three and six months ended June 28, 2025. As of June 28, 2025, approximately 4.9 million shares remained available for repurchase pursuant to the 2022 Repurchase Program.
The following table provides a summary of the Company’s stock repurchase activities (in thousands, except per share amounts):

|  | Three Months Ended |  | Six Months Ended
|  | June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Share repurchased(1) |  | 80 |  |  | — |  |  | 80 |  |  | — |
Average cost per share |  | $ | 171.41 |  |  | $ | — |  |  | $ | 171.41 |  |  | $ | — |
Value of shares repurchased |  | $ | 13,661 |  |  | $ | — |  |  | $ | 13,661 |  |  | $ | — |

______________
(1) Excludes shares withheld from the shares of its common stock actually issued in connection with the vesting of PSU or RSU awards to satisfy certain U.S. federal and state tax withholding obligations.
20. Stock-Based Compensation
Total stock-based compensation expense for the three months ended June 28, 2025 and June 29, 2024 was $8.5 million and $11.9 million, respectively. Total stock-based compensation expense for the six months ended June 28, 2025 and June 29, 2024 was $17.6 million and $20.6 million, respectively. The stock-based compensation expense amounts for each of the three and six months ended June 28, 2025 and June 29, 2024 reflect adjustments for the expected life-to-date achievement of certain PSUs. The Company reassesses the expected achievement of such PSU awards based upon the achievement of certain pre-established multi-year performance criteria approved by the Board at the date of grant.
As of June 28, 2025, an aggregate of 5.4 million shares of common stock were reserved for future issuance under the Company’s equity plans, of which 3.5 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.
Equity Incentive Plans
2017 Equity Plan
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. 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.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
2007 Stock Incentive Plan
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.
Stock-Based Award Activity
Stock Options
The number and weighted-average exercise price of options issued and outstanding under all of the Company’s equity plans are as follows:

| Six Months Ended June 28, 2025
(in millions, except for weighted-average exercise prices) | Shares |  | Weighted-Average Exercise Price
Options outstanding, beginning of period(1) | 1.6 |  |  | $ | 110.43 |
Granted(2) | 0.1 |  |  | 165.45 |
Canceled | (0.1) |  |  | 159.32 |
Exercised | (0.7) |  |  | 84.80 |
Options outstanding, end of period | 0.9 |  |  | $ | 119.16 |
Options exercisable, end of period | 0.8 |  |  | $ | 113.98 |

______________
(1) The Company recorded less than $0.1 million of stock option expenses for discontinued operations for each of the three months ended June 28, 2025 and June 29, 2024. The Company recorded $0.1 million of stock option expenses for discontinued operations for each of the six months ended June 28, 2025 and June 29, 2024.
(2) No stock options were granted for discontinued operations for the three and six months ended June 28, 2025.
Total stock option expense for the three months ended June 28, 2025 and June 29, 2024 was $0.3 million and $1.9 million, respectively. Total stock option expense for the six months ended June 28, 2025 and June 29, 2024 was $0.6 million and $4.0 million, respectively. As of June 28, 2025, the Company had $5.4 million of unrecognized compensation cost related to non-vested stock options that are expected to vest over a weighted-average period of approximately 3.5 years.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
RSUs
The number of RSUs issued and outstanding under all of the Company’s equity plans are as follows:

| Six Months Ended June 28, 2025 |  |  |  |
(in millions, except for weighted-average grant date fair value amounts) | Units |  | Weighted-Average Grant Date Fair Value |  |  |  |  |  |  |  |
RSUs outstanding, beginning of period(1) | 0.6 |  |  | $ | 135.96 |  |  |  |  |  |  |  |  |
Granted(2) | 0.2 |  |  | 167.38 |  |  |  |  |  |  |  |  |
Canceled | — |  |  | 144.77 |  |  |  |  |  |  |  |  |
Vested | (0.1) |  |  | 157.56 |  |  |  |  |  |  |  |  |
RSUs outstanding, end of period | 0.7 |  |  | $ | 142.28 |  |  |  |  |  |  |  |  |

___________________________
(1) The Company recorded $1.1 million and $1.2 million of RSU related expense for discontinued operations for each of the three months ended June 28, 2025 and June 29, 2024. The Company recorded $2.3 million and $2.1 million of RSU related expense for discontinued operations for each of the six months ended June 28, 2025 and June 29, 2024.
(2) No RSUs were granted for discontinued operations for the three and six months ended June 28, 2025.
Total RSU expense for the three months ended June 28, 2025 and June 29, 2024 was $8.0 million and $7.0 million, respectively. Total RSU expense for the six months ended June 28, 2025 and June 29, 2024 was $17.2 million and $13.3 million, respectively. As of June 28, 2025, the Company had $82.5 million of unrecognized compensation cost related to non-vested RSU awards expected to be recognized and vest over a weighted-average period of approximately 3.2 years.
As previously mentioned in Note 2, “Summary of Significant Accounting Policies” under the heading “Net Income Per Share”, 2.7 million shares related to certain RSUs were considered contingently issuable shares as their vesting is contingent upon the occurrence of certain events. As of June 28, 2025, such events were deemed to have not occurred. See Note 24, “Commitments and Contingencies” for additional details.
PSUs
The number of PSUs outstanding under all of the Company’s equity plans are as follows:

| Six Months Ended June 28, 2025
(in millions, except for weighted-average grant date fair value amounts) | Units |  | Weighted-Average Grant Date Fair Value
PSUs outstanding, beginning of period(1) | 0.1 |  |  | $ | 172.50 |
Granted(2)(3) | 0.1 |  |  | 181.70 |
Canceled | (0.1) |  |  | 167.84 |
PSUs outstanding, end of period | 0.1 |  |  | $ | 181.16 |

______________
(1) The Company recorded $0.3 million of PSU expenses for discontinued operations for each of the three months ended June 28, 2025 and June 29, 2024. The Company recorded $0.6 million and less than $0.3 million of PSU expenses for discontinued operations for each of the six months ended June 28, 2025 and June 29, 2024.
(2) On February 25, 2025, the Audit Committee approved the weighted payout percentage of 0% for the 2022 PSU awards (three-year performance period), which were based upon the actual fiscal 2024 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.
(3) No PSUs were granted for discontinued operations for the three and six months ended June 28, 2025.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
During the six months ended June 28, 2025, the Company awarded 77,775 PSUs that will vest three years from the award date, based on the achievement of certain pre-established multi-year performance criteria approved by the Board. Estimates of stock-based compensation expense for an award with performance conditions are based on the probable outcome of the performance conditions and the cumulative effect of any changes in the probability outcomes is recorded in the period in which the changes occur. If earned, the PSUs granted will vest upon achievement of the performance criteria, which include a relative total shareholder return (TSR) modifier, in the year following the evaluation and confirmation of the performance achievement criteria. The Company’s TSR modifier estimate is based on Masimo’s TSR performance over a 3-year period as a percentile ranking relative to the constituents of the S&P Healthcare Equipment Select Index. for the performance period beginning on March 11, 2025 and ending on January 1, 2028. The number of shares that may be earned can range from 0% to 200% of the target amount. The fair value of market-based RSUs is determined using a Monte Carlo simulation model, which uses multiple input variables to determine the probability of satisfying the market condition requirements. The fair value of performance-based PSUs is determined using the closing price of the Company’s common stock on the grant date. Based on management’s estimate of the number of units expected to vest, total PSU expense for the three months ended June 28, 2025 and June 29, 2024 was $0.2 million and $3.0 million, respectively. The total PSU (benefit) expense for the six months ended June 28, 2025 and June 29, 2024 was $(0.2) million and $3.3 million, respectively. The PSU expense amounts for the three months ended June 28, 2025 relate to adjustments for the expected life-to-date performance of the PSU along with expense related to PSU awards for new executives officers that started or where appointed during the quarter. As of June 28, 2025, the Company had $26.5 million of unrecognized compensation cost related to non-vested PSU awards expected to be recognized and vest over a weighted-average period of approximately 2.1 years.
Valuation of Stock-Based Award Activity
The fair value of each RSU and PSU is determined based on the closing price of the Company’s common stock on the grant date.
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:

| Three Months Ended |  | Six Months Ended |  |
| June 28, 2025(1) |  | June 29, 2024 |  | June 28, 2025(1) |  | June 29, 2024 |  |  |  |
Risk-free interest rate | 4.0% to 4.2% |  | —% |  | 4.0% to 4.2% |  | 4.2% |  |  |  |
Expected term (in years) | 5.8 |  | — |  | 5.8 |  | 5.9 |  |  |  |
Estimated volatility | 41.0% to 43.1% |  | —% |  | 41.0% to 43.1% |  | 42.6% |  |  |  |
Expected dividends | —% |  | —% |  | —% |  | —% |  |  |  |
Weighted-average fair value of options granted | $69.61 to $78.81 |  | $— |  | $69.61 to $78.81 |  | $59.60 |  |  |  |

______________
(1) Less than 0.1 million of stock options were granted during the three and six months ended June 28, 2025.
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 June 28, 2025 was $47.8 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 June 28, 2025 was $46.7 million.
21. Employee Benefits
Defined Contribution Plan
In the U.S. the Company sponsors one qualified defined contribution plan or 401(k) plan, the Masimo Retirement Savings Plan (MRSP), covering the Company’s full-time U.S. employees who meet certain eligibility requirements.
The MRSP matches 100% of a participant’s salary deferral, up to 3% of each participant’s compensation for the pay period, subject to a maximum amount. The Company may also contribute to the MRSP on a discretionary basis. The Company contributed $1.0 million and $1.1 million to the MRSP for each of the three months ended June 28, 2025 and June 29, 2024, respectively, all in the form of matching contributions. The Company contributed $2.0 million and $2.1 million to the MRSP for each of the six months ended June 28, 2025 and June 29, 2024, respectively, all in the form of matching contributions.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
In addition, some of the Company’s international subsidiaries also have defined contribution plans to which both the employee and employers are eligible to make contributions. The Company contributed $0.6 million and $0.5 million to these plans for the three months ended June 28, 2025 and June 29, 2024, respectively. The Company contributed $1.1 million and $1.0 million to these plans for the six months ended June 28, 2025 and June 29, 2024, respectively.
Defined Benefit Plans
The Company sponsors several international noncontributory defined benefit plans. The service cost component for the defined benefit plans are recorded in operating expenses in the condensed consolidated statement of operations. All other cost components are recorded in other income (expense), net in the condensed consolidated statement of operations.
The Company’s net periodic defined benefit costs for each of the three and six months ended June 28, 2025, and June 29, 2024 were immaterial.
22. Non-operating Loss
Non-operating loss consists of the following:

| Three Months Ended |  | Six Months Ended |  |
(in millions) | June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024 |  |  |  |
Interest income | $ | 0.6 |  |  | $ | 1.1 |  |  | $ | 2.0 |  |  | $ | 2.2 |  |  |  |  |
Realized and unrealized foreign currency losses | (1.5) |  |  | (1.6) |  |  | (3.9) |  |  | (3.0) |  |  |  |  |
Interest expense | (8.2) |  |  | (10.6) |  |  | (16.9) |  |  | (21.9) |  |  |  |  |
Total non-operating loss | $ | (9.1) |  |  | $ | (11.1) |  |  | $ | (18.8) |  |  | $ | (22.7) |  |  |  |  |

23. Income Taxes
The Company has provided for income taxes in fiscal year 2025 and 2024 interim periods based on the estimated effective income tax rate for the complete fiscal year, as adjusted for discrete tax events, including excess tax benefits or deficiencies related to stock-based compensation, in the period such events occur. The estimated annual effective tax rate is computed based on the expected annual pretax income of the consolidated entities located within each taxing jurisdiction based on legislation enacted as of the balance sheet date. For the three months ended June 28, 2025 and June 29, 2024, the Company recorded discrete tax benefits of approximately $1.6 million and $2.0 million, respectively, related to excess tax benefits realized from stock-based compensation. For the six months ended June 28, 2025 and June 29, 2024, the Company recorded discrete tax benefits of approximately $4.5 million and $3.3 million, respectively, related to excess tax benefits realized from stock-based compensation.
Deferred tax assets and liabilities are determined based on the future tax consequences associated with temporary differences between income and expenses reported for accounting and tax purposes. A valuation allowance for deferred tax assets is recorded to the extent that the Company cannot determine that the ultimate realization of the net deferred tax assets is more likely than not. Realization of deferred tax assets is principally dependent upon the achievement of future taxable income, the estimation of which requires significant judgment by the Company’s management. The judgment of the Company’s management regarding future profitability may change due to many factors, including future market conditions and the Company’s ability to successfully execute its business plans or tax planning strategies. These changes, if any, may require material adjustments to these deferred tax asset balances.
As of June 28, 2025, the liability for income taxes associated with uncertain tax positions was approximately $37.2 million. If fully recognized, approximately $34.1 million (net of federal benefit on state taxes) would impact the Company’s effective tax rate. It is reasonably possible that the amount of unrecognized tax benefits in various jurisdictions may change in the next twelve months due to the expiration of statutes of limitation and audit settlements. However, due to the uncertainty surrounding the timing of these events, an estimate of the change within the next twelve months cannot currently be made.
The Company conducts business in multiple jurisdictions and, as a result, one or more of the Company’s subsidiaries files income tax returns in U.S. federal, various state, local and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters through fiscal year 2020. All material state, local and foreign income tax matters have been concluded through fiscal year 2017. The Company does not believe that the results of any tax authority examination would have a significant impact on its consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company is currently assessing the impact on its consolidated financial statements.
24. Commitments and Contingencies
Employment and Severance Agreements
The Company and Mr. Kiani entered into an employment agreement on November 4, 2015 (as thereafter amended and waived, the Amended Employment Agreement). Pursuant to the terms of the Amended Employment Agreement, upon a “Qualifying Termination” (as defined in the Amended Employment Agreement), Mr. Kiani would be entitled to receive (i) a cash severance benefit equal to two times the sum of his then-current base salary and the average annual bonus paid to Mr. Kiani during the immediately preceding three years, (ii) immediate vesting of Mr. Kiani’s stock options and equity awards, (iii) 2.7 million restricted share units (RSUs), and (iv) a cash payment of $35 million (the Cash Payment and, together with the RSUs, the Special Payment). As set forth in the Amended Employment Agreement, a Qualifying Termination includes a termination by Mr. Kiani for “Good Reason” (as defined in the Amended Employment Agreement), which includes, among other things, (i) any diminution of Mr. Kiani’s responsibilities, duties and authority as set forth in Section 2 of the Amended Employment Agreement, (ii) Mr. Kiani ceasing to serve as the Company’s CEO and Chairman (the Chairman Provision), and (iii) a “Change-in-Control” (as defined in the Amended Employment Agreement).
On January 14, 2022, the Company entered into the Second Amendment to the Amended Employment Agreement (Second Amendment) with Mr. Kiani. The Second Amendment provides that the RSUs granted to Mr. Kiani pursuant to the Amended Employment Agreement will vest in full upon the termination of Mr. Kiani’s employment with the Company pursuant to Mr. Kiani’s death or disability.
On February 8, 2023, Mr. Kiani agreed that the valid election to the Board at the Company’s 2023 Annual Meeting of Stockholders of any two individuals nominated by the Company’s stockholders in lieu of two of the Company’s then-current Board members would not be deemed to constitute a Change in Control for purposes of Section 9(iii) of the Amended Employment Agreement.
On March 22, 2023, in connection with the Board’s unanimous selection of H Michael Cohen as Lead Independent Director, Mr. Kiani voluntarily irrevocably and permanently waived his right to treat the appointment of any lead independent director as “Good Reason” to terminate his employment under the Amended Employment Agreement, and waived his right to receive contractual separation payments on this basis.
On June 5, 2023, Mr. Kiani, pursuant to a Limited Waiver (Waiver), unconditionally, irrevocably and permanently waived his right, pursuant to the Amended Employment Agreement, to assert that a “Change in Control” has occurred pursuant to Section 9(iii) of the Amended Employment Agreement unless the individuals who constituted the Board at the beginning of the twelve (12) month period immediately preceding such change, as defined in Section 9(iii) of the Amended Employment Agreement, cease for any reason to constitute one-half or more of the directors then in office. In addition, Mr. Kiani agreed that, for purposes of determining whether such a “Change in Control” has occurred, any individual elected to the Board at the Company’s 2023 Annual Meeting of Stockholders will be treated as a member of the Board at the beginning of the twelve (12) month period.
As a result of Mr. Kiani’s execution of the Waiver on June 5, 2023, the Company remeasured the expense related to the Award Shares and Cash Payment that would be recognized in the Company’s condensed consolidated financial statements upon the occurrence of a Qualifying Termination under th e Amended Employment Agreement, as amended by the Second Amendment, and the expense was determined to be approximately $479.7 million.
On September 19, 2024, at the Company’s 2024 Annual Meeting of Stockholders, the Company’s stockholders voted to not reelect Mr. Kiani to the Board. Additionally, on September 19, 2024, after the Company’s 2024 Annual Meeting of Stockholders, Mr. Kiani delivered a notification to the Board stating his decision to resign from his position of CEO of the Company and filed a claim in California Superior Court relating to his Amended Employment Agreement, seeking, among other things, declaratory relief that he had validly terminated his employment for “Good Reason” (as defined in the Amended Employment Agreement), and that he was entitled to certain benefits provided in the Amended Employment agreement upon termination for “Good Reason” (see the heading “Litigation” under Note 24, “Commitments and Contingencies” for further details).
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Following an investigation by outside counsel, in which counsel collected and reviewed relevant documents, it was determined that the Company had grounds to terminate Mr. Kiani’s employment for cause. On October 24, 2024, the Board adopted resolutions to terminate Mr. Kiani’s employment for cause, effective that day. The termination was not a Qualifying Termination (as defined in the Amended Employment Agreement). Consequently, the Company believes Mr. Kiani is not entitled to receive the Special Payment under the Amended Employment Agreement.
Also on October 24, 2024, the Company filed claims against Mr. Kiani in the Court of Chancery of the State of Delaware (the Kiani Delaware Litigation), seeking judicial declarations that numerous provisions in Mr. Kiani’s Amended Employment Agreement, including the Special Payment, are invalid, unenforceable, and amount to a waste of corporate assets and, therefore, that Mr. Kiani is not entitled to receive the Special Payment. The Company’s complaint alleges that the Company’s directors at the time of the initial adoption of Mr. Kiani’s Amended Employment Agreement and at the adoption of subsequent amendments abdicated their fiduciary duties as a matter of Delaware law by approving the Amended Employment Agreement, which contained provisions intended to entrench Mr. Kiani’s control of the Company indefinitely (see the heading “Litigation” under Note 24, “Commitments and Contingencies” for further details).
On November 13, 2024, the Company entered into an employment agreement with Michelle Brennan (Brennan Agreement), who the Board appointed Interim CEO on September 24, 2024. The Brennan Agreement, effective as of the September 24, 2024 appointment, has a term of six months unless earlier terminated by its terms (Brennan Term).
The Brennan Agreement provided for an annual base salary of $1,042,000. Additionally, Ms. Brennan, was eligible for a discretionary bonus of a target amount equal to $621,250 at the end of the Brennan Term. At the conclusion of Ms. Brennan’s service as interim CEO, in the early 2025, the Board determined her discretionary bonus amount would be $1,087,190.
Under the Brennan Agreement, Ms. Brennan was granted an equity award of 8,916 RSUs, which vested upon the appointment of the CEO of the Company, effective February 12, 2025. The RSUs were granted under Company’s 2017 Equity Plan. Ms. Brennan was entitled to participate in all Company employee benefits plans and programs maintained by the Company from time to time, at a level consistent with the benefits provided to other senior executives, subject to the provision of such plans and programs. On February 12, 2025, Ms. Brennan’s term as CEO ended and the Board appointed her to the role of Chairman of the Board.
On January 17, 2025, the Company and Ms. Catherine Szyman entered into an offer letter (“the Offer Letter”) in respect of her service as the next CEO of Masimo, effective as of February 12, 2025 (“the Effective Date”). Under the Offer Letter, Ms. Szyman will receive an initial annual base salary of $1,000,000, a target annual bonus opportunity of 100% of base salary and a maximum annual bonus opportunity equal to 200% of such target, and an annual target long-term incentive award opportunity of $7,000,000. To the extent that the Company determines after the Effective Date to adopt a policy for the vesting of performance stock units upon retirement, any such retirement policy that applies to Ms. Szyman will be no worse than the attainment of 60 years of age and at least five years of continuous employment with the Company. Ms. Szyman will also be eligible to participate in the Company’s employee benefit plans and programs applicable to senior executives of the Company generally, as may be in effect from time to time.
A s of June 28, 2025, the Company had severance plan participation agreements with three executive officers. The participation agreements (the Agreements) are governed by the terms and conditions of the Company’s 2007 Severance Protection Plan (the Severance Plan), which became effective on July 19, 2007 and which was amended effective December 31, 2008.
Under each of the Agreements, the applicable executive officer may be entitled to receive certain salary, equity, medical and life insurance benefits if he is terminated by the Company without cause or if he terminates his employment for good reason under certain circumstances. Each executive officer is also required to give the Company six months’ advance notice of his resignation under certain circumstances.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Willow Cross-Licensing Agreement Provisions
The Company’s Cross-Licensing Agreement with Willow contains annual minimum aggregate royalty obligations for the use of the rainbow® licensed technology, which is a perpetual global license. Prior to a change in control, which is defined in the Willow Cross-Licensing Agreement to include, among other things, Mr. Kiani ceasing to serve as CEO of either the Company or Willow, the Company’s annual minimum royalty obligation is $5.0 million. Upon a change in control of the Company or Willow: (i) all rights to the “Masimo” trademark will be assigned to Willow if the surviving or acquiring entity ceases to use “Masimo” as a company name and trademark; (ii) the option to license technology developed by Willow for use in blood glucose monitoring will be deemed automatically exercised and a $2.5 million license fee for this technology will become immediately payable to Willow; and (iii) the minimum aggregate annual royalties payable to Willow for carbon monoxide, methemoglobin, fractional arterial oxygen saturation, hemoglobin and/or glucose measurements will increase to $15.0 million per year until the exclusivity period of the agreement ends, plus up to $2.0 million for each additional rainbow® parameter (with no maximum ceiling for non-vital sign measurements). Any future payment due annually to Willow resulting from a change in control of the Company is less than what the Company paid to Willow for licensing rights in 2022 or 2023.
On October 24, 2024, a change in control as defined in the Willow Cross-Licensing Agreement occurred when Mr. Kiani’s employment as the Company’s CEO was terminated, resulting in a payment of $2.5 million for the licensing of Willow blood glucose monitoring technology. A change in control does not otherwise impact the scope or duration of the license rights. No additional accruals or payments were made in connection with the change in control under the Willow Cross-Licensing Agreement.
Purchase Commitments
Pursuant to contractual obligations with vendors, the Company had $223.2 million of purchase commitments as of June 28, 2025 that are expected to be purchased within one year, and certain circumstances beyond one year for critical inventory and raw materials. In general, these purchase commitments have been made for inventory related items in order to secure sufficient levels of those items, other critical inventory and manufacturing supplies, and to achieve better longer term pricing.
Other Contractual Commitments
In the normal course of business, the Company may provide bank guarantees to support government hospital tenders in certain foreign jurisdictions. As of June 28, 2025, the Company had approximately $4.2 million in outstanding unsecured bank guarantees.
In certain circumstances, the Company also provides limited indemnification within its various customer contracts whereby the Company indemnifies the parties to whom it sells its products with respect to potential infringement of intellectual property, and against bodily injury caused by a defective Company product. It is not possible to predict the maximum potential amount of future payments under these or similar agreements, due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved. As of June 28, 2025, the Company had not incurred any significant costs related to contractual indemnification of its customers.
Fee Agreements
On January 1, 2024, the Company entered into a one year alternative fee agreement (Fee Agreement) with respect to certain on-going legal fees and costs charged by a vendor. The Fee Agreement imposed certain limits on a quarterly and annual basis for actual legal fees incurred by the vendor that are payable based on work performed related to litigation matters against Apple (see the heading “Litigation” under Note 24, “Commitments and Contingencies” for further details regarding the Apple matters). The Fee Agreement provided that if the vendor was successful in obtaining a favorable judgment for the Company on any claim or counterclaim after exhaustion or dismissal of any appeals, or upon settlement resulting in monetary consideration to the Company, the vendor would be paid a success fee equal to three times the amount of the excess fees and costs incurred over the annual limit within 60 days after entry of a judgment or the effective date of any settlement. On June 12, 2025, the Company and the vendor agreed to terminate the Fee Agreement. The Company paid the vendor approximately $2.8 million related to this termination. As of June 28, 2025, no amounts were outstanding in connection with the Fee Agreement.
In connection with the potential separation of the Company’s consumer businesses, the Company entered into contingent or discretionary fee agreements with various service providers, advisors and consultants. The Company is unable to reasonably estimate the contingent fees due under these agreements at this time. Amounts due will be recognized when probable and reasonably estimable.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
Concentrations of Risk
The Company is exposed to credit loss for the amount of its cash deposits with financial institutions in excess of federally insured limits. The Company invests a portion of its excess cash with major financial institutions. As of June 28, 2025, the Company had $149.6 million of bank balances, of which $4.0 million was covered by either the U.S. Federal Deposit Insurance Corporation limit or foreign countries’ deposit insurance organizations.
The Company’s ability to sell its healthcare products to U.S. hospitals depends in part on its relationships with GPOs. Many existing and potential healthcare customers for the Company’s products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusively, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. During the three months ended June 28, 2025 and June 29, 2024, revenue from the sale of the Company’s healthcare products to customers that are members of GPOs approximated 59.0% and 59.8% of healthcare revenue, respectively. During the six months ended June 28, 2025 and June 29, 2024, revenue from the sale of the Company’s healthcare products to customers that are members of GPOs approximated 58.9% and 58.2% of healthcare revenue, respectively.
For the three months ended June 28, 2025 and June 29, 2024, the Company had sales through one just-in-time healthcare distributor that represented 19.2% and 20.9% of healthcare revenue, respectively. For the six months ended June 28, 2025 and June 29, 2024, the Company had sales through one just-in-time healthcare distributor that represented 19.0% and 18.5% of healthcare revenue, respectively.
As of June 28, 2025, one healthcare customer represented 19.9% of the Company’s healthcare accounts receivable balance. The receivable balance related to such healthcare customer is fully secured by a letter of credit. As of December 28, 2024, two healthcare customers represented 12.2% and 11.9%, respectively, of the Company’s healthcare accounts receivable balance.
Litigation
On January 9, 2020, the Company filed a complaint against Apple Inc. (Apple) in the United States District Court for the Central District of California for infringement of a number of patents, for trade secret misappropriation, and for ownership and correction of inventorship of a number of Apple patents listing one of its former employees as an inventor. The Company is seeking damages, injunctive relief, and declaratory judgment regarding ownership of the Apple patents. Apple filed petitions for Inter Partes review (IPR) of the asserted patents in the U.S. Patent and Trademark Office (PTO). The PTO instituted IPR of the asserted patents. On October 13, 2020, the District Court stayed the patent infringement claims pending completion of the IPR proceedings. In the IPR proceedings, one or more of the challenged claims of three of the asserted patents were found valid. The challenged claims of nine of the asserted patents were found invalid. On appeal, the U.S. Court of Appeals for the Federal Circuit affirmed all the IPR decisions except it reversed a finding of invalidity for certain dependent claims of one Masimo patent. From April 4, 2023 through May 1, 2023, the District Court held a jury trial on the trade secret, ownership, and inventorship claims. The District Court granted Apple’s motion for judgment as a matter of law on certain trade secrets and denied the remainder of Apple’s motion. On May 1, 2023, the District Court declared a mistrial because the jury was unable to reach a unanimous verdict. The District Court conducted a bench trial on the trade secret, ownership, and inventorship claims which commenced on November 5, 2024. The final argument following the bench trial occurred on February 3, 2025. A jury trial on the patent infringement claims is scheduled to begin on November 4, 2025.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
On June 30, 2021, the Company filed a complaint with the U.S. International Trade Commission (ITC) against Apple for infringement of a number of other patents. The Company filed an amended complaint on July 12, 2021. On August 13, 2021, the ITC issued a Notice of Institution of Investigation on the asserted patents. From June 6, 2022 to June 10, 2022, the ITC conducted an evidentiary hearing. In July and August 2022, Apple filed petitions for IPR of the asserted patents in the PTO. On January 10, 2023, a United States Administrative Law Judge in Washington, D.C. ruled that Apple violated Section 337 of the Tariff Act of 1930 (Section 337), as amended, by importing and selling within the United States certain Apple Watches with light-based pulse oximetry functionality and components, which infringe several claims of the Company’s pulse oximeter patents. On January 24, 2023, the United States Administrative Law Judge further recommended that the ITC issue an exclusion order and a cease and desist order on certain Apple Watches. On October 26, 2023, the ITC issued a Notice of Final Determination finding a violation of Section 337 by Apple. The ITC determined that the appropriate form of relief is a Limited Exclusion Order (LEO) prohibiting the unlicensed entry of infringing wearable electronic devices with light-based pulse oximetry functionality manufactured by or on behalf of Apple, and a Cease and Desist Order (CDO). The LEO and CDO went into effect after the 60-day Presidential review period expired. The LEO and CDO are currently in effect. Apple’s appeal to the Federal Circuit is pending, and oral arguments were held on July 7, 2025. On Jan uary 30, 2023, the PTO denied institution of IPR proceedings for the Company’s pulse oximeter patents that the ITC ruled were infringed. With respect to the other patents asserted at the ITC, the PTO denied institution of IPR proceedings for one patent and instituted IPR proceedings for two patents in January and February 2023. In the IPR proceedings, one or more of the c hallenged claims were found valid, while others were found invalid. Appeals for the two IPRs are pending. On January 12, 2024, the U.S. Customs and Border Protection Exclusion Order Enforcement Branch issued a ruling letter allowing importation of certain Apple Watches with the blood oxygen feature disabled.
On October 20, 2022, Apple filed two complaints against the Company in the U.S. District Court for the District of Delaware alleging that the Masimo W1® watch infringes six utility and four design patents. Apple is seeking damages and injunctive relief. On December 12, 2022, the Company counterclaimed for monopolization, attempted monopolization, false advertising (and related causes of action) and infringement of ten patents. The Company is seeking damages and injunctive relief. On May 5, 2023, the Court ordered that the two cases be coordinated through the pre-trial stage. The Court held a case management conference in March 2024. On October 7, 2024, the Court granted summary judgment dismissing on the Company’s inequitable conduct defense and counterclaim. The Court held a jury trial in October 2024 on Apple’s patent claims. The jury found that the Company’s current product offerings do not infringe any Apple patents. The jury found a discontinued version of the Masimo W1® watch infringed one design patent and a discontinued version of the Masimo W1® watch charger infringed a second design patent. The jury awarded Apple a total of $250. The Company’s patent, false advertising, and antitrust counterclaims will be tried at a later date. The Company intends to vigorously pursue all of its claims against Apple and believes the Company has good and substantial defenses to Apple’s claims, but there is no guarantee that the Company will be successful in these efforts.
On August 22, 2023, a putative class action complaint was filed by Sergio Vazquez against the Company and members of its management alleging violations of the federal securities laws (Securities Class Action). On November 14, 2023, the Court appointed Boston Retirement System, Central Pennsylvania Teamsters Pension Fund-Defined Benefit Plan, and Central Pennsylvania Teamsters Pension Fund-Retirement Income Plan 1987 as lead plaintiffs. The lead plaintiffs filed an amended complaint on February 12, 2024. The amended complaint alleges that the Company and members of its management, from May 4, 2022 through August 8, 2023, disseminated materially false and misleading statements and/or concealed material adverse facts relating to the performance of its healthcare business and the success of the Company’s legacy Sound United business. The Company moved to dismiss the amended complaint on April 29, 2024. On November 5, 2024, the Court granted the motion in part, allowing the surviving claims to proceed to discovery. The parties engaged in a mediation on May 28, 2025. On July 11, 2025, the parties informed the Court that they have reached a settlement in principle. Plaintiffs have informed the Court that they intend to file their motion for preliminary approval of the proposed class settlement on or before August 14, 2025.
On May 1, 2024, a purported stockholder of the Company, Linda McClellan, filed a derivative action in the U.S. District Court for the Southern District of California against certain of the Company’s current and former executives and directors, and the Company as nominal defendant. The complaint alleges, among other things, that the defendants breached their fiduciary duties owed to the Company by allowing or permitting false or misleading statements to be disseminated regarding the performance of the Company’s healthcare business and the success of the Company’s legacy Sound United business. The complaint also asserts causes of action for violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (15 U.S.C.§ 78j(b)) and Rule 10b-5 promulgated thereunder, aiding and abetting breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
On May 16, 2024, a purported stockholder of the Company, Dianne Himmelberger, filed a similar derivative action in the U.S. District Court for the Southern District of California (collectively, Derivative Actions). On July 22, 2024, the Court consolidated the Derivative Actions and stayed them until the motion to dismiss the Securities Class Action has been (i) denied in whole or in part, and no amended complaint is subsequently filed; or (ii) granted with prejudice, and any appeals pertaining to the motion to dismiss have concluded, or the time for seeking appellate review has passed with no further action from the Securities Class Action parties. On March 14, 2025, the Court lifted the stay. On May 16, 2025, Plaintiffs filed an Amended Compliant and on July 11, 2025, the Court entered an order for Defendants to respond to the Amended Complaint by September 16, 2025.
In addition to the Derivative Actions, the Company has received two shareholder requests under Delaware law demanding, among other things, that the Company take certain actions in response to alleged breaches of fiduciary duty relating to the same matters at issue in the Securities Class Action and the Derivative Actions. One of the shareholder demands was subsequently withdrawn. The Company’s board of directors has formed a review committee, consisting of Mr. Jellison and Ms. Lane, to consider and assess the remaining demand.
In August 2023, the Company decided to conduct a voluntary recall of select Rad-G® products in connection with an issue that could result in an unintentional change in the power state of the device. On February 14, 2024, the Company initiated a voluntary recall. On February 21, 2024, the Company received a subpoena from the Department of Justice (DOJ) seeking documents and information related to the Company’s Rad-G® and Rad-97® products, including information relating to complaints surrounding the products and the Company’s decision to recall the Rad-G®. On March 25, 2024, the Company received a civil investigative demand from the DOJ pursuant to the False Claims Act, 31 U.S.C §§ 3729-3733, seeking documents and information related to customer returns of the Company’s Rad-G® and Rad-97® products, including returns related to the Company’s recall of select Rad-G® products in 2024. The Company is investigating the reasons for the delay between August 2023 and February 2024 when the recall was initiated. The Company is cooperating with the government and may expend significant financial and managerial resources in connection with responding to the subpoena and any related investigation or any other future requests for information.
The Company received a subpoena from the Securities and Exchange Commission dated March 26, 2024 seeking documents and information relating to allegations of potential accounting irregularities and internal control deficiencies from former employees within the Company’s accounting department.
With respect to each of the subpoenas and the investigative demand described above, the Company is cooperating with the government and may expend significant financial and managerial resources in connection with responding to the subpoenas and investigative demand and any related investigation or any other future request for information. In addition, requests and investigation of this nature may lead to the assertion of claims or the commencement of legal proceedings against the Company, which in turn may lead to material fines, penalties or other liabilities.
On September 19, 2024, at the Company’s 2024 Annual Meeting of Stockholders, the Company’s stockholder voted not to reelect Mr. Kiani to the Board. On September 19, 2024, after the conclusion of the Company’s 2024 Annual Meeting of Stockholders, Mr. Kiani delivered a notification to the Board stating his decision to resign from his position of CEO of the Company (the September 19 Notice). On September 23, 2024, Mr. Kiani delivered a notification to the Board further describing his decision to resign (the September 23 Notice), and, on September 25, 2024, Mr. Kiani delivered an amended notification to the Board stating his decision to resign (the September 25 Notice, and, together with the September 19 Notice and the September 23 Notice, the Notice).
The Notice further states that Mr. Kiani’s resignation is for “Good Reason” (as such term is defined in Mr. Kiani’s Amended Employment Agreement) and that the basis for his resignation for Good Reason was the diminution of his “responsibilities, duties and authority as the Chairman of the Board and CEO” as defined in Sections 2 and 7.4 of his Amended Employment Agreement.
Additionally, on September 19, 2024, Mr. Kiani filed a claim in California Superior Court relating to his Amended Employment Agreement seeking, among other things, a declaration that he had validly terminated his employment for “Good Reason”, and that he was entitled to certain benefits provided in the Amended Employment Agreement upon a termination for Good Reason, including the Special Payment. On October 31, 2024, Mr. Kiani filed an amended complaint, bringing additional claims for, among other things, breach of contract and violations of the California Labor Code.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
On February 28, 2025, Mr. Kiani notified the Company and the Board that he intends to file claims against them under the California Private Attorney General Act based on the Company’s alleged failure to pay Mr. Kiani certain wages upon termination in purported violation of his Amended Employment Agreement, seeking damages in excess of $100 million. Mr. Kiani has since moved for leave to file an amended complaint to assert his Private Attorneys General Act claims against the Company, as well as additional breach of contract claims, claims under Section 216 of the Labor Code, and claims under California’s Unfair Competition Law, Bus. & Prof. Code § 17200 et seq. On May 22, 2025, Mr. Kiani filed a second lawsuit in the Superior Court of Orange County, California against individual Board Members (Mr. Koffey, Ms. Brennan, Ms. Solomon, Mr. Jellison, Ms. Lane, and Mr. Scannell) asserting claims for violations of Cal. Labor Code §§ 203, 558.1 and Cal. Bus. & Prof. Code § 17200 (Unfair Competition Law) arising from the Company’s alleged failure to timely pay him severance and certain wages purportedly owed under his Employment Agreement. The Orange County Superior Court deemed this case “related” to Mr. Kiani’s action against the Company and assigned the two cases to the same judge.
The Company is evaluating the claims, and believes it has good and substantial defenses to them, but there is no guarantee that the Company will be successful in these efforts.
Following an investigation by outside counsel, in which counsel collected and reviewed relevant documents, it was determined that the Company had grounds to terminate Mr. Kiani’s employment for cause. On October 24, 2024, the Board adopted resolutions to terminate Mr. Kiani’s employment for cause, effective October 24, 2024. The termination was not a Qualifying Termination (as defined in the Amended Employment Agreement). Consequently, the Company believes Mr. Kiani is not entitled to receive the Special Payment under the Amended Employment Agreement.
On October 24, 2024, the Company filed litigation against Mr. Kiani in the Court of Chancery of the State of Delaware, seeking judicial declarations that numerous provisions in Mr. Kiani’s Amended Employment Agreement, including the Special Payment, are invalid, unenforceable, and amount to a waste of corporate assets and, therefore, that Mr. Kiani is not entitled to receive the Special Payment. On March 3, 2025, the Company filed an Amended Complaint, which alleges that Masimo’s directors at the time of the initial adoption of the Employment Agreement and subsequent amendments abdicated their fiduciary duties as a matter of Delaware law by approving the Amended Employment Agreement, which contained provisions intended to entrench Mr. Kiani in control of the Company indefinitely. On March 17, 2025, Mr. Kiani filed a motion to dismiss the Amended Complaint.
On October 25, 2024, the Company commenced litigation in the United States District Court for the Southern District of New York against Mr. Kiani, Roderick Wong, Naveen Yalamanchi, RTW Investments, LP, RTW Investments GP, LLC, RTW Master Fund, Ltd., RTW Offshore Fund One, Ltd., RTW Onshore Fund One, LP, RTW Innovation Master Fund, Ltd., RTW Innovation Offshore Fund, Ltd., RTW Innovation Onshore Fund, LP, and RTW Fund Group GP, LLC, seeking disgorgement of short-swing profits pursuant to Section 16(b) of the Exchange Act (the RTW Litigation). The Company filed an amended complaint in the RTW Litigation on December 30, 2024. The defendants filed motions to dismiss the RTW Litigation on January 23, 2025. On April 3, 2025, the Court issued an order granting the defendant’s motion to transfer the RTW Litigation to the United States District Court for the Central District of California. In the RTW Litigation, the Company alleges that the defendants formed a stockholder group under Section 13(d) of the Exchange Act holding 10% or more of the Company’s common stock and engaged in short-swing trading between May and September 2024 as a part of an emp ty voting scheme to manipulate the vote in Mr. Kiani’s favor for the Company’s 2024 Annual Meeting of Stockholders. The Company believes the total amount of RTW’s disgorgeable profits could be substantial.
On May 26, 2025, Willow Laboratories, a Nevada corporation (Willow) founded by Mr. Kiani and of which he currently serves as Executive Chairman, filed an arbitration demand against the Company alleging that the Company breached the Cross-Licensing Agreement described in Note 3, “Related Party Transactions”. Willow seeks money damages of at least $2.75 million, specific performance, and a declaration that Willow does not have any obligation to reimburse the Company for past royalty overpayments. The Company is evaluating the claims, and believes it has good and substantial defenses to them, as well as substantial counterclaims, but there is no guarantee that the Company will be successful in these efforts.
For each of the foregoing matters, the Company is unable to determine whether any loss ultimately will occur or to estimate the range of such loss; therefore, no amount of loss accrued by the Company in the accompanying condensed consolidated financial statements. Gain contingencies, when applicable, are recognized upon being realized or realizable.
From time to time, the Company may be involved in other litigation and investigations relating to claims and matters arising out of its operations in the normal course of business. The Company believes that it currently is not a party to any other legal proceedings which, individually or in the aggregate, would have a material adverse eff ect on its consolidated financial position, results of operations or cash flows.
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MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(unaudited)
25. Segment and Enterprise Reporting
The Company’s reportable segments are determined based upon the Company’s organizational structure and the way in which the Company’s Chief Operating Decision Maker (CODM), the Company’s CEO, makes operating decisions, assesses financial performance, and allocates resources. As of June 28, 2025, the Company operates under two reportable segments, the healthcare and non-healthcare consumer audio businesses. However, a s a result of the non-healthcare consumer audio business being classified as held-for-sale, it has been excluded from the segment and enterprise reporting herein for all periods presented. The Company’s CODM uses segment gross profit, as presented in the Company’ CODM reports, as the primary measure of segment profitability. The significant segment expenses help the Company to better understand operating results. Segment information presented herein reflects the impact of these changes for all periods presented.
Selected information for the healthcare segment is presented below for each of the three and six months ended June 28, 2025 and June 29, 2024:

| Three Months Ended |  | Six Months Ended |  |  |  |
(in millions) | June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024 |  |  |  |  |  |  |  |
Revenues by segment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Healthcare | $ | 370.3 |  |  | $ | 343.9 |  |  | $ | 741.3 |  |  | $ | 683.5 |  |  |  |  |  |  |  |  |
Other(1) | 0.6 |  |  | — |  |  | 1.6 |  |  | — |  |  |  |  |  |  |  |  |
Total revenue by segment | $ | 370.9 |  |  | $ | 343.9 |  |  | $ | 742.9 |  |  | $ | 683.5 |  |  |  |  |  |  |  |  |
Cost of goods sold by segment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Healthcare | $ | 137.5 |  |  | $ | 129.0 |  |  | $ | 274.5 |  |  | $ | 257.2 |  |  |  |  |  |  |  |  |
Other(1) | 0.1 |  |  | 7.6 |  |  | 1.1 |  |  | 12.4 |  |  |  |  |  |  |  |  |
Total costs of goods sold by segment | $ | 137.6 |  |  | $ | 136.6 |  |  | $ | 275.6 |  |  | $ | 269.6 |  |  |  |  |  |  |  |  |
Gross profit by segment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Healthcare |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Segment gross profit | $ | 232.8 |  |  | $ | 214.9 |  |  | $ | 466.9 |  |  | $ | 426.3 |  |  |  |  |  |  |  |  |
Acquired asset amortization(1)(2) | (0.3) |  |  | (0.5) |  |  | (0.6) |  |  | (1.0) |  |  |  |  |  |  |  |  |
Business transition and related costs(1)(3) | 0.8 |  |  | (6.8) |  |  | 1.1 |  |  | (7.1) |  |  |  |  |  |  |  |  |
Acquisitions, integrations, divestitures, and related costs(1)(4) | — |  |  | (0.1) |  |  | — |  |  | (0.1) |  |  |  |  |  |  |  |  |
Other(1) | — |  |  | (0.2) |  |  | (0.1) |  |  | (4.2) |  |  |  |  |  |  |  |  |
Total gross profit by segment | $ | 233.3 |  |  | $ | 207.3 |  |  | $ | 467.3 |  |  | $ | 413.9 |  |  |  |  |  |  |  |  |

____________________________
(1) Management excludes certain revenues and expenses from segment gross profit. Management considers these excluded amounts to be non-recurring or non-operational and as such, are excluded from segment gross profit as this enables management to better understand operational results.
(2) Acquired asset amortization is a non-GAAP financial measure. These transactions represent amortization expense in connection with business or assets acquisitions associated with acquired intangible assets including, but not limited to customer relationships, intellectual property, trade names and non-competition agreements.
(3) Business transition and related costs are a non-GAAP financial measure. These transactions represent gains, losses, and other related costs associated with business transition plans. These items may include but are not limited to severance, relocation, consulting, leasehold exit costs, asset impairment, and other related costs to rationalize our operational footprint and optimize business results.
(4) Acquisitions, integrations, divestitures, and related costs are a non-GAAP financial measure. These transactions represent gains, losses, and other related costs associated with acquisitions, integrations, investments, divestitures, assets impairments, and in-process research and development.
For the three months ended June 28, 2025, and June 29, 2024, total depreciation and amortization expense for the healthcare segment was $8.4 million and $10.5 million, respectively. For the six months ended June 28, 2025, and June 29, 2024, total depreciation and amortization expense for the healthcare segment was $17.0 million and $20.4 million, respectively.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. Such forward-looking statements include any expectation of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; matters relating to future board and management leadership; factors that may affect our operating results or financial condition; statements concerning new products, technologies or services; statements related to future capital expenditures; statements related to future economic conditions or performance; statements related to our stock repurchase program; statements related to our ability to complete the proposed sale of our non-healthcare business on the timeline anticipated, or at all, and the effect of the announcement, pendency and completion of the sale on our ability to maintain relationships with third parties, and the other risks and uncertainties related to the sale that may affect future results; statements as to industry trends and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may” or “will,” the negative versions of these terms and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, which we filed with the SEC on February 25, 2025. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Recent Developments
Sale of Non-Healthcare Business
On May 6, 2025, we announced that we entered into a definitive agreement with HARMAN International, a wholly-owned subsidiary of Samsung Electronics Co., Ltd., to sell our non-healthcare business for an aggregate purchase price of $350 million in cash, subject to certain adjustments. The transaction is subject to the satisfaction or waiver of certain conditions, and is expected to close by the end of 2025 subject to receiving required regulatory approvals.
Cybersecurity Incident
On April 27, 2025, we identified unauthorized activity on our on-premise network. Upon detection, we activated incident response protocols and implemented containment measures, including proactively isolating impacted systems. We promptly commenced an investigation to assess, mitigate, and remediate the incident with the assistance of third-party cybersecurity professionals. We also notified law enforcement.
As a result of the incident, certain of our manufacturing facilities and our customer order acceptance processes were temporarily operating at less than normal capacity, which had an impact on our ability to process, fulfill, and ship customer orders timely. We worked diligently to bring the affected portions of its network back online, restore normal business operations and mitigate the impact of the incident.
As of May 27, 2025, our manufacturing operations were running at near full capacity, and our critical order taking, distribution and shipping systems are fully operational. We continued to optimize these systems to ensure that any delayed orders were being processed in a timely manner.
As of June 28, 2025, all our manufacturing operations have returned to normal operations. For the three months ended June 28, 2025, we incurred approximately $4.5 million, in selling, general and administrative expenses, net, related to the cybersecurity incident, which included an insurance reimbursement of approximately $1.0 million.
Discontinued Operations
Our results for all periods presented, as discussed in Management’s Discussion and Analysis, are presented on a continuing operations basis. Results related to our non-healthcare consumer audio business are reported as discontinued operations for all periods presented. See Note 18, “Discontinued Operations” to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to discontinued operations.
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Recent Tax Law Changes
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing the impact of the OBBBA on our consolidated financial statements.
Executive Overview
We are a global technology company dedicated to improving lives. We aim to accelerate our growth strategies by continuously innovating and prioritizing patient care with a lens toward value-creation initiatives.
Our healthcare business develops, manufactures and markets a v ariety of noninvasive patient monitoring technologies, hospital automation® and connectivity solutions, and remote monitoring devices. Our healthcare products and patient monitoring solutions generally incorporate a monitor or circuit board, proprietary single-patient use or reusable sensors, software, cables and other services. We primarily sell our healthcare products to hospitals, emergency medical service (EMS) providers, home care providers, phy sician offices, veterinarians, and long-term care facilities through our direct sales force, distributors and original equipment manufacturer (OEM) partners, such as GE Healthcare, Hillrom, Mindray, Philips, Physio-Control, and Zoll, among others.
Our core measurement technologies are our breakthrough Measure-through Motion and Low Perfusion™ pulse oximetry, known as Masimo Signal Extraction Technology® (SET®) pulse oximetry, and advanced rainbow® Pulse CO-Oximetry parameters such as noninvasive hemoglobin (SpHb®), alongside many other modalities, including brain function monitoring, hemodynamic monitoring, regional oximetry, acoustic respiration rate monitoring, capnography and gas monitoring, nasal high-flow respiratory support therapy, patient position and activity tracking and telehealth solutions.
Our measurement technologies are available on many types of devices, from bedside hospital monitors, such as the Root® Patient Monitoring and Connectivity Hub, to various handheld and portable devices, and to the tetherless Radius-PPG®, Radius-VSM® and Masimo SafetyNet® remote patient surveillance solution. The Masimo Hospital Automation® Platform facilitates data integration, connectivity, and interoperability through solutions, such as Patient SafetyNet™, Iris®, iSirona®, Replica® and UniView® to facilitate more efficient clinical workflows and to help clinicians provide the best possible care, both in-person and remotely.
We continue to seek out differentiated growth opportunities to cross-leverage technologies, and to advance our integration technologies into the hospital to advance hospital automation® connectivity, cloud-based technologies and tetherless monitoring.
Economic Trends and Developments Effecting Our Business
Economic Trends
The healthcare market we operate in is highly competitive, dynamic, and experienced a number of headwinds in 2024 and continuing into the first quarter of 2025, including but not limited to supply chain volatility, inflationary pressures, interest rates volatility, rising energy costs, recessionary trends, foreign currency fluctuations and tariffs. All of these have affected the global economic environment, along with the healthcare facility spending trends and consumer spending behaviors which ultimately affect our performance. While w e experienced volatility in our healthcare business, we continue to be optimistic about our long-term growth and prospects.
During the fourth quarter of 2024, we implemented a strategic realignment initiative to refocus on profitability, maximizing our return on invested capital, in an effort to drive stronger returns for our stockholders going into 2025.
Tariffs
During the first quarter of 2025, the U.S. government imposed a series of tariffs on many products imported into the U.S. from China, Canada and Mexico. Since that time the U.S. government has increased some of those tariffs and postponed others. It has threatened to levy additional tariffs on some countries and new tariffs on additional countries, including those of the European Union, Asia and South America. Many of the countries on which those tariffs have been levied have imposed their own retaliatory tariffs or threatened to impose tariffs on goods they import from the U.S.
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The Company’s production footprint includes operations in the U.S., Mexico and Malaysia. Currently, certain raw materials are imported from China, and certain subassemblies are imported from Malaysia and Mexico. These tariff costs are expected to reflect their impact in the costs of raw materials and subassemblies used in production, as well as costs we may incur on finished goods shipped to our customers. We are actively working to mitigate the operating profit impact of these tariffs with adjustments to our supply chain and manufacturing, as well as a significant amount of administrative effort to qualify our products for exemptions, including those under United States-Mexico-Canada Agreement. We are also pursuing longer-term mitigation measures to further reduce our tariff exposure, including the vertical integration of sensors made in the U.S., and evaluating alternative suppliers for raw materials and cables currently sourced from China.
To the extent we are unable to offset the cost from the tariffs, or the tariffs negatively impact demand, our revenue and profitability could be adversely impacted. If additional tariffs come into effect or are adopted, we could incur additional tariff costs that could be material to our revenue and profitability, effecting our financial results.
Seasonality
Our business is influenced by many factors, including but not limited to: new product releases, acquisitions, regulatory approvals, holiday schedules, hospital census, clinicians, nurses and hospital personnel, the timing of the influenza season, fluctuations in interest rates, inflationary and recessionary pressures, among many other factors.
Our healthcare revenues in the third quarter of our fiscal years have historically represented a lower percentage of revenues due to the seasonality of the U.S., European and Japanese markets, where summer vacation schedules normally result in fewer elective procedures utilizing our healthcare products.
On-Going Russian-Ukraine Conflict, Israel-Palestine-Iran War
We continue to monitor the uncertainty from conflicts and wars in Russia, the Ukraine, Israel and Iran, with respect to on-going business in such regions, and are continuing to support existing patient populations while remaining compliant with all applicable U.S. and E U sanctions and regulations, where applicable. While none of Russia, the Ukraine or Israel constitute a material portion of our business, a significant escalation or expansion of economic disruption or the current scope of the conflicts in either geographic region, including the Middle East, could have an impact on our business. In the interim, order acceptance for Russia has been halted. For the six months ended June 28, 2025 and June 29, 2024, sales deriv ed from customers based in Russia represented an immaterial percentage of our total revenue.
Transactions with Willow Laboratories, Inc.
Willow Laboratories, Inc. (Willow), formerly known as Cercacor Laboratories, Inc., is an independent entity spun off from us to our stockholders in 1998. Our former Chairman and CEO, Mr. Kiani, is the Chairman and CEO of Willow. We are a party to a cross-licensing agreement with Willow, which was amended and restated effective January 1, 2007 (the Cross-Licensing Agreement), which governs each party’s rights to certain intellectual property held by the two companies. See Note 3, “Related Party Transactions”, to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to Willow.
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Results of Operations
The following table sets forth, for the periods indicated, our results of operations from continued operations, expressed as U.S. Dollar amounts and as a percentage of revenue from continued operations.

| Three Months Ended (in million, except percentages) |  | Six Months Ended (in million, except percentages)
| June 28, 2025 |  | Percentage of Revenue |  | June 29, 2024 |  | Percentage of Revenue |  | June 28, 2025 |  | Percentage of Revenue |  | June 29, 2024 |  | Percentage of Revenue
Total revenue | $ | 370.9 |  |  | 100.0 | % |  | $ | 343.9 |  |  | 100.0 | % |  | $ | 742.9 |  |  | 100.0 | % |  | $ | 683.5 |  |  | 100.0 | %
Cost of goods sold | 137.6 |  |  | 37.1 |  |  | 136.6 |  |  | 39.7 |  |  | 275.6 |  |  | 37.1 |  |  | 269.6 |  |  | 39.4 |
Gross profit | 233.3 |  |  | 62.9 |  |  | 207.3 |  |  | 60.3 |  |  | 467.3 |  |  | 62.9 |  |  | 413.9 |  |  | 60.6 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling, general and administrative | 138.9 |  |  | 37.4 |  |  | 126.3 |  |  | 36.7 |  |  | 258.3 |  |  | 34.8 |  |  | 242.0 |  |  | 35.4 |
Research and development | 29.9 |  |  | 8.1 |  |  | 39.1 |  |  | 11.4 |  |  | 63.8 |  |  | 8.6 |  |  | 76.8 |  |  | 11.2 |
Litigation settlements | — |  |  | — |  |  | — |  |  | — |  |  | 2.7 |  |  | 0.4 |  |  | — |  |  | — |
Total operating expenses | 168.8 |  |  | 45.5 |  |  | 165.4 |  |  | 48.1 |  |  | 324.8 |  |  | 43.8 |  |  | 318.8 |  |  | 46.6 |
Operating income | 64.5 |  |  | 17.4 |  |  | 41.9 |  |  | 12.2 |  |  | 142.5 |  |  | 19.1 |  |  | 95.1 |  |  | 14.0 |
Non-operating loss | (9.1) |  |  | (2.5) |  |  | (11.1) |  |  | (3.2) |  |  | (18.8) |  |  | (2.5) |  |  | (22.7) |  |  | (3.3) |
Income from continuing operations before provision for income taxes | 55.4 |  |  | 14.8 |  |  | 30.8 |  |  | 9.0 |  |  | 123.7 |  |  | 16.6 |  |  | 72.4 |  |  | 10.7 |
Provision for income taxes | 10.5 |  |  | 2.8 |  |  | 6.0 |  |  | 1.7 |  |  | 31.6 |  |  | 4.3 |  |  | 15.5 |  |  | 2.3 |
Income from continuing operations, net of tax | 44.9 |  |  | 12.0 |  |  | 24.8 |  |  | 7.2 |  |  | 92.1 |  |  | 12.3 |  |  | 56.9 |  |  | 8.4 |
Income (loss) from discontinued operations, net of tax | 6.4 |  |  | 1.7 |  |  | (8.8) |  |  | (2.6) |  |  | (211.5) |  |  | (28.5) |  |  | (22.0) |  |  | (3.2) |
Net income (loss) | $ | 51.3 |  |  | 13.8 | % |  | $ | 16.0 |  |  | 4.6 | % |  | $ | (119.4) |  |  | (16.2) | % |  | $ | 34.9 |  |  | 5.2 | %

Comparison of the Three Months ended June 28, 2025 to the Three Months ended June 29, 2024
Revenue. Revenue is comprised of hospital products and services.

|  | Revenue (in millions, except percentage)
|  | Three Months Ended June 28, 2025 |  | Percentage of Net Revenues |  | Three Months Ended June 29, 2024 |  | Percentage of Net Revenues |  | Increase/ (Decrease) |  | Percentage Change
|  | $370.9 |  | 100.0% |  | $343.9 |  | 100.0% |  | $27.0 |  | 7.9%

Revenue for the three months ended June 28, 2025 increased $27.0 million, or 7.9%, compared to the three months ended June 29, 2024, driven primarily by increased consumable sales, which was offset by lower capital sales. However, revenues were favorably impacted by approximately $0.8 million of foreign exchange rate movements from the prior year period that increased the U.S. Dollar translation of foreign sales that were denominated in various foreign currencies.
Revenue generated through our direct and distribution sales channels increased $22.8 million, or 7.2%, to $338.5 million for the three months ended June 28, 2025 compared to $315.7 million for the three months ended June 29, 2024. Revenues from our OEM channel increased $4.2 million, or 14.9%, to $32.4 million for the three months ended June 28, 2025 as compared to $28.2 million for the three months ended June 29, 2024.
During the three months ended June 28, 2025, we shipped approximately 63,100 noninvasive technology boards and instruments, compared to approximately 58,600 during the three months ended June 29, 2024.
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Gross Profit. Gross profit consists of revenue less cost of goods sold. Cost of goods sold includes labor, material, overhead, tariffs and other similar costs related to the production, supply, distribution and support of our prod ucts. Our gross profit for the three months ended June 28, 2025 and June 29, 2024 was as follows:

Gross Profit (in millions, except percentages)
Three Months Ended June 28, 2025 | Percentage of Net Revenues | Three Months Ended June 29, 2024 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$233.3 | 62.9% | $207.3 | 60.3% | $26.0 | 12.5%

Cost of goods sold increased $1.0 million for the three months ended June 28, 2025, compared to the three months ended June 29, 2024, primarily due to increased sales volumes in our healthcare products. Gross profit increased to 62.9% for the three months ended June 28, 2025, compared to 60.3% for the three months ended June 29, 2024, due to operational efficiencies and product cost reductions, partially offset by $1.9 million of incremental tariffs.
Selling, General and Administrative. Selling, general and administrative expenses consist primarily of salaries, stock-based compensation and related expenses for sales, marketing and administrative personnel, sales commissions, advertising, marketing, promotion costs, licensing fees, professional fees related to legal, accounting and other outside services, public company costs and other corporate expenses. Selling, general and administrative expenses for the three months ended June 28, 2025 and June 29, 2024 were as follows:

Selling, General and Administrative (in millions, except percentages)
Three Months Ended June 28, 2025 | Percentage of Net Revenues | Three Months Ended June 29, 2024 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$138.9 | 37.4% | $126.3 | 36.7% | $12.6 | 10.0%

Selling, general and administrative expenses increased $12.6 million, or 10.0%, for the three months ended June 28, 2025, compared to the three months ended June 29, 2024. The increase was primarily attributable to higher legal and professional fees of approximately $6.8 million, higher occupancy, office and other expenses of approximately $2.6 million, and higher compensation and other employee-related costs of approximately $0.4 million, which were offset by lower advertising and marketing-related costs of approximately $1.7 million. Furthermore, the expenses for the three months ended June 28, 2025 increased by approximately $4.5 million related to the cybersecurity incident, which included an insurance reimbursement of approximately $1.0 million.
Research and Development. Research and development expenses consist primarily of salaries, stock-based compensation and related expenses for engineers and other personnel engaged in the design and development of our products. These expenses also include third-party fees paid to consultants, prototype and engineering supply expenses and the costs of clinical trials. Research and development expenses for the three months ended June 28, 2025 and June 29, 2024 were as follows:

Research and Development (in millions, except percentages)
Three Months Ended June 28, 2025 | Percentage of Net Revenues | Three Months Ended June 29, 2024 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$29.9 | 8.1% | $39.1 | 11.4% | $(9.2) | (23.5)%

Research and development expenses decreased $9.2 million, or 23.5%, for the three months ended June 28, 2025, compared to the three months ended June 29, 2024. The decrease was primarily attributable to lower compensation and stock-based compensation expense, along with other employee-related costs of approximately $8.2 million, lower project expenses of approximately $1.7 million, and lower amortization expense of approximately $0.2 million, which were offset by higher engineering costs of approximately $1.0 million.
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Non-operating loss. Non-operating loss consists primarily of interest income, interest expense and foreign exchange gains and losses. Non-operating loss for the three months ended June 28, 2025 and June 29, 2024 was as follows:

Non-operating loss (in millions, except percentages)
Three Months Ended June 28, 2025 | Percentage of Net Revenues | Three Months Ended June 29, 2024 | Percentage of Net Revenues | (Increase)/ Decrease | Percentage Change
$(9.1) | (2.5)% | $(11.1) | (3.2)% | $2.0 | (18.0)%

Non-operating loss was $9.1 million for the three months ended June 28, 2025, as compared to $11.1 million of non-operating loss for the three months ended June 29, 2024. The change in the non-operating loss of approximately $2.0 million was primarily due to interest expense incurred under our various lines of credit and borrowing facilities of approximately $8.2 million and the net realized and unrealized foreign currency denominated transactions of approximately $1.5 million, offset by interest income on cash deposits of approximately $0.6 million.
Provision for Income Taxes. Our provision for income taxes for the three months ended June 28, 2025 and June 29, 2024 was as follows:

Provision for Income Taxes (in millions, except percentages)
Three Months Ended June 28, 2025 | Percentage of Net Revenues | Three Months Ended June 29, 2024 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$10.5 | 2.8% | $6.0 | 1.7% | $4.5 | 75.0%

For the three months ended June 28, 2025, we recorded a provision for income taxes of approximately $10.5 million, or an effective tax provision rate of 19.0%, as compared to a provision for income taxes of approximately $6.0 million, or an effective tax provision rate of 19.5%, for the three months ended June 29, 2024. The decrease in our income tax rate for the three months ended June 28, 2025 resulted primarily from changes in geographic composition of income and certain non-deductible items, offset by a decrease of approximately $0.4 million of excess tax benefits realized from stock-based compensation compared to the three months ended June 29, 2024.
Income (Loss) from Discontinued Operations, net of tax. The results of our discontinued operations include the operations of the non-healthcare consumer audio business. See Note 18, “Discontinued Operations” to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to these discontinued operations.

Income (Loss) from Discontinued Operations, net of tax (in millions, except percentages)
Three Months Ended June 28, 2025 | Percentage of Net Revenues | Three Months Ended June 29, 2024 | Percentage of Net Revenues | (Increase)/ Decrease | Percentage Change
$6.4 | 1.7% | $(8.8) | (2.6)% | $15.2 | 172.7%

Income from discontinued operations, net of tax was $6.4 million for the three months ended June 28, 2025, as compared to a loss of from discontinued operations, net of tax of $8.8 million for the three months ended June 29, 2024. The change in the income from discontinued operations, net of tax was primarily related to continued momentum in realizing cost efficiencies in the business.
Comparison of the Six Months ended June 28, 2025 to the Six Months ended June 29, 2024
Revenue. Revenue is comprised of hospital products and services.

|  | Revenue (in millions, except percentage)
|  | Six Months Ended June 28, 2025 |  | Percentage of Net Revenues |  | Six Months Ended June 29, 2024 |  | Percentage of Net Revenues |  | Increase/ (Decrease) |  | Percentage Change
|  | $742.9 |  | 100.0% |  | $683.5 |  | 100.0% |  | $59.4 |  | 8.7%

Revenue for the six months ended June 28, 2025 increased $59.4 million, or 8.7%, compared to the six months ended June 29, 2024, driven primarily by increased capital and consumable sales. However, revenues were unfavorably impacted by approximately $3.3 million of foreign exchange rate movements from the prior year period that decreased the U.S. Dollar translation of foreign sales that were denominated in various foreign currencies.
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Revenue generated through our direct and distribution sales channels increased $43.4 million, or 6.9%, to $669.9 million for the six months ended June 28, 2025, compared to $626.5 million for the six months ended June 29, 2024. Revenues from our OEM channel increased $16.0 million, or 28.1%, to $73.0 million for the six months ended June 28, 2025 as compared to $57.0 million for the six months ended June 29, 2024.
During the six months ended June 28, 2025, we shipped appr oximately 135,300 noninva sive technology boards and instruments, compared to approximately 109,000 during the six months ended June 29, 2024.
Gross Profit. Gross profit consists of revenue less cost of goods sold. Cost of goods sold includes labor, material, overhead, tariffs and other similar costs related to the production, supply, distribution and support of our prod ucts. Our gross profit for the six months ended June 28, 2025 and June 29, 2024 was as follows:

Gross Profit (in millions, except percentages)
Six Months Ended June 28, 2025 | Percentage of Net Revenues | Six Months Ended June 29, 2024 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$467.3 | 62.9% | $413.9 | 60.6% | $53.4 | 12.9%

Cost of goods sold increased $6.0 million for the six months ended June 28, 2025 compared to the six months ended June 29, 2024, primarily due to product mix on increased sales volumes. Gross profit increased to 62.9% for the six months ended June 28, 2025, compared to 60.6% for the six months ended June 29, 2024, due to operational efficiencies and product cost reductions, partially offset by $1.9 million of incremental tariffs. Furthermore, the six months ended June 29, 2024 included approximately $3.1 million for certain product recall expenses.
Selling, General and Administrative. Selling, general and administrative expenses for the six months ended June 28, 2025 and June 29, 2024 were as follows:

Selling, General and Administrative (in millions, except percentages)
Six Months Ended June 28, 2025 | Percentage of Net Revenues | Six Months Ended June 29, 2024 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$258.3 | 34.8% | $242.0 | 35.4% | $16.3 | 6.7%

Selling, general and administrative expenses increased $16.3 million, or 6.7%, for the six months ended June 28, 2025, compared to the six months ended June 29, 2024. The increase was primarily attributable to higher legal and professional fees of approximately $17.7 million, higher occupancy, office and other expenses of approximately $3.0 million, which were offset by lower advertising and marketing-related costs of approximately $5.4 million, and lower compensation and other employee-related costs of approximately $3.6 million. Furthermore, the expenses for the six months ended June 28, 2025 were increased by approximately $4.5 million related to the cybersecurity event.
Research and Development. Research and development expenses for the six months ended June 28, 2025 and June 29, 2024 were as follows:

Research and Development (in millions, except percentages)
Six Months Ended June 28, 2025 | Percentage of Net Revenues | Six Months Ended June 29, 2024 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$63.8 | 8.6% | $76.8 | 11.2% | $(13.0) | (16.9)%

Research and development expenses decreased $13.0 million, or 16.9%, for the six months ended June 28, 2025 compared to the six months ended June 29, 2024, primarily due to lower compensation and stock-based compensation expense along with other employee-related costs of approximately $11.0 million, lower project expenses of approximately $3.9 million, and lower amortization expense of approximately $0.3 million, which were partially offset by higher engineering costs of approximately $2.2 million.
Litigation settlements. Litigation settlements consist primarily of litigation related settlements and other legal expenses. Litigation settlements for the six months ended June 28, 2025 and June 29, 2024 were as follows:
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Litigation Settlements (in millions, except percentages)
Six Months Ended June 28, 2025 | Percentage of Net Revenues | Six Months Ended June 29, 2024 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$2.7 | 0.4% | $— | —% | $2.7 | 100.0%

Litigation settlements increased $2.7 million for the six months ended June 28, 2025, as compared to zero for the six months ended June 29, 2024, related to litigation settlements in the current period, as these settlements vary in their characteristics and frequency.
Non-operating loss. Non-operating loss consists primarily of interest income, interest expense and foreign exchange gains and losses. Non-operating loss for the six months ended June 28, 2025 and June 29, 2024 was as follows:

Non-operating Loss (in millions, except percentages)
Six Months Ended June 28, | Percentage of Net Revenues | Six Months Ended June 29, 2024 | Percentage of Net Revenues | (Increase)/ Decrease | Percentage Change
$(18.8) | (2.5)% | $(22.7) | (3.3)% | $3.9 | (17.2)%

Non-operating loss was $18.8 million for the six months ended June 28, 2025, compared to $22.7 million of non-operating loss for the six months ended June 29, 2024. This net decrease in the non-operating loss of approximately $3.9 million was primarily due to interest expense incurred under our various lines of credit and borrowing facilities of approximately $16.9 million and the net realized and unrealized foreign currency denominated transactions of approximately $3.9 million, offset by interest income on cash deposits of approximately $2.0 million.
Provision for Income Taxes. Our provision for income taxes for the six months ended June 28, 2025 and June 29, 2024 was as follows:

Provision for Income Taxes (in millions, except percentages)
Six Months Ended June 28, | Percentage of Net Revenues | Six Months Ended June 29, 2024 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$31.6 | 4.3% | $15.5 | 2.3% | $16.1 | 103.9%

For the six months ended June 28, 2025, we recorded a provision for income taxes of approximately $31.6 million, or an effective tax rate of 25.5%, as compared to a provision for income taxes of approximately $15.5 million, or an effective tax rate of 21.4%, for the six months ended June 29, 2024. The increase in our income tax rate for the six months ended June 28, 2025 resulted primarily from establishing a valuation allowance against certain state deferred tax assets from the discontinued operations.
Loss from Discontinued Operations, net of tax. The results of our discontinued operations include the operations of the non-healthcare consumer audio business. See Note 18, “Discontinued Operations” to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to these discontinued operations.

Loss from Discontinued Operations, net of tax (in millions, except percentages)
Six Months Ended June 28, | Percentage of Net Revenues | Six Months Ended June 29, 2024 | Percentage of Net Revenues | (Increase)/ Decrease | Percentage Change
$(211.5) | (28.5)% | $(22.0) | (3.2)% | $(189.5) | 861.4%

Loss from discontinued operations, net of tax was $211.5 million for the six months ended June 28, 2025, as compared to a loss from discontinued operations, net of tax of $22.0 million for the six months ended June 29, 2024. The change in the loss from discontinued operations, net of tax was primarily related to impairment charges of approximately $295.0 million, which were offset by continued momentum in realizing cost efficiencies in the business.
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Liquidity and Capital Resources
Our principal sources of liquidity consist of our existing cash and cash equivalent balances, future funds expected to be generated from operations and available borrowing capacity under our Credit Facility. As of June 28, 2025, we had approximately $677.7 million in working capital, of which approximately $149.6 million was in cash and cash equivalents, as compared to approximately $608.1 million in working capital and approximately $123.6 million in cash and cash equivalents at December 28, 2024. In addition to net working capital, as of June 28, 2025, we had approximately $355.2 million of available borrowing capacity (net of outstanding letters of credit) under our Credit Facility.
We currently maintain a Credit Facility which provides for $705.0 million of unsecured borrowings. The Credit Facility also provides for a sublimit of up to $50.0 million for the issuance of letters of credit. Proceeds from the Credit Facility are being used for general corporate, capital investment and expenditures and working capital needs. For additional information regarding the Credit Facility, see Note 15, “Debt”, to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
In managing our day-to-day liquidity and capital structure, we generally do not rely on foreign earnings as a source of funds. As of June 28, 2025, we had cash totaling $64.8 million held outside of the U.S., of which approximately $46.7 million was accessible without additional tax cost and approximately $18.1 million was accessible at an incremental estimated tax cost of less than $0.1 million. We currently have sufficient funds on-hand and cash held outside the U.S. that is available without additional tax cost to fund our global operations. In the event funds that are treated as permanently reinvested are repatriated, we may be required to accrue and pay additional U.S. taxes to repatriate these funds.
Our cash requirements depend on numerous factors, including, but not limited to, market acceptance of our technologies, our continued ability to commercialize new products and to create or improve our technologies and applications, expansion of our global footprint through acquisitions and/or strategic investments in technologies or technology companies, hedging and derivative activities, investments in property and equipment, the renewal of our Credit Facility, the impact of disruptions to the manufacturing industry supply chain for key components, inflation, repurchases of our stock under our authorized stock repurchase program, costs related to our domestic and international regulatory requirements and other long-term commitments and contingencies. For further information regarding our commitment and contingencies, see Note 24 to our accompanying condensed consolidated financial statements included in Part IV, Item 15(a) of this Quarterly Report on Form 10-Q.
Our total cash and cash equivalents and related cash flows may be affected by certain discretionary actions we may take with customers and suppliers to accelerate or delay certain cash receipts or payments to manage liquidity for our strategic business requirements. These actions can include, among others, negotiating with suppliers to optimize our payment terms and conditions, adjusting the timing of cash flows associated with customer sales programs and collections, managing inventory levels and purchasing practices, and selling certain of our accounts receivables on a non-recourse basis to third party financial institutions.
We anticipate that our existing cash and cash equivalents, amounts available under our Credit Facility and cash provided by operations and, taken together, provide adequate resources to fund on-going operating and capital expenditures, working capital requirements, and other operational funding needs for the next 12 months.
Should we require additional funds in the future to support our working capital requirements or for other purposes, we may seek to raise such additional funds through debt financing, as well as from other sources such as through our effective automatic shelf registration statement on Form S-3 (File No. 333-262770) on file with the SEC, pursuant to which we may offer an unspecified amount of debt, equity, and other securities. No assurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on terms favorable when required.
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Cash Flows
The following table summarizes our cash flows from continuing operations:

|  | Six Months Ended June 28,
(in millions) | June 28, 2025 |  | June 29, 2024
Net cash provided by (used in): |  |  |
Operating activities | $ | 99.5 |  |  | $ | 106.0 |
Investing activities | 10.6 |  |  | (8.1) |
Financing activities | (86.0) |  |  | (116.7) |
Effect of foreign currency exchange rates on cash | 1.9 |  |  | (9.0) |
Increase (decrease) in cash, cash equivalents and restricted cash | $ | 26.0 |  |  | $ | (27.8) |

Operating Activities. Cash provided by operating activities was approximately $99.5 million for the six months ended June 28, 2025, generated primarily from net income from operations of $92.1 million. Non-cash activity included depreciation and amortization of approximately $17.0 million and stock-based compensation expense of approximately $17.6 million.
Other major changes in operating assets and liabilities included a decrease in accrued compensation, lease receivable, other non-current assets, and deferred costs and other contract assets of approximately $12.0 million, $5.5 million, $5.1 million, and $1.9 million, respectively, primarily due to the timing of payments; an increase in inventories, accounts receivable, other current assets, accrued liabilities, accounts payable, deferred revenue and other contract-related liabilities, and other non-current liabilities of approximately $31.7 million, $10.3 million, $8.8 million, $8.0 million, $2.7 million, $1.9 million, and $1.1 million, respectively, primarily due to inventory build-up and the timing of payments.
For the six months ended June 29, 2024, cash provided by operating activities was approximately $106.0 million, generated primarily from net income from operations of $56.9 million. Non-cash activity included depreciation and amortization of approximately $20.4 million and stock-based benefit of approximately $20.6 million. Other major changes in operating assets and liabilities included a decrease in accounts payable, other current assets, lease receivables, income taxes payable, other non-current liabilities, and other non-current assets of approximately $16.6 million, $11.7 million, $4.9 million, $4.9 million, $1.8 million and $0.5 million, respectively, primarily due to the timing of payments; an increase in accrued liabilities, accrued compensation, accounts receivable, inventories, deferred revenue and other contract-related liabilities, and deferred costs and other contract assets of approximately $15.3 million, $12.8 million, $8.2 million, $4.7 million, $3.7 million, and $1.6 million, respectively, primarily due to the timing of payments and inventory build-up.
Investing Activities. Cash provided in investing activities for the six months ended June 28, 2025 was approximately $10.6 million, consisting primarily of proceeds from the sale of property and equipment of approximately $19.6 million, which were offset by approximately $6.4 million from the purchases of property and equipment and approximately $2.6 million of capitalized intangible asset costs related primarily to patent and trademark costs and license fees,
For the six months ended June 29, 2024, cash used in investing activities was approximately $8.1 million, consisting primarily of approximately $9.7 million for purchases of property and equipment, approximately $8.1 million of capitalized intangible asset costs related primarily to patent and trademark costs and license fees, and approximately $0.1 million of strategic investments, which were offset by approximately $9.8 million from the sale of property and equipment.
Financing Activities. Cash used in financing activities for the six months ended June 28, 2025 was approximately $86.0 million, consisting primarily of repayment on the line of credit of approximately $116.5 million, repurchases of common stock of approximately $13.7 million.and withholding of shares for employee payroll taxes for vested equity awards of approximately $12.0 million, which were offset by the issuance of common stock related to employee equity awards of approximately $56.2 million.
For the six months ended June 29, 2024, cash used in financing activities was approximately $116.7 million, consisting primarily of repayment on the line of credit of approximately $184.8 million, and withholding of shares for employee payroll taxes for vested equity awards of approximately $5.8 million, which were offset by proceeds from borrowings under the line of credit of approximately $64.0 million and the issuance of common stock related to employee equity awards of approximately $9.9 million.
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Capital Resources and Prospective Capital Requirements
We expect to fund our future operating, investing and financing activities through our available cash, future cash from operations, our Credit Facility and other potential sources of capital. In addition to funding our working capital requirements, we anticipate additional capital expenditures primarily related to investments in infrastructure growth. Possible additional uses of cash may include acquisitions of and/or strategic investments in technologies or technology companies, investments in property, repurchases of common stock under our authorized stock repurchase program and continued legal defense of our intellectual property. However, any repurchases of common stock will be subject to numerous factors, including the availability of our common stock, general market conditions, the trading price of our common stock, availability of capital, alternative uses for capital and our financial performance. In addition, the amount and timing of our actual investing activities will vary significantly depending on numerous factors, including the timing and amount of capital expenditures, costs of product development efforts, our timetable for infrastructure expansion, any stock repurchase activity and costs related to our domestic and international regulatory requirements. Despite these strategic investment requirements and potential expenditures, we anticipate that our existing cash and cash equivalents, amounts available under our Credit Facility and cash provided by operations, taken together, provide adequate resources to fund on-going operating and capital expenditures, working capital requirements, and other operational funding needs for the next 12 months. We may require additional funds in the future to support our working capital requirements or for other purposes and may seek to raise such additional funds through debt financing, as well as from other sources. No assurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on terms favorable when required. For additional information related to our Credit Facility, see Note 15, “Debt”, to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of net revenues, expenses, assets and liabilities. We regularly evaluate our estimates and assumptions related to our critical accounting policies, including revenue recognition, inventory valuation, stock-based compensat ion, intangible assets and goodwill; defer red taxes and related valuation allowances, uncertain tax positions, tax contingencies, litigation costs and loss contingencies.
These estimates and judgments are based on historical experience and on various other factors that we believe to be reasonable under the circumstances, and form the basis for making management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Although we regularly evaluate these estimates and assumptions, changes in judgments and uncertainties relating to these estimates could potentially result in materially different results under different assumptions and conditions. If these estimates differ significantly from actual results, the impact on the condensed consolidated financial statements may be material.
There have been no material changes to any of our critical accounting policies during the six months ended June 28, 2025.
For a description of our critical accounting policies, please refer to “Critical Accounting Estimates” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, which was filed with the SEC on February 25, 2025.
Recent Accounting Pronouncements
For details regarding any recently adopted and recently issued accounting standards, see Note 2, “Summary of Significant Accounting Policies”, to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks that may arise from adverse changes in market rates and prices, such as interest rates, foreign exchange fluctuations and inflation. We do maintain a derivative instrument for cash flow hedging, but do not enter into derivatives or other financial instruments for trading or speculative purposes.
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Interest Rate Risk
Our exposure to market risk for changes in interest rates relates to the increase or decrease in the amount of interest income we can earn on our cash and cash equivalents and on the increase or decrease in the amount of interest expense we must pay with respect to our various outstanding debt instruments. As of June 28, 2025, the carrying value of our cash equivalents approximated fair valu e. We manage our risk associated with interest rates fluctuations related to interest expenses under our Credit Facility by engaging in hedging activities. Since July 2022, we entered into various interest rate swap contracts to hedge our exposure to changes in cash flows associated with our outstanding debt with variable interest rates. The interest rate swap contracts have maturities averaging five years or less. S ee Note 17, “Derivative Instruments and Hedging Activities”, to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details.
Our ultimate realized gain or loss with respect to interest rate fluctuations will depend on interest rates, the exposures that arise during the period and our hedging strategies at that time. A hypothetical 100 basis point change in interest rates would increase or decrease our interest expense by approximately $0.2 million based on average debt outstanding, after consideration of our interest rate swap contracts, for the quarter ended June 28, 2025.
We sponsor multiple defined benefit pension plans covering certain international employees. The aggregate fair value of the plans’ investments was $24.1 million as of June 28, 2025. The plans’ assets may be subject to market risk, interest rate risk, and credit risk, which may affect the value of the plans’ assets and the funding of the plans.
Increases in interest rates globally may impact the value of pension plan assets held by us. When interest rates increase, the value of fixed income securities, such as bonds, may decrease, which can negatively impact the fair value of the pension plan assets. However, interest rate increases may also improve the funded status of plan by increasing the discount rate used to measure the present value of the pension obligations and potentially decreasing our requirement to make contributions to the plan. The most significant actuarial assumption affecting pension expense and pension obligations is discount rates. A hypothetical increase of 100 basis point in discount rates would result in a decrease of approximately $0.3 million in the projected benefit obligation. The impact of interest rate increases on the pension plan assets and funded status may not be predictable and may vary from period to period.
Foreign Currency Exchange Rate Risk
A majority of our assets and liabilities are maintained in the United States in U.S. Dollars and a majority of our sales and expenditures are transacted in U.S. Dollars. However, we also transact with foreign customers in currencies other than the U.S. Dollar. These foreign currency revenues, when converted into U.S. Dollars, can vary depending on average exchange rates during a respective period. In addition, certain of our foreign subsidiaries transact in their respective country’s local currency, which is also their functional currency. As a result, expenses of these foreign subsidiaries, when converted into U.S. Dollars can also vary depending on average monthly exchange rates during a respective period.
We are exposed to foreign currency gains or losses on outstanding foreign currency denominated receivables and payables, as well as our foreign currency denominated cash balances and certain intercompany transactions. In addition, other transactions between us or our subsidiaries and a third-party, denominated in a currency different from the functional currency, are foreign currency transactions. Realized and unrealized foreign currency gains or losses on these transactions are also included in our statements of operations as incurred.
The balance sheets of each of our foreign subsidiaries whose functional currency is not the U.S. Dollar are translated into U.S. Dollars at the rate of exchange at the balance sheet date and the statements of comprehensive income and cash flows are translated into U.S. Dollars using an approximation of the average monthly exchange rates applicable during the period. Any foreign exchange gain or loss as a result of translating the balance sheets of our foreign subsidiaries whose functional currency is not the U.S. Dollar is included in equity as a component of accumulated other comprehensive income (loss). Our foreign currency exchange rate exposures are primarily with the Euro, the British Pound and Mexican Peso. Foreign currency exchange rates may experience significant volatility from one period to the next.
We do not use derivatives or financial instruments for trading or speculative purposes. The effect of additional changes in foreign currency exchange rates could have a material effect on our future operating results or cash flows, depending on which foreign currency exchange rates change and depending on the directional change (either a strengthening or weakening against the U.S. Dollar). We estimate that the potential impact of a hypothetical 10% adverse change in all applicable foreign currency exchange rates from the rates in effect as of June 28, 2025 would have resulted in an estimated reduction of $19.4 million in reported pre-tax income for the six months ended June 28, 2025. As our foreign operations continue to grow, our exposure to foreign currency exchange rate risk may become more significant.
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Inflation Risk
We believe that inflationary pressures on commodity prices, labor costs, and transportation directly impacted our business during 2024. Though we believe that the easing of interest rates throughout 2024 has had a positive impact on the return of consumer discretionary spending in 2025, any inherent volatility could have a significant materiel adverse effect on our business, financial condition or results of operations, and may have an adverse effect on us in the future. We are unable to estimate or determine the exact impact of inflation on our global business, financial condition or results of operations during the periods presented.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (SEC) regulations, rules and forms and that such information is accumulated and communicated to our management, including our CEO and Chief Financial Officer (CFO), as appropriate, to allow for timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Rule 13a-15(b) or Rule 15d-15(b) promulgated by the SEC under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.
During the three m onths ended June 28, 2025, there were no changes in o ur internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
On May 6, 2025, we disclosed that we had identified unauthorized activity on our on-premise network. Upon detection, we activated our incident response protocols and implemented containment measures, including proactively isolating impacted systems.
We promptly commenced an investigation and began working to assess, mitigate, and remediate the incident with the assistance of third-party cybersecurity professionals. As a result of the incident,, certain of our manufacturing facilities were operating at less than normal levels, and our ability to process, fulfill, and ship customer orders timely was temporarily impacted.
During the disruptions caused by the cyberattack, we deployed additional interim controls in response to taking certain systems offline during the period to maintain our internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The information set forth in Note 24, “Commitments and Contingencies”, to our accompanying condensed consolidated financial statements under the caption “Litigation” included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.
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Item 1A. Risk Factors
This Form 10-Q should be read in conjunction with Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 28, 2024, filed with the SEC on February 25, 2025. With the exception of the risk factors noted below, which updates the risk factors in our Annual Report on Form 10-K for year ended December 28, 2024, there have been no material changes from the risk factors previously disclosed therein. The following risk factors and other information included in this report should be carefully considered. The risks and uncertainties described below are not the only ones we face; others, either unforeseen or currently deemed not material, may also have a negative impact on our Company. If any of the following occurs, our business, operating results, cash flows, and financial condition could be materially adversely affected.
Our operations and financial performance may be negatively affected directly or indirectly by changes in trade policies and tariffs.
A significant amount of our material components and sub-assemblies are sourced or manufactured from Mexico, China and Malaysia and other regions outside of the United States. Recently, the U.S. government implemented substantial changes to U.S. trade policies, including increased tariffs and changes to multilateral trade agreements. Additionally, the President of the United States has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. U.S. trade policy continues to evolve in this regard. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. These changes could prevent or make it difficult or more expensive for us to obtain the materials or components needed for new products, which could affect our sales. Tariff increases could negatively impact our costs and/or require us to increase our prices, which likely would decrease customer demand for our products. Retaliatory tariff and trade measures imposed by other countries could affect our ability to export products and therefore adversely affect our sales. Any significant changes in current U.S. trade or other policies that restrict imports or increase import tariffs could have a material adverse effect upon our results of operations.
Changes to regulatory, funding, staffing, trade, and other policies and actions by the U.S. government could adversely affect our business operations.
Domestic and international policy shifts may introduce considerable uncertainty to the macroeconomic and regulatory landscape in which we operate. Some of our customers include the U.S. government, companies and hospitals that rely on government funding and reimbursements, and patients that rely on Medicare/Medicaid for reimbursement of medical coverages and procedures.
Since January 2025, the current U.S. administration has enacted and proposed substantial policy changes that affect federal health agencies, public health priorities, and international trade. These measures — ranging from staffing and budget reductions at the U.S. Food and Drug Administration (“FDA”) to sweeping tariff actions — may significantly disrupt the medical device ecosystem in which we operate.
In 2025, the FDA laid off approximately 3,500 employees, representing approximately 19% of its workforce at the beginning of the year. Such workforce reductions at the FDA have raised some concerns regarding the agency’s capacity to perform timely regulatory reviews and approvals of medical devices. Recent and/or potential further reductions in workforce or other personnel changes at the FDA, including terminations, may disrupt the agency’s review and approval processes, potentially impacting our ability to timely and effectively release new products in our product pipeline portfolio, disrupt research and development of new products and commercial viability, all of which could adversely impact our operating and financial results.
On July 4, 2025, the One Big Beautiful Bill Act was signed into law. Included in the bill was an estimated $1 trillion in cuts to Medicaid spending, implemented through Medicaid work requirements, patient cost-sharing, and a phase down of Medicaid provider taxes and state-directed payments. Such reductions in Medicaid spending could result in reductions in hospital revenues resulting from reduced patient reimbursements for the use of our sensors, adversely impacting sensor utilization, order patterns, all of which could adversely impact our operating and financial results.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Repurchases and Withholdings of Equity Securities
During the quarter ended June 28, 2025, we effected stock repurchases pursuant to our stock repurchase program. In addition, we satisfied certain U.S. federal and state tax withholding obligations due upon the vesting of restricted share units by withholding a number of shares of our common stock with an aggregate fair market value on the date of vesting equal to the tax withholding obligations from the shares of our common stock being issued in connection with such award. Shares repurchased by us or withheld to satisfy tax withholding obligations during each fiscal month of the quarter ended June 28, 2025 were as follows:

Period |  | Total Number of Shares Purchased or Withheld |  | Average Price Paid Per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1) |
March 30, 2025 to April 26, 2025 |  | — |  |  | — |  |  | — |  |  | 5,000,000 |  |
April 27, 2025 to May 24, 2025 |  | — |  |  | — |  |  | — |  |  | 5,000,000 |  |
May 25, 2025 to June 28, 2025 |  | 79,696 |  | (2) | $ | 171.41 |  | (2) | 79,696 |  |  | 4,920,304 |  |
Total |  | 79,696 |  |  | $ | 171.41 |  |  | 79,696 |  |  | 4,920,304 |  | (2)

______________
(1) In June 2022, our Board approved a new stock repurchase program, authorizing us to purchase up to 5.0 million shares of our common stock on or before December 31, 2027 (2022 Repurchase Program) The 2022 Repurchase Program became effective in July 2022 and can be carried out at the discretion of a committee comprised of our CEO and CFO through open market purchases, one or more Rule 10b5-1 trading plans, block trades and privately negotiated transactions.
(2) Comprised solely of shares of our common stock withheld from employees to satisfy tax withholding obligations. Average price paid price share represents fair market value of our common stock on the date of withholding.
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Item 5. Other Information
Trading Arrangements
During the fiscal quarter ended June 28, 2025, none of our directors or officers (as defined in Section 16 of the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K.
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Item 6. Exhibits

EXHIBIT INDEX
Exhibit Number |  |  |  | Description of Document
3.1 |  |  |  | Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1 (No. 333-142171) originally filed with the Securities and Exchange Commission on April 17, 2007).
3.2 |  |  |  | Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated June 28, 2023 (incorporated herein by reference Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 28, 2023).
3.3 |  |  |  | Sixth Amended and Restated Bylaws of Masimo Corporation dated February 12, 2025 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 19, 2025).
4.1 |  |  |  | Amended Form of Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 16, 2022).
4.2#+ |  |  |  | Masimo Retirement Savings Plan (incorporated herein by reference to Exhibit 4.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 10, 2022).
10.1 |  |  |  | Offer letter, by and between Masimo Corporation and Catherine Szyman, dated January 17, 2025 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 21, 2025).
10.2#* |  |  |  | Offer letter, by and between Masimo Corporation and Lisa Hellmann, dated March 24, 2025.
10.3#* |  |  |  | Offer letter, by and between Masimo Corporation and Tim Benner, dated April 25, 2025.
10.4 |  |  |  | Stock Purchase Agreement, dated May 6, 2025, by and between Masimo Corporation and Harman International Industries, Incorporated, (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 7, 2025).
31.1* |  |  |  | Certification of Catherine Szyman, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
31.2* |  |  |  | Certification of Micah Young, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
32.1* |  |  |  | Certification of Catherine Szyman, Chief Executive Officer, and Micah Young, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
101.INS* |  |  |  | Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH* |  |  |  | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104 |  |  |  | Cover Page Interactive Data File (embedded within the inline XBRL document)

Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 28, 2025 and December 28, 2024, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 28, 2025 and June 29, 2024, respectively, (iii) Condensed Consolidated Statements of Comprehensive for the three and six months ended June 28, 2025 and June 29, 2024, respectively, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 28, 2025 and June 29, 2024, respectively, and (v) Notes to Condensed Consolidated Financial Statements.
______________
# Indicates management or compensatory plan.
* Filed herewith.
** Furnished herewith.
+ Non-material schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the SEC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  |  |  | M ASIMO C ORPORATION
Date: August 5, 2025 |  |  |  | By: |  | /s/ C ATHERINE S ZYMAN
|  |  |  |  |  | Catherine Szyman
|  |  |  |  |  | Chief Executive Officer
Date: August 5, 2025 |  |  |  | By: |  | /s/ M ICAH Y OUNG
|  |  |  |  |  | Micah Young
|  |  |  |  |  | Executive Vice President and Chief Financial Officer

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