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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________
FORM 10-K
________________________________________________________________________

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

For the fiscal year ended January 3, 2026
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 Number 001-33642
________________________________________________
MASIMO CORPORATION
(Exact name of registrant as specified in its charter)
_________________________________________________________

DE |  |  |  |  |  | 33-0368882
(State or Other Jurisdiction of Incorporation or Organization) |  |  |  |  |  | (I.R.S. Employer Identification Number)
52 Discovery |  | Irvine, |  | CA |  |  |  |  |  | 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: |  | Name of each exchange on which registered:
Common Stock, par value $0.001 |  | MASI |  | The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None. |  |  |  |  |  |  |  |  |  |  |  |  |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. |  | ☒ |  | Yes | ☐ | No |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. |  | ☐ |  | Yes | ☒ | No |
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, a 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. | ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. | ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). | ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) |  | ☐ |  | Yes | ☒ | No |

The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on June 28, 2025, the last business day of the registrant’s most recently completed second fiscal quarter, as reported on the Nasdaq Global Select Market, was approximately $3.9 billion. Shares of stock held by officers, directors and 5 percent or more stockholders have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. At January 31, 2026, the registrant had 52,192,538 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K incorporate information by reference from the registrant’s proxy statement for the registrant’s 2026 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this annual report on Form 10-K.

Table of Contents
MASIMO CORPORATION
FISCAL YEAR 2025 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS

|  | Page
PART I
Item 1 | Business | 2
Item 1A | Risk Factors | 27
Item 1B | Unresolved Staff Comments | 58
Item 1C | Cybersecurity | 58
Item 2 | Properties | 60
Item 3 | Legal Proceedings | 60
Item 4 | Mine Safety Disclosures | 60
PART II
Item 5 | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 61
Item 6 | [Reserved] | 62
Item 7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 62
Item 7A | Quantitative and Qualitative Disclosures about Market Risk | 77
Item 8 | Financial Statements and Supplementary Data | 78
Item 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 78
Item 9A | Controls and Procedures | 78
Item 9B | Other Information | 79
Item 9C | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 79
PART III
Item 10 | Directors, Executive Officers and Corporate Governance | 80
Item 11 | Executive Compensation | 80
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 80
Item 13 | Certain Relationships and Related Transactions and Director Independence | 80
Item 14 | Principal Accounting Fees and Services | 80
PART IV
Item 15 | Exhibits and Financial Statement Schedules | 81
Item 16 | Form 10-K Summary | 84
Signatures | 85

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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” 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. The forward-looking statements are contained principally in Item 1—“Business,” Item 1A—“Risk Factors” and Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” but appear throughout this Annual Report on Form 10-K. Examples of forward-looking statements include, but are not limited to, any projection or expectation of earnings, revenue or other financial items; the plans, strategies and objectives of management for future operations; organizational impact of executive leadership and board transitions; factors that may affect our operating results, including accounting and tax estimates; our success in pending litigation; new products or services; the demand for our products; our ability to consummate acquisitions and successfully integrate them into our operations; any discussions of potential, expected, planned business divestitures, separations or spinoffs; future capital expenditures; effects of current or future economic conditions or performance; our ability to successfully consummate the
proposed merger with Danaher Corporation on the anticipated timeline or at all and the impact of the pendency of the
proposed merger on our ability to maintain relationships with customers and other third parties, on management’s attention to
the operation of our business and other risks and uncertainties related to the proposed merger that may affect future results; 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,” “on-going,” “opportunity,” “plan,” “potential,” “predicts,” “seek,” “should,” “will,” or “would,” and similar expressions and variations or negatives of these words. These forward-looking statements are based on the expectations, estimates, projections, beliefs and assumptions of our management based on information currently available to management, all of which is subject to change. Such forward-looking statements are subject to risks, uncertainties and other factors that are difficult to predict and could cause our 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 discussed under Item 1A—“Risk Factors” in this Annual Report on Form 10-K. Furthermore, such forward-looking statements speak only as of the date of this Annual Report on Form 10-K. We undertake no obligation to update or revise publicly any forward-looking statements to reflect events or circumstances after the date of such statements for any reason, except as otherwise required by law.
1

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PART I
ITEM 1. BUSINESS
Overview
We are a global medical technology company that develops and produces a wide array of industry-leading monitoring technologies, including innovative measurements, sensors, and patient monitors. Powered by the Masimo Hospital Automation™ and Masimo SafetyNet® platforms, Masimo connectivity, automation, and telehealth and telemonitoring solutions are improving and automating care delivery in the hospital.
Healthcare
Our healthcare business develops, manufactures and markets a variety 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 and/or cables. We primarily sell our products to hospitals, emergency medical service providers, home care providers, physician 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, and telehealth solutions.
Our measurement technologies are available on many types of devices, from bedside hospital monitors like 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 like 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.
2

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Non-healthcare
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 sell Viper Holdings Corporation, a Delaware corporation which previously owned and operated the Company’s non-healthcare business (together with its subsidiaries, “Sound United”) to Harman International Industries, Incorporated, a wholly-owned subsidiary of Samsung Electronics., Ltd. On September 23, 2025, the Company completed the sale of Sound United. For additional information with respect to the non-healthcare consumer business separation, discontinued operations of this business and sale, see “Separation of Non-Healthcare Operations” under Part I, Item 1—“Business” for additional details.
Proposed Merger
On February 16, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Danaher Corporation, a Delaware corporation (“Parent” or “Danaher”), and Mobius Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, among other things, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent. As set forth in the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $0.001 per share, of the Company (other than any shares owned by Parent, Merger Sub or the Company or any of their wholly owned subsidiaries or shares in respect of which appraisal has been duly demanded, and not effectively withdrawn or otherwise waived or lost, pursuant to Section 262 of the General Corporation Law of the State of Delaware) issued and outstanding immediately prior to the effective time of the Merger will be automatically converted into the right to receive $180.00 in cash, without interest. The Merger is expected to close in the second half of 2026, subject to customary closing conditions, including approval by our stockholders and the receipt of required regulatory approvals.
If the Merger is completed, our common stock will be delisted from the Nasdaq Stock Market and deregistered under the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable following the effective time of the Merger.
Additional information about the Merger Agreement and the Merger will be set forth in the Company’s Definitive Proxy Statement on Schedule 14A that will be filed with the SEC.
Our Strategy
We are an organization that innovates, and empowers clinicians to transform patient care. Our values:
3

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Our strategy to deliver value to our customers and stockholders is through:
We are positioned to succeed through our:
•World-class execution-oriented leadership team;
•Targeted growth strategy in our core markets;
•Refocused innovation to accelerate growth, and
•Market-leading growth in EPS and Free Cash Flow.
We have refocused Innovation to Accelerate Growth through 3 Waves:
4

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Our Technologies
Conventional Pulse Oximetry
Pulse oximetry enables the noninvasive measurement of the oxygen saturation level of arterial blood (SpO 2), which delivers oxygen to the body’s organs and tissues. Pulse oximetry also measures pulse rate (PR), which, when measured by electrocardiogram (ECG), is called heart rate. Pulse oximeters use sensors attached to an extremity, typically the fingertip or certain core body sites. These sensors contain two light-emitting diodes that transmit red and infrared light from one side of the extremity through the tissue to a photodetector on the other side of the extremity. The photodetector in the sensor measures the amount of red and infrared light absorbed by the tissue. A microprocessor then analyzes the changes in light absorption to provide a continuous, real-time measurement of the amount of oxygen in the patient’s arterial blood. Pulse oximeters typically give audio and visual alerts, or alarms, when the patient’s arterial blood oxygen saturation level or pulse rate falls outside of a user-designated range. As a result, clinicians have the opportunity to assess patients who may need immediate treatment to prevent the serious clinical consequences of hypoxemia, or low arterial blood oxygen saturation levels, and hyperoxemia, or high arterial blood oxygen levels.
As one of the most common technologies used in and out of hospitals around the world, pulse oximetry has gained widespread clinical acceptance as a standard patient vital sign measurement because it can give clinicians a warning of possible hypoxemia or hyperoxemia. SpO 2 monitoring of oxygen saturation is critical because hypoxemia can lead to a lack of oxygen in the body’s tissues, which can be toxic and result in organ damage or death. Pulse oximeters are used in a variety of critical care settings, including surgery, recovery rooms, intensive care units (ICUs), emergency departments and general care floors, as well as alternative care settings, such as long-term care facilities, physician offices and the home monitoring of patients with chronic conditions. Clinicians also use pulse oximeters to monitor oxygen saturation in premature babies to ensure that appropriate oxygen saturation levels are maintained.
Conventional pulse oximetry has limitations that can reduce its effectiveness and the quality of patient care. In particular, when using conventional pulse oximetry, oxygen saturation measurements can be distorted by motion artifact, or patient movement, and low perfusion, or low arterial blood flow at the measurement site. Motion artifact can cause conventional pulse oximeters to inaccurately measure the arterial blood oxygen saturation level, due mainly to the effect of movement-induced pulsations of venous blood, which is at a lower oxygen saturation than arterial blood. Low perfusion can also cause conventional pulse oximeters to report inaccurate measurements or, in some cases, no measurement at all. In addition, conventional pulse oximeters cannot distinguish oxygenated hemoglobin from dyshemoglobin, including the most prevalent forms of dyshemoglobins, carboxyhemoglobin and methemoglobin. As a result, conventional pulse oximeters may report falsely high oxygen levels when these dyshemoglobins are present in the blood. Furthermore, conventional pulse oximetry readings can also be impacted by bright light and electrical interference caused by the presence of electrical surgical equipment.
The Masimo Difference - Masimo SET® Pulse Oximetry
Masimo SET® was designed to overcome the primary limitations of conventional pulse oximetry by maintaining accuracy in the presence of motion artifact, low perfusion and weak signal-to-noise situations. Our Masimo SET® platform, which became available to U.S. hospitals in 1998, is the basis of our pulse oximetry products, and we believe represented the first significant technological advancement in pulse oximetry since its invention in the early 1970s and introduction in the early 1980s. Masimo SET® utilizes five signal processing algorithms, four of which are proprietary, in parallel to deliver high sensitivity and specificity in the measurement of arterial blood oxygen saturation levels. Sensitivity is the ability to detect true alarms and specificity is the ability to avoid false alarms. One of our proprietary processing algorithms, Discrete Saturation Transform®, separates the signal from noise in real time through the use of adaptive filtering and an iterative sampling technique that tests each possible saturation value for validity. Masimo SET® signal processing can therefore identify the venous blood and other “noise”, isolate them and extract the arterial signal.
The performance of Masimo SET® pulse oximetry has been evaluated in more than 100 independent studies and thousands of clinical evaluations. We believe that Masimo SET® is trusted by clinicians to safely monitor in excess of approximately 200 million patients each year and has been chosen as the primary pulse oximeter technology used by all of the top ten hospitals according to the 2024-2025 U.S. News & World Report Best Hospitals Honor Roll. Compared to conventional pulse oximeters, during patient motion and low perfusion, Masimo SET® provides measurements when other pulse oximeters cannot, significantly reduces false alarms (improved specificity), and accurately detects true alarms (improved sensitivity). Despite pulse oximetry’s widespread use since the 1980s, it had not been shown to improve clinical outcomes before the introduction of Masimo SET®,. which has been shown to help clinicians reduce severe retinopathy of prematurity neonates, improve CCHD screening in newborns, and, when used for continuous monitoring with Masimo Patient SafetyNet™ in post-surgical wards, reduce rapid response team activations, ICU transfers, and costs.
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Our pulse oximetry technology is contained on a circuit board which can be placed inside a standalone pulse oximetry monitor, placed inside OEM multiparameter monitors, or included as part of an external “Board-in-Cable” solution that is plugged into a port on an OEM or other device. All of these solutions, as well as most of our patient cables, use our proprietary single-patient-use or reusable sensors. We sell our products to end-users through our direct sales force and through certain distributors, as well as to our OEM partners, for incorporation into their products.
To complement our Masimo SET® platform, we have developed a wide range of proprietary single-patient-use (disposable) sensors, including untethered Radius PPG®, and multi-patient-use (reusable) sensors, cables and other accessories designed specifically to work with Masimo SET® software and hardware. Our single-patient-use sensors offer several advantages over reusable sensors, including improved performance, cleanliness, increased comfort and greater reliability. Although our technology platforms operate solely with our proprietary sensor lines, our sensors have the capability to work with certain competitive pulse oximetry monitors through the use of adapter cables.
Adhesive sensors are single-patient-use items, but the U.S. Food and Drug Administration (FDA) allows third parties to reprocess pulse oximetry sensors. In response to some hospitals’ requests to implement environmentally friendly products, we offer sensor reprocessing as well as sensor recycling programs.
Masimo rainbow SET® Platform and Other Technology Solutions
Since introducing Masimo SET®, we have continued to innovate by introducing noninvasive measurements that go beyond arterial blood oxygen saturation and pulse rate. Our Masimo rainbow SET® platform leverages our Masimo SET® technology and incorporates licensed rainbow® technology to enable real-time monitoring of additional noninvasive measurements. Our rainbow SET® platform includes our rainbow SET® Pulse CO-Oximetry products, which we believe are the first devices cleared by the FDA to noninvasively and continuously monitor additional hemoglobin species that were previously only measurable using intermittent invasive procedures using multiple wavelengths of light.
In addition to SpO 2, pulse rate (PR), perfusion index (Pi), Pleth Variability Index (PVi®), Rainbow® Pleth Variability Index (RPVi™) and respiration rate from the pleth (RRp®), rainbow® Pulse CO-Oximetry has the unique ability to measure and distinguish oxygenated hemoglobins from the dyshemoglobins that are incapable of transporting oxygen, carboxyhemoglobin (SpCO®) and methemoglobin (SpMet®). Besides the ability to measure SpCO® and SpMet®, the Masimo rainbow SET® platform also allows for the noninvasive and continuous monitoring of total hemoglobin concentration (SpHb®) as well as the monitoring of arterial oxygen saturation, in the presence of carboxyhemoglobin and methemoglobin, known as fractional arterial oxygen saturation (SpfO 2™). Additionally, the rainbow SET® platform also allows for the calculation of Oxygen Content (SpOC). SpfO 2™ has received CE Marking, but is not currently available for sale in the U.S.
We believe that Masimo rainbow® Pulse CO-Oximetry products will become widely adopted for the noninvasive monitoring of these measurements in the future. We also believe that the addition of acoustic respiration rate (RRa®), using our rainbow Acoustic Monitoring® technology, will strengthen the clinical demand for noninvasive and continuous monitoring using our rainbow® platform, especially in the growing general floor market.
Products with our MX circuit board contain our Masimo SET® pulse oximetry technology as well as circuitry to support rainbow® measurements. At the time of purchase, or at any time in the future, our customers and our OEMs’ customers have the option of purchasing additional rainbow® software measurements, which allow such customers to incrementally expand their patient monitoring systems with a cost-effective solution. To date, over forty companies have released rainbow SET® equipped products or announced rainbow® integration plans.
Following the introduction of our rainbow SET® platform, we have continued to expand our technology offerings by introducing additional noninvasive measurements (such as Oxygen Reserve Index™ (ORi™), technologies, platforms and other solutions to create new market opportunities in both hospital and non-hospital care settings, including the Masimo Hospital Automation® Platform, along with other connectivity platforms and telehealth solutions, which are described in more detail below.
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The Masimo Hospital Automation® Platform
Patient SafetyNet™(1), our patient surveillance, remote monitoring and clinician notification solution, works in concert with our bedside and ambulatory monitoring devices to facilitate the supplemental monitoring of the oxygen saturation, pulse rate, perfusion index, hemoglobin, methemoglobin and respiration rate of up to 200 patients simultaneously from a single server. Patient SafetyNet™ offers an intuitive and powerful user interface with trending, real-time waveform capability at a central station, as well as remote clinician notification via pager, voice-over-IP phone or smart-phones. Patient SafetyNet™ also features an Adaptive Connectivity Engine™ (ACE™) that enables two-way, HL-7 based connectivity to clinical/hospital information systems. The ACE™ significantly reduces the time and complexity to integrate and validate custom HL-7 implementations, and demonstrates our commitment to innovation that automates patient care with open, scalable and standards-based connectivity architecture.
Patient SafetyNet™ Series 5000, along with Hospital Automation® Connectivity, Iris Gateway®, Kite®, iSirona®, UniView®, UniView®: 60 and MyView® through the Root® patient monitoring and connectivity platform, offers a new level of interoperability designed to enhance clinician workflows and reduce the cost of care in a variety of hospital settings, including operating rooms and the general care floors. Patient SafetyNet™ Series 5000 with Iris® ports enables Root® to assimilate data from all devices connected to the patient, thereby acting as a comprehensive in-room patient monitor and connectivity hub. Alarms and alerts for all devices are seamlessly forwarded to the patient’s clinician and device data can be transferred to the patient’s electronic medical record (EMR). In an operating room setting, the patient-centric user interface of the Patient SafetyNet™ Series 5000 displays near real-time data from all devices with Kite®, providing a single unified dashboard of patient information.
Connectivity Platforms
Despite medical technology advances, the lack of device communication and integration creates risks to patient safety in hospitals around the world. Without device interoperability, critical patient information can go unnoticed, leaving clinicians unaware and patients at risk. Existing approaches for device interoperability require separate hardware, software and/or network infrastructure, which can clutter the patient room, increase complexity, burden IT management and increase costs. To address these challenges, we introduced Iris® connectivity in our Root® patient monitoring and connectivity platform. iSirona® and Iris® connectivity enables multiple standalone third-party devices such as intravenous pumps (IV), ventilators, hospital beds and other patient monitors to connect through Root®, enabling display, notification and documentation to the EMR through Masimo Patient SafetyNet™.
The addition of Iris® connectivity to Root® and Patient SafetyNet™ provides multiple advantages to hospitals, such as allowing standalone device information to be remotely viewed at a Patient SafetyNet™ view station, transmitted through notification systems to clinicians regardless of location or sent to electronic health record systems. This may enhance patient assessment, clinical workflows and decision support. In addition, bringing data from disparate devices together facilitates more integrated patient care and provides a flexible and cost-effective platform, while avoiding installation of separate costly systems and potentially reducing costs by leveraging existing network infrastructure.
(1) The use of the trademark Patient SafetyNet™ is under license from the University HealthSystem Consortium.
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Our Products and Markets
Noninvasive Monitoring Solutions:

OEM Solutions, Circuit Boards and Modules
Our Masimo circuit boards perform all signal processing and other pulse oximetry functions incorporating the Masimo SET®, Masimo rainbow® Pulse CO-Oximetry or rainbow Acoustic Monitoring® technology with specific functionality or measurements. Our MX-7™ OEM circuit board is our latest and most advanced rainbow SET® board, offering more efficient power utilization, and designed for integration into the more than 200 multi-parameter monitors available from our more than 90 OEM partners. The MX-7™ has the ability to support all 13 of Masimo’s SET® pulse oximetry and rainbow® Pulse CO-Oximetry measurements.
Our MSX-2040 board uses about a third of the power and is only half the physical size of previously available Signal Extraction Technology® pulse oximetry solutions, while providing the same proven Measure-through Motion and Low Perfusion capabilities. The MSX-2040 board is also available as an external “board-in-cable” solution embedded within a completely self-contained patient cable (uSpO2®), providing Masimo SET® pulse oximetry measurements and Pleth Variability Index (PVi®) externally for existing devices not presently compatible with integrated pulse oximetry solutions.

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Bedside Monitors and Handheld Devices
We offer a variety of continuous bedside monitoring and handheld devices suitable for all patient populations. Fueled by clinically proven Masimo SET® pulse oximetry and advanced rainbow® Pulse CO-Oximetry and additional noninvasive monitoring technologies, these highly versatile and configurable monitors are designed to accommodate patient scenarios across the continuum of care, from high-acuity ICUs and surgical suites, to low-acuity general floors and recovery units, to long-term care facilities and beyond.
The Masimo Rad-97® device offers advanced patient monitoring technologies in a compact, portable, and highly configurable standalone device. Powered by Masimo SET® Measure-through Motion and Low Perfusion™ pulse oximetry with upgradeable rainbow SET® technology, the Rad-97® is customizable to suit various clinical needs, delivering pertinent patient data at a glance. It is also available with integrated noninvasive blood pressure or capnography
The Rad-G® (image above left), is a rugged, handheld spot-check pulse oximeter that is used to quickly assess patients and make more informed care decisions on the go. The Rad-G® is a robust device, that is strong, light and slim for easy transport, making if very portable. Powered by reliable, accurate Masimo SET® Measure-through Motion and Low Perfusion™ spot-check pulse oximetry, the Rad-G® is compatible with single-patient and reusable sensors.
The Rad-67®’s (image above right), ability to provide portable spot-check monitoring measurements of both oxygen saturation and noninvasive hemoglobin makes it a single-device solution in multiple clinical and non-clinical settings, such as emergency rooms, pre-/post-surgery settings, and physicians’ offices. When used with the rainbow® DCI®-mini sensor, the Rad-67® provides spot-check monitoring with Next Generation SpHb technology. This technology significantly advances the forefront of noninvasive portable hemoglobin spot-check monitoring.

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Patient Monitoring and Connectivity Platform
Radius VSM® is a wearable vital signs monitoring platform that includes three single-use sensors: a chest patch, a blood pressure cuff, and a finger sensor. As an on-demand, connected, continuous vital signs monitoring platform, Radius VSM® is designed to streamline workflows, reduce nurse burn-out and increase throughput. Radius VSM® is intended for a range of care areas including: the waiting room, emergency room departments, critical care and ambulatory surgery centers. Radius VSM® monitors a wide range of measurements on a modular form; components can be customized based on each patient’s monitoring needs and provides waveform and parameter trend data on its built-in multi touch LED display, allowing clinicians to stay informed about patient status while moving about with the patient

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Patient Monitoring and Connectivity Platform (Continued)
Our patient monitoring and connectivity platforms are expandable, customizable patient monitoring and connectivity hubs that integrate an array of technologies, devices and systems to provide multimodal monitoring and connectivity solutions in a single, clinician-centric platform. With plug-and-play expansion capabilities, clinicians can centralize patient monitoring by bringing together advanced rainbow SET® Pulse CO-Oximetry, brain function monitoring, regional oximetry and capnography measurements on an easy-to-interpret, customizable display, empowering them with more information for making patient assessments. Further, acting as a central connectivity hub, with automated electronic charting of Masimo and third-party device data to patient data management systems (PDMS), the hub can help with manual data documentation.
Root® with Radius VSM™, Root® with NIBP and Root® with Next Generation SedLine® (image shown above), integrates noninvasive blood pressure (NIBP) and temperature and connects third-party devices such as IV pumps, ventilators, beds and other patient monitors to automate data transfer to the EMR.

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Sensors and Cannulas
Our innovative noninvasive monitoring devices depend on reliable, high-quality sensors, cannulas, and accessories to capture the accurate, high-fidelity patient data trusted by clinicians all over the world. We offer a wide variety of these components, all manufactured to the highest standards, many in both single-patient-use and reusable configurations, to meet a broad spectrum of monitoring needs across all patient populations and care scenarios.
We offer a complete portfolio of capnography and gas monitoring solutions, both sidestream and mainstream, to meet the challenges of ventilation and gas monitoring across care areas, from pre-hospital and in-hospital to transport, long-term care, home care and more. Solutions range from external “plug in and measure” gas analyzers, to bedside and handheld devices, to flexible, integrated OEM offerings.

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Masimo SET® Technology
Masimo sensors offer a unique array of breakthrough parameters, such as:
At Masimo, our innovative technologies also go beyond basic pulse oximetry to include a unique array of advanced parameters (noted in red circles) obtained through rainbow® multi-wavelength (4+ LEDs) sensors. By utilizing these parameters, clinicians can gain visibility to patients’ fluid responsiveness status, respiration rate, oxygenation in the moderate hyperoxic range, hemoglobin concentration, and dyshemoglobin levels.
Hospital Automation® and Connectivity Suite (e.g., Iris® Connectivity, Iris Gateway®, iSirona™, Patient SafetyNet™, UniView®, UniView: 60™, Replica®, Iris® Analytics, and Halo ION® (shown below))
As increasing amounts of patient information become available to clinicians, new opportunities to enhance the care experience for both the clinician and the patient abound. Our automation solutions are revolutionizing not only the kind of patient data that can be collected and moved through the continuum of care, but also how that information can empower clinicians to deliver superior, evidence-based care. Our hospital automation integrates patient monitoring, driven by clinically proven SET® pulse oximetry and rainbow® Pulse CO-Oximetry, with sophisticated connectivity and interoperability solutions to seamlessly provide access to the most accurate, relevant patient data in the most helpful ways at the most important moments, improving workflow efficiencies and helping clinicians deliver the best care possible.
Software and hardware enables third-party devices to connect through Patient SafetyNet™ and to document data in the EMR.

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Hospital Automation® and Connectivity Suite - (Continued)
Medical Device Integration
iSirona™ is a versatile, easy-to-use connectivity hub designed for use with the Masimo Hospital Automation™ platform, which facilitates the physical integration of up to six medical devices at the patient bedside and enables the patient data collected from all devices to be automatically pushed to the patient electronic medical record (EMR). A fan-less design makes iSirona™ an ideal solution for connecting multiple patient monitors, anesthesia machines, pumps, and other medical device in space-restricted operating rooms and ICUs. iSirona™ is compatible with both wireless and patient-worn devices.

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Medical Device Integration - (Continued)
Iris Gateway bridges the gap between device data generated at the patient bedside and documentation in patient data management systems such as EMRs by automating data transfers from medical devices into EMRs, which can improve productivity and reduce the likelihood of transcription errors. Existing approaches for device connectivity can clutter the patient room, burden IT management, and increase the complexity and cost of care.
Minimally Invasive and Noninvasive Advanced Hemodynamic Monitoring Solutions
The Masimo LidCO® Hemodynamic monitoring system provides beat-to-beat advanced monitoring to support informed decision-making in high-acuity care areas like an operating room. This platform uses an already existing arterial line and blood pressure transducer to monitor hemodynamic parameters through the use of the PulseCO® algorithm, which converts beat-to-beat blood pressure into its constituent parts, flow and resistance, which is scalable to each patient’s age, height and weight.

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Remote Patient Monitoring Solutions to Extend Care from the Hospital to the Home
Designed to help providers remotely manage patient care, Masimo SafetyNet® is a secure, scalable, cloud-based patient management platform featuring clinical-grade spot-checking and continuous measurements, digital care pathways and remote patient surveillance. Patients receive a multi-day supply of disposable sensors or reusable devices, along with access to the Masimo SafetyNet® mobile application.

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. Joe Kiani, our former Chairman and Chief Executive Officer, is the Chairman and Chief Executive Officer of Willow. We are a party to a cross-licensing agreement with Willow (the Cross-Licensing Agreement), which purports to govern each party’s rights to certain intellectual property currently held by the two companies.
The following table outlines the rights relating to specific end-user markets and the related technology applications of specific measurements that the Cross-Licensing Agreement purports to grant to each party.

|  | End-User Markets
Measurements |  | Professional Caregiver and Alternate Care Market |  | Patient and Pharmacist
Vital Signs(1) |  | Masimo (owns) |  | Willow (non-exclusive license)
Non-Vital Signs(2) |  | Masimo (exclusive license) |  | Willow (owns or exclusive license)

______________
(1)Vital signs measurements include, but are not limited to, SpO 2, peripheral venous oxygen saturation, mixed venous oxygen saturation, fetal oximetry, sudden infant death syndrome, ECG, blood pressure (noninvasive blood pressure, invasive blood pressure and continuous noninvasive blood pressure), temperature, respiration rate, CO 2, pulse rate, cardiac output, EEG, perfusion index, depth of anesthesia, cerebral oximetry, tissue oximetry and/or EMG, and associated features derived from these measurements, such as 3D alarm®, PVi® and other features.
(2)Non-vital signs measurements include the body fluid constituents other than vital signs measurements and include, but are not limited to, carbon monoxide, methemoglobin, blood glucose, hemoglobin and bilirubin.
See Note 3, “Related Party Transactions”, to our accompanying consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for additional information on our related party transactions with Willow.
Government Regulation
As a global technology company, we are subject to significant government regulation, compliance requirements, fees and costs, both in the U.S. and abroad. These regulatory requirements subject our products and our business to numerous risks that are specifically discussed within “Risks Related to Our Regulatory Environment” under Part I, Item 1A—“Risk Factors” within this Annual Report on Form 10-K.
Due to the breadth of some of these laws, it is possible that some of our current or future practices might be challenged. In addition, we may be required to alter one or more of our practices to remain in compliance with these laws. Evolving interpretations of current laws or the adoption of new laws or regulations could adversely affect many of the arrangements we have with customers and physicians. Some of these laws are broad and open to varying interpretation, increasing our compliance risk. A summary of certain critical aspects of our regulatory environment is included below.
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Product Clearance and Approval Requirements for Medical Devices
Many of our healthcare products are regulated by numerous government agencies, the most significant of which are the U.S. FDA, the national authorities in the European Union (EU) and the United Kingdom (UK), and the Ministry of Health, Labour and Welfare of Japan. In addition, there are government agencies for other countries that regulate our healthcare products for their countries. These requirements vary substantially from country to country. These agencies require us to comply with laws that regulate our quality system, design, development, clinical testing, verification and validation testing, manufacture, packaging, labeling, storage, distribution, import, export, promotion, and adverse event reporting of many of our products.
In the U.S., unless an exemption applies, each medical device that we wish to market in the U.S. must, generally, first receive from the FDA either 510(k) clearance, premarket approval (PMA), or a de novo classification grant. The appropriate process depends on the risk classification of the medical device. There are three classifications, from Class I (low risk) to Class III (high risk). For certain Class I and Class II medical devices, the FDA’s 510(k) clearance process can be used. It requires us to show that our new medical device is substantially equivalent to a legally marketed “predicate” medical device and can take from four to nine months but may take longer. Class III medical devices require a PMA. The PMA process requires us to demonstrate through valid scientific evidence that there is reasonable assurance of safety and effectiveness of the device for its intended use. The PMA process is much more costly, lengthy and uncertain than the process of obtaining 510(k) clearance. Devices that have not been classified and cannot demonstrate substantial equivalence through the 510(k) process are automatically classified as Class III medical devices by statute, but for such devices that are low or moderate risk, the de novo classification process can be used. The de novo classification process authorizes the marketing of the device and also creates a new classification for the device type into Class I or Class II. The de novo process requires us to demonstrate the benefits and risks of the device to show that either general controls (for Class I) or general controls and special controls (for Class II) are sufficient to provide reasonable assurance of the safety and effectiveness of the device. 510(k), PMA and de novo submissions are subject to user fees. The majority of our current regulated medical products fit into Class II device types, requiring 510(k) clearance, while some have been deemed Class I devices or exempt from a 510(k) clearance.
Most of our OEM partners are required to obtain clearance or approval of their devices that incorporate Masimo’s healthcare technologies, like Masimo SET® technology, Masimo rainbow SET® technology, Masimo Board-in-Cable technology, or that are used with Masimo’s sensors. We generally allow our OEM partners to cross-reference the 510(k) submission files from our cleared Masimo SET® circuit boards, sensors, cables and notification systems.
In the EU, medical devices are subject to Regulation (EU) No 2017/745 (EU MDR). Under the EU MDR, a medical device may only be placed on the market within the EU if it conforms to “General Safety and Performance Requirements,” has been assessed pursuant to an appropriate conformity assessment procedure and bears a CE Mark. Key General Safety and Performance Requirements entail the medical device’s achievement of its intended medical purpose for its intended population and supports its safe and effective use and that the clinical benefit outweighs the clinical risks. Each medical device that we wish to market in the EU must conform to these requirements. EU MDR provides risk categories for medical devices that range from Class I to Class III. A notified body must be involved in the review of the compliance of higher risk medical devices with the EU MDR and must also assess quality management systems. Individual countries within the EU also have their own notification or registration processes in order to import and distribute medical devices into and within their countries.
The UK exited the EU on December 31, 2020 (Brexit). The UK continues to follow the prior EU medical device laws (as set out in Directive 93/42/EEC) but has amended its national medical device regulations to include a requirement that medical devices must be registered with the UK Medicines and Healthcare products Regulatory Agency (MHRA) before they are placed on the market in Great Britain (England, Scotland and Wales). Currently, the UK will accept a CE Marked medical device to be registered and placed on the Great Britain market; however, in the future, medical devices marketed in Great Britain will likely need to complete a UK-specific conformity assessment procedure, the details of which are currently subject to consultation, and bear a UKCA Mark. The UKCA Mark is not recognized outside of the UK.
Continuing FDA Regulation for Medical Devices
Clinical trials involving medical devices in the U.S. are subject to FDA regulation. Among other requirements, clinical trial sponsors must comply with requirements related to informed consent, Institutional Review Board (IRB) approval, monitoring, reporting, record-keeping, labeling and promotion. If the study involves a significant risk device, the sponsor must obtain FDA approval of an investigational device exemption application in addition to IRB approval prior to beginning the study. Information regarding certain device clinical trials must also be submitted to a public database maintained by the National Institutes of Health.
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After a device is approved and placed on the market, numerous regulatory requirements continue to apply. These regulatory requirements in the U.S. include, but are not limited to, the following: device listing and establishment registration; adherence to the Quality System Regulation (QSR) which requires stringent testing, control, documentation and other quality assurance procedures for the design, manufacture, storage and handling of devices; labeling requirements and FDA prohibitions against the promotion of off-label uses or indications; adverse event and device malfunction reporting; post-approval restrictions or conditions, including post-approval clinical trials or other required testing for certain devices; post-market surveillance requirements for certain devices; the FDA’s recall authority, whereby it can require the recall of products from the market; and requirements relating to voluntary corrections or removals. Device manufacturers are subject to announced and unannounced inspections by the FDA to evaluate compliance with these requirements.
Failure to comply with applicable regulatory requirements, which are subject to new legislation and change, can result in enforcement action by the FDA, or other federal and state government agencies, which may include, but may not be limited to, any of the following sanctions or consequences: warning letters or untitled letters; fines, injunctions and civil penalties; recall, seizure or import holds of our products; operating restrictions, suspension or shutdown of production; refusing to issue certificates to foreign governments needed to export products for sale in other countries; refusing our request for 510(k) clearance or premarket approval of new or modified products; withdrawing premarket approvals that are already granted; and criminal prosecution.
Advertising and Promotion of Medical Devices
Advertising and promotion of medical devices in the U.S., in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission (FTC) and by federal and state regulatory and enforcement authorities, including the Department of Justice, the Office of Inspector General of the Department of Health and Human Services (OIG), and various state attorneys general. Although physicians are permitted to use their medical judgment to use medical devices for indications other than those cleared or approved by the FDA, we may not promote our products for such “off-label” uses and can only market our products for cleared or approved uses. Other companies’ promotional activities for their FDA-regulated products have been the subject of DOJ and FTC enforcement actions brought under healthcare reimbursement laws and consumer protection statutes, respectively. DOJ and FTC enforcement actions often result in consent decrees that constrain future actions. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. Government agencies in the EU, UK, Japan and other countries and jurisdictions have similar regulations on the advertising and promotion of medical devices.
Import and Export Requirements Applicable to Medical Devices
To import a device into the U.S., the importer must file an entry notice and bond with the United States Bureau of Customs and Border Protection (CBP). All devices are subject to FDA examination before release from CBP. Any article that appears to be in violation of the Federal Food, Drug and Cosmetics Act (FDCA) may be refused admission and a notice of detention and hearing may be issued. If the FDA ultimately refuses admission, the CBP may issue a notice for redelivery and, if a company fails to redeliver the goods or otherwise satisfy CBP and the FDA with respect to their disposition, may assess liquidated damages for up to three times the value of the lot. The CBP also imposes its own regulatory requirements on the import of our products, including inspection and possible sanctions for noncompliance.
Medical device products exported from the U.S. are subject to forei gn countries’ import requirements and the exporting requirements of the FDA. In particular, international sales of medical devices manufactured in the U.S. that are not approved or cleared by the FDA for use in the U.S., or that are banned or deviate from lawful performance standards, are subject to FDA export requirements.
Foreign countries often require, among other things, a Certificate of Foreign Government (CFG) for export. To obtain a CFG, the device manufacturer must apply to the FDA. The FDA certifies that the product has been granted clearance or approval in the United States and that the manufacturing facilities were in compliance with the FDA’s QSR regulations at the time of the last FDA inspecti on.
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Anti-Kickback Regulations
In the U.S., there are federal and state anti-kickback laws that generally prohibit the payment or receipt of kickbacks, bribes or other remuneration in exchange for the referral of patients or other health-related business. The Federal Anti-Kickback Statute (AKS) prohibits anyone from, among other things, knowingly and willfully offering, paying, soliciting or receiving any bribe, kickback or other remuneration intended to induce the referral of patients for, or the purchase, order or recommendation of, health care products and services reimbursed by a federal health care program, including Medicare and Medicaid. Recognizing that the federal anti-kickback law is broad and potentially applicable to many commonplace arrangements, Congress and the OIG have created statutory “exceptions” and regulatory “safe harbors”. Exceptions and safe harbors exist for a number of arrangements relevant to our healthcare business, including, among other things, payments to bona fide employees, certain discount and rebate arrangements, and certain payment arrangements involving Group Purchasing Organizations (GPOs).
Although an arrangement that fits into one or more of these exceptions or safe harbors is immune from prosecution, arrangements that do not fit squarely within an exception or safe harbor do not necessarily violate the law, but the OIG or other government enforcement authorities may examine the practice to determine whether it involves the sorts of abuses that the statute was designed to combat. Violations of the AKS can result in significant penalties, including imprisonment, monetary fines and assessments, and exclusion from Medicare, Medicaid and other federal health care programs. Exclusion of a manufacturer, like us, would preclude any federal health care program from paying for its products.
In addition to the AKS, many states have their own laws that are analogous to the AKS, but may apply regardless of whether any federal or state health care program business is involved. Federal and state anti-kickback laws may affect our sales, marketing and promotional activities, educational programs, pricing and discount practices and policies, and relationships with health care providers by limiting the kinds of arrangements we may have with hospitals, alternate care market providers, GPOs, physicians, payers and others in a position to purchase or recommend our healthcare products.
False Claims Laws and Fraud Statutes
Federal and state false claims laws prohibit anyone from presenting, or causing to be presented, claims for payment to third-party payers that are false or fraudulent. The Federal Civil False Claims Act (FCA) imposes liability on any person or entity who, among other things, knowingly and willfully presents, or causes to be presented, a false or fraudulent claim for payment by a federal health care program, including Medicaid and Medicare. Some suits filed under the FCA, known as “qui tam” actions, are brought by a “whistleblower” or “relator” on behalf of the government and such individuals may share in any amounts paid by the entity to the government in fines or settlement. Manufacturers, like us, can be held liable under the FCA, even if they do not submit claims to the government, where they are found to have caused submission of false claims by, among other things, providing incorrect coding or billing advice about their products to customers that file claims, or by engaging in kickback arrangements or off-label promotion with customers that file claims. A number of states also have false claims laws, and some of these laws may apply to claims for items or services reimbursed under Medicaid and/or commercial insurance. Sanctions under these federal and state fraud and abuse laws may include civil monetary penalties and criminal fines, exclusion from government health care programs and imprisonment.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) created new federal crimes, including health care fraud and false statements related to health care matters. The health care fraud statute prohibits, among other things, knowingly and willfully executing a scheme to defraud any health care benefit program, including those offered by private payers. The false statements statute prohibits, among other things, knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services. A violation of either statute is a felony and may result in fines, imprisonment and other significant penalties.
Transparency Regulations
The Physician Payment Sunshine Act (Sunshine Act), which was enacted by Congress as part of the Patient Protection and Affordable Care Act (ACA), requires medical device companies to track and publicly report, with limited exceptions, all payments and transfers of value to physicians, advance practice nurses, physician assistants, and teaching hospitals in the U.S. Companies are required to track payments made and to report such payments to the government by March 31 of each year. Several states have similar requirements. In addition to the burden of establishing processes for compliance, if we fail to provide these reports, or if the reports we provide are not accurate, we could be subject to significant penalties.
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Anti-Corruption Laws
Our international operations are subject to the U.S. Foreign Corrupt Practices Act of 1977 (FCPA), the U.K. Bribery Act 2010 and other global anti-corruption laws. The FCPA and similar worldwide anti-bribery laws generally prohibit companies from directly or indirectly promising, offering, or giving anything of value to a non-U.S. official corruptly to influence the official for the purpose of gaining an improper advantage to assist in obtaining or retaining business. We interact with foreign officials because our business is regulated in every country where we operate, and in many countries outside of the U.S., we sell our products to government entities or to health care providers employed by the government who may be considered foreign officials. Failing to comply with the FCPA or any other applicable anti-corruption law could result in fines, penalties or other adverse consequences.
Third-Party Reimbursement for Medical Devices
Health care providers in the U.S., including hospitals, that purchase our products generally rely on third-party payers, including the Medicare and Medicaid programs and private payers, including indemnity insurers and managed care plans, to cover and reimburse all or part of the cost of our products and the procedures in which they are used. As a result, demand for our products is dependent in part on the coverage and reimbursement policies of these payers. No uniform coverage or reimbursement policy for medical technology exists among all third-party payers, and coverage and reimbursement can differ significantly from payer to payer.
Because a large percentage of our products are used by Medicare beneficiaries, Medicare’s coverage and reimbursement policies are particularly significant to our business. Generally, Medicare will cover a medical product or procedure when the product or procedure is included within a statutory benefit category and is reasonable and necessary for the diagnosis or treatment of an illness or injury, or to improve the functioning of a malformed body part. Even if the medical product or procedure is considered medically necessary and coverage is available, Medicare may place restrictions on the circumstances where it provides coverage. Because payments through the prospective payment system in both the hospital inpatient and outpatient settings are based on predetermined rates and may be less than a hospital’s actual costs in furnishing care, hospitals have incentives to lower their operating costs by utilizing products that will reduce the length of inpatient stays, decrease labor costs or otherwise lower their costs. If hospitals cannot obtain adequate coverage and reimbursement for our products, or the procedures in which they are used, we cannot be certain that they will purchase our products, despite the clinical benefits and opportunity for cost savings that we believe can be derived from their use.
Our success with rainbow SET® technologies in the U.S. market in settings of care with reimbursable monitoring procedures, such as hospital emergency departments, hospital clinical labs and physician offices, may largely depend on the ability of providers to receive reimbursement for such procedures. While private insurance payers often follow Medicare coverage and payment rates, we cannot be certain of this and, in many cases, cannot control the coverage or payment rates that private insurance payers put in place.
Our success in non-U.S. markets depends largely upon the availability of coverage and reimbursement from the third-party payers through which health care providers are paid in those markets. Health care payment systems in non-U.S. markets vary significantly by country, and include single-payer government managed systems, as well as systems in which private payers and government managed systems exist side-by-side. Our ability to achieve market acceptance or significant sales volume in international markets we enter will be dependent in large part on the availability of reimbursement for procedures performed using our products under health care payment systems in such markets.
Other U.S. and Foreign Regulation
We must comply with numerous federal, state and local laws, as well as laws in other jurisdictions, relating to matters such as safe working conditions, manufacturing practices, environmental protection, fire hazard control and hazardous substance disposal. We may be required to incur significant costs to comply with these laws and regulations in the future. Unanticipated changes in existing regulatory requirements, adoption of new requirements and increased compliance costs could hurt our business, financial condition and results of operations.
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Data Privacy and Protection of Health and Other Personal Information
Both at the federal and state levels, the U.S. has increased legislative activity in connection with data privacy and data security. In addition to the California Privacy Rights Act (CPRA) which went into effect on January 1, 2023, a number of other states have passed comprehensive consumer privacy laws or have introduced related bills. On the federal level, an omnibus privacy bill (the American Data Privacy and Protection Act) was proposed and is currently under congressional review. If enacted, the law will dramatically increase oversight of how companies collect, use, and store the personal data. Federal agencies such as the FTC and the Securities and Exchange Commission (SEC) have increased their scrutiny and enforcement of how companies disclose their use of personal data to consumers, secure personal data, and report unauthorized disclosures of personal data. In particular, the FTC has issued statements that indicate increase in enforcement action against deceptive marketing practices that use cookies, pixels and other tracking tags to monitor consumer behavior. Moreover, there has been a similar increase in privacy-related class action litigation in connection with the use of consumers’ personal data.
Internationally, in addition to the General Data Protection Regulation (GDPR) in Europe, other jurisdictions have adopted their own data privacy and protection laws. China, Canada, the Kingdom of Saudi Arabia, the UAE, Australia, Argentina and India have all passed new privacy and data protection laws. We have implemented, and continue to implement, procedures and processes to comply with these various laws and regulations. As international data privacy and protection laws continue to evolve, and as new regulations, interpretive guidance and enforcement information become available, we may incur incremental costs to modify our business practices to comply with these requirements. In addition, our internal control policies and procedures may not always protect us from reckless or criminal acts committed by third-parties, nation states, our employees or agents.
Recently, we have seen a global rise in scrutiny and legislative activity in connection with data breaches of health information in medical devices. Data security related to medical devices has been a priority for us and will continue to be so as we strive to safeguard the health information of our device users and of our customers’ patients. We may be required to make costly system and device modifications to comply with privacy and security requirements. Our failure to comply may result in liability and adversely affect our business.
Additionally, in the U.S., HIPAA applies to covered entities and extends to their business associates. Covered entities include many healthcare facilities that purchase and use our products. The HIPAA Privacy Rule restricts the use and disclosure of protected health information (PHI) and requires covered entities and their business associates to safeguard that information. The HIPAA Security Rule establishes detailed technical, administrative and physical requirements for safeguarding PHI transmitted or stored electronically. Although we are not a covered entity, we are sometimes deemed by our U.S. customers to be a business associate due to activities that we perform for or on behalf of covered entity customers. As business associates, we may be subject to many of the requirements of HIPAA and could be directly subject to HIPAA civil and criminal enforcement and the associated penalties for violation of the Privacy, Security and Breach Notification Rules. Moreover, even when we are not a business associate, healthcare facilities impose contractual limitations on the use and disclosure of their patients’ health information, and otherwise require additional safeguards to protect that information. These laws, as well as any new developing laws around health data, could create liability for us and increase our cost of doing business as well as increase costs associated with complying with these various laws both in the U.S. and globally.
Environmental Regulations
We are subject to stringent international, federal, state and local laws relating to the protection of the environment, including those governing the use, handling and disposal of hazardous materials and wastes. Products that we sell in Europe are subject to regulation in EU markets under the Restriction of Hazardous Substances Directive (RoHS). RoHS prohibits companies from selling products that contain certain hazardous materials in EU member states. Other regulations which affect the product content, manufacturing, packaging and disposal of our products include, for example, the Registration, Evaluation, Authorization and Restriction of Chemical substances, the Waste Electrical and Electronic Equipment Directive, and the Directive on Packaging and Packaging Waste enacted in the EU which require the registration of and regulate the use of certain hazardous substances and chemicals in certain products we manufacture, and require the collection, reuse and recycling of waste product and packaging from certain products we manufacture. Similar legislation that has been or is in the process of being enacted in Japan, China, other foreign countries and various states of the U.S. may require us to re-design our products to ensure compliance with the applicable standards, for example by requiring the use of different types of materials or adding country specific product and/or packaging labeling. Any redesigns or alternative materials may detrimentally impact the performance of our products, add greater testing lead-times for product introductions, result in additional costs or have other similar negative effects.
Future environmental laws may require us to alter our manufacturing processes, thereby increasing our manufacturing costs. We believe that our products and manufacturing processes at our facilities comply in all material respects with applicable environmental laws and worker health and safety laws; however, the risk of environmental liabilities cannot be completely eliminated.
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Markets
Competitive Conditions
We compete in many healthcare electronic markets across the globe. These markets are highly competitive and are characterized by continual change and improvements in technology. Many of our competitors have substantially greater financial resources, broader product portfolios and more aggressive advertising and marketing strategies and may be able to adapt to market preferences or consumer demands more rapidly than us. Competitors may develop superior products or products of similar quality for sale at the same or lower prices. Moreover, our products could be rendered obsolete by changes to industry standards or guidelines or advances in technology.
Our primary competitor in the healthcare market is Medtronic plc, who currently holds a substantial share of the pulse oximetry market. In addition, large technology companies that have not historically operated in the healthcare or medical device space, such as Alphabet Inc. (Alphabet), Amazon, Apple Inc. (Apple), Samsung Electronics Co., Ltd. (Samsung) and others, have developed or may develop products and technologies that may compete with our current or future products and technologies in the professional healthcare marketplaces.
We believe that the principal competitive factors in the markets in which we operate include:
•brand recognition, perception of innovation abilities, and reputation;
•product technology and innovation;
•product quality and safety;
•quality, cost-effectiveness and price;
•breadth of product lines, network of technology and content partners;
•access to hospitals which are members of GPO and OEM partners; and
•patent protection.
Market Demand
We currently sell our products directly to hospitals and various distributors in the U.S. and around the world, including Europe, the Middle East and Asia Pacific, through our direct sales force.
Our sales and marketing strategy for pulse oximetry has been, and will continue to be, focused on building end-user awareness of the clinical and cost-saving benefits of our technologies. Our sales representatives’ primary focus is to facilitate the conversion of competitor accounts to our Masimo SET® pulse oximetry and rainbow SET® Pulse CO-Oximetry products, to expand the use of Masimo SET® and Patient SafetyNet™ on the general hospital floor and to create and expand the use of rainbow® measurements in both critical care and non-critical care areas. In addition to sales representatives, we employ clinical specialists to work with our sales representatives to educate end-users on the benefits of Masimo SET® and assist with the introduction and implementation of our technology and products to their sites.
For the year ended January 3, 2026, one just-in-time distributor represented approximately 18.8% of our total revenue. This was the only customer that represented 10% or more of our revenue for the year ended January 3, 2026. Importantly, this distributor takes and fulfills orders from our direct customers, many of which have signed long-term sensor purchase agreements with us. If a specific just-in-time distributor is unable to fulfill these orders, the orders would be redirected to other distributors or fulfilled directly by us.
Additionally, we sell certain of our products through our OEM partners who incorporate our technologies into their monitors and sometimes resell our sensors to their installed base. Our OEM agreements allow us to expand the availability of our technologies through the sales and distribution channels of each OEM partner. To facilitate clinician awareness of Masimo technologies, our OEM partners have generally agreed to place the applicable Masimo trademark prominently on their instruments.
In order to facilitate our U.S. direct sales to hospitals, we have signed contracts with what we believe to be the five largest national GPOs in the U.S., based on the total volume of negotiated purchases. In return for the GPOs putting our products on contract, we have agreed to pay the GPOs a percentage of our revenue from their member hospitals. In 2025 and 2024, revenues from the sale of our pulse oximetry products to hospitals that are associated with GPOs amounted to $872.8 million and $794.0 million, respectively.
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Seasonality
Our quarterly revenues are influenced by many factors, including new product releases, acquisitions, regulatory approvals, holiday schedules, hospital census, the timing of influenza season, competitive pricing, adaption of new technologies, among other factors.
Our revenues in the third quarter of our fiscal years have generally historically represented a lower percentage of segment revenues due to the seasonality of the U.S., European and Japanese markets, where summer vacation schedules normally result in fewer medical procedures utilizing our products.
Resources
Intellectual Property
We believe that in order to maintain a competitive advantage in the marketplace, we must develop and maintain protection of the proprietary aspects of our technology. The ownership of intellectual property rights is an important factor in our business. We rely on a combination of patents, trademarks, trade secrets, copyrights, know-how, continuing technological innovations, licensing opportunities, internet domain names and other intellectual property rights and measures to protect our intellectual property in the U.S. and a number of foreign countries.
We have developed a diverse intellectual property portfolio internally, and through acquisitions and licensing, that covers many aspects of our product offerings. In aggregate, our intellectual property is of material importance to our business; however, we believe that no single intellectual property asset or license is material on its own to the healthcare segment of our business or to our business as a whole.
The Cross-Licensing Agreement purports to allocate between us and Willow proprietary ownership of technology developed based on the functionality of the technology. Under the terms of the Cross-Licensing Agreement, we have proprietary ownership, including ownership of all patents, copyrights and trade secrets, of all technology related to the noninvasive monitoring of vital signs measurements. The Cross-Licensing Agreement purports to give Willow proprietary ownership of all technology related to the noninvasive monitoring of non-vital signs measurements.
We have been issued hundreds of patents and trademarks and currently have hundreds of pending patent and trademark applications in the U.S. and abroad and continue to file for additional patent and trademark protection where appropriate and cost effective. We intend to hold these patents and trademarks as part of our strategy to protect and defend our technology and branding, including to protect and defend our company in patent‑related and trademark-related litigation. We believe that our intellectual property has significant value and is important to our brand‑building efforts and the marketing of our products and services. We cannot predict, however, whether steps taken by us to protect our proprietary rights will be adequate to prevent misappropriation of any of these rights.
Some of our competitors may seek to compete primarily through aggressive pricing and low-cost structures while infringing on our intellectual property. Third parties may also design around our proprietary rights, which may render our protected products less valuable if the design around is favorably received in the marketplace. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity, misappropriation, or other claims. There is no guarantee that we will prevail on our litigation claims against third parties and any such litigation could result in substantial costs and diversion of our resources. Moreover, any settlement of or adverse judgment resulting from such litigation could require us to obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. Any required licenses may not be available to us on acceptable terms, if at all. If we attempt to design around the technology at issue or to find another provider of suitable alternative technology to permit us to continue offering applicable software or product solutions, our continued supply of software or product solutions could be disrupted or our introduction of new or enhanced software or products could be significantly delayed.
We seek to protect our trade secrets and proprietary know-how, in part, with confidentiality agreements with consultants, vendors and employees, although we cannot be certain that the agreements will not be breached or that we will have adequate remedies for any breach.
There are risks related to our intellectual property rights. For further detail on these risks, see “Risks Related to Our Intellectual Property” under Item 1A—“Risk Factors” in this Annual Report on Form 10-K.
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Research and Product Development
We believe that ongoing research and product development (R&D) efforts are essential to our success. Our R&D efforts focus on continuing to enhance our technical expertise toward our existing product portfolios, expanding our technological leadership in each of the markets we serve with new innovations, entering into strategic partnerships with third parties to fund the development of certain new technologies, driving growth in emerging markets and introducing new products necessary to maintain market superiority.
Manufacturing
Our strategy is to manufacture products in-house when it is efficient and cost-effective for us to do so. We manufacture products at facilities located in various countries throughout the world and maintain captive contract maquiladora operations for key components. For information related to our manufacturing facilities, refer to “Item 2. Properties” in this Annual Report on Form 10-K.
We will continue to utilize third-party contract manufacturers for products and subassemblies that can be more efficiently manufactured by these parties, such as our circuit boards, speakers and certain audio components. We monitor our third-party manufacturers and perform inspections and product tests at various steps in the manufacturing cycle to ensure compliance with our specifications. We also do full functional testing of our circuit boards.
For raw materials, we and our contract manufacturers may rely on sole source suppliers for some components. We and our contract manufacturers have taken steps to minimize the impact of a shortage or stoppage of shipments of key components by maintaining a safety stock of component inventory and by redesigning certain products to allow for more universal sub-components. Generally, we have been able to obtain adequate supplies of such raw materials and components. However, we may not be able to quickly establish additional or replacement sources for certain components or materials if we experience a sudden or unexpected reduction or interruption in supply and are unable to develop alternative sources.
We have agreements with certain major suppliers and each agreement provides for varying terms with respect to contract expiration, termination and pricing. Most of these agreements allow for termination upon specified advance notice of various periods to the non-terminating party. Certain of these agreements with our major suppliers allow for pricing adjustments and each agreement provides for annual pricing negotiation.
S ustainability
As a global manufacturer of healthcare products, we understand the materials we use and the products we manufacture can have an impact on the environment, and our commitment to sustainability is integral to our role as a global healthcare technology leader. As we design and manufacture advanced patient monitoring solutions used around the world, we recognize that our environmental practices impact not only our own operations, but also the broader healthcare systems we serve. By prioritizing energy efficiency, waste reduction, and responsible material use, we work to reduce our environmental footprint, manage risk, and meet the evolving expectations of hospitals, partners, and investors.
Our social and community initiatives further reflect our mission to improve patient outcomes and reduce the cost of care. Partnerships with organizations like the World Health Organization and support for humanitarian and nonprofit groups reinforce Masimo’s core purpose—improving patient outcomes globally—and strengthens key stakeholder relationships.
We are committed to operating in an environmentally responsible manner and support the internationally recognized environmental principles set forth in the United Nations Global Compact. We strive to identify new opportunities to improve the sustainability of our business and encourage our employees to join in our efforts. The Nominating, Compliance and Corporate Governance Committee oversees our efforts regarding corporate responsibility and sustainability and implements policies and practices that foster our business sustainability initiatives. In furtherance of these commitments, we reinforce the following sustainability principles:
•Environmental. We undertake initiatives to promote greater environmental responsibility and incorporate energy efficiency measures in all areas of our business. We comply with applicable environmental protection laws in all areas of our business.
•Social. We train and encourage our employees to conduct their activities in an environmentally responsible and sustainable manner.
•Economic. We continuously take steps to minimize material waste and energy inefficiencies in our products and manufacturing processes.
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•Communities. We have a long and proud history of investing in and giving back to the communities in which we live and work, as well as providing aid around the globe. Through the partnerships with organizations like the World Health Organization, we give back by providing grants to humanitarian aid organizations and offering in-kind donations of medical equipment. In addition, our employees also actively support causes by raising awareness and funds for non-profit organizations. Organizations that our employees have supported in recent years include: Rise Against Hunger, Doctors Without Borders, Feeding America and March of Dimes.
Human Capital Resources
Core to our long-term strategy for human capital is attracting, developing and retaining the best talent globally with the right skills to drive our future success. We consider our employees to be a key factor in our future innovation and success. We seek to attract and retain highly talented, experienced and well-educated individuals to support our long-term growth and profitability goals.
We have developed key recruitment and retention strategies that we focus on as part of our overall management of our business. These include:
•Compensation. Our compensation programs are designed to align the compensation of our employees with their performance and to provide the proper incentives to attract and retain employees while motivating them to achieve superior results. The structure of our compensation programs balance incentive earnings for both short-term and long-term performance.
▪Our executive compensation is aligned with stockholder interests by aligning pay-for-performance metrics and is overseen by the Compensation Committee of the Board.
▪We utilize nationally-recognized compensation consultants to evaluate our executive compensation benefit programs and provide benchmarking against our peer groups.
▪We provide employee wages that are consistent with employee positions, experience, skills, knowledge and geography.
▪Base compensation adjustments and incentive compensation are based on market data and awarded based on individual performance and Company performance.
▪We offer a wide variety of benefits, including health insurance, paid time off, retirement plans, and voluntary benefits such as financial and personal wellness benefits, etc.
•Developing Leaders of Tomorrow/Succession Planning. We are committed to identifying and developing the talents of our next generation of leaders. Our executive management team conducts organization and leadership reviews of all bus iness leaders, focusing on our high-performing and high potential talent, diversity, and the succession planning for critical roles. Executive management succession planning is overseen by the Nominating, Compliance and Corporate Governance Committee of the Board.
•Employee Feedback and Retention. To assess and improve employee retention and engagement, we survey employees on an annual basis and take actions to address areas of employee concerns.
•Employee Composition. In fiscal 2025, our full-time employees decreased from approximately 3,600 as of December 28, 2024 to 2,200 as of January 3, 2026, primarily due to the sale of Sound United, which was completed on September 23, 2025. Our dedicated contract personnel worldwide decreased from approximately 5,600 as of December 28, 2024 to approximately 5,300 as of January 3, 2026. Of our full-time employees, approximately 62% were male and 38% were female, and women represented approximately 28% of our management/leadership roles. Minorities represented approximately 54% of our U.S. workforce, and approximately 46% of our management/leadership roles.
Governance
Our Board and board committees provide oversight on certain human capital resource matters. The Compensation Committee acts on behalf of the Board to review, adopt and approve our compensation strategy, policies, plans and programs, including, among others, reviewing and approving corporate performance goals and objectives relevant to the compensation of our executive officers and other senior leadership and management, evaluating and approving the compensation plans and programs advisable for us, and administration of our equity compensation plans, stock repurchase plans and incentive compensation programs. The Nominating, Compliance and Corporate Governance Committee of the Board oversees governance related risks, such as board independence, conflicts of interest, related party transactions, and executive management succession planning.
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Sale of Non-Healthcare Consumer Business
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 sell Viper Holdings Corporation, a Delaware corporation which previously owned and operated the Company’s non-healthcare business (together with its subsidiaries, “Sound United”) to Harman International Industries, Incorporated, a wholly-owned subsidiary of Samsung Electronics., Ltd. On September 23, 2025, the Company completed the sale of Sound United.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge at our website, www.masimo.com, as soon as reasonably practicable after electronically filing such reports with the SEC. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it in any way a part of, this Annual Report on Form 10-K. The SEC also maintains a website that contains our filings with the SEC. The address of the website is www.sec.gov.
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ITEM 1A. RISK FACTORS
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. If any of the following risks come to fruition, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you could lose all or part of your investment.
Summary of Material Risk Factors
Below is a summary of the principal factors that make an investment in our securities speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this summary, and other risks that we face, can be found following this summary and should be carefully considered together with all of the other information appearing in this Annual Report on Form 10-K.
•We may not complete the proposed Merger within the timeframe we anticipate or at all, which could have an adverse effect on our business, financial results and/or operations.
•The Merger is subject to the expiration or termination of applicable waiting periods and the receipt of approvals, consents or clearances from several regulatory authorities that, if not obtained, could prevent completion of the Merger.
•Uncertainties associated with the Merger could adversely affect our business, results of operations, cash flows and financial condition.
•The Merger Agreement contains provisions that could discourage a potential competing acquirer of the Company or could result in a competing acquisition proposal being at a lower price than it might otherwise be.
•We have incurred, and will continue to incur, direct and indirect costs as a result of the Merger.
•Our directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of our other stockholders.
•If the Merger is completed, our stockholders will forgo the opportunity to benefit from potential future appreciation in the value of the Company.
•We currently derive a significant portion of our revenue from our Masimo SET® platform, Masimo rainbow SET® platform and related products. If these technologies and related products do not continue to achieve market acceptance, our business, financial condition and results of operations would be adversely affected.
•Some of our products are in development or have been recently introduced into the market and may not achieve market acceptance, which could limit our growth and adversely affect our business, financial condition and results of operations.
•Our Cross-Licensing Agreement with Willow Laboratories, Inc. (Willow), formerly known as Cercacor Laboratories, Inc., by its terms, purports to limit Masimo’s ability to commercialize new products, new or improved technologies and additional applications for Masimo SET® and our licensed rainbow® technology, which may impair our growth and adversely affect our business, financial condition and results of operations.
•We depend on our domestic and international original equipment manufacturer (OEM) partners for a portion of our revenue. If they do not devote sufficient resources to the promotion of products that use our technologies, our business would be harmed.
•If we fail to maintain or develop relationships with Group Purchasing Organizations, sales of our products would decline.
•Inadequate levels of coverage or reimbursement from governmental or other third-party payers for our products, or for procedures using our products, may cause our revenue to decline or prevent us from realizing revenues from future products.
•The loss of any large customer or distributor, or any cancellation or delay of a significant purchase by a large customer or international tender, or any non-payment, non-performance or disagreement or dispute with any customer or distributor could reduce our net sales and harm our operating results.
•Counterfeit Masimo sensors and third-party reprocessed single-patient-use Masimo sensors may harm our reputation and adversely affect our business, financial condition and results of operations.
•If the patents we own or license, or our other intellectual property rights, do not adequately protect our technologies, we may lose market share to our competitors and be unable to operate our business profitably.
•If third-parties claim that we infringe their intellectual property rights, we may incur liabilities and costs and may have to redesign or discontinue selling certain products.
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•We believe competitors may currently be violating and may in the future violate our intellectual property rights. As a result, we may initiate litigation to protect and enforce our intellectual property rights, which may result in substantial expense and may divert management’s attention from implementing our business strategy.
•Our failure to obtain and maintain FDA clearances or approvals on a timely basis, or at all, would prevent us from commercializing our current, upgraded or new products in the U.S., which could severely harm our business.
•If our products cause or contribute to a death or serious injury, or malfunction in a way that would likely cause or contribute to a death or serious injury, we will be subject to medical device reporting regulations and other applicable laws and may need to initiate voluntary or mandatory corrective actions, such as the recall of our products.
•Promotion of our products using claims that are off-label, unsubstantiated, false or misleading could subject us to substantial penalties.
•The regulatory environment governing information, data security and privacy is increasingly demanding and evolving. Many of the laws and regulations in this area are subject to uncertain interpretation, and our failure to comply could result in claims, penalties or increased costs or otherwise harm our business.
•We may be subject to or otherwise affected by federal and state healthcare laws, including fraud and abuse laws, and could face substantial penalties if we are unable to fully comply with these laws.
•Changes to regulatory, funding, staffing, trade, and other policies and actions by the U.S. government could adversely affect our business operations.
•Under the Cross-Licensing Agreement, by its terms, we would be required to assign to Willow certain products and technologies we develop that relate to the monitoring of non-vital sign parameters.
•In the event that the Cross-Licensing Agreement is terminated for any reason, or Willow grants a license to rainbow® technology to a third-party, our business could be adversely affected.
•If we are unable to obtain key materials and components from sole or limited source suppliers, we will not be able to deliver our products to customers.
•Future strategic transactions, including acquisitions or separations of businesses and strategic investments or joint ventures, could negatively affect our business, financial condition and results of operations if we fail to integrate the acquired businesses and their employees successfully into our existing operations or achieve the desired results of our initiatives.
•Our new products and changes to existing products could fail to attract or retain users or generate revenue and profits.
•Our Credit Facility contains certain covenants and restrictions that may limit our flexibility in operating our business.
•We may need additional capital and failure to raise additional capital on terms favorable to us, or at all, could limit our ability to grow our business and develop or enhance our service offerings to respond to market demand or competitive challenges.
•Concentration of ownership of our stock among our existing directors, executive officers and principal stockholders may prevent new investors from influencing significant corporate decisions.
•We may be unable to accurately forecast our financial and operating results and appropriately plan our expenses in the future, or we may fail to meet our publicly announced guidance about our business and future operating results.
•Our corporate documents, and Delaware law contain provisions that could discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our stock.
•Recent changes to our senior leadership and our Board could create uncertainties and adversely impact our business.
•Exclusive forum provisions in our bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
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Risks Related to the Proposed Merger
We may not complete the proposed Merger within the timeframe we anticipate or at all, which could have an adverse effect on our business, financial results and/or operations.
Completion of the Merger is subject to a number of closing conditions, including the adoption of the Merger Agreement by the holders of a majority of the voting power represented by the outstanding shares of our common stock that are entitled to vote thereon and expiration or termination of any applicable waiting periods (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of certain non-U.S. antitrust and foreign direct investment approvals with respect to the Merger. We can provide no assurance that all required consents and approvals will be obtained or that all closing conditions will otherwise be satisfied (or waived, if applicable), and, even if all required consents and approvals can be obtained and all closing conditions are satisfied (or waived, if applicable), we can provide no assurance as to the terms, conditions and timing of such consents and approvals or the timing of the completion of the Merger. Many of the conditions to completion of the Merger are not within our control, and we cannot predict when or if these conditions will be satisfied (or waived, if applicable). Any adverse consequence of the pending Merger could be exacerbated by any delays in completion of the Merger or termination of the Merger Agreement.
Each party’s obligation to consummate the Merger is also subject to the accuracy of the representations and warranties of the other party (subject to customary materiality qualifications) and compliance in all material respects with the covenants and agreements contained in the Merger Agreement as of the closing of the Merger, including, among others, with respect to us, covenants to use commercially reasonable efforts to conduct our business in the ordinary course of business and to refrain from taking certain types of actions without Danaher’s consent and to not engage in certain kinds of material transactions prior to closing without Danaher’s consent. In addition, the Merger Agreement may be terminated under certain specified circumstances, including, among others, in connection with a change in the recommendation of our Board to enter into an agreement for a Superior Proposal (as defined in the Merger Agreement). As a result, we cannot assure you that the Merger will be completed, even if our stockholders approve the Merger, or that, if completed, it will be exactly on the terms set forth in the Merger Agreement or within the expected timeframe.
If the Merger is not completed within the expected timeframe, or at all, our ongoing business may be materially adversely affected, and we would be subject to a number of risks, including the following:
•we may experience negative reactions from the financial markets, including negative impacts on our stock price, particularly to the extent that the current market price of our common stock reflects an assumption that the Merger will be completed, and it is uncertain when, if ever, the price of our shares would return to the prices at which our shares currently trade;
•we may experience negative publicity, which could have an adverse effect on our ongoing operations including, but not limited to, retaining and attracting employees, customers, partners, suppliers and others with whom we do business;
•investor confidence in us could decline, and stockholder litigation could be brought against us or members of our Board or our officers, which may require us to commit significant time and resources defending and which could prevent or delay completion of the Merger;
•we have incurred, and will continue to incur, significant costs relating to the Merger, such as legal, accounting, financial advisory, printing and other professional services fees, which may relate to activities that we would not have undertaken other than in connection with the Merger;
•we may be required to pay a cash termination fee to Danaher, as required under the Merger Agreement under certain circumstances;
•while the Merger Agreement is in effect, we are subject to restrictions on our business activities, including, among other things, restrictions on our ability to engage in certain kinds of material transactions, which could prevent us from pursuing strategic business opportunities, taking actions with respect to our business that we may consider advantageous and responding effectively and/or timely to competitive pressures and industry developments, and may as a result materially adversely affect our business, results of operations and financial condition; and
•matters relating to the Merger require substantial commitments of time and resources by our management, which could result in the distraction of management from ongoing business operations and pursuing other opportunities that could have been beneficial to us.
If the Merger is not completed, our stockholders will not receive any payment for their shares of our common stock in connection with the Merger. Instead, we will remain a public company, our common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act of 1934, as amended, and we will be required to continue to file periodic reports with the SEC.
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The Merger is subject to the expiration or termination of applicable waiting periods and the receipt of approvals, consents or clearances from several regulatory authorities that, if not obtained, could prevent completion of the Merger.
Before the Merger may be completed, the applicable waiting period (and any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, relating to the completion of the Merger must have expired or been terminated and we must have received certain non-U.S. antitrust and foreign direct investment approvals with respect to the Merger under certain other applicable foreign regulatory laws. In deciding whether to grant the required regulatory authorization or consent, the relevant governmental entities will consider the effect of the Merger within their relevant jurisdiction, including, among other things, the impact on the parties’ respective customers and suppliers and the impact of the parties’ foreign investment in the jurisdiction.
The approvals that are granted may impose terms and conditions, limitations, obligations or costs, or place restrictions on Danaher’s conduct in operating the business following the closing or require changes to the terms of the Merger Agreement. There can be no assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the Merger.
Under the Merger Agreement, the Company and Danaher have agreed to use their respective reasonable best efforts to take or cause to be taken all actions necessary or advisable on its part under the Merger Agreement and applicable laws to consummate the Merger as promptly as practicable. However, Danaher and Merger Sub are not required to take any action, (i) relating to Danaher or any of its subsidiaries or any of their respective assets or businesses, or (ii) relating to the Company or any of our subsidiaries or any of our respective assets or businesses that would reasonably be expected to have, individually or in the aggregate, a material adverse effect on us and our subsidiaries, taken as a whole.
Uncertainties associated with the Merger could adversely affect our business, results of operations, cash flows and financial condition.
The announcement and pendency of the Merger, as well as any delays in the expected timeframe, could cause disruption in our business and create uncertainties, which could have an adverse effect on our business, results of operations, cash flows and financial condition, regardless of whether the Merger is completed. These risks and uncertainties include, but are not limited to:
•the possibility that our relationship with suppliers, customers and employees could be adversely affected, including if our suppliers, customers or others attempt to negotiate changes in existing business relationships, consider entering into business relationships with parties other than us, delay or defer decisions concerning their business with us, or terminate their existing business relationships with us during the pendency of the Merger;
•uncertainties caused by any negative sentiment in the marketplace with respect to the Merger, which could adversely impact investor confidence in the Company;
•a diversion of a significant amount of management time and resources toward the completion of the Merger;
•a distraction of our current employees as a result of the Merger, which could result in a decline in their productivity or cause distractions in the workplace;
•being subject to certain restrictions on the conduct of our business;
•possibly foregoing certain business opportunities that we might otherwise pursue absent the pending Merger;
•difficulties in attracting and retaining key employees due to uncertainties related to the Merger;
•impact of costs related to completion of the Merger; and
•other developments beyond our control, including, but not limited to, changes in domestic or global economic conditions that may affect the timing or success of the Merger.
The adverse effects of the pendency of the Merger could be exacerbated by any delays in completion of the Merger or termination of the Merger Agreement. As a result, there can be no assurance that our business, results of operations, cash flows and financial condition will not be adversely affected, as compared to prior to the announcement of the Merger Agreement.
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The Merger Agreement contains provisions that could discourage a potential competing acquirer of the Company or could result in a competing acquisition proposal being at a lower price than it might otherwise be.
Under the Merger Agreement, we are subject to customary “no shop” restrictions on the Company’s ability to solicit any Acquisition Proposal (as defined in the Merger Agreement) and to enter into any Alternative Acquisition Agreement (as defined in the Merger Agreement). Prior to entering into the Merger Agreement, the Company engaged with other potential acquirors as part of a targeted auction process and one or more potential counterparties (including those that had prior engagement with the Company) could make an Acquisition Proposal in the future. Notwithstanding the limitations applicable under the “no-shop” restrictions, if, after the date of the Merger Agreement and prior to the date on which the Requisite Company Vote (as defined in the Merger Agreement) is obtained, the Company receives a bona fide Acquisition Proposal that did not result from a material breach of the Company’s obligations under the “no-shop” restrictions and our Board determines in good faith, after consultation with its outside financial advisors and outside legal counsel, constitutes or would reasonably be expected to lead to a Superior Proposal and the failure to take such action would be inconsistent with its fiduciary duties under applicable law, the Company may engage in discussions or negotiations with and may provide non-public information relating to the Company to the person making such Acquisition Proposal and change its recommendation that the Company’s stockholders approve the adoption of the Merger Agreement, subject to certain notice rights and match rights in favor of Danaher.
Under the terms of the Merger Agreement, we may be required to pay a termination fee of $305 million to Danaher following or in connection with the termination of the Merger Agreement in certain circumstances, including if the Company terminates the Merger Agreement in order to accept a Superior Proposal as set forth in the Merger Agreement.
These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of the Company’s business from considering or making a competing acquisition proposal, even if the potential competing acquirer was prepared to pay consideration with a higher per share cash value than the per share value proposed to be received or realized in the Merger, or might cause a potential competing acquirer to propose to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the Merger Agreement.
We have incurred, and will continue to incur, direct and indirect costs as a result of the Merger.
We have incurred, and will continue to incur, costs and expenses, including fees for professional services and other transaction costs in connection with the Merger, for which we will have received little or no benefit if the Merger is not completed. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses. Many of these fees and costs will be payable by us even if the Merger is not completed and may relate to activities that we would not have undertaken other than to complete the Merger.
Our directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of our other stockholders.
Our directors and executive officers have financial interests in the Merger that may be different from, or in addition to, the interests of our other stockholders. These interests may include:
•the treatment of Company long-term incentive awards;
•severance entitlements and other benefits in the case of certain qualifying terminations under the terms of an individual employment agreement or Company severance plan;
•retention arrangements for the benefit of certain Company employees; and
•continued indemnification and insurance coverage under the Merger Agreement, the Company’s organizational documents and indemnification agreements the Company has entered into with its directors and executive officers.
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Litigation challenging the Merger Agreement may prevent the Merger from being consummated within the expected timeframe or at all.
Lawsuits may be filed against us, our Board or our officers or other parties to the Merger Agreement, challenging the Merger or making other claims in connection therewith. Such lawsuits may be brought by our purported stockholders and may seek, among other things, to enjoin consummation of the Merger. One of the conditions to the consummation of the Merger is that the consummation of the Merger is not made unlawful, restrained, enjoined or otherwise prohibited by any order or legal or regulatory restraint or prohibition of a court of competent jurisdiction or any governmental entity. As such, if the plaintiffs in such potential lawsuits are successful in obtaining an injunction prohibiting the defendants from completing the Merger on the agreed upon terms, then such injunction may prevent the Merger from becoming effective, or from becoming effective within the expected timeframe. Additionally, the amount of fees and costs of defense, including costs associated with the indemnification of directors and officers, and other liabilities that may be incurred in connection with lawsuits and other negative effects, such as diversion of resources from the Merger and ongoing business activities, negative publicity or damage to our relationships with business partners, suppliers and customers, could have a material adverse effect on our business, results of operations, cash flows and financial condition.
If the Merger is completed, our stockholders will forgo the opportunity to benefit from potential future appreciation in the value of the Company.
The Merger Agreement provides for the stockholders of record of the Company’s common stock to receive cash consideration of $180.00 per share of Company common stock, without interest and subject to any applicable withholding taxes, upon the closing of the Merger. The amount of cash per outstanding share of our common stock to be paid under the Merger Agreement is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or operating results or in the event of any change in the market price of, analyst estimates of, or projections relating to, our common stock. If the transaction is consummated, our stockholders will no longer hold interests in the Company and, therefore, will not be entitled to benefit from any potential future appreciation in the value of the Company. In the absence of the Merger, we could have various opportunities to enhance the Company’s value, including, but not limited to, entering into a transaction that values the shares of our common stock higher than the value provided for in the Merger Agreement. Therefore, if the Merger is completed, our stockholders will forgo potential future appreciation, if any, in the value of the Company and the opportunity to participate in any other potential transactions that may have resulted in a higher price per share than the price to be paid in the Merger.
Risks Related to Our Revenues
We currently derive a significant portion of our revenue from our Masimo SET® platform, Masimo rainbow SET® platform and related products. If these technologies and related products do not continue to achieve market acceptance, our business, financial condition and results of operations would be adversely affected.
Our business is highly dependent upon the continued success and market acceptance of our proprietary Masimo SET® and Masimo rainbow SET® technologies that serve as the basis of our primary product offerings. Continued market acceptance of products incorporating these technologies will depend upon us continuing to provide evidence to the medical community that our products are cost-effective and offer significantly improved performance compared to conventional pulse oximeters. Healthcare providers that currently have significant investments in competitive pulse oximetry products may be reluctant to purchase our products. If hospitals and other healthcare providers do not believe our Masimo SET® and Masimo rainbow SET® platforms are cost-effective, safe or more accurate or reliable than competitive pulse oximetry products, they may not buy our products in sufficient quantities to enable us to generate revenue growth from the sale of these products. In addition, allegations regarding the safety and effectiveness of our products, whether or not substantiated, may impair or impede the acceptance of our products.
Some of our products are in development or have been recently introduced into the market and may not achieve market acceptance, which could limit our growth and adversely affect our business, financial condition and results of operations.
Many of our noninvasive measurement technologies are considered disruptive. These technologies have performance levels that we believe are acceptable for many clinical environments but may be insufficient in others. In addition, these technologies may perform better in some patients and settings than others. Over time, we hope to continue to improve the performance of these technologies and educate the clinical community on how to properly evaluate them. If we are successful in these endeavors, we expect these technologies will become more useful in more environments and will become more widely adopted. Our product portfolio continues to expand, and we are investing significant resources to enter into, and in some cases, create new markets for our products. See the risk factor with the heading “Our new products and changes to existing products could fail to attract or retain users or generate revenue and profits, which could adversely affect our business, reputation or financial results” f or additional risks related to this expansion of our business.
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We are continuing to invest in sales and marketing resources to achieve market acceptance of our products but are unable to guarantee that our technologies will achieve general market acceptance.
The degree of market acceptance of our products will depend on a number of factors, including but not limited to:
•perceived clinical benefits from our products;
•perceived cost effectiveness of our products;
•perceived safety and effectiveness of our products;
•reimbursement available through government and private healthcare programs for using some of our products; and
•introduction and acceptance of competing products or technologies.
Our Cross-Licensing Agreement with Willow Laboratories, Inc. (Willow), formerly known as Cercacor Laboratories, Inc., by its terms, purports to limit Masimo’s ability to commercialize new products, new or improved technologies and additional applications for Masimo SET® and our licensed rainbow® technology, which may impair our growth and adversely affect our business, financial condition and results of operations.
Since 1998, we have been a party to a cross-licensing agreement with Willow (as amended, the Cross-Licensing Agreement), under which we purportedly granted Willow:
•an exclusive, perpetual and worldwide license, with sublicense rights, to use all Masimo SET® technology owned by us, including all improvements to this technology, for the monitoring of non-vital signs parameters and to develop and sell devices incorporating Masimo SET® for monitoring non-vital signs parameters (alone or in combination with vital signs parameters) in any product market in which a product is intended to be used by a patient or pharmacist rather than by a professional medical caregiver, which the agreement refers to as the “Willow Market”; and
•an option for a non-exclusive, perpetual and worldwide license, with sublicense rights, to use all Masimo SET® technology owned by us for measurement of vital signs in the “Willow Market”.
Under the terms of the Cross-Licensing Agreement, non-vital signs measurements consist of body fluid constituents other than vital signs measurements, including, but not limited to, carbon monoxide, methemoglobin, blood glucose, hemoglobin and bilirubin. Under the Cross-Licensing Agreement, we are only permitted to sell devices utilizing Masimo SET® for the monitoring of non-vital signs parameters in markets where the product is intended to be used by a professional medical caregiver, including, but not limited to, hospital caregivers and alternate care facility caregivers, rather than by a patient or pharmacist, which the agreement refers to as the “Masimo Market”.
Accordingly, under the terms of the Cross-Licensing Agreement, our ability to commercialize new products, new or improved technologies and additional applications for Masimo SET® would be limited. In particular, any inability under the contract to expand beyond the “Masimo Market” may limit our ability to maintain or increase our revenue and impair our growth.
Pursuant to the Cross-Licensing Agreement, we have licensed from Willow the right to make and distribute products in the “Masimo Market” that utilize rainbow® technology for certain noninvasive measurements. As a result, under the terms of the Cross-Licensing Agreement, the opportunity to expand the market for our products incorporating rainbow® technology would also be limited, which could limit our ability to maintain or increase our revenue and impair our growth.
The Company has a dispute with Willow over the Cross-Licensing Agreement, described in further detail below under the risk factor, A dispute with Willow with respect to the Cross-Licensing Agreement could result in damages awarded against the Company or could adversely affect our business. As part of that dispute and the Company’s review of the facts and agreements, the Company will contest several of the rights and obligations under the Cross-Licensing Agreement, including, but not limited to, Masimo’s ownership of the rainbow® technology that Willow purportedly licensed to Masimo.
We depend on our domestic and international original equipment manufacturer (OEM) partners for a portion of our revenue. If they do not devote sufficient resources to the promotion of products that use our technologies, our business would be harmed.
We are, and will continue to be, dependent upon our domestic and international OEM partners for a portion of our revenue through their marketing, selling and distribution of certain of their products that incorporate our technologies. Although we expect that our OEM partners will accept and actively market, sell and distribute products that incorporate our technologies, they may not do so. Because products that incorporate our technologies may represent a relatively small percentage of business for some of our OEM partners, they may have less incentive to promote these products over other products that do not incorporate these technologies.
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In addition, some of our OEM partners offer products that compete with ours and also may be involved in intellectual property disputes with us. Therefore, we cannot guarantee that our OEM partners, or any company that may acquire any of our OEM partners, will vigorously promote products incorporating our technologies. The failure of our OEM partners to successfully market, sell or distribute products incorporating our technologies, the termination of OEM agreements, the loss of OEM partners or the inability to enter into future OEM partnership agreements would have a material adverse effect on our business, financial condition and results of operations.
If we fail to maintain or develop relationships with Group Purchasing Organizations, sales of our products would decline.
Our ability to sell our products to hospitals depends, in part, on our relationships with Group Purchasing Organizations (GPOs). Many existing and potential customers for our products are members of GPOs. GPOs negotiate pricing arrangements and contracts with medical supply manufacturers and distributors that may include provisions for sole sourcing and bundling, which generally reduce the choices available to member hospitals.
These negotiated prices are made available to a GPO’s members. If we are not one of the providers selected by a GPO, the GPO’s members may be less likely or unlikely to purchase our products. If a GPO has negotiated a strict sole source, market share compliance or bundling contract for another manufacturer’s products, we may be prohibited from making sales to members of such GPO for the duration of such contractual arrangement. Shipments of our pulse oximetry products to customers that are members of GPOs represent approximately 91.2% of our U.S. product sales. Our failure to renew our contracts with GPOs may cause us to lose market share and could have a material adverse effect on our business, financial condition and results of operations. In addition, if we are unable to develop new relationships with GPOs, our competitive position would likely suffer and our opportunities to grow our revenues and business would be harmed.
Inadequate levels of coverage or reimbursement from governmental or other third-party payers for our products, or for procedures using our products, may cause our revenue to decline or prevent us from realizing revenues from future products.
Sales of our products depend in part on the reimbursement and coverage policies of governmental and private healthcare payers. The lack of adequate coverage and reimbursement for our products or the procedures in which our products are used may deter customers from purchasing our products.
We cannot guarantee that governmental or third-party payers will reimburse or begin reimbursing a customer for the cost of our products or the procedures in which our products are used. In addition, we may incur significant expenses to generate clinical data to demonstrate not only the safety and efficacy, but also the cost-effectiveness of our products in order to obtain favorable reimbursement policies from payers.
We do not control payer decision-making with respect to coverage and payment levels for our products. Additionally, we expect many payers to continue to explore cost-containment strategies (e.g., comparative and cost-effectiveness analyses, so-called “pay-for-performance” programs implemented by various public government healthcare programs and private third-party payers, and expansion of payment bundling initiatives, and other such methods that shift medical cost risk to providers) that may potentially impact coverage and/or payment levels for our current products or products we develop in the future.
Outside of the U.S., reimbursement systems vary by country. These systems are often subject to the same pressures to curb rising healthcare costs and control healthcare expenditures as those in the U.S. In addition, as economies of emerging markets develop, these countries may implement changes in their healthcare delivery and payment systems. If adequate levels of reimbursement from third-party payers outside of the U.S. are not obtained, sales of our products outside of the U.S. may be adversely affected.
These trends could lead to pressure to reduce prices for our current and future products, hinder our ability to obtain market adoption, cause a decrease in the size of the market or potentially increase competition, any of which could have a material adverse effect on our business, financial condition and results of operations.
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Our customers may reduce, delay or cancel purchases due to a variety of factors, such as lower hospital census levels or third-party guidelines, which could adversely affect our business, financial condition and results of operations.
Our customers are facing growing levels of uncertainties, including variations in overall hospital census for paying patients and the impact of such census variations on hospital budgets. As a result, many hospitals are reevaluating their entire cost structure, including the amount of capital they allocate to medical device technologies and products. In addition, certain of our products, including our rainbow® measurements such as carbon monoxide, methemoglobin and hemoglobin, that are sold with upfront license fees and more complex and expensive sensors, could also be impacted by hospital budget reductions. Any reductions in capital spending budgets by hospitals could have a significant negative impact on our OEM customers who, due to their traditionally larger capital equipment sales model, could see declines in purchases from their hospital customers. This, in turn, could reduce our board sales to our OEM customers.
From time to time, states and other local regulatory authorities may issue guidelines regarding the appropriate scope and use of our products. For example, some of our noninvasive monitoring devices may be subject to authorization by individual states as part of the Emergency Medical Services (EMS) scope of practice procedures. A lack of inclusion into scope of practice procedures may limit adoption of our products.
Additionally, increases in demand resulting from global medical crises, such as the increase in demand we experienced during the COVID-19 pandemic, may be short lived. If the increased demand results in a stockpiling of our products by, or excess inventory at, our customers, future orders may be delayed or canceled until such on-hand inventory is consumed. We may be unable to accurately forecast our financial and operating results and appropriately plan our expenses in the future, or we may fail to meet our publicly announced guidance about our business and future operating results. Continued stockpiling or excess inventory as a result of lower hospital census could also negatively impact our revenue in future periods.
The loss of any large customer or distributor, or any cancellation or delay of a significant purchase by a large customer or international tender, or any non-payment, non-performance or disagreement or dispute with any customer or distributor could reduce our net sales and harm our operating results.
Our business has a concentration of OEM, distributor and direct customers. For example, sales to one just-in-time distributor represented 10% or more of our revenue for the year ended January 3, 2026.
We cannot provide any assurances that we will retain our current customers, they will maintain their current or forecasted demand for our products, or that we will be able to attract and retain additional customers in the future. If for any reason we were to lose our ability to sell to a specific group or class of customers or through a large distributor, we could experience a significant reduction in revenue or loss of market share, which would adversely impact our operating results.
Our revenues could also be negatively affected by any rebates, discounts or fees that are required by, or offered to, GPOs and customers, including wholesalers or distributors. An increase in distributor or GPO rebates, discounts or fees, or the risks associated with selling directly to our customers in the event that a distributor relationship is terminated, could have a material adverse effect on our business, financial condition and results of operations.
Counterfeit Masimo sensors and third-party reprocessed single-patient-use Masimo sensors may harm our reputation and adversely affect our business, financial condition and results of operations.
We believe that other entities are manufacturing and selling counterfeit Masimo sensors. In addition, certain medical device reprocessors have been collecting our used single-patient-use sensors from hospitals and then reprocessing, repackaging and reselling those sensors to hospitals. These counterfeit and third-party reprocessed sensors are sold at lower prices than new Masimo sensors. Our experience with both these counterfeit sensors and third-party reprocessed sensors is that they provide inferior performance, increased sensor consumption, reduced comfort and a number of monitoring problems. Notwithstanding these limitations, some of our customers have indicated a willingness to purchase some of their sensor requirements from these counterfeit manufacturers and third-party reprocessors in an effort to reduce their sensor costs.
These counterfeit and reprocessed sensors have led and may continue to lead to confusion with our genuine Masimo products, have reduced and may continue to reduce our revenue, and, in some cases, have harmed and may continue to harm our reputation if customers conclude incorrectly that these counterfeit or reprocessed sensors are original Masimo sensors.
In addition, we have expended a significant amount of time and expense investigating issues caused by counterfeit and reprocessed sensors, troubleshooting problems stemming from such sensors, educating customers about why counterfeit and reprocessed sensors do not perform to their expectations, enforcing our proprietary rights against the counterfeit manufacturers and reprocessors, and enforcing our contractual rights.
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In response to these counterfeit sensors and third-party reprocessors, we have incorporated X-Cal® technology into certain products to ensure our customers get the performance they expect by using genuine Masimo sensors and that such sensors do not continue to be used beyond their useful life. However, some customers may object to the X-Cal® technology, potentially resulting in the loss of customers and revenues.
Risks Related to Our Intellectual Property
If the patents we own or license, or our other intellectual property rights, do not adequately protect our technologies, we may lose market share to our competitors and be unable to operate our business profitably.
Our success depends significantly on our ability to protect our rights to the technologies used in our products. Our utilization of patent protection, trade secrets and a combination of copyright and trademark laws, as well as nondisclosure, confidentiality and other contractual arrangements, to protect our intellectual property afford us only limited protection and may not adequately protect our rights or permit us to gain or maintain any competitive advantage.
Certain of our patents related to our technologies have expired. Upon the expiration of our issued or licensed patents, we generally lose some of our rights to exclude competitors from making, using, selling or importing products using the technology based on the expired patents.
Furthermore, in recent years, the U.S. Supreme Court has ruled on several patent cases, and several laws have been enacted that, in certain situations, potentially narrow the scope of patent protection available and weaken the rights of patent owners. As a result, we believe large technology companies may be pursuing an “efficient infringement” strategy, having concluded that it is cheaper to infringe third-party intellectual property rights than to acquire, license or otherwise respect them. There can be no assurance that we will be successful in securing additional patents on commercially desirable improvements, that such additional patents will adequately protect our innovations or offset the effect of expiring patents, or that competitors will not be able to design around our patents.
In addition, third-parties have challenged, and may continue to challenge, our issued patents through procedures such as Inter-Partes Review (IPR). In many IPR challenges, the U.S. Patent and Trademark Office (PTO) cancels or significantly narrows issued patent claims. IPR challenges could increase the uncertainties and costs associated with the maintenance, enforcement and defense of our issued and future patents and could have a material adverse effect on our business, financial condition and results of operations. Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we have licensed or that we may obtain in the future. For example, the complexity and uncertainty of European patent laws have also increased in recent years. In Europe, in June 2023, a new unitary patent system was introduced, which significantly impacts European patents, including those granted before the introduction of the system. Under the unitary patent system, after a European patent is granted, the patent proprietor can request unitary effect, thereby getting a European patent with unitary effect (Unitary Patent). Each Unitary Patent is subject to the jurisdiction of the Unitary Patent Court (UPC). As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation. Patents granted before the implementation of the UPC will have the option of opting out of the jurisdiction of the UPC and remaining as national patents in the UPC countries. Patents that remain under the jurisdiction of the UPC may be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC. We cannot predict with certainty the long-term effects of the new unitary patent system.
We also utilize unpatented proprietary technology and know-how and often rely on confidentiality agreements and intellectual property assignment agreements with our employees, OEM partners, independent distributors and consultants to protect such unpatented proprietary technology and know-how. However, such agreements may not be enforceable or may not provide meaningful protection for our proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, or in the event that our competitors discover or independently develop similar or identical designs or other proprietary information.
We rely on the use of registered and common law trademarks with respect to our brands and the names of some of our products. Common law trademarks provide less protection than registered trademarks. Loss of rights in our trademarks could adversely affect our business, financial condition and results of operations.
If third-parties claim that we infringe their intellectual property rights, we may incur liabilities and costs and may have to redesign or discontinue selling certain products.
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Searching for existing intellectual property rights may not reveal important intellectual property and our competitors may also have filed for patent protection, which may not be publicly-available information, or claimed trademark rights that have not been revealed through our searches. In addition, some of our employees were previously employed at our competitors. We may be subject to claims that our employees have disclosed, or that we have used, trade secrets or other proprietary information of our employees’ former employers. Our efforts to identify and avoid infringing on third-parties’ intellectual property rights may not always be successful. Any claims of patent or other intellectual property infringement against us, even those without merit, could:
•be expensive and time-consuming to defend and result in payment of significant damages to third-parties;
•force us to stop making or selling products that incorporate the intellectual property;
•require us to redesign, reengineer or rebrand our products, product candidates and technologies;
•require us to enter into royalty agreements that would increase the costs of our products;
•require us to indemnify third-parties pursuant to contracts in which we have agreed to provide indemnification for intellectual property infringement claims;
•divert the attention of our management and other key employees; and
•result in our customers or potential customers deferring or limiting their purchase or use of the affected products impacted by the claims until the claims are resolved;
any of which could have a material adverse effect on our business, financial condition and results of operations. In addition, new patents obtained by our competitors could threaten the continued commercialization of our products in the market even after they have already been introduced.
We believe competitors may currently be violating and may in the future violate our intellectual property rights. As a result, we may initiate litigation to protect and enforce our intellectual property rights, which may result in substantial expense and may divert management’s attention from implementing our business strategy.
We believe that the success of our business depends, in part, on obtaining patent protection for our products and technologies, defending our patents and preserving our trade secrets. We have historically been involved in significant litigation to protect our patent positions related to some of our pulse oximetry signal processing patents that resulted in various settlements. We believe some of the new market entrants in the healthcare and monitoring space, including some of the world’s largest technology companies, may be infringing our intellectual property, and we may be required to engage in additional litigation to protect our intellectual property in the future. In addition, we believe that certain individuals who previously held high level technical and clinical positions with us misappropriated our intellectual property for the benefit of themselves and other companies. For example, on January 9, 2020, we initiated litigation against Apple Inc. for infringement of a number of patents, for trade secret misappropriation and for ownership and correction of inventorship of a number of Apple Inc. patents that list one of our former employees as an inventor. For additional information on the current status of our litigation with Apple Inc., please see Note 24, “Commitments and Contingencies”, to our accompanying consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K. Our on-going and future litigation could result in significant additional costs and further divert the attention of our management and key personnel from our business operations and the implementation of our business strategy and may not be successful or adequate to protect our intellectual property rights.
Risks Related to Our Regulatory Environment
Our failure to obtain and maintain FDA clearances or approvals on a timely basis, or at all, would prevent us from commercializing our current, upgraded or new products in the U.S., which could severely harm our business.
Unless an exemption applies, each medical device that we market in the U.S. must first undergo premarket review pursuant to the Federal Food, Drug, and Cosmetic Act (FDCA) by receiving clearance of a 510(k) premarket notification, receiving grant of a de novo classification request or obtaining approval of a premarket approval (PMA) application. Even if regulatory clearance or approval of a product is granted, the U.S. Food and Drug Administration (FDA) may clear or approve our products only for limited indications for use. Additionally, the FDA may not grant 510(k) clearance on a timely basis, if at all, for new products or new uses that we propose for Masimo SET® or licensed rainbow® technology.
The traditional FDA 510(k) clearance process for our medical devices has generally taken between four to nine months. However, our more recent experience and interactions with the FDA, along with information we have received from other medical device manufacturers, suggests that, in some cases, the FDA is requiring applicants to provide additional or different information and data for 510(k) clearance than it had previously required, and that the FDA may not rely on approaches that it had previously accepted to support 510(k) clearance. As a result, FDA 510(k) clearance can be delayed for our products in some cases.
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To support our product applications to the FDA, we frequently are required to conduct clinical testing of our products. Such clinical testing must be conducted in compliance with FDA requirements pertaining to human research. Among other requirements, we must obtain informed consent from study subjects and approval by institutional review boards before such studies may begin. We must also comply with other FDA requirements such as monitoring, record-keeping, reporting and the submission of information regarding certain clinical trials to a public database maintained by the National Institutes of Health. In addition, if the study involves a significant risk device, we are required to obtain the FDA’s approval of the study under an Investigational Device Exemption (IDE). Compliance with these requirements can require significant time and resources. In addition, public health emergencies and other extraordinary circumstances may disrupt the conduct of our clinical trials. If the FDA determines that we have not complied with such requirements, the FDA may refuse to consider the data to support our applications or may initiate enforcement actions.
Even though 510(k) clearances have been obtained, if safety or effectiveness problems are identified with our products, we may need to initiate a recall of such products. Furthermore, our new products or significantly modified marketed products could be denied 510(k) clearance and be required to undergo the more burdensome PMA or de novo classification review processes. The process of obtaining a de novo classification or PMA approval is much more costly, lengthy and uncertain than the process for obtaining 510(k) clearance.
De novo classification review generally takes six months to one year from the time of submission of the de novo request, although it can take longer. Approval of a PMA generally takes one year from the time of submission of the PMA but may be longer.
Some of our products or product features may not be subject to the 510(k) process and/or other regulatory requirements in accordance with specific FDA guidance and policies, such as the FDA guidance related to mobile medical applications. In addition, some of our products or product features may not be subject to device regulation pursuant to Section 520(o) of the FDCA, which excludes certain software functions from the statutory definition of a device. If the FDA changes its policies or concludes that our marketing of these products is not in accordance with its current policies and/or Section 520(o) of the FDCA, we may be required to seek clearance or approval of these devices through the 510(k), de novo classification review or PMA processes.
In the past year, the U.S. federal government experienced a shutdown that resulted in delays in certain regulatory approvals, including FDA clearances and other agency actions. Such shutdowns can disrupt our ability to bring new products to market, delay clinical trials, and impact our interactions with regulatory authorities. Prolonged or repeated government shutdowns could have a material adverse effect on our business, financial condition, and results of operations.
The failure of our OEM partners to obtain required FDA clearances or approvals for products that incorporate our technologies could have a negative impact on our revenue.
Our OEM partners are required to obtain their own FDA clearances in the U.S. for most products incorporating our technologies. The FDA clearances we have obtained may not make it easier for our OEM partners to obtain clearances of products incorporating these technologies, or the FDA may not grant clearances on a timely basis, if at all, for any future products incorporating our technologies that our OEM partners propose to market.
We are subject to on-going post-market regulation by regulatory authorities and if we fail to comply with these regulatory requirements we could be subject to enforcement actions, penalties or other harm to our business.
Our products, along with the manufacturing processes, labeling and promotional activities for those products, are subject to continual review and periodic inspections by the FDA and other regulatory bodies. Among other requirements, we and certain of our suppliers are required to comply with the FDA’s Quality System Regulation (QSR), which governs the methods and documentation of the design, control testing, production, component suppliers’ control, quality assurance, complaint handling, labeling control, packaging, storage and shipping of our products. The FDA enforces the QSR through announced and unannounced inspections. We are also subject to similar state requirements and licenses. In February 2026, the FDA is expected to replace the QSR with a new Quality Management System Regulatory (QMSR), which has the potential to increase the scope of the FDA to review, inspect, management review of quality audits and supplier audit reports.
In addition to the FDA, from time to time we are subject to inspections by the California Food and Drug Branch, international regulatory authorities and other similar governmental agencies. The standards used by these regulatory authorities are complex and may differ from those used by the FDA.
Failure by us or one of our suppliers to comply with statutes and regulations administered by the FDA and other regulatory bodies or failure to adequately respond to any FDA Form 483 observations, any California Food and Drug Branch notices of violation or any similar reports could result in, among other things, any of the following:
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•warning letters or untitled letters issued by the FDA;
•fines, civil penalties, in rem forfeiture proceedings, injunctions, consent decrees and criminal prosecution;
•import alerts;
•unanticipated expenditures to address or defend such actions;
•delays in clearing or approving, or refusal to clear or approve, our products;
•withdrawals or suspensions of clearance or approval of our products or those of our third-party suppliers by the FDA or other regulatory bodies;
•product recalls or seizures;
•orders for physician notification or device repair, replacement or refund;
•interruptions of production or inability to export to certain foreign countries; and
•operating restrictions.
In addition, many of our products are subject to various laws, regulations and legal requirements, including those governing product import and export, hazardous materials usage and discharge, product related energy consumption, electrical safety, wireless emissions, cybersecurity, packaging and recycling. Compliance with these requirements, which vary widely depending on jurisdiction, is time consuming and expensive.
If we fail to comply with applicable legal requirements, it would harm our reputation and adversely affect our business, financial condition and results of operations.
Failure to obtain regulatory authorizations in foreign jurisdictions may prevent us from marketing our products abroad.
We currently market and intend to continue to market our products internationally. Outside of the U.S., we can generally market our products only if we receive a marketing authorization (and/or meet certain pre-marketing requirements) and, in some cases, pricing approval, from the appropriate regulatory authorities. The regulatory registration/licensing process varies among international jurisdictions and may require additional or different product testing than required to obtain FDA clearance. FDA clearance does not ensure new product registration/licensing by foreign regulatory authorities, and we may be unable to obtain foreign regulatory registration/licensing on a timely basis, if at all.
In addition, clearance by one foreign regulatory authority does not ensure clearance by any other foreign regulatory authority or by the FDA. If we fail to receive necessary approvals to commercialize our products in foreign jurisdictions on a timely basis, or at all, our business, financial condition and results of operations could be adversely affected.
Furthermore, foreign regulatory requirements may change from time to time, which could adversely affect our ability to market new products, and/or continue to market existing products, internationally.
Modifications to our marketed medical devices may require new regulatory clearances or premarket approvals, or may require us to cease marketing or to recall the modified devices until clearances or approvals are obtained.
We have made modifications to our medical devices in the past and we may make additional modifications in the future. Any modification to a medical device that is cleared by the FDA that could significantly affect its safety or effectiveness or that could constitute a major change in its intended use would require a new clearance or approval and certain modifications to devices cleared or approved by foreign regulatory authorities may also require a new clearance or approval.
We may not be able to obtain such clearances or approvals in a timely fashion, or at all. Delays in obtaining future clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would have an adverse effect on our business, financial condition and results of operations.
For device modifications that we conclude do not require a new regulatory clearance or approval, we may be required to recall and to stop marketing the modified devices if the government agency disagrees with our conclusion and requires new clearances or approvals for the modifications. This could have an adverse effect on our business, financial condition and results of operations.
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If our products cause or contribute to a death or serious injury, or malfunction in a way that would likely cause or contribute to a death or serious injury, we will be subject to medical device reporting regulations and other applicable laws and may need to initiate voluntary or mandatory corrective actions, such as the recall of our products.
Regulatory agencies in many countries require us to report anytime our products cause or contribute to a death or serious injury, or malfunction in a way that would likely cause or contribute to a death or serious injury. For example, under the FDA medical device reporting regulations, we are required to report to the FDA any incident in which a product of ours may have caused or contributed to a death or serious injury or in which a product of ours malfunctioned and, if the malfunction were to recur, would be likely to cause or contribute to death or serious injury. In addition, all manufacturers placing medical devices on the market in the EU are legally required to report any serious or potentially serious incidents involving devices produced or sold by the manufacturer to the relevant authority in those jurisdictions where any such incident occurred.
The FDA and similar foreign regulatory authorities have the authority to require the recall of our commercialized products in the event of material deficiencies or defects in, for example, design, labeling or manufacture. The FDA must find that there is a reasonable probability that the device would cause serious adverse health consequences or death in order to require a recall. The standard for recalling deficient products may be different in foreign jurisdictions. Manufacturers may, under their own initiative, recall a product if any material deficiency is found in a device or they become aware of a safety issue involving a marketed product. A government-mandated or voluntary recall by us or by one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues.
We may initiate certain field actions, such as a product correction or removal of our products in the future. In addition, third- parties that commercialize products incorporating our technologies may initiate similar actions or product corrections. Any correction or removal initiated by us to reduce a health risk posed by our device, or to remedy a violation of the FDCA caused by the device that may present a risk to health, must be reported to the FDA. If the FDA subsequently determines that a report was required for a correction or removal of our products that we did not believe required a report, we could be subject to enforcement actions.
Any recalls or corrections of our products or third-party products that incorporate our technologies, or enforcement actions would divert managerial and financial resources and could have an adverse effect on our financial condition and results of operations. In addition, given our dependence upon patient, physician and customer perceptions, any negative publicity associated with any recalls could materially and adversely affect our business, financial condition, results of operations and growth prospects.
In August 2023, we decided to conduct a voluntary recall of select Rad-G® products in connection with an issue that can result in an unintentional change in the power state of the device. On February 14, 2024, we initiated the voluntary recall. On February 21, 2024, we received a subpoena from the Department of Justice (DOJ) seeking documents and information related to our Rad-G® and Rad-97® products, including information relating to complaints surrounding the products and our decision to recall the Rad-G®. Additionally, on March 25, 2024, we received a civil investigative demand from the DOJ seeking documents and information related to customer returns of our Rad-G® and Rad-97® products, including returns related our recall of select Rad-G® products in 2024.
We are investigating the reasons for the delay between August 2023 and February 2024 when the recall was initiated. We are cooperating with the government and may expend significant financial and managerial resources in connection with responding to the subpoena and the investigative demand and any related investigation or any other future requests for information.
Promotion of our products using claims that are off-label, unsubstantiated, false or misleading could subject us to substantial penalties.
Obtaining 510(k) clearance permits us to promote our products for the uses cleared by the FDA. Use of a device outside its cleared or approved indications is known as “off-label” use. Physicians may use our products off-label because the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine, but we may not promote our products “off-label”. While we may request additional cleared indications for our current products, the FDA may deny those requests, require additional expensive clinical data to support any additional indications or limit the cleared indications for use when clearing a device. If the FDA determines that our products were promoted for off-label use or that false, misleading or inadequately substantiated promotional claims have been made by us or our OEM partners, it could request that we or our OEM partners modify those promotional materials or it could take regulatory or enforcement actions, including the issuance of an untitled letter, warning letter, injunction, seizure, civil fine and criminal penalties. While certain U.S. courts have held that truthful, non-misleading, off-label information is protected under the First Amendment under certain circumstances, the FDA continues to take the position that off-label promotion is subject to enforcement action.
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It is also possible that other federal, state or foreign enforcement authorities may act if they consider our communications, including promotional or training materials, to constitute promotion of an uncleared or unapproved use. If not successfully defended, enforcement actions related to off-label promotion could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In any such event, our reputation could be damaged, adoption of our products could be impaired and we could be subject to extensive fines and penalties.
Additionally, we must have adequate substantiation for the claims we make for our products. If any of our claims are determined to be false, misleading or deceptive, our products could be considered misbranded under the FDCA or in violation of the Federal Trade Commission Act. We could also face lawsuits from our competitors under the Lanham Act alleging that our marketing materials are false or misleading.
Government agencies in the EU, UK, Japan and other countries and jurisdictions have similar regulations on the advertising and promotion of medical devices. If we fail to comply with any of these regulations, our reputation could be damaged, adoption of our products could be impaired and we could be subject to extensive fines and penalties.
The regulatory environment governing information, data security and privacy is increasingly demanding and evolving. Many of the laws and regulations in this area are subject to uncertain interpretation, and our failure to comply could result in claims, penalties or increased costs or otherwise harm our business.
Personal privacy and data security have become significant issues in the U.S., Europe, the Middle East, Canada, China and many other jurisdictions where we offer our products. The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.
A growing number of U.S. states have passed comprehensive privacy laws. These state laws govern the processing of residents’ personal information. Among many new requirements, some of the state privacy laws expand consumers’ rights (such as opting out of the sale of personal information to third parties and targeted advertising, restricting certain uses and disclosures of sensitive data, and requesting access, deletion, or correction of personal information). Some state laws also minimize what data can be collected from consumers and how businesses may use and disclose it. These state privacy laws also require businesses to make disclosures to consumers about data collection, use and sharing practices, and some state privacy laws require that businesses obtain consent from consumers for certain uses and disclosures of their sensitive data, including health information. In addition, some of these state privacy laws, along with other standalone state health privacy laws, subject certain health-related information to additional safeguards and disclosures. There is significant uncertainty regarding how regulators will interpret and enforce this patchwork of new laws, particularly to the extent there are inconsistencies or differences in their requirements. In addition, in states that allow for a private right of action to enforce these laws, we are subjected to a higher risk of individual and class action lawsuits. Further, many states have implemented biometric privacy laws that have resulted in individual and class-action lawsuits against businesses as well as state enforcement. Moreover, we have observed an increase in plaintiffs seeking to apply older privacy laws such as the Video Privacy Protection Act and the California Invasion of Privacy Act to newer technologies to allege claims of invasion of privacy rights.
We continue to be subject to federal privacy laws, such as the Health Insurance Portability and Accountability Act of 1996 (HIPAA), in certain circumstances, in connection with any personal health information or medical information that we may obtain or have access to in connection with the operation of our business. Further, we are subject to regulation by the Federal Trade Commission (FTC), which, in recent years, has increased its scrutiny of the practices of entities that collect certain health-related information from consumers. Moreover, comprehensive federal data privacy legislation has been proposed and, if passed, would further change the privacy and data security compliance landscape. In addition, on July 26, 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy and governance. The U.S. Cybersecurity and Infrastructure Security Agency (CISA) is in the process of implementing rules that would require that entities in certain critical infrastructure sectors, including health care, report any cybersecurity incidents or ransom payments in connection with a ransomware attack, among other requirements.
All 50 U.S. states have data breach notification laws that, if violated, could result in penalties, fines and litigation. The full impact of these laws on our business is yet to be determined, but it could result in increased operating expenses as well as additional exposure to the risk of litigation by or on behalf of consumers. In addition, Colorado has enacted comprehensive legislation to regulate certain artificial intelligence systems that will subject businesses that develop and deploy these systems to increased compliance obligations, and a number of other states have proposed legislation to regulate the use of artificial intelligence.
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Internationally, the European Data Protection Board continues to release guidelines for industries and impose fines related to the General Data Protection Regulation (GDPR), some of which have been very significant. To improve coordination among EU supervisory authorities, the European Commission has proposed a new regulation that would help to streamline enforcement of the GDPR in cross-border cases. Meanwhile, there continues to be persistent uncertainty relating to the transfer of personal data from Europe to the U.S., or other non-adequate countries, following the Schrems II decision. On July 10, 2023, the European Commission adopted its adequacy decision on the EU-U.S. Data Privacy Framework (DPF). The decision, which took effect on the day of its adoption, concludes that the United States ensures an adequate level of protection for personal data transferred from the EEA to companies certified to the DPF. However, it remains too soon to tell how the future of Privacy Shield 2.0 will evolve and what impact it will have on our international activities. At least one challenge to the DPF is pending before the Court of Justice of the European Union. In addition, data processing in the UK is governed by a UK version of the GDPR (combining the GDPR and the Data Protection Act 2028), exposing us to two parallel regimes, each of which authorizes similar fines and other potentially divergent enforcement actions for certain violations.
Other international jurisdictions, including Canada, China, India, Saudi Arabia, South Africa, the UAE, Singapore, South Korea, Mexico, Australia, Argentina, India and Brazil, among others, have also implemented, or are in the process of implementing laws relating to data privacy and protection that are all already in effect or are anticipated to go into effect soon, or are amending existing laws. In addition, several jurisdictions such as South Korea have shown increased enforcement of their existing data privacy and security laws. Although we believe that we are complying with the GDPR and similar laws, these laws are still relatively new. Therefore, as international data privacy and protection laws continue to evolve, and as new regulations, interpretive guidance and enforcement information become available, we may incur additional costs to modify our business practices to comply with these requirements.
We may be required to make costly system modifications to comply with applicable data privacy and security laws. Violations of these laws, or allegations of such violations, could subject us to criminal or civil, monetary and/or non-monetary penalties, disrupt our operations, involve significant management distraction, negatively impact our brand image, subject us to class action lawsuits and result in a material adverse effect on our business, financial condition and results of operations.
We may be subject to or otherwise affected by federal and state healthcare laws, including fraud and abuse laws, and could face substantial penalties if we are unable to fully comply with these laws.
Healthcare fraud and abuse laws potentially applicable to our operations include, but are not limited to:
•the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving any bribe, kickback or other remuneration intended to induce the purchase, order or recommendation of an item or service reimbursable under a federal healthcare program (such as the Medicare or Medicaid programs);
•the federal False Claims Act and other federal laws which prohibit, among other things, knowingly and willfully presenting, or causing to be presented, claims for payment from Medicare, Medicaid, other government payers or other third-party payers that are false or fraudulent;
•the Physician Payments Sunshine Act, which requires medical device companies to track and publicly report, with limited exceptions, all payments and transfers of value to certain healthcare professionals and teaching hospitals in the U.S.; and
•state laws analogous to each of the above federal laws, such as state anti-kickback and false claims laws that may apply to items or services reimbursed by governmental programs and non-governmental third-party payers, including commercial insurers.
If we are found to have violated any such laws or other similar governmental regulations, including their foreign counterparts, that are directly or indirectly applicable to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion of our products from reimbursement under Medicare, Medicaid and other federal healthcare programs, and the curtailment or restructuring of our operations. Any penalties could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against such action, could cau se us to incur significant legal expenses and divert our management’s attention from the operation of our business.
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.
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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 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.
Risks Related to Our Business and Operations
Under the Cross-Licensing Agreement, by its terms, we would be required to assign to Willow certain products and technologies we develop that relate to the monitoring of non-vital sign parameters.
Under the Cross-Licensing Agreement, by its terms, if we develop certain products or technologies that relate to the noninvasive monitoring of non-vital sign parameters, including improvements to Masimo SET® for the noninvasive monitoring of non-vital sign parameters, we would be required to assign these developments to Willow.
In addition, under the Cross-Licensing Agreement, by its terms, we would not be reimbursed by Willow for our expenses relating to the development or improvement of any such products or technologies, which expenses may be significant. As a result of these terms, we may not generate any revenue from the further development of certain products and technologies for the monitoring of non-vital sign parameters, including improvements to Masimo SET®, which could adversely affect our business, financial condition and results of operations.
In the event that the Cross-Licensing Agreement is terminated for any reason, or Willow grants a license to rainbow® technology to a third-party, our business could be adversely affected.
Willow claims to own all of the proprietary rights to certain rainbow® technology developed by Masimo with our proprietary Masimo SET® for products intended to be used in the “Willow Market”, and all rights to any non-vital signs measurement for which we do not exercise an option pursuant to the Cross-Licensing Agreement. In addition, the Cross-Licensing Agreement purports to provide Willow the right to terminate the Cross-Licensing Agreement or grant licenses covering rainbow® technology to third-parties if we breach certain terms of the agreement, including any failure to meet our minimum royalty payment obligations or failure to use commercially reasonable efforts to develop or market products incorporating licensed rainbow® technology. In connection with our dispute with Willow, Willow disagrees with us regarding the interpretation or enforceability of certain terms in the Cross-Licensing Agreement and we cannot guarantee that any such dispute will be resolved in our favor. Willow has also asserted that it may terminate the Cross-Licensing Agreement based on alleged breaches of the Cross-Licensing Agreement, before a court or arbitral tribunal has found any breach of the agreement. We believe the Company has strong grounds to oppose termination of the Cross-Licensing Agreement, but there is no guarantee that the Company’s arguments will prevail. If the Cross-Licensing Agreement is terminated, our business could be adversely affected, including by potentially losing our exclusive license to rainbow® technology. If we lose our exclusive license to rainbow® technology, we would lose the ability to prevent others from making, using, selling or importing products using rainbow® technology in our market. As a result, we would likely be subject to increased competition within our market, and Willow or competitors who obtain a license to rainbow® technology from Willow would be able to offer related products.
We may not be able to commercialize our products incorporating licensed rainbow® technology cost-effectively or successfully.
As a result of the royalties that the Cross-Licensing Agreement purportedly obligates us to pay to Willow, it is generally more expensive for us to make products that incorporate licensed rainbow® technology than products that do not include licensed rainbow® technology.
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Accordingly, we may not be able to sell products incorporating licensed rainbow® technology at a price the market is willing to accept. If we cannot commercialize our products incorporating licensed rainbow® technology successfully, we may not be able to generate sufficient revenue from these products to be profitable, which could adversely affect our business, financial condition and results of operations.
Our dispute with Willow with respect to the Cross-Licensing Agreement could result in damages awarded against the Company or could adversely affect our business.
After the Company raised royalty overpayment claims against Willow, on May 26, 2025, Willow filed a demand for arbitration (the Demand) against the Company with the American Arbitration Association. Willow asserts in the Demand and Statements of Additional Claims filed on November 28, 2025, and January 16, 2026, that it is entitled to declaratory judgment on the parties’ respective rights under the Cross-Licensing Agreement, including that Willow does not owe the Company repayment for any past royalty overpayments. Willow also claims the Company breached the Cross-Licensing Agreement, including by failing to pay adequate royalties, provide Willow with pricing for certain products, place certain technology in escrow, and provide Willow with engineering support. Willow seeks, among other things, (i) monetary damages of at least $6.1 million and (ii) specific performance compelling the Company to provide price lists for certain products, permit Willow’s chosen auditor to conduct an audit of the Company’s books and records, place certain technology in escrow, and provide Willow with engineering support.
The Company has asserted counterclaims against Willow and the Company’s former CEO Joe Kiani, seeking, among other things, (i) repayment of historical royalty overpayments, (ii) for Willow to re-assign to the Company intellectual property rights that are owned by the Company, (iii) declaratory judgment that provisions under the Cross-Licensing Agreement are not enforceable, and (iv) to the extent the agreement is enforceable, declaratory judgment on the parties’ respective rights under the Cross-Licensing Agreement, including the scope of the Company’s royalty obligations, if any.
We believe the Company has strong defenses to Willow’s claims, and that the Company’s counterclaims are meritorious. However, there is no guarantee that the Company will prevail in its dispute with Willow. That dispute could be costly and become a distraction to our management and employees and adversely affect our business. Any costs incurred to resolve any dispute, money damages that may be awarded to Willow, or declarations as to the Company’s rights and obligations under the Cross-Licensing Agreement could have a material adverse effect on our financial condition.
If we are unable to obtain key materials and components from sole or limited source suppliers, we will not be able to deliver our products to customers.
We depend on certain sole or limited source suppliers for certain key materials and components, including digital signal processor chips and analog-to-digital converter chips for certain products. These suppliers are located around the world, and the production and shipment of such materials and components may be constrained globally due to freight carrier delays and other disruptions to the supply chain. These disruptions may continue or worsen due to ongoing geopolitical conflicts and trade restrictions. We may experience manufacturing problems related to these suppliers and other outside sources if such suppliers fail to develop, manufacture or ship products and components to us on a timely basis, or provide us with products and components that do not meet our quality standards and required quantities. From time to time there have been industry-wide shortages of certain components that we use in certain products. We may also experience price increases for materials, components and shipping with no guarantee that such increases can be passed along to our customers, which could adversely impact our gross margins. If any of these problems occur, we may be unable to obtain substitute sources for these products and components on a timely basis or on terms acceptable to us, which could harm our ability to manufacture our own products and components profitably or on time.
Future strategic transactions, including acquisitions or separations of businesses and strategic investments or joint ventures, could negatively affect our business, financial condition and results of operations if we fail to integrate the acquired businesses and their employees successfully into our existing operations or achieve the desired results of our initiatives.
We have acquired several businesses since our inception and we may acquire additional businesses in the future. Future acquisitions may require additional debt or equity financing, which could be dilutive to our existing stockholders or reduce our earnings per share or other financial metrics. Even if we complete acquisitions, there are many factors that could affect whether such acquisition, will be beneficial to our business, including, without limitation:
•payment of above-market prices for acquisitions and higher than anticipated acquisition costs;
•issuance of common stock as part of the acquisition price or a need to issue stock options or other equity-based compensation to newly-hired employees of target companies, resulting in dilution of ownership to our existing stockholders;
•reduced profitability if an acquisition is not accretive to our business over either the short-term or the long-term;
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•difficulties in integrating any acquired companies, personnel, products and other assets into our existing business;
•delays in realizing the benefits of the acquired company, products or other assets;
•regulatory challenges and becoming subject to additional regulatory requirements;
•cybersecurity and compliance-related issues;
•diversion of our management’s time and attention from other business concerns;
•limited or no direct prior experience in new markets or countries we may enter;
•unanticipated issues dealing with unfamiliar suppliers, service providers or other collaborators of the acquired company;
•higher costs of integration than we anticipated;
•write-downs or impairments of goodwill or other intangible assets associated with the acquired company;
•difficulties in retaining key employees of the acquired business who are necessary to manage these acquisitions;
•negative impacts on our relationships with our employees, clients, customers or collaborators;
•intellectual property and other litigation, other claims or liabilities in connection with the acquisition; and
•changes in the overall financial model as certain acquired companies may have a different revenue, gross profit margin or operating expense profile.
Further, our ability to benefit from future acquisitions and/or external strategic investments, joint ventures or any other business combinations depends on our ability to successfully conduct due diligence, negotiate acceptable terms, evaluate prospective opportunities and bring acquired technologies and/or products to market at acceptable margins and operating expense levels.
We may also discover deficiencies in internal controls, data adequacy and integrity, product quality, regulatory compliance, product liabilities or other undisclosed liabilities that we did not uncover prior to our acquisition or investment, which could result in us becoming subject to penalties, other liabilities or asset impairments. In addition, if we do not achieve the anticipated benefits of an acquisition or other external investment as rapidly as expected, or at all, investors or analysts may downgrade our stock.
We also expect to continue to carry out internal strategic initiatives that we believe are necessary to grow our revenues and expand our business. For example, we have continued to invest in international expansion programs designed to increase our worldwide presence and take advantage of market expansion opportunities around the world. Although we believe our investments in these initiatives continue to be in the long-term best interests of Masimo and our stockholders, there are no assurances that such initiatives will yield favorable results for us. Accordingly, if these initiatives are not successful, our business, financial condition and results of operations could be adversely affected.
Our new products and changes to existing products could fail to attract or retain users or generate revenue and profits.
Over time, we have expanded our business and product strategy to include other products to integrate with our successful medical technology businesses. Further, we may introduce certain changes to our existing products or introduce new and unproven products. We expect this will be a complex, evolving, and long-term strategic initiative that will involve the development of new and emerging technologies, continued investment in medical technology and collaboration with other companies, developers, partners and other participants. We may be unsuccessful in our research and product development efforts, including if we are unable to develop relationships with key industry participants. Our new strategic efforts may also divert resources and management attention from other areas of our business. As a result of these or other factors, certain strategic investments may not be successful in the foreseeable future, or at all, which could adversely affect our business, reputation, or financial results.
Our Credit Facility contains certain covenants and restrictions that may limit our flexibility in operating our business.
Our Credit Facility contains various affirmative covenants and restrictions that limit our ability to engage in specified types of transactions, including:
•incurring specified types of additional indebtedness, there can be no assurance that we will be able to obtain any additional debt or equity financing at the time needed or that such financing will be available on terms that are favorable or acceptable to us (including guarantees or other contingent obligations);
•paying dividends on, repurchasing or making distributions in respect of our common stock or making other restricted payments, subject to specified exceptions;
•making specified investments (including loans and advances);
•selling or transferring certain assets;
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•creating certain liens;
•consolidating, merging, selling or otherwise disposing of all or substantially all of our assets; and
•entering into certain transactions with any of our affiliates.
In addition, under our Credit Facility, we are required to satisfy and maintain specified financial ratios and other customary affirmative and negative covenants. Our ability to meet those financial ratios and affirmative and negative covenants could be affected by events beyond our control and, therefore, we cannot be assured that we will be able to continue to satisfy these requirements. A breach of any of these ratios or covenants could result in a default under our Credit Facility. Upon the occurrence of an event of default, the Lenders could elect to declare all amounts outstanding under our Credit Facility immediately due and payable, terminate all commitments to extend further credit and pursue legal remedies for recovery, all of which could adversely affect our business and financial condition. See Note 15, “Debt”, to our accompanying consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for additional information on our Credit Facility.
Our ability to arrange additional financing and make payments of principal and interest on our indebtedness will depend on our future performance, which will be subject to general economic, financial, and business conditions as well as other factors affecting our operations, many of which are beyond our control.
We may need additional capital and failure to raise additional capital on terms favorable to us, or at all, could limit our ability to grow our business and develop or enhance our service offerings to respond to market demand or competitive challenges.
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. However, we may require additional cash resources due to changed business conditions or other future developments. If our existing resources are insufficient to satisfy cash requirements, we may seek to obtain one or more additional credit facilities, sell equity or debt securities or pursue other forms of financing. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financing covenants that could potentially restrict our operations. The sale of additional equity securities, or securities convertible into equity securities, could result in dilution to stockholders. In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems and could increase our costs of borrowing.
Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including investors’ perception of, and demand for, our securities, conditions in the capital markets in which we may seek to raise funds, our future results of operations and financial condition, and general economic, macro-economic, political and geopolitical conditions. In addition, even if debt financing is available, the cost of additional financing may be significantly higher than those provided for in our current Credit Facility. Moreover, financing may not be available in amounts or on terms acceptable to us, or at all, or at times when we require it, each of which could limit our ability to grow and expand our business and operations and develop or enhance our products and offerings to respond to market demand or competitive or other business challenges.
Risks Related to Our Stock
Concentration of ownership of our stock among our existing directors, executive officers and principal stockholders may prevent new investors from influencing significant corporate decisions.
As of January 3, 2026, our current directors and executive officers and their affiliates, in the aggregate, beneficially owned approximately 9.1% of our outstanding stock. Subject to any fiduciary duties owed to our other stockholders under Delaware law, these stockholders may be able to exercise significant influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, and will have some control over our management and policies in their roles as stockholders. Some of these persons or entities may have interests that are different from yours. For example, these stockholders may support proposals and actions with which you may disagree or which are not in your best interests.
The concentration of ownership could delay or prevent a change in control of us or otherwise discourage a potential acquirer from attempting to obtain control of us, which in turn could reduce the price of our stock.
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In addition, these stockholders could use their voting influence to maintain our existing management and directors in office or support or reject other management and Board proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.
We may be unable to accurately forecast our financial and operating results and appropriately plan our expenses in the future, or we may fail to meet our publicly announced guidance about our business and future operating results.
From time to time, we release earnings guidance or other financial guidance in our quarterly and annual earnings conference calls or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. Our guidance includes forward-looking statements based on projections prepared by our management. Projections are based upon a number of assumptions and estimates that are based on information known when they are issued, and, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies relating to our business, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. Some of those key assumptions include broader macro-economic conditions, tariff rates, and the resulting impact of these factors on our business. These assumptions are inherently difficult to predict, particularly in the long term. Additionally, forecasted financial and operating results may differ materially from actual results, which may materially adversely affect our financial condition and stock price. For example, if certain of our assumptions or estimates prove to be wrong, including any of the economic trends and developments affecting our business discussed in Part II, Item 7 of this Annual Report on Form 10-K, this could cause us to miss our earnings guidance or negatively impact the results we report, either of which could negatively impact our stock price and expose us to potential stockholder litigation.
We generally state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges. Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. Our actual business results may vary significantly from such guidance or estimates or that consensus due to a number of factors, many of which are outside of our control, including global economic uncertainty and financial market conditions, geopolitical events, rising inflation, and rising interest rates, potential recessionary factors, and foreign exchange rate volatility, which could adversely affect our business and future operating results. We use the reports and models of economic experts in making assumptions relating to consumer discretionary spending and predictions as to timing and pace of any future economic impacts. If these models are incorrect or incomplete, or if we fail to accurately predict the full impact of certain factors, such as macro-economic factors, the guidance and other forward-looking statements we provide may also be incorrect or incomplete. Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of analysts, investors, or other interested parties, the price of our common stock could decline. Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results. In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock.
Our corporate documents, and Delaware law contain provisions that could discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our stock.
Provisions in our certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition involving us that our stockholders may consider favorable. For example, our certificate of incorporation authorizes our Board to issue up to 5.0 million shares of “blank check” preferred stock. As a result, without further stockholder approval, our Board has the authority to attach special rights, including voting and dividend rights, to this preferred stock, including pursuant to a stockholder rights plan, such as those underlying the Rights Agreement we previously adopted on September 9, 2022, which we terminated in accordance with the terms of the Amendment to the Rights Agreement we entered into effective as of March 22, 2023. We may implement a new stockholder rights plan in the future, which may have the effect of discouraging or preventing a change in control by, among other things, making it uneconomical for a third party to acquire us without the consent of our Board. With such rights, preferred stockholders could make it more difficult for a third-party to acquire us.
We are also subject to anti-takeover provisions under the General Corporation Law of the State of Delaware (DGCL). Under these provisions, if anyone becomes an “interested stockholder,” we may not enter into a “business combination” with that person for three years without special approval, which could discourage a third-party from making a takeover offer and could delay or prevent a change in control of us. For purposes of these provisions, an “interested stockholder” generally means someone owning 15% or more of our outstanding voting stock or an affiliate of ours that owned 15% or more of our outstanding voting stock during the past three years, subject to certain exceptions as described in the DGCL.
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Recent changes to our senior leadership and our Board could create uncertainties and adversely impact our business.
Our senior leadership and our Board have experienced recent personnel turnover. Changes in our executive leadership team and our Board may be disruptive to, or cause uncertainty in, our business and could have a negative impact on our ability to manage and grow our business effectively.
Exclusive forum provisions in our bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our bylaws provide that the state or federal courts located within the State of Delaware are the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees or stockholders to our stockholders, (iii) any action asserting a claim against us arising pursuant to the DGCL, our certificate of incorporation or our bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine. However, this choice of forum provision does not apply to (a) actions in which the Court of Chancery in the State of Delaware concludes that an indispensable party is not subject to the jurisdiction of Delaware courts, or (b) actions in which a federal court has assumed exclusive jurisdiction to a proceeding. This choice of forum provision is not intended to apply to any actions brought under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees or stockholders, which may discourage such lawsuits against us and our directors, officers and other employees or stockholders.
Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to find the choice of forum provision in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition and results of operations.
General Risk Factors
We may experience significant fluctuations in our periodic financial results and may not maintain our current levels of profitability in the future.
Our operating results have fluctuated in the past and are likely to fluctuate in the future. Many of the countries in which we operate, including the U.S. and several of the members of the EU, have experienced and continue to experience uncertain economic conditions resulting from global as well as local factors. In addition, continuing uncertainty in the U.S. economy may result in continued inflationary pressures globally and in the U.S. in particular, which may contribute to future interest rate volatility.
Our business or financial results may be adversely impacted by these uncertain economic conditions, including: adverse changes in interest rates, foreign currency exchange rates, tax laws or tax rates; inflation; contraction in the availability of credit in the marketplace due to legislation or other economic conditions, which may potentially impair our ability to access the capital markets on terms acceptable to us or at all; changes in consumer spending during a recession; and the effects of government initiatives to manage economic conditions.
We are also unable to predict how changing global economic conditions or potential global health concerns will affect our critical customers, international tenders, suppliers and distributors. Any negative impact of such matters on our critical customers, international tenders, suppliers or distributors may also have an adverse impact on our results of operations or financial condition. Our expense levels are based, in part, on our expectations regarding future revenue levels and are relatively fixed in the short-term.
As a result, if our revenue for a particular period was below our expectations, we would not be able to proportionately reduce our operating expenses for that period. Any revenue shortfall would have a disproportionately negative effect on our operating results for the period.
In addition, the methods, estimates and judgments that we use in applying our accounting policies are, by their nature, subject to substantial risks, uncertainties and assumptions. Factors may arise over time that lead us to change our methods, estimates and judgments, the impact of which could significantly affect our results of operations. See “Critical Accounting Policies and Estimates” contained in Part II, Item. 7 of this Annual Report on Form 10-K.
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Changes in accounting standards related to our embedded leases within certain deferred equipment agreements have also resulted in the acceleration of the timing related to our recognition of revenue and expenses associated with certain equipment provided to healthcare customers at no up-front charge. Since we cannot control the timing of when our customers will request us to deliver such equipment, our revenue and costs with respect to leased equipment could vary substantially in any given quarter or year, which could further increase quarterly or annual fluctuations within our financial results.
Due to these and other factors, you should not rely on our results for any one quarter as an indication of our future performance. If our operating results fail to meet or exceed the expectations of securities analysts or investors, our stock price could drop suddenly and significantly.
A dispute with our former Chairman and CEO, Mr. Kiani, with respect to his Amended Employment Agreement could be costly and adversely affect our business.
We are currently engaged in multiple legal disputes with Mr. Kiani relating to the circumstances of the termination of his employment and related issues. For additional information on the current status of our litigation with Mr. Kiani, please see Note 24, “Commitments and Contingencies”, to our accompanying consolidated financial statements included in Part IV, Item15(a) of this Annual Report on Form 10-K.
There is no guarantee that the Company will prevail in its disputes with Mr. Kiani. Those disputes could be costly and become a distraction to our management and employees and adversely affect our business. Any costs incurred to resolve these disputes, including severance or other compensation we may become obligated, or otherwise determine, to pay to Mr. Kiani, could have a material adverse effect on our financial condition.
If we lose the services of our key personnel, or if we are unable to attract and retain other key personnel, we may not be able to manage our operations or meet our growth objectives.
We are highly dependent on our senior management. We are also heavily dependent on our engineers and field sales team, including sales representatives and clinical specialists. We do not maintain any “key person” life insurance policies with respect to any of our key personnel.
To the extent that key personnel depart, we may be required to bring on new hires that require training and take time before they achieve full productivity. New employees may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. In general, our key personnel may terminate their employment at any time and for any reason without notice, unless the individual is a participant in our 2007 Severance Protection Plan, in which case the individual has agreed to provide us with six months’ notice if such individual decides to voluntarily resign.
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and its financial condition and results of operations.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have credit agreements or arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.
The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. These could include, but may not be limited to, the following:
•delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets;
•loss of access to revolving existing credit facilities or other working capital sources and/or the inability to refund, roll over or extend the maturity of, or enter into new credit facilities or other working capital resources;
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•potential or actual breach of contractual obligations that require us to maintain letters or credit or other credit support arrangements;
•potential or actual breach of financial covenants in our credit agreements or credit arrangements;
•potential or actual cross-defaults in other credit agreements, credit arrangements or operating or financing agreements; or
•termination of cash management arrangements and/or delays in accessing or actual loss of funds subject to cash management arrangements.
Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our financial and/or contractual obligations or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.
In addition, any further deterioration in the macro-economic economy or financial services industry could lead to losses or defaults by our customers or suppliers, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition. For example, a customer may fail to make payments when due, default under their agreements with us, become insolvent or declare bankruptcy, or a supplier may determine that it will no longer deal with us as a customer. In addition, a customer or supplier could be adversely affected by any of the liquidity or other risks that are described above as factors that could result in material adverse impacts on our company, including but not limited to delayed access or loss of access to uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution. Any customer or supplier bankruptcy or insolvency, or the failure of any customer to make payments when due, or any breach or default by a customer or supplier, or the loss of any significant supplier relationships, could result in material losses to our company and may have material adverse impacts on our business.
Future changes in accounting pronouncements and tax laws, or the interpretation thereof, could have a significant impact on our reported results, and may affect our historical reporting of previous transactions.
New accounting pronouncements or taxation rules, and evolving interpretations thereof, have occurred and are likely to occur in the future. Future changes made by new accounting standards may apply prospectively or retrospectively, depending on the method of adoption, and may recast previously reported results. For additional information related to the impact of new accounting pronouncements, please see Note 2, “Summary of Significant Accounting Policies”, to our accompanying consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
In addition, future changes to the U.S. tax code and its regulations could have a material impact on our effective tax rate and the implementation of these changes could require us to make substantial changes to our business practices, allocate resources, and increase our costs, which could negatively affect our business, results of operations and financial condition. For example, the Trump administration has proposed various U.S. federal tax law changes, which if enacted could have a material impact on our business, cash flows, financial condition or results of operations. In addition, it is uncertain if and to what extent various states will conform to federal tax laws. Future tax reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.
The OECD (Organization for Economic Co-operation and Development) has proposed a global minimum tax of 15% of reported profits (Pillar Two) that has been agreed upon in principle by over 140 countries. The OECD continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. A number of countries have utilized the administrative guidance as a starting point for legislation that became effective January 1, 2024. We are continuing to evaluate the potential impact on future periods of Pillar Two, pending legislative adoption by individual countries.
Our retirement and post-retirement pension benefit plans are subject to financial market risks that could adversely affect our future results of operations and cash flows.
We sponsor several defined benefit plans with post-retirement benefits to certain employees in certain international markets. These defined benefit plans are funded with trust assets invested in a diversified portfolio of securities and other investments. Changes in interest rates, mortality rates, early retirement rates, investment returns, discount rates and the market value of plan assets could affect the funded status of our defined benefit plan and post-retirement benefit obligations, causing volatility in the net periodic benefit cost and future funding requirements of the plans. A significant increase in our obligations or future funding requirements could have a negative impact on our results of operations and cash flows from operations.
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We are involved, and may become involved in the future, in disputes and other legal or regulatory proceedings that, if adversely decided or settled, could materially and adversely affect our business, financial condition and results of operations.
We are, and may in the future become, party to litigation, regulatory proceedings or other disputes. In general, claims made by or against us in disputes and other legal or regulatory proceedings can be expensive and time-consuming to bring or defend against, requiring us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations. These potential claims may include, but are not limited to personal injury and class action lawsuits, intellectual property claims and regulatory investigations relating to the advertising and promotional claims about our products and employee claims against us based on, among other things, discrimination, harassment or wrongful termination. In addition, we may become subject to claims against companies we acquire based on circumstances arising prior to the acquisition, and the sellers of the acquired company may have no obligation to reimburse us for any resulting damages or expenses.
Due to the complexity of our business and the variety of risks that we face, our internal risk mitigation policies and procedures may not always be sufficient to allow us to identify issues and take corrective action before a claim, lawsuit or regulatory action is initiated against us. Failure to detect and remediate issues at an early stage could have a material adverse effect on our business and result in increased liability in any ensuing proceeding.
Any litigation, proceedings or dispute, even those without merit, may divert our financial and management resources that would otherwise be used to benefit the future performance of our operations. Any adverse determination against us in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on our business, financial condition and results of operations.
Changes to government immigration regulations may materially affect our workforce and limit our supply of qualified professionals, or increase our cost of securing workers.
We recruit professionals on a global basis and must comply with the immigration laws in the countries in which we operate, including the U.S. Some of our employees are working under Masimo-sponsored temporary work visas, including H1-B visas. Recent changes and uncertainty in U.S. immigration policy, including potential reductions in available H1-B visas and increased scrutiny of work visa applications, may limit our ability to hire and retain skilled personnel. Statutory law limits the number of new H1-B temporary work permit petitions that may be approved in a fiscal year. Furthermore, there is a possibility that the current U.S. immigration visa program may be significantly overhauled, and the number of H1-B visas available, as well as the process and cost to obtain them, may be subject to significant change.
Any resulting changes to this visa program could impact our ability to recruit, hire and retain qualified skilled personnel. If we are unable to obtain work visas in sufficient quantities or at a sufficient rate for a significant period of time, our business, operating results and financial condition could be adversely affected.
The risks inherent in operating internationally, including the purchase, sale and shipment of our components and products across international borders, may adversely impact our business, financial condition and results of operations.
We currently derive approximately 37% of our net sales from international operatio ns. 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. The sale and shipment of our products across international borders, as well as the purchase of materials and components from international sources, subject us to extensive U.S. and foreign governmental trade regulations, including those related to duties, tariffs and conflict minerals. Compliance with such regulations is costly and we could be exposed to potentially significant penalties, fines and interest if we are found not to be in compliance. Any failure to comply with applicable legal and regulatory obligations could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments, restrictions on certain business activities, and exclusion or debarment from government contracting. We have historically engaged in transactions with entities related to or located in countries subject to certain U.S. export restrictions. For example, we have had sales of medical products destined for Iran. Although these activities have not been financially material to our business, financial condition or results of operations, and were undertaken in accordance with general licenses authorizing such activities issued by the U.S. Treasury Department’s Office of Foreign Assets Control, we may not be successful in ensuring compliance with limitations or restrictions on business in Iran or any other countries subject to economic sanctions and embargoes imposed by the U.S. Additionally, the export of U.S. technology or goods manufactured in the U.S. to some jurisdictions requires special U.S. export authorization or local market controls that may be influenced by factors, including political dynamics, outside our control. Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of our shipping, manufacturing and sales activities.
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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. Global trade policy continues to evolve and the ultimate impact of recent developments with respect to U.S. tariffs is unclear. On February 20, 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA). Following the Supreme Court’s decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. 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. 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.
In addition, our international opera tions expose us and our representatives, agents and distributors to risks inherent in operating in foreign jurisdictions. These risks include, but are not limited to:
•the imposition of additional U.S. and foreign governmental controls or regulations;
•the imposition of costly and lengthy new export licensing requirements;
•a shortage of high-quality sales people and distributors;
•the loss of any key personnel who possess proprietary knowledge, or who are otherwise important to our success in certain international markets;
•changes in duties and tariffs, license obligations and other non-tariff barriers to trade;
•the imposition of new trade restrictions;
•the imposition of restrictions on the activities of foreign agents, representatives and distributors;
•compliance with foreign tax laws, regulations and requirements;
•pricing pressure;
•changes in foreign currency exchange rates;
•laws and business practices favoring local companies;
•political instability and actual or anticipated military or political conflicts, including the on-going conflict between Ukraine and Russia, the global impact of restrictions and sanctions imposed on Russia, the instability in Venezuela and the conflict between Israel-Palestine-Iran;
•financial and civil unrest worldwide;
•outbreaks of illnesses, pandemics or other local or global health issues;
•the inability to collect amounts paid by foreign government customers to our appointed foreign agents;
•longer payment cycles, increased credit risk and different collection remedies with respect to receivables; and
•difficulties in enforcing or defending intellectual property rights.
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The U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws in non-U.S. jurisdictions generally prohibit companies and their intermediaries from promising or making improper payments to foreign officials for the purpose of obtaining an advantage to secure or retain business. Because of the predominance of government-sponsored healthcare systems around the world, many of our customer relationships outside of the U.S. are with governmental entities and are therefore subject to such anti-bribery laws. We have adopted policies and practices that help us ensure compliance with these anti-bribery laws. However, such policies and practice may require us to invest in additional monitoring resources or forgo certain business opportunities in order to ensure global compliance with these laws. Additionally, any alleged or actual violation could subject us to government scrutiny, severe criminal or civil fines, or sanctions on our ability to export product outside the U.S., which could adversely affect our reputation and financial condition.
Any material decrease in our international sales would adversely affect our business, financial condition and results of operations.
The laws of foreign countries may not adequately protect our intellectual property rights.
Intellectual property protection laws in foreign countries differ substantially from those in the U.S. If we fail to apply for intellectual property protection in foreign countries, or if we cannot adequately protect our intellectual property rights in these foreign countries, our competitors may be able to compete more effectively against us, which could adversely affect our competitive position, as well as our business, financial condition and results of operations.
Our operations may be adversely impacted by our exposure to risks related to foreign currency exchange rates.
We market our products in certain foreign markets through our subsidiaries and other international distributors. As a result, events that result in global economic uncertainty could significantly affect our results of operations in the form of gains and losses on foreign currency transactions and potential devaluation of the local currencies of our customers relative to the U.S. Dollar.
While a majority of our sales are transacted in U.S. Dollars, some of our sales agreements with foreign customers provide for payment in currencies other than the U.S. Dollar. These foreign currency revenues, when converted into U.S. Dollars, can vary depending on the approximation of the exchange rates applied during a respective period. Similarly, certain of our foreign subsidiaries transact business in their respective country’s local currency, which is also their functional currency. In addition, certain production costs related to our manufacturing operations are denominated in local currency. As a result, expenses of these foreign subsidiaries and certain production costs, when converted into U.S. Dollars, can vary depending on average monthly exchange rates during a respective period.
We are also exposed to foreign currency gains or losses on outstanding foreign currency denominated receivables and payables, as well as cash deposits. When converted to U.S. Dollars, these receivables, payables and cash deposits can vary depending on the monthly exchange rates at the end of the period. In addition, certain intercompany transactions may give rise to realized and unrealized foreign currency gains or losses based on the currency underlying such intercompany transactions. Accordingly, our operating results are subject to fluctuations in foreign currency exchange rates.
The balance sheets 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 operations and cash flows are translated into U.S. Dollars using an approximation of the average monthly exchange rates applicable during the period. Any foreign currency 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).
We currently do not hedge our foreign currency exchange rate risk. As a result, changes in foreign exchange rates could have a material adverse effect on our business, financial condition and results of operations. For additional information related to our foreign currency exchange rate risk, please see “Quantitative and Qualitative Disclosures about Market Risk” in Part I, Item 3 of this Annual Report on Form 10-K.
We currently manufacture our products at a limited number of locations and any disruption to, expansion of, or changes in trade programs related to such manufacturing operations could adversely affect our business, financial condition and results of operations.
We rely on manufacturing facilities in North America, the Middle East and Asia that may be affected by natural or man-made disasters. Earthquakes are of particular significance since some of our facilities are located in earthquake-prone areas. We are also vulnerable to damage from other types of disasters, including power loss, attacks from extremist or terrorist organizations, epidemics, communication failures, fire, floods, hurricanes and similar events. Our facilities and the manufacturing equipment we use to produce our products would be difficult to replace and could require substantial time to repair if significant damage were to result from any of these occurrences.
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If one of our manufacturing facilities was affected by a natural or man-made disaster, we would be forced to rely on third-party manufacturers if we could not shift production to our other manufacturing facilities. Furthermore, our insurance for damage to our property and the disruption of our business from casualties may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. If the lease for any of our leased facilities is terminated, we are unable to renew any of our leases or we are otherwise forced to seek alternative facilities, or if we voluntarily expand one or more of our manufacturing operations to new locations, we may incur additional transition costs and experience a disruption in the supply of our products until the new facilities are available and operating. Additionally, we have occasionally experienced seasonality and other shortages among our manufacturing workforce, and if we continue to experience such seasonality or other workforce shortages or otherwise have issues retaining employees or contractors at our manufacturing facilities, we may not be able to meet our customers’ demands.
Our global manufacturing and distribution are dependent upon our manufacturing facilities in multiple countries, and the expedient importation of raw materials and exportation of finished goods between these facilities. Undue delays and/or closures of cross-border transit facilities, or any restrictions by local governments related to the movement of goods to or from the U.S., may adversely affect our ability to fulfill orders and supply our customers, as well as adversely impact our business, operating results and financial condition.
In addition, delays and closures of shipping ports, or ports of entry into and out of the U.S., including as a result of labor strikes or shortages, may delay our ability to fulfill order and supply of our products, which could also adversely impact our business, operating results and financial condition.
Our manufacturing facilities in Mexico are authorized to operate under the Mexican Maquiladora (IMMEX) program. The IMMEX program allows us to import certain items from the U.S. into Mexico duty-free, provided that such items, after processing, are exported from Mexico within a stipulated timeframe. Maquiladora status, which is renewed periodically, is subject to various restrictions and requirements, including compliance with the terms of the IMMEX program and other local regulations. Failure to comply with the IMMEX program regulations, including any changes thereto, could increase our manufacturing costs and adversely affect our business, operating results and financial condition.
If we do not accurately forecast customer demand, we may hold suboptimal inventory levels that could adversely affect our business, financial condition and results of operations.
If we are unable to meet the demand of our customers, our customers may cancel orders or purchase products from our competitors, which could reduce our revenue and profitability. Conversely, if product demand decreases, we may be unable to timely adjust our manufacturing cost structure, resulting in excess capacity, which would lower profitability. Similarly, if we are unable to forecast demand accurately, we could be required to record charges related to excess or obsolete inventory, which would also lower our profitability. Our business is influenced by many factors, including but not limited to: new product releases, acquisitions, regulatory approvals, holiday schedules, hospital census, the timing of the influenza season, among many other factors.
In addition, we may experience seasonal demand for our products. For example, revenues in the third quarter of our fiscal years have generally 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 products. Any shortfalls in expected revenue due to a mismatch in supply of and demand for our products could cause our operating results to suffer significantly, and seasonal or similar variances may also result in fluctuations in our revenues.
If we fail to comply with the reporting obligations of the Exchange Act or if we fail to maintain adequate internal control over financial reporting, our business, results of operations and financial condition and investors’ confidence in us could be adversely affected.
We are required to prepare and disclose certain information under the Exchange Act, in a timely manner and meet our reporting obligations in their entirety, and our failure to do so could subject us to penalties under federal securities laws and regulations of The Nasdaq Stock Market LLC, expose us to lawsuits and restrict our ability to access financing on favorable terms, or at all.
If we fail to maintain adequate internal controls over financial reporting, we may not be able to conclude on an on-going basis that we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act. Moreover, any material weakness in our internal control environment could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business, negatively impact the trading price of our stock, and adversely affect investors’ confidence in our company and our ability to access capital markets for financing.
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Changing laws and increasingly complex corporate governance and public disclosure requirements could have an adverse effect on our business and operating results.
Changing laws, regulations and standards relating to corporate governance and public disclosure have created, and will create, additional compliance requirements for us. Complying with these rules and regulations has increased and will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business, financial condition and results of operations.
We may also need to hire additional employees or engage outside consultants to comply with these requirements, which will increase our costs and expenses. To maintain high standards of corporate governance and public disclosure, we have invested in, and intend to continue to invest in, reasonably necessary resources to comply with evolving standards.
Our stockholders in certain instances have not approved our advisory vote on named executive officer compensation. If we are involved in a lawsuit related to compensation matters or any other matters not covered by our directors’ and officers’ liability insurance, we may incur significant expenses in defending against such lawsuits, or be subject to significant fines or required to take significant remedial actions, each of which could adversely affect our business, financial condition and results of operations.
If product liability claims are brought against us, we could face substantial liability and costs.
Our products expose us to product liability claims and product recalls, including, but not limited to, those that may arise from unauthorized off-label use, malfunctions, design flaws or manufacturing defects related to our products or the use of our products with incompatible components or systems. In addition, as we continue to expand our product portfolio, we may enter or create new markets, which may expose us to additional product liability risks.
We cannot be certain that our product liability insurance will be sufficient to cover any or all damages for product liability claims that may be brought against us in the future. Furthermore, we may not be able to obtain or maintain insurance in the future at satisfactory rates or in adequate amounts to protect us against any product liability claims.
Additionally, the laws and regulations regarding product liability are constantly evolving, both through the passage of new legislation at the state and federal levels and through new interpretations of existing legislation. As the legal and regulatory landscape surrounding product liability change, we may become exposed to greater liability than currently anticipated.
Any losses that we may suffer from product liability claims, and the effect that any product liability litigation may have upon the reputation and marketability of our technology and products, together with the corresponding diversion of the attention of our key employees, may subject us to significant damages and could adversely affect our business, financial condition and results of operations.
We may incur environmental and personal injury liabilities related to certain hazardous materials used in our operations.
Certain manufacturing processes for our products may involve the storage, use, generation and disposal of certain hazardous materials and wastes, including silicone adhesives, solder and solder paste, sealants, epoxies and various solvents such as methyl ethyl ketone, acetone and isopropyl alcohol. As a result, we are subject to certain environmental laws, as well as certain other laws and regulations, that restrict the materials that can be used in our products or in our manufacturing processes. For example, products that we sell in Europe are subject to regulation in the EU markets under the Restriction of the Use of Hazardous Substances Directive (RoHS). RoHS prohibits companies from selling products that contain certain hazardous materials in EU member states. In addition, the EU’s Registration, Evaluation, Authorization, and Restriction of Chemicals Directive also restricts substances of very high concern in products. Compliance with such regulations may be costly and, therefore, we may incur significant costs to comply with these laws and regulations.
In addition, new environmental laws may further affect how we manufacture our products, how we use, generate or dispose of hazardous materials and waste, or further affect what materials can be used in our products. Any required changes to our operations or products may increase our manufacturing costs, detrimentally impact the performance of our products, add greater testing lead-times for product introductions or have other similar effects.
In connection with our research and manufacturing activities, we use, and our employees may be exposed to, materials that are hazardous to human health, safety or the environment. The risk of accidental injury to our employees or contamination from these materials cannot be eliminated, and we could be held liable for any resulting damages, the related liability for which could exceed our reserves. We do not specifically insure against environmental liabilities. If an enforcement action were to occur, our reputation and our business and financial condition may be harmed, even if we were to prevail or settle the action on terms favorable to us.
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We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.
Increased global cybersecurity vulnerabilities, cybersecurity threats and sophisticated and targeted cybersecurity attacks pose a risk to the security of our systems and networks, including the confidentiality, availability and integrity of any underlying information and data, and those of our customers, partners, suppliers and third-party service providers. Recent global conflicts have increased the risk of cyberattacks targeting healthcare and technology companies, including ransomware and data breaches. Our ability to effectively manage and maintain our internal business information, and to ship products to customers and invoice them on a timely basis, depends significantly on our enterprise resource planning system and other information systems.
Portions of our information technology systems may experience interruptions, delays or cessations of service or produce errors in connection with on-going systems implementation work. In addition, interfaces between our products and our customers’ computer networks could provide additional opportunities for cybersecurity attacks on us and our customers. The techniques used to attack computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world. We have experienced a cybersecurity incident in the past, and we expect that we will continue to be subject to cybersecurity risks in the future. On April 27, 2025, we identified unauthorized activity on our on-premise network. As a result of this incident, certain of our manufacturing facilities temporarily operated at less than normal levels, and our ability to process, fulfill, and ship customer orders timely was temporarily impacted. Cybersecurity threats and attacks in particular are evolving and include, but are not limited to: malicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, misappropriation of confidential or otherwise protected information and corruption of data. There can be no assurance that our protective measures will prevent or detect security breaches that could have a significant impact on our business, reputation, financial condition and results of operations.
The failure of these systems to operate or integrate effectively with other internal, customer, supplier or third-party service provider systems and to protect the underlying information technology system and data integrity, including from cyber-attacks, intrusions or other breaches or unauthorized access of these systems, or any failure by us to remediate any such attacks or breaches, may also result in damage to our reputation or competitiveness, delays in product fulfillment and reduced efficiency of our operations, and could require significant capital investments to remediate any such failure, problem or breach, all of which could adversely affect our business, financial condition and results of operations. Failure to protect the confidentiality, integrity or availability of our systems and information contained within those systems could also subject us to significant litigation and regulatory enforcement risks in all of the jurisdictions in which we operate.
Artificial intelligence presents risks and challenges that can impact our business, including by posing security risks to our confidential information, proprietary information and personal data.
Issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences to our business operations. As with many technological innovations, artificial intelligence presents risks and challenges that could impact our business. We may adopt and integrate generative artificial intelligence tools into our systems for specific use cases reviewed by legal and information security. Our vendors may incorporate generative artificial intelligence tools into their offerings without disclosing this use to us, and the providers of these generative artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data protection and may inhibit our or our vendors’ ability to maintain an adequate level of service and experience. If we, our vendors, or our third-party partners experience an actual or perceived breach or privacy or security incident because of the use of generative artificial intelligence, we may lose valuable intellectual property and confidential information and our reputation and the public perception of the effectiveness of our security measures could be harmed. Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information, and intellectual property. Any of these outcomes could damage our reputation, result in the loss of valuable property and information, and have a material adverse effect on our business, financial condition and results of operations.
The impact of th e Russian invasion of Ukraine, ongoing instability in Venezuela and the Israel-Palestine-Iran Conflict, on t he global economy, energy supplies and raw materials is uncertain, but may prove to negatively impact our business and operations.
The short and long-term implications of Russia’s invasion of Ukraine, the instability in Venezuela and the conflict in the Middle East are difficult to predict. We continue to monitor any adverse impact that the outbreak of conflicts in Ukraine and the subsequent institution of sanctions against Russia by the U.S. and several European and Asian countries; other regional or international tensions, including ongoing uncertainty in Venezuela; along with the conflict in the Middle East, may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and customers. For example, a prolonged conflict may result in challenges associated with timely receipt of customer payments and banking transactions in Russia, increased inflation, escalating energy prices and constrained availability, and thus increasing costs, of
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raw materials. Furthermore, the conflict in the Middle East could negatively impact our operations in that region. We will continue to monitor these fluid situations and develop contingency plans as necessary to address any disruptions to our business operations as they develop.
Our stock price may be volatile, and your investment in our stock could suffer a decline in value.
There has been and could continue to be significant volatility in the market price and trading volume of equity securities. For example, our closing stock price ranged from $127.40 to $190.63 per share from December 29, 2024 to January 3, 2026. Factors contributing to our stock price volatility may include our financial performance, as well as broader economic, political and market factors. In addition to the other risk factors previously discussed in this Annual Report on Form 10-K, there are many other factors that we may not be able to control that could have a significant effect on our stock price. These include, but are not limited to:
•actual or anticipated fluctuations in our operating results or future prospects;
•our announcements or our competitors’ announcements of new products;
•the public’s reaction to our press releases, including those relating to our earnings or financial guidance, our other public announcements and our filings with the SEC;
•strategic actions by us or our competitors, such as acquisitions or restructurings;
•new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
•changes in accounting standards, policies, guidance, interpretations or principles;
•changes in our growth rates or our competitors’ growth rates;
•developments regarding our patents or proprietary rights or those of our competitors;
•on-going legal proceedings;
•our inability to raise additional capital as needed;
•concerns or allegations as to the safety or efficacy of our products;
•changes in financial markets or general economic conditions, including the effects of recession or slow economic growth in the U.S. and abroad;
•tariffs and changes to multilateral trade agreements;
•effects of public health crises, epidemics and pandemics;
•sales of stock by us or members of our management team, our Board or certain institutional stockholders;
•our evaluation of a proposed separation of our consumer businesses;
•shareholder activism;
•recent changes to our Board and management;
•changes in stock market analyst recommendations or earnings estimates regarding our stock, other comparable companies or our industry generally; and
•short selling or other hedging activity in our stock.
Therefore, you may not be able to resell your shares at or above the price you paid for them.
Our investors could experience substantial dilution of their investments as a result of subsequent exercises of our outstanding options, vesting of outstanding restricted stock units (RSUs) and performance stock units (PSUs), or the grant of future equity awards by us.
As of January 3, 2026, approximately 5.1 million shares of our common stock were reserved for issuance under our equity incentive plans, of which approximately 0.7 million shares were subject to options outstanding at such date at a weighted-average exercise price of $117.87 per share, approximately 0.6 million shares were subject to outstanding RSUs, approximately 0.1 million shares were subject to outstanding PSUs and approximately 3.7 million shares were available for future awards under our 2017 Equity Incentive Plan. To the extent outstanding options are exercised or outstanding RSUs or PSUs vest, our existing stockholders may incur dilution.
We rely on equity awards to motivate current employees and to attract new employees. The grant of future equity awards by us to our employees and other service providers may further dilute our stockholders.
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Future resales of our stock, including those by our insiders and a few investment funds, may cause our stock price to decline.
A significant portion of our outstanding shares are held by our directors, our executive officers and a few investment funds. Resales by these stockholders of a substantial number of such shares, announcements of any proposed resale of substantial amounts of our stock or the perception that substantial resales may be made, could significantly reduce the market price of our stock. Some of our directors and executive officers have entered into Rule 10b5-1 trading plans pursuant to which they have arranged to sell shares of our stock from time to time in the future. Generally, these sales require public filings. Actual or potential sales by these insiders, including those under a pre-arranged Rule 10b5-1 trading plan, could be interpreted by the market as an indication that the insider has lost confidence in our stock and reduce the market price of our stock.
We have registered and expect to continue to register shares reserved under our incentive equity plans pursuant to Registration Statements on Form S-8. All shares issued pursuant to a Registration Statement on Form S-8 can be freely sold in the public market upon issuance, subject to restrictions on our affiliates under Rule 144. If a large number of these shares are sold in the public market, the sales could reduce the trading price of our stock.
We may elect not to declare cash dividends on our stock, may elect to only pay dividends on an infrequent or irregular basis, or may elect not to make any additional stock repurchases. As a result, any return on your investment may be limited to the value of our stock. In addition, the payment of any future dividends or the repurchase of our stock might limit our ability to pursue other growth opportunities.
Our Board may from time to time declare, and we may pay, dividends on our outstanding shares in the manner and upon the terms and conditions permitted under applicable law. However, we may elect to retain all future earnings for the operation and expansion of our business, rather than paying cash dividends on our stock. In addition, under certain circumstances, our Credit Facility may limit our ability to pay cash dividends, repurchase our common stock or make other distributions to stockholders. Any payment of cash dividends on our stock will be at the discretion of our Board and will depend upon our results of operations, earnings, capital requirements, financial condition, business prospects, contractual restrictions and other factors deemed relevant by our Board. In addition, our Credit Facility places limitations on our ability to pay dividends. In the event our Board declares any dividends, there is no assurance with respect to the amount, timing or frequency of any such dividends.
Any repurchase of our common stock under the stock repurchase plan authorized by our Board in June 2022 (Repurchase Program) will be at the discretion of a committee comprised of our CEO and Chief Financial Officer, and will depend on several factors, including, but not limited to, results of operations, capital requirements, financial conditions, available capital from operations or other sources, including debt, and the market price of our common stock. In addition, any stock repurchases will be subject to an excise tax of 1% on the fair market value of net stock repurchases made after December 31, 2022. Therefore, there is no assurance with respect to the amount, price or timing of any such repurchases. We may elect to retain all future earnings for the operation and expansion of our business, rather than repurchasing additional outstanding shares. For additional information related to our Repurchase Program, please see Note 19, “Equity”, to our accompanying consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
In the event we pay dividends, or make any stock repurchases in the future, our ability to finance any material expansion of our business, including through acquisitions, investments or increased capital spending, or to fund our operations, may be limited. In addition, any repurchases we may make in the future may not prove to be at optimal prices. Our Board may modify or amend the Repurchase Program, or adopt a new stock repurchase program, at any time at its discretion without stockholder approval.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management & Strategy
Cybersecurity is integral to our risk management approach. We are reliant on information technology, and any interruption, failure, or security breach-including cybersecurity incidents-could adversely impact our operations and business continuity.
To address these risks, we maintain a comprehensive, risk-based cybersecurity program focused on protecting sensitive data and systems. Our approach includes:
•Layered Security (defense-in-Depth): Implementing multiple levels of controls to safeguard against cyber threats.
•Employee Awareness: Delivering mandatory cybersecurity training, conducting phishing simulations, and fostering a culture of vigilance.
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•Proactive Monitoring and Testing: Leveraging real-time monitoring, regular vulnerability assessments, and external audits to continuously evaluate and enhance defenses.
•Preparedness: Maintaining and testing business continuity and disaster recovery plans with scenarios such as simulated cyberattacks.
For more information on risks related to cybersecurity and data security, see Item 1A. “Risk Factors - Risks Related to Our Regulatory Environment” and “Risk Factors - General Risk Factors”. On April 27, 2025, we identified unauthorized activity on our on-premise network. As a result of this incident, certain of our manufacturing facilities temporarily operated at less than normal levels, and our ability to process, fulfill, and ship customer orders timely was temporarily impacted. We have completed restoration of our affected systems and continue to monitor our environment. We have implemented additional security measures and continue to evaluate and enhance our cybersecurity policies, procedures, and controls. We continue to evaluate and refine our cybersecurity practices to help mitigate the risk of similar incidents in the future.
Key Elements of Our Cybersecurity Program
Our cybersecurity program emphasizes:
•Threat Awareness and Risk Identification: Engaging with industry groups and third-party experts to stay ahead of emerging threats.
•Employee Training: Conducting annual training and phishing simulations to reinforce best practices.
•Advanced Safeguards: Deploying comprehensive technical measures, including firewalls, intrusion detection systems, penetration tests, anti-malware, encryption, and access controls to secure our systems and data.
•Vendor Management: Requiring contractual data protection safeguards and screening vendors for compliance during onboarding.
•Incident Response: Maintaining up-to-date response and recovery plans, validated through regular tabletop exercises.
•Compliance Standards: Adhering to recognized standards such as HITRUST, NIST CSF, ISO 27001, and PCI DSS.
•Insurance: Partnering with leading insurers to maintain cyber liability coverage.
Governance
Our Audit Committee oversees our cybersecurity program and its alignment with overall risk management. This includes monitoring cybersecurity, data privacy and IT risks.
Leadership of our cybersecurity efforts is provided by our VP, Cybersecurity & Infrastructure, a seasoned expert with over a decade of experience. This role ensures continuous program improvement and alignments with evolving threats and standards.
Our executive team, including our Chief Financial Officer and Chief Information Officer, receive regular briefings on:
•Cybersecurity trends and evolving threats;
•Program effectiveness and risk mitigation strategies; and
•Updates to regulatory and legal requirements related to data security and privacy.
These briefings ensure cybersecurity considerations are integrated into strategic decisions, resource allocation, and risk mitigation planning. In accordance with our incident response plan, any material cybersecurity incidents are promptly reported to the Audit Committee to maintain transparency and oversight.
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ITEM 2. PROPERTIES
Our U.S. corporate headquarters is located in Irvine, California. We own and or lease facilities globally that are utilized for research and development, engineering, sales, administrative, manufacturing, distribution and warehousing. The following is a summary of our material facilities:

Location |  | Ownership Status (Owned/Leased) |  | Approximate Square Footage |  | Lease Term |  | Business Segment |  | Primary Usage
Pasir Gudang, Malaysia |  | Leased |  | 329,000 |  | April 2029 |  | Healthcare |  | Manufacturing, warehousing and distribution
Irvine, California |  | Owned |  | 314,000 |  | N/A |  | Healthcare |  | Executive offices, engineering, research and development
Mexicali, Mexico |  | Leased |  | 291,700 |  | May 2027, August 2029, December 2035 |  | Healthcare |  | Manufacturing, warehousing and distribution
Irvine, California |  | Leased |  | 103,000 |  | November 2026, January 2032 |  | Healthcare |  | Sales and administrative, warehousing, manufacturing and distribution
Hudson, New Hampshire |  | Owned |  | 87,000 |  | N/A |  | Healthcare |  | Manufacturing, warehousing and distribution
Neuchatel, Switzerland |  | Owned |  | 79,000 |  | N/A |  | Healthcare |  | Sales and administrative
Oude Meer, Netherlands |  | Leased |  | 62,000 |  | January 2030 |  | Healthcare |  | Warehousing and distribution
Riyadh, Saudi Arabia |  | Leased |  | 33,000 |  | April 2026, October 2026 |  | Healthcare |  | Manufacturing, warehousing, distribution and trading
San Luis Ray, Mexico |  | Leased |  | 11,000 |  | December 2028 |  | Healthcare |  | Manufacturing, warehousing and distribution

We also lease and occupy various other facilities throughout the world to operate our business. We believe that our existing facilities are adequate to meet our needs and that existing needs and future growth can be accommodated by purchasing or leasing alternative or additional space.
ITEM 3. LEGAL PROCEEDINGS
The information set forth in Note 24, “Commitments and Contingencies” to our accompanying consolidated financial statements under the caption “Litigation” included in Part IV, Item 15(a) of this Annual Report on Form 10-K is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our stock is traded on the Nasdaq Global Select Market under the symbol “MASI”. As of January 30, 2026, the closing price of our stock was $137.33 per share, and the number of stockholders of record, excluding persons whose stock is in nominee or “street name” accounts through brokers, was 26.
Dividend Policy
We have historically not paid dividends to our stockholders. Any determination to declare and pay dividends will be made by our Board and will depend upon our results of operations, earnings, capital requirements, financial condition, business prospects, contractual restrictions and other factors deemed relevant by our Board. In addition, under certain circumstances, our credit facility may limit our ability to pay cash dividends. In the event a dividend is declared, there is no assurance with respect to the amount, timing or frequency of any such dividends. The dividend declared in 2012 was deemed to be a special dividend and there is no assurance that special dividends will be declared again during the expected term.
Stock Performance Graph
The following stock performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
The following stock performance graph compares total stockholder returns for our common stock from January 2, 2021 through January 3, 2026 against the Nasdaq Market Composite Index and Nasdaq Health Care Index, assuming a $100 investment made on January 2, 2021. Each of the two comparative measures of cumulative total return assumes reinvestment of dividends. The stock performance shown on the graph below is not necessarily indicative of future price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Masimo Corporation, the Nasdaq Market Composite Index, and
the Nasdaq Health Care Index
*$100 invested on 1/2/2021 in stock or in index, including reinvestment of dividends. Indexes calculated on month-end basis.
**During fiscal 2023, the Nasdaq Medical Equipment Index was discontinued and replaced with the Nasdaq Health Care Index.
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Stock Repurchase Programs
In June 2022, our Board approved a stock repurchase program, authorizing us to purchase up to 5.0 million shares of our common stock on or before December 31, 2027 (Repurchase Program). The Repurchase Program became effective in July 2022. We expect to fund the Repurchase Program through our available cash, cash expected to be generated from future operations, our Credit Facility and other potential sources of capital. The Repurchase Program 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. Approximately 1.1 million shares were repurchased pursuant to the Repurchase Program during the quarter ended January 3, 2026. As of January 3, 2026, 2.5 million shares remained available for repurchase pursuant to the Repurchase Program.
During the three months ended January 3, 2026, we effected stock repurchases pursuant to the Repurchase Program. Shares repurchased by us or withheld to satisfy tax withholding obligations during each fiscal month of the quarter ended January 3, 2026 were as follows:

Period |  | Total Number of Shares Purchased |  | 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) |  |
September 27, 2025 to October 25, 2025 |  | 1,131,017 |  |  | $ | 146.58 |  |  | 1,131,017 |  |  | 2,524,819 |  |  |
October 26, 2025 to November 22, 2025 |  | — |  |  | — |  |  | — |  |  | 2,524,819 |  |  |
November 23, 2025 to January 3, 2026 |  | — |  |  | — |  |  | — |  |  | 2,524,819 |  |  |
Total |  | 1,131,017 |  |  | $ | 146.58 |  |  | 1,131,017 |  |  | 2,524,819 |  |  |

_____________
(1) In June 2022, our board of directors authorized the Repurchase Program, whereby we may repurchase up to 5.0 million shares of our common stock. The Repurchase Program 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.
Issuer Repurchases and Withholdings of Equity Securities
During the year ended January 3, 2026, we satisfied certain U.S. federal and state tax withholding obligations due upon the vesting of equity grants by withholding 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 actually issued in connection with such award. Shares withheld to satisfy tax withholding obligations for the years ended January 3, 2026 and December 28, 2024 were as follows (in millions, except shares withheld and per share amounts):

|  | Three Months Ended |  | Year Ended |  |
|  | January 3, 2026 |  | December 28, 2024 |  | January 3, 2026 |  | December 28, 2024 |  |
Shares withheld |  | 29,687 |  |  | 34,976 |  |  | 109,323 |  |  | 80,643 |  |  |
Average cost per share |  | $ | 145.62 |  |  | $ | 166.69 |  |  | $ | 164.22 |  |  | $ | 149.58 |  |  |
Value of shares withheld |  | $ | 4.3 |  |  | $ | 5.8 |  |  | $ | 18.0 |  |  | $ | 12.1 |  |  |

ITEM 6. [RESERVED.]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this discussion together with the financial statements, related notes and other financial information included in this Annual Report on Form 10-K. The following discussion may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under Item 1A—“Risk Factors” and elsewhere in this Annual Report on Form 10-K. These risks could cause our actual results to differ materially from any future performance suggested below.
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Recent Developments
On February 16, 2026, the Company entered into the Merger Agreement with Danaher and Merger Sub, pursuant to which, among other things, the Merger will occur, whereby Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of Danaher. As set forth in the Merger Agreement, at the effective time of the Merger, each share of common stock of the Company (other than any shares owned by Parent, Merger Sub or the Company or any of their wholly owned subsidiaries or shares in respect of which appraisal has been duly demanded, and not effectively withdrawn or otherwise waived or lost, pursuant to Section 262 of the General Corporation Law of the State of Delaware) issued and outstanding immediately prior to the effective time of the Merger will be automatically converted into the right to receive $180.00 in cash, without interest. The Merger is expected to close in the second half of 2026, subject to customary closing conditions, including approval by our stockholders and the receipt of required regulatory approvals.
If the Merger is completed, our common stock will be delisted from the Nasdaq Stock Market and deregistered under the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable following the effective time.
In connection with the proposed Merger, we have incurred significant costs in the first quarter of fiscal 2026 and expect to continue to incur additional financial advisory, legal, accounting, and other professional fees prior to the completion of the Merger, which could be significant.
Additional information about the Merger Agreement and the Merger will be set forth in the Company’s Definitive Proxy Statement on Schedule 14A that will be filed with the SEC.
Executive Overview
We are a global medical technology company that develops and produces a wide array of industry-leading monitoring technologies, including innovative measurements technologies, sensors, and patient monitors. Powered by the Masimo Hospital Automation™ and Masimo SafetyNet® platforms, Masimo connectivity, automation, telehealth and telemonitoring solutions are improving and automating patient care in the hospital.
Healthcare
Our healthcare business develops, manufactures and markets a variety 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 products to hospitals, emergency medical service (EMS) providers, home care providers, physician offices, veterinarians, long-term care facilities and through our direct sales force, distributors and original equipment manufacturer (OEM) partners, such as GE Healthcare, Hillrom, Mindray, Philips, Physio-Control, 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, and telehealth solutions.
Our measurement technologies are available on many types of devices, from bedside hospital monitors like 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 like 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.
Outlook and Strategy
We are excited about the long-term prospects of patient care, hospital automation® and advancing our initiatives of expanding patient monitoring through the hospital, and into other growth markets such as outpatient and ambulatory surgery centers. The widespread caregiver shortage demands have created transformative changes in the healthcare space. Patients continue to gravitate toward products that can extend the reach of physicians without any compromise on the quality of care.
We continue to seek out differentiated growth opportunities to cross-leverage technologies, while continuing to advance our integration technologies into the hospital to advance hospital automation® connectivity and cloud-based technologies.
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Economic Trends and Developments Affecting Our Business
The healthcare market we operate in is highly competitive, dynamic, and experienced a number of headwinds over the past two years. These included, but were not limited to supply chain volatility, inflationary pressures, interest rates volatility, fluctuations in energy costs, recessionary trends, foreign currency fluctuations, tariffs, increases in unemployment rates, geo-political uncertainty and the U.S. government shutdown. All of these have affected the global economic environment costs, along with the healthcare facility spending trends and consumer spending behaviors which ultimately affect our performance. While we 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. In the second quarter of 2025, we announced that we had entered into a definitive agreement to sell our non-healthcare business, and subsequently in the third quarter of 2025, completed the sale. Please see “Separation of Non-Healthcare Operations” under Part I, Item 1—“Business” for additional details on the divestiture.
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.
On February 20, 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA). Following the Supreme Court’s decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business.
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 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, inflationary and recessionary pressures, among many other factors.
Historically, revenues in the third quarter of each fiscal year have represented a lower percentage of revenue 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.
Contract Conversions and Installations
During the second quarter and continuing into the third and fourth quarters of 2023, we achieved substantial market share gains through contract acquisitions as new hospital customers continued to switch to Masimo technology at rapid rates. However, conversions of new customers who have contracted to switch to Masimo were less than expected due to continued labor shortages in hospitals and our OEM partners not being able to provide the patient monitoring equipment needed to complete the installations in a timely manner; thereby impacting our second, third and fourth quarter 2023 healthcare revenues. The installation challenges we experienced in fiscal 2023 increased our backlog systems installations into fiscal 2024, which carried over into fiscal 2025. In fiscal 2025, we achieved record level of new customer conversions along with expanded hospital agreements with our existing customers, which has added to the installation backlogs.
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While we previously faced obstacles such as labor shortages in hospitals, our 2025 performance serves as a positive indication that our growth strategy is working. We continue to be vigilant in our efforts to address the labor shortages, including engaging additional third-party installation service providers. Our hospital business continued to be strong, as our growth in contracting reflects.
Ongoing Russian-Ukraine Conflict, Israel-Palestine-Iran Conflicts
We continue to monitor the uncertainty and geopolitical instability resulting from the ongoing Russia-Ukraine conflict, the Israel-Palestine conflict, and the Israel-Iran conflict, including the involvement of the United States, 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 EU 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. Future orders for Russia have been halted indefinitely. For the three and twelve months ended January 3, 2026, sales derived from customers based in Russia represented an immaterial percentage of our total revenue.
Results of Operations for the Years Ended January 3, 2026 and December 28, 2024
The following table sets forth, for the periods indicated, our results of operations expressed as U.S. Dollar amounts and as a percentage of revenue:

| Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  |  |
| Amount (in millions) |  | % of Revenue |  | Amount (in millions) |  | % of Revenue |  |  |  |  |
Revenue: |  |  |  |  |  |  |  |  |  |  |  |
Product revenue | $ | 1,408.4 |  |  | 92.2 | % |  | $ | 1,281.1 |  |  | 91.8 | % |  |  |  |  |
Related party revenue | 118.5 |  |  | 7.8 |  |  | 114.1 |  |  | 8.2 |  |  |  |  |  |
Total revenue | 1,526.9 |  | 100.0 |  |  | 1,395.2 |  | 100.0 |  |  |  |  |  |
Cost of goods sold | 581.7 |  |  | 38.1 |  |  | 600.9 |  |  | 43.1 |  |  |  |  |  |
Gross profit | 945.2 |  |  | 61.9 |  |  | 794.3 |  |  | 56.9 |  |  |  |  |  |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Selling, general and administrative | 506.0 |  |  | 33.1 |  |  | 548.6 |  |  | 39.3 |  |  |  |  |  |
Research and development | 126.4 |  |  | 8.3 |  |  | 182.2 |  |  | 13.1 |  |  |  |  |  |
Litigation settlements | 2.8 |  |  | 0.2 |  |  | 0.5 |  |  | — |  |  |  |  |  |
Total operating expenses | 635.2 |  |  | 41.6 |  |  | 731.3 |  |  | 52.4 |  |  |  |  |  |
Operating income | 310.0 |  |  | 20.3 |  |  | 63.0 |  |  | 4.5 |  |  |  |  |  |
Non-operating loss | (37.4) |  |  | (2.4) |  |  | (41.2) |  |  | (3.0) |  |  |  |  |  |
Income from continuing operations before provision for income taxes | 272.6 |  |  | 17.9 |  |  | 21.8 |  |  | 1.5 |  |  |  |  |  |
Provision for income taxes | 64.9 |  |  | 4.3 |  |  | 5.6 |  |  | 0.4 |  |  |  |  |  |
Net income from continuing operations, net of tax | 207.7 |  |  | 13.6 |  |  | 16.2 |  |  | 1.1 |  |  |  |  |  |
Net (loss) from discontinued operations, net of tax | (359.2) |  |  | (23.5) |  |  | (321.1) |  |  | (23.0) |  |  |  |  |  |
Net (loss) | $ | (151.5) |  |  | (9.9) | % |  | $ | (304.9) |  |  | (21.9) | % |  |  |  |  |

Comparison of the Year ended January 3, 2026 to the Year ended December 28, 2024
Revenue. Revenue is comprised of hospital products and services. The following table details our revenues for each of the years ended January 3, 2026 and December 28, 2024:

|  | Revenue ( in millions, except percentages)
|  | Year Ended January 3, 2026 |  | Percentage of Revenues |  | Year Ended December 28, 2024 |  | Percentage of Revenues |  | Increase/ (Decrease) |  | Percentage Change
|  | $1,526.9 |  | 100.0% |  | $1,395.2 |  | 100.0% |  | $131.7 |  | 9.4%

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Revenue increased 9.4%, or $131.7 million to $1,526.9 million for the year ended January 3, 2026, compared to $1,395.2 million for the year ended December 28, 2024. This increase was driven by higher growth in consumable sales, and the additional selling week over the prior year due to our conventional 52/53 fiscal calendar. Revenues were favorably impacted by approximately $0.9 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 $113.3 million, or 9.0%, to $1,376.9 million for the year ended January 3, 2026, compared to $1,263.6 million for the year ended December 28, 2024. Revenues from our OEM channel increased $18.4 million, or 14.0%, to $150.0 million for the year ended January 3, 2026, as compared to $131.6 million for the year ended December 28, 2024.
During the year ended January 3, 2026, we shipped approximately 270,600 noninvasive technology board monitors, an increase of approximately 36,000 units, or 15.3%, over the year ended December 28, 2024.
Gross Profit. Gross profit consists of revenue less cost of goods sold. Cost of goods sold includes labor, material, overhead and other similar costs related to the production, supply, distribution and support of our products. Our gross profit for the years ended January 3, 2026 and December 28, 2024 were as follows:

Gross Profit (in millions, except percentages)
Year Ended January 3, 2026 | Percentage of Revenues | Year Ended December 28, 2024 | Percentage of Revenues | Increase/ (Decrease) | Percentage Change
$945.2 | 61.9% | $794.3 | 56.9% | $150.9 | 19.0%

Gross profit increased $150.9 million to $945.2 million for the year ended January 3, 2026, from $794.3 million for the year ended December 28, 2024, primarily due to increased sales volumes. Gross profit as a percentage of revenue, increased to 61.9% for the year ended January 3, 2026, from 56.9% for the year ended December 28, 2024.
The increase in gross profit for the year ended January 3, 2026, compared to the year ended December 28, 2024, was also driven by the absence of certain strategic realignment initiative charges recognized for the year ended December 28, 2024, which did not reoccur for the year ended January 3, 2026. As a result of the strategic realignment initiative, improved manufacturing efficiencies from the transition of high volume sensor manufacturing to Malaysia, and a beneficial product mix, the gross profit increased during the year ended January 3, 2026.
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 and promotion costs, professional fees related to legal, accounting and other outside services, public company costs and other corporate expenses. Selling, general and administrative expenses for the years ended January 3, 2026 and December 28, 2024 were as follows:

Selling, General and Administrative (in millions, except percentages)
Year Ended January 3, 2026 | Percentage of Revenues | Year Ended December 28, 2024 | Percentage of Revenues | Increase/ (Decrease) | Percentage Change
$506.0 | 33.1% | $548.6 | 39.3% | $(42.6) | (7.8)%

Selling, general and administrative expenses decreased $42.6 million, or 7.8%, to $506.0 million for the year ended January 3, 2026, from $548.6 million for the year ended December 28, 2024. This decrease was primarily attributable to lower legal and professional fees of approximately $31.0 million, lower occupancy, offices and other expenses of approximately $16.7 million, and lower advertising and marketing-related expenses of approximately $12.4 million, which were offset by higher compensation and other employee-related costs of approximately $16.4 million. Furthermore, the expenses for the year ended January 3, 2026, increased by approximately $5.7 million related to the cybersecurity event offset partially by insurance reimbursement of approximately $4.8 million.
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The decrease in selling, general and administrative expenses for the year ended January 3, 2026, compared to the year ended December 28, 2024, was also driven by the absence of certain strategic realignment charges recognized for the year ended December 28, 2024, which did not reoccur for the year ended January 3, 2026.
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 years ended January 3, 2026 and December 28, 2024 were as follows:

Research and Development (in millions, except percentages)
Year Ended January 3, 2026 | Percentage of Revenues | Year Ended December 28, 2024 | Percentage of Revenues | Increase/ (Decrease) | Percentage Change
$126.4 | 8.3% | $182.2 | 13.1% | $(55.8) | (30.6)%

Research and development expenses decreased $55.8 million, or 30.6%, to $126.4 million for the year ended January 3, 2026 from $182.2 million for the year ended December 28, 2024, primarily due to lower occupancy, offices and other expenses of approximately of $33.5 million, lower compensation and employee-related costs of approximately $22.0 million, lower patent and other amortization costs of approximately of $5.8 million, and lower professional fees of approximately $0.3 million, which were partially offset by higher engineering project costs of approximately $5.8 million.
The decrease in research and development expenses for the year ended January 3, 2026, compared to the year ended December 28, 2024, was also driven by the absence of certain strategic realignment charges recognized for the year ended December 28, 2024, which did not reoccur for the year ended January 3, 2026.
Litigation settlements. Litigation settlements consist primarily of litigation related settlements and other legal expenses. Litigation settlements for the years ended January 3, 2026 and December 28, 2024 were as follows:

Litigation Settlements (in millions, except percentages)
Year Ended January 3, 2026 | Percentage of Revenues | Year Ended December 28, 2024 | Percentage of Revenues | Increase/ (Decrease) | Percentage Change
$2.8 | 0.2% | $0.5 | —% | $2.3 | 460.0%

Litigation settlements increased $2.3 million to $2.8 million for the year ended January 3, 2026, as compared to $0.5 million for the year ended December 28, 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 years ended January 3, 2026 and December 28, 2024 was as follows:

Non-operating Loss (in millions, except percentages)
Year Ended January 3, 2026 | Percentage of Revenues | Year Ended December 28, 2024 | Percentage of Revenues | (Decrease)/ Increase | Percentage Change
$(37.4) | (2.4)% | $(41.2) | (3.0)% | $3.8 | (9.2)%

Non-operating loss was $37.4 million for the year ended January 3, 2026 compared to $41.2 million of non-operating loss for the year ended December 28, 2024. This reduction in non-operating loss of approximately $3.8 million was primarily due to a decrease of interest expense incurred under our various lines of credit and the borrowing facilities of approximately $33.2 million, which was offset by $3.4 million of interest income on cash deposits in combination with approximately $7.6 million of net realized and unrealized foreign currency denominated transactions during the year ended January 3, 2026.
Provision for Income Taxes. Our provision for income taxes for the years ended January 3, 2026 and December 28, 2024 were as follows:

(Benefit) Provision for Income Taxes (in millions, except percentages)
Year Ended January 3, 2026 | Percentage of Revenues | Year Ended December 28, 2024 | Percentage of Revenues | Increase/ (Decrease) | Percentage Change
$64.9 | 4.3% | $5.6 | 0.4% | $59.3 | 1,058.9%

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Our provision for income taxes was $64.9 million for the year ended January 3, 2026 compared to $5.6 million for the year ended December 28, 2024. Our effective tax rate was 23.8% for the year ended January 3, 2026 compared to 25.7% for the year ended December 28, 2024. This decrease in our effective tax rate for the year ended January 3, 2026 resulted primarily from changes in geographic composition of income.
We have made no provision for U.S. income taxes or foreign withholding taxes on approximately $531.3 million in accumulated earnings from our foreign subsidiaries as we expect that such amounts will continue to be indefinitely reinvested in operations outside the U.S. Our actual future effective income tax rate will depend on various factors, including the geographic composition of our pre-tax income, the amount of excess tax benefits realized from U.S. stock-based compensation, the amount of our research and development tax credits, the deductibility of executive compensation, changes in tax laws, changes in deferred tax asset valuation allowances and the recognition and derecognition of tax benefits associated with uncertain tax positions.
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Results of Operations for the Years Ended December 28, 2024 and December 30, 2023
The following table sets forth, for the periods indicated, our results of operations expressed as U.S. Dollar amounts and as a percentage of revenue:

| Year Ended December 28, 2024 |  | Year Ended December 30, 2023
| Amount (in millions) |  | % of Revenue |  | Amount |  | % of Revenue
Revenue: |  |  |  |  |  |  |
Product revenue | $ | 1,281.1 |  |  | 91.8 | % |  | $ | 1,181.6 |  |  | 92.6 | %
Related party revenue | 114.1 |  |  | 8.2 |  |  | 93.9 |  |  | 7.4 |
Total revenue | 1,395.2 |  | 100.0 |  |  | 1,275.5 |  |  | 100.0 |
Cost of goods sold | 600.9 |  |  | 43.1 |  |  | 509.9 |  |  | 40.0 |
Gross profit | 794.3 |  |  | 56.9 |  |  | 765.6 |  |  | 60.0 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 548.6 |  |  | 39.3 |  |  | 451.3 |  |  | 35.4 |
Research and development | 182.2 |  |  | 13.1 |  |  | 130.5 |  |  | 10.2 |
Litigation settlements | 0.5 |  |  | — |  |  | 17.8 |  |  | 1.4 |
Total operating expenses | 731.3 |  |  | 52.4 |  |  | 599.6 |  |  | 47.1 |
Operating income | 63.0 |  |  | 4.5 |  |  | 166.0 |  |  | 12.9 |
Non-operating loss | (41.2) |  |  | (3.0) |  |  | (53.0) |  |  | (4.2) |
Income from continuing operations before provision for income taxes | 21.8 |  |  | 1.5 |  |  | 113.0 |  |  | 8.8 |
Provision for income taxes | 5.6 |  |  | 0.4 |  |  | 5.3 |  |  | 0.4 |
Net income from continuing operations, net of tax | 16.2 |  |  | 1.1 |  |  | 107.7 |  |  | 8.4 |
Net (loss) from discontinued operations, net of tax | (321.1) |  |  | (23.0) |  |  | (26.2) |  |  | (2.1) |
Net (loss) income | $ | (304.9) |  |  | (21.9) | % |  | $ | 81.5 |  |  | 6.3 | %

Comparison of the Year ended December 28, 2024 to the Year ended December 30, 2023

|  | Revenue ( in millions, except percentages)
|  | Year Ended December 28, 2024 |  | Percentage of Revenues |  | Year Ended December 30, 2023 |  | Percentage of Revenues |  | Increase/ (Decrease) |  | Percentage Change
|  | $1,395.2 |  | 100.0% |  | $1,275.5 |  | 100.0% |  | $119.7 |  | 9.4%

Revenue increased 9.4%, or $119.7 million to $1,395.2 million for the year ended December 28, 2024, compared to $1,275.5 million for the year ended December 30, 2023. This increase was driven by continued growth in hospital contracting both inside and outside the U.S. as well as a return to normal hospital ordering patterns after a weak prior year. Revenues were unfavorably impacted by approximately $4.9 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 $118.6 million, or 10.4%, to $1,263.6 million for the year ended December 28, 2024, compared to $1,145.0 million for the year ended December 30, 2023. Revenues from our OEM channel increased $1.1 million, or 0.8%, to $131.6 million for the year ended December 28, 2024, as compared to $130.5 million for the year ended December 30, 2023.
During the year ended December 28, 2024, we shipped approximately 234,600 noninvasive technology board monitors, a decrease of approximately 28,400 units, or 10.8%, over the year ended December 30, 2023.
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Gross Profit. Gross profit consists of revenue less cost of goods sold. Cost of goods sold includes labor, material, overhead and other similar costs related to the production, supply, distribution and support of our products. Our gross profit for the years ended December 28, 2024 and December 30, 2023 were as follows:

Gross Profit (in millions, except percentages)
Year Ended December 28, 2024 | Percentage of Revenues | Year Ended December 30, 2023 | Percentage of Revenues | Increase/ (Decrease) | Percentage Change
$794.3 | 56.9% | $765.6 | 60.0% | $28.7 | 3.7%

Gross profit increased $28.7 million to $794.3 million for the year ended December 28, 2024, from $765.6 million for the year ended December 30, 2023, primarily due to increased sales volumes offset by various charges for certain products that were earmarked “end of life” or included in the strategic realignment initiative, which are no longer going to be supported or expected to be brought to market. These inventory related charges also had a negative impact to our gross profit as a percentage of revenue, which decreased to 56.9% for the year ended December 28, 2024, from 60.0% for the year ended December 30, 2023.
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 and promotion costs, professional fees related to legal, accounting and other outside services, public company costs and other corporate expenses. Selling, general and administrative expenses for the years ended December 28, 2024 and December 30, 2023 were as follows:

Selling, General and Administrative (in millions, except percentages)
Year Ended December 28, 2024 | Percentage of Net Revenues | Year Ended December 30, 2023 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$548.6 | 39.3% | $451.3 | 35.4% | $97.3 | 21.6%

Selling, general and administrative expenses increased $97.3 million, or 21.6%, to $548.6 million for the year ended December 28, 2024 from $451.3 million for the year ended December 30, 2023. This increase was primarily attributable to higher occupancy, offices and other expenses of approximately $36.5 million, higher compensation and other employee-related costs of approximately $34.1 million, higher legal and professional fees of approximately $22.1 million, higher advertising and marketing-related expenses of approximately $4.1 million, and higher patent and other amortization costs of approximately $0.4 million.
Included within selling, general, and administrative expenses for the year ended December 28, 2024, was certain strategic realignment initiative charges of $31.0 million, primarily consisting of severance packages related to workforce reductions, facility exit costs and lease impairments, and charges for patent and license abandonments.
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 years ended December 28, 2024 and December 30, 2023 were as follows:

Research and Development (in millions, except percentages)
Year Ended December 28, 2024 | Percentage of Net Revenues | Year Ended December 30, 2023 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$182.2 | 13.1% | $130.5 | 10.2% | $51.7 | 39.6%

Research and development expenses increased $51.7 million, or 39.6%, to $182.2 million for the year ended December 28, 2024 from $130.5 million for the year ended December 30, 2023. This increase was primarily attributable to higher occupancy, offices and other expenses of approximately $30.6 million, higher compensation and other employee-related costs of approximately $17.7 million, and higher patent and other amortization costs of approximately $5.3 million, which were partially offset by lower engineering project costs of approximately $1.1 million and lower legal and professional fees of approximately $0.9 million.
Included within research and development expenses for the year ended December 28, 2024, was certain strategic realignment initiative charges of $36.0 million, primarily consisting of severance packages related to workforce reductions, the write off of capitalized research and development costs for projects and products that are no longer being supported and/or expected to be brought to market.
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Litigation settlements. Litigation settlements consist primarily of litigation related settlements and other legal expenses. Litigation settlements for the years ended December 28, 2024 and December 30, 2023 were as follows:

Litigation Settlements (in millions, except percentages)
Year Ended December 28, 2024 | Percentage of Revenues | Year Ended December 30, 2023 | Percentage of Revenues | Increase/ (Decrease) | Percentage Change
$0.5 | —% | $17.8 | 1.4% | $(17.3) | (97.2)%

Litigation settlements decreased $17.3 million to $0.5 million for the year ended January 3, 2026, as compared to $17.8 million for the year ended December 30, 2023. This decrease related to a litigation settlement of approximately $17.8 million made to Politan’s lawsuit against Masimo during the year ended December 30, 2023.
Non-operating Loss. Non-operating loss consists primarily of interest income, interest expense and foreign exchange gains and losses. Non-operating loss for the years ended December 28, 2024 and December 30, 2023 were as follows:

Non-operating Loss (in millions, except percentages)
Year Ended December 28, 2024 | Percentage of Net Revenues | Year Ended December 30, 2023 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$(41.2) | (3.0)% | $(53.0) | (4.2)% | $11.8 | (22.3)%

Non-operating loss was $41.2 million for the year ended December 28, 2024, as compared to $53.0 million for the year ended December 30, 2023. This reduction in non-operating loss of approximately $11.8 million was primarily due to a lower interest expense incurred under our various lines of credit and the borrowing facilities of approximately $41.2 million, and net realized and unrealized losses on foreign currency denominated transactions of approximately $4.4 million, which was offset by $4.4 million of interest income on cash deposits during the year ended December 28, 2024.
Provision for Income Taxes. Our provision for income taxes for fiscal years December 28, 2024 and December 30, 2023 was as follows (dollars in millions):

Provision for Income Taxes (in millions, except percentages)
Year Ended December 28, 2024 | Percentage of Net Revenues | Year Ended December 28, 2024 | Percentage of Net Revenues | Increase/ (Decrease) | Percentage Change
$5.6 | 0.4% | $5.3 | 0.4% | $0.3 | 5.7%

Our provision for income taxes was $5.6 million for the year ended December 28, 2024, as compared to $5.3 million for the year ended December 30, 2023. Our effective tax rate was 25.7% for the year ended December 28, 2024 compared to 4.7% for the year ended December 30, 2023. This increase in our effective tax rate for the year ended December 28, 2024 resulted primarily from certain non-deductible items and income tax credits for the year ended December 30, 2023.
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Liquidity, Capital Resources and Prospective Capital Requirements
Our principal sources of liquidity consist of existing cash and cash equivalents, future funds expected to be generated from operations and available borrowing capacity under our Revolving Credit Facility. This Credit Facility provides $750.0 million in unsecured borrowings and a $50.0 million sublimit for letters of credit. For further information, see Note 15, “Debt,” in Part IV, Item 15(a) of this Annual Report on Form 10-K.
As of January 3, 2026, we had approximately $554.4 million in working capital, of which approximately $152.3 million was in cash and cash equivalents, as compared to approximately $608.1 million in working capital, of which approximately $123.6 million was in cash and cash equivalents as of December 28, 2024. As of January 3, 2026, we had approximately $467.6 million of available borrowing capacity (net of outstanding letters of credit) under our Credit Facility.
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 January 3, 2026, we had cash totaling $50.4 million held outside of the U.S., of which approximately $31.9 million was accessible without additional tax cost and approximately $18.5 million was accessible at an incremental estimated tax cost of up to $0.1 million. We currently have sufficient domestic funds on-hand and cash held outside the U.S. that is available without additional tax cost to fund our domestic 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 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 commitment and contingencies. For further information see Note 24,“Commitments and Contingencies” to our accompanying consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
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 may 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 ongoing 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. 333-285240) 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.
Cash Flows

The following table summarizes our cash flows (in millions):
|  | Year Ended
|  | January 3, 2026 |  | December 28, 2024
Net cash provided by (used in): |  |  |
Operating activities | $ | 217.2 |  |  | $ | 162.5 |
Investing activities | (3.4) |  |  | (24.9) |
Financing activities | (518.1) |  |  | (133.4) |
Effect of foreign currency exchange rates on cash | (0.3) |  |  | (6.4) |
Increase in cash, cash equivalents, and restricted cash | $ | (28.1) |  |  | $ | 13.2 |

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Operating Activities. Cash provided by operating activities was approximately $217.2 million for the year ended January 3, 2026, generated primarily from net income from operations of $207.7 million which were increased by non-cash activities, including depreciation and amortization of $38.8 million, stock-based compensation of $35.8 million, deferred income tax benefit of $11.8 million, and loss on disposal of inventory, equipment, and other assets of $7.0 million. Other major changes in operating assets and liabilities include decreases in accounts payable, lease receivable, other current assets, accrued liabilities, other non-current assets, and accounts receivable of $27.1 million, $15.7 million, $11.5 million, $7.3 million, $5.5 million, and $2.2 million, respectively, primarily due to timing of payments; an increase in inventories, accrued compensation, other non-current liabilities, income taxes payable, deferred revenue and other contract-related liabilities, and deferred costs and other contract assets of $112.1 million, $12.2 million, $5.1 million, $3.9 million, $3.7 million, and $2.5 million, respectively, primarily due to inventory build-up and timing of payments.
For the year ended December 28, 2024, cash provided by operating activities was approximately $162.5 million, generated primarily from net income from operations of $16.2 million which were increased by non-cash activities, including loss on disposal of inventory, equipment, and other assets of $96.8 million, depreciation and amortization of $48.5 million, and stock-based compensation of $36.1 million, partially offset by a deferred income tax benefit of $23.3 million. Other major changes in operating assets and liabilities include decreases in lease receivable, other current assets, other non-current liabilities, and income taxes payable of $12.7 million, $7.8 million, $5.6 million, and $5.4 million, respectively, primarily due to timing of payments; an increase in accounts receivable, inventories, accrued compensation, deferred revenue and other contract-related liabilities, accrued liabilities, accounts payable, deferred costs and other contract assets, and other non-current assets of $55.3 million, $22.5 million, $22.2 million, $17.9 million, $15.6 million, $10.6 million, $3.9 million, and $2.0 million, respectively, primarily due to timing of payments and inventory build-up.
Investing Activities. Cash used in investing activities for the year ended January 3, 2026 was approximately $3.4 million, consisting primarily of approximately $19.4 million for purchases of property and equipment, and approximately $5.3 million of capitalized intangible asset related primarily to patent and trademark costs and license fees, which were offset by approximately of $19.6 million from the sale of property and equipment, and approximately of $1.7 million from the sale of strategic investments.
For the year ended December 28, 2024, cash used in investing activities was approximately $24.9 million, consisting primarily of approximately $21.1 million for purchases of property and equipment, approximately $17.2 million of capitalized intangible asset related primarily to patent and trademark costs and license fees, and approximately $0.1 million of strategic investments, which were offset by approximately of $13.5 million from the sale of property and equipment.
Financing Activities. Cash used in financing activities for the year ended January 3, 2026 was approximately $518.1 million, consisting primarily of repayments on the line of credit of approximately $1,281.5 million, repurchases of common stock of approximately $363.7 million, withholding of shares for employee payroll taxes for vested equity awards of approximately $18.0 million, and debt issuance costs of approximately $3.7 million, which were offset by proceeds from borrowings under the line of credit of approximately $1,077.4 million and the issuance of common stock related to employee equity awards of approximately $71.4 million.
For the year ended December 28, 2024, cash used in financing activities was approximately $133.4 million, consisting primarily of repayments on the line of credit of approximately $235.8 million, and withholding of shares for employee payroll taxes for vested equity awards of approximately $11.8 million, which were offset by proceeds from borrowings under the line of credit of approximately $89.0 million and the issuance of common stock related to employee equity awards of approximately $25.2 million.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of net revenues, expenses, assets and liabilities. 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 consolidated financial statements may be material. We believe that the critical accounting policies that are the most significant for purposes of fully understanding and evaluating our reported financial results include the following:
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Revenue Recognition, Deferred Revenue and Other Contract Liabilities
We derive the majority of our revenue from four primary sources: (i) direct sales under deferred equipment agreements with end-user hospitals where we provide 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 our embedded software technology into their multiparameter monitoring devices. Subject to customer credit considerations, the majority of such sales are made on open account using industry standard payment terms based on the geography within which the specific customer is located.
We generally recognize revenue following a single, principles-based five-step model to be applied to all contracts with customers and generally provide for the recognition of revenue in an amount that reflects the consideration to which we expect 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. Revenue related to equipment supplied under sales-type lease arrangements is recognized once control over the equipment is transferred to the customer, while revenue related to equipment supplied under operating-type lease arrangements is generally recognized on a straight-line basis over the term of the lease.
While the majority of our sales transactions contain standard business terms and conditions, there are some transactions that contain non-standard business terms and conditions. As a result, contract interpretation and analysis is required to determine the appropriate accounting, including: (i) the amount of the total consideration, including 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.
We enter into agreements to sell our monitoring solutions and services, sometimes as part of arrangements with multiple performance obligations that include various combinations of distinct product sales, equipment leases 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, we estimate 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, our pricing and discount practices, and other market conditions.
Sales under deferred equipment agreements are generally structured such that we agree 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 to six years. We allocate 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, we evaluate 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 us, as well as our expectations surrounding potential contract/lease extensions or renewals and the customer’s likelihood to exercise any purchase options. Revenue allocable to non-lease components is generally recognized as such non-lease components 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. We generally do not expect to derive any significant value in excess of such asset’s unamortized book value from equipment underlying our operating leases arrangements.
Revenue from direct sales of our products to end-user hospitals, emergency medical response organizations, other direct customers, distributors and OEM customers is generally recognized by us when control of such products transfer 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 us upon the OEM’s shipment of its product to its customer, as reported to us by the OEM.
We provide certain customers with various sales incentives that may take the form of discounts or rebates. We estimate and provide allowances for 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, we allow returns under certain circumstances. At the end of each period, we estimate and accrue for these returns as a reduction to revenue. We estimate 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.
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Inventory
Inventories are stated at the lower of cost or net realizable value. Cost is determined using a standard cost method, which approximates first-in, first-out method and includes material, labor and overhead costs. Inventory valuation reserves are recorded for materials 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. We generally purchase raw materials in quantities that we anticipate will be fully used within one year. However, changes in operating strategy and customer demand, and frequent unpredictable fluctuations in market values for such materials, can limit our ability to effectively utilize all of the raw materials purchased and sold through resulting finished goods to customers for a profit. We regularly monitor potential inventory excess, obsolescence and lower market values compared to standard costs and, when necessary, reduce the carrying amount of our inventory to its market value.
We determine any required inventory valuation adjustments based on an evaluation of the expected future use of our inventory on an item by item basis. We apply historical obsolescence rates to estimate the loss on inventory expected to have a recovery value below cost. Our historical obsolescence rates are developed from our company specific experience for major categories of inventory, which are then applied to excess inventory on an item by item basis. We also record other specific inventory valuation adjustments when we become aware of other unique events that result in a known recovery value below cost. For inventory items that have been written down, the reduced value becomes the new cost basis. If our assumptions, judgments or estimates for potential inventory losses prove to be too low, our future earnings will be affected when any related additional inventory losses are recorded.
Goodwill
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, we have 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. We have one reporting unit, healthcare. Our 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 our financial performance; or (iv) a sustained decrease in our 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 we elect to bypass the qualitative analysis, then we perform 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.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue forecast projections, expected growth rates, future product launches and operating margins used to calculate projected future cash flows and risk-adjusted discount rates. In addition, we make certain judgments and assumptions in determining our reporting units. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.
Indefinite-lived Intangible Assets and Long-lived Assets
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 our 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.
We review 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.
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Determining the recoverability of finite-lived intangible assets and long-lived assets is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue forecast projections, expected growth rates, future product launches and operating margins used to calculate projected future cash flows and the future market value of our asset group. In addition, we make certain judgments and assumptions in determining our asset group. We base our recoverability estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.
Stock-Based Compensation
Our stock-based compensation awards are currently comprised of stock options, restricted stock units (RSUs) and performance share units (PSUs), all of which are equity-classified awards. For equity-classified awards granted on or after January 1, 2006, we estimate the fair value of the award on the date of grant and expense stock-based compensation over the requisite service period. In the case of PSUs, the amount of expense recognized is also dependent upon the expected achievement level for the specified performance criteria. The fair value of RSU and PSU awards is the closing price of our common stock on the grant date. To calculate the fair value of stock option awards, we use the Black-Scholes option pricing model, which, in addition to the closing price of our stock on the grant date and the option strike price, requires the input of subjective assumptions. These assumptions include the estimated length of time employees will retain their stock options before exercising them (the expected term), the estimated volatility of our stock price over the expected term and the dividend yield on our common stock. We estimate expected term based on both our specific historical option exercise experience, as well as expected term information available from a peer group of companies with similar vesting schedules. The estimated volatility is based on both the historical and implied volatilities of our share price.
Changes in the types and quantity of equity awards, as well as the fair market value of our stock may impact the cost of future stock option grants. In general, to the extent that the fair market value of our stock increases, the overall cost of granting these options will also increas e. Any changes in the assumptions, judgments and estimates mentioned above could cause our actual stock-based compensation expense to vary, resulting in changes to future earnings. For further information, see Note 20, “Stock-Based Compensation” to our accompanying consolidated financial statements i ncluded in Part IV, Item 15(a) of this Annual Report on Form 10-K.
Accounting for Income Taxes
We account for income taxes using the asset and liability method, under which we recognize 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. A tax position that meets a more-likely-than-not recognition threshold is 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 our assumptions, or changes in our assumptions in future periods, are recorded in the period they become known. We record potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
As a multinational corporation, we are 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. We have concluded all U.S. federal income tax matters for years through 2021 and all material state, local and foreign income tax matters for years through 2018. Given the foregoing, our actual liability for U.S. or foreign taxes may be materially different from our estimates, which could result in the need to record additional liabilities or pot entially to reverse previously recorded tax liabilities.
Deferred tax assets (DTA) 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, we consider 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 our future income over the lives of our DTAs and the impact of changes in valuation allowances. Any difference in the assumptions, judgments and estimates mentioned above could results in changes to our results of operations.
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Litigation Costs and Contingencies
We record 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. We record insurance and other indemnity recoveries for litigation expenses when both of the following conditions are met: (i) the recovery is probable and (ii) collectability is reasonably assured. The insurance recoveries recorded are only to the extent the litigation costs have been incurred and recognized in the financial statements; however, it is reasonably possible that the actual recovery may be significantly different from our estimates. There are many uncertainties associated with any litigation, and we cannot provide assurance that any actions or other third-party claims against us will be resolved without costly litigation or substantial settlement charges. If any of those events were to occur, our business, financial condition and results of operations could be materially and adversely affected.
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 consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
ITEM 7A. 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.
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 January 3, 2026, the carrying value of our cash equivalents approximated fair value. We manage our risk associated with interest rate fluctuations related to interest expenses under our Credit Facility by engaging in hedging activities. Since July 2022, we have 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. See Note 17, “Derivative Instruments and Hedging Activities”, to our accompanying consolidated financial statements included in Item 15(a) of this Annual Report on Form 10-K for further details.
A hypothetical 100 basis point change in interest rates along the entire interest rate yield curve would increase or decrease our interest rate yields on our investments, interest income by approximately $0.1 million for each $10.0 million in interest-bearing investments and by $0.1 million for each additional $10.0 million of investments.
A hypothetical 100 basis point change in interest rates would increase or decrease our interest expense by approximately $0.3 million for the quarter ended January 3, 2026 and approximately $1.0 million for the year ended January 3, 2026, in each case based on average debt outstanding and net of interest rate swap contracts.
We sponsor several defined benefit pension plans covering certain international employees. The aggregate fair value of the plans’ investments was $24.8 million as of January 3, 2026. 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.
See Notes 2, “Summary of Significant Accounting Policies” and 21, “Employee Benefits” to our accompanying consolidated financial statements i ncluded in Part IV, Item 15(a) of this Annual Report on Form 10-K. for further discussion of these assets.
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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. Our foreign currency exchange rate exposures are primarily with the Saudi Riyal and European Euro. 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 January 3, 2026 would have resulted in an estimated reduction of $38.9 million in reported pre-tax income for the year ended January 3, 2026. As our foreign operations continue to grow, our exposure to foreign currency exchange rate risk may become more significant.
Inflation Risk
We believe that inflationary pressures on commodity prices, labor costs, and transportation directly impacted our business during the year ended 2024. Though we believe that the easing of interest rates throughout 2024 had a positive impact on the return of consumer discretionary spending in 2025, any inherent volatility could have a significant material 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and supplementary data required by this item are set forth at the pages indicated in Part IV, Item 15(a)(1) and 15(a)(2), respectively, of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. We recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K.
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Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated by the SEC under the Exchange Act. All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect all misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of January 3, 2026.
Grant Thornton LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of January 3, 2026. Their attestation report, which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of January 3, 2026 is included in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
During the three months ended January 3, 2026, there were no changes in our 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.
ITEM 9B. OTHER INFORMATION
During the three months ended January 3, 2026, 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.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference from the information contained in our Definitive Proxy Statement to be filed with the SEC in connection with the Annual Meeting of Stockholders to be held in 2026 (2026 Proxy Statement).
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the information contained in the 2026 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference from the information contained in the 2026 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference from the information contained in the 2026 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference from the information contained in the 2026 Proxy Statement.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
The Consolidated Financial Statements of Masimo Corporation and Reports of Grant Thornton LLP, Independent Registered Public Accounting Firm (PCAOB ID 248), are included in a separate section of this Annual Report on Form 10-K beginning on page F-1.
(a)(2) Financial Statement Schedules
The financial statement schedule is included in a separate section of this Annual Report on Form 10-K beginning on page F-1.
(a)(3) Exhibits

Exhibit Number |  | Description of Document
2.1^ |  | Agreement and Plan of Merger, dated as of February 16, 2026, by and among Masimo Corporation, Danaher Corporation and Mobius Merger Sub, Inc. (incorporated by refere nce herein to Exhibit 2.1 to the Regis trant’s Current report on Form 8-K filed with the Securities and Ex change Commission on Feb ruary 17, 2026).
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 to 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 herein 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).
4.3 |  | Description of Securities of Masimo Corporation.
10.1# |  | Form of Indemnity Agreement between the Registrant and its officers and directors (incorporated herein by reference to Exhibit 10.1 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).
10.2# |  | 2007 Stock Incentive Plan of the Registrant, and forms of agreements related thereto (incorporated herein by reference to Exhibit 10.33 to the Registrant’s Registration on Form S-1 (No. 333-142171) originally filed with the Securities and Exchange Commission on April 17, 2007).
10.3# |  | Amended and Restated 2007 Severance Protection Plan and Summary Plan Description, effective December 31, 2008 (incorporated herein by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 15, 2013).
10.4# |  | Masimo Corporation 2017 Equity Incentive Plan (incorporated herein by reference to Appendix B to the Registrant’s Definitive Proxy Statement on Schedule 14A (File No. 001-33642) filed with the Securities and Exchange Commission on April 12, 2017).
10.5# |  | Masimo Corporation Executive Bonus Incentive Plan (incorporated herein by reference to Appendix D to the Registrant’s Definitive Proxy Statement on Schedule 14A (File No. 001-33642) filed with the Securities and Exchange Commission on April 16, 2020).
10.6† |  | Manufacturing and Purchase Agreement, dated October 2, 2008, by and between Analog Devices, Inc. and the Registrant (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2022).
10.7† |  | Purchase Agreement, dated July 26, 2001, between Jabil Circuit, Inc. and the Registrant (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 10, 2022).
10.8† |  | Shelter Labor Services Agreement, dated December 27, 2000, between Industrial Vallera de Mexicali, S.A. de C.V. and the Registrant (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 10, 2022).

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Exhibit Number |  | Description of Document
10.9† |  | Lease Agreement effective as of September 1, 2007, by and among Industrias Asociadas Maquiladoras, S.A. de C.V., Industrial Vallera de Mexicali, S.A. de C.V. and the Registrant, as guarantor (incorporated herein by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2019).
10.10† |  | First Amendment, Lease Agreement effective as of December 17, 2013, by and among Industrias Asociadas Maquiladoras, S.A. de C.V., Industrial Vallera de Mexicali, S.A. de C.V. and the Registrant, as guarantor (incorporated herein by reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2021).
10.11^ |  | Third Amendment Agreement, dated August 1, 2024, entered into by and between Industrial Vallera de Mexicali, S.A. de C.V and Masimo Corporation (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 6, 2024).
10.12^* |  | Fifth Amendment Agreement, dated November 28, 2025, entered into by and and between Industrial Valle ra de Mexicali, S.A. de C.V. and the Registrant, as guarantor.
10.13† |  | Settlement Agreement and Release of Claims, dated January 17, 2006, between Cercacor Laboratories, Inc., Nellcor Puritan Bennett, Inc., Mallinckrodt, Inc., Tyco Healthcare Group LP, Tyco International Ltd., Tyco International (US) Inc. and the Registrant (incorporated herein by reference to Exhibit 10.30 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).
10.14† |  | Second Amendment to the January 17, 2006 Settlement Agreement and Release of Claims, as amended pursuant to the January 24, 2006 Amendment to Settlement Agreement and Release of Claims, dated January 28, 2011, by and among Masimo Corporation, Masimo Laboratories, Inc., Nellcor Puritan Bennett LLC, Mallinckrodt Inc., Tyco Healthcare Group LP and Covidien Inc. (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 January 31, 2011).
10.15† |  | Third Amendment to Settlement Agreement and Release of Claims, dated as of September 1, 2016, by and among Masimo Corporation and Cercacor Laboratories, Inc., and Medtronic Plc., Covidien LP, Nellcor Puritan Bennett LLC and Covidien Holdings Inc.
10.16+ |  | Amended and Restated Cross-Licensing Agreement, effective January 1, 2007, between Cercacor Laboratories, Inc. and the Registrant (incorporated herein by reference to Exhibit 10.34 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).
10.17 |  | Services Agreement, effective January 1, 2007, between Willow Laboratories, Inc. and the Registrant (incorporated herein by reference to Exhibit 10.35 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).
10.18† |  | Settlement and Covenant Not to Sue Agreement, entered into as of the Effective Date of November 16, 2015, between Masimo Corporation, Masimo Technologies SARL, and Masimo International SARL and Mindray Medical International, Limited, Shenzhen Mindray Biomedical Electronics Co., Ltd and Mindray DS USA, Inc. (incorporated herein by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2021).
10.19 |  | Third Amendment to June 22, 2012 Lease Agreement, relating to the premises at 9600 Jeronimo, between the Registrant and Irvine Company, LLC (incorporated herein by reference to Exhibit 10.48 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2016).
10.20 |  | Single-Tenant Lease, relating to the premises at 9600 Jeronimo, dated as of July 13, 2016, by and between Masimo Corporation and The Irvine Company LLC (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 3, 2016).
10.21† |  | Settlement Agreement, dated November 5, 2016, by and between Masimo Corporation, Masimo International Technologies SARL and Masimo International SARL and Koninklijke Philips N.V. (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 November 7, 2016).
10.22# |  | Offer Letter, dated September 22, 2017, between the Company and Micah Young (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 September 25, 2017).
10.23# |  | Amended and Restated 2007 Severance Protection Plan Agreement, dated March 30, 2022, by and between the Registrant and Micah Young (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 3, 2022).

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Exhibit Number |  | Description of Document
10.24# |  | Offer letter, by and between Masimo Corporation and Catherine Szyman, dated January 17, 2025 (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 January 21, 2025).
10.25# |  | Offer letter, by and between Masimo Corporation and Lisa Hellmann, dated March 24, 2025 (incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 5, 2025).
10.26# |  | Offer letter, by and between Masimo Corporation and Tim Benner, dated April 25, 2025 (incorporated herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 5, 2025).
10.27# |  | Offer letter, by and between Masimo Corporation and Omar Ahmed, dated July 3, 2025 (incorporated herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2025).
10.28# |  | Offer letter, by and between Masimo Corporation and Greg Meehan, dated July 8, 2025 (incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2025).
10.29# |  | Offer letter, by and between Masimo Corporation and Charles Dadswell, dated August 11, 2025 (incorporated herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2025).
10.30# |  | Amended and Restated 2007 Severance Protection Plan Agreement, dated May 23, 2025, by and between the Registrant and Lisa Hellmann (incorporated by reference to Exhibit 10.24 to the Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2025).
10.30* |  | Credit Agreement dated as of December 1, 2025, among Masimo Corporation as the Borrower, the Lenders and Issuing Banks Party Hereto and Bank of America, N.A., as Administrative Agent.
10.31 |  | Masimo Corporation Indemnity Agreement (incorpo rated herein by ref erence to Exh i bit 10.5 to the R egistrant’s Quarterly Report on Form 10-Q filed with the S ecurities and Ex change Commission on November 4, 2025).
10.32‡ |  | 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).
10.33 |  | Voting and Support Agreement, dated as of February 16, 2026, by and among Masimo Corporation, Danaher Corporation, Mobius Merger Sub, Inc. and Politan Capital Management LP., (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 February 17, 2026).
19 |  | M asimo Insider Trading Policy (incor porated herein by reference to Exhibit 19 to the Registrant’s Quarterly Report on Form 10-K filed with the Securities and Exchange Commission on Feb ruary 25, 2 025).
21.1* |  | List of Registrant’s Subsidiaries.
23.1* |  | Consent of Independent Registered Public Accounting Firm.
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.
97 |  | Masimo Corporation Clawback Policy (incorporated herein by reference to Exhibit 97 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2025).

__________
Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of January 3, 2026 and December 28, 2024, (ii) Consolidated Statements of Operations for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, (iii) Consolidated Statements of Comprehensive Income for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, (iv) Consolidated Statements of Stockholders’ Equity for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, (v) Consolidated Statements of Cash Flows for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, and (vi) Notes to Consolidated Financial Statements.
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___________
* Filed herewith.
** Furnished herewith.
# Indicates management contract or compensatory plan.
+ The SEC has granted confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
† Certain identified information has been omitted pursuant to Item 601(b)(10) of Regulation S-K because such information is both (i) not material and (ii) of the type that the Registrant customarily and actually treats as private or confidential The Registrant hereby undertakes to furnish supplemental copies of the unredacted exhibit upon request by the SEC.
‡ Non-material schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant hereby undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the SEC.
^ Schedules have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule to the SEC upon its request; provided, however, that the Registrant may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule so furnished.
(b) Exhibits
See Item 15(a)(3) above.
(c) Financial Statement Schedules
See Item 15(a)(2) above.
ITEM 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.

Date: | February 26, 2026 |  | By: | /s/ M ICHELLE B RENNAN
|  |  |  | Michelle Brennan
|  |  |  | Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE |  | TITLE(S) |  | DATE
/s/ C ATHERINE S ZYMAN |  | Chief Executive Officer and Director (Principal Executive Officer) |  | February 26, 2026
Catherine Szyman |  |  |  |
/s/ M ICAH Y OUNG |  | Executive Vice President, Chief Financial Officer (Principal Financial Officer) |  | February 26, 2026
Micah Young |  |  |  |
/s/ P AUL H ATAISHI |  | Senior Vice President, Chief Accounting Officer (Principal Accounting Officer) |  | February 26, 2026
Paul Hataishi |  |  |  |
/s/ M ICHELLE B RENNAN |  | Chairman of the Board |  | February 26, 2026
Michelle Brennan |  |  |  |
/s/ Q UENTIN K OFFEY |  | Vice Chairman of the Board and Director |  | February 26, 2026
Quentin Koffey |  |  |  |
/s/ W ENDY L ANE |  | Director |  | February 26, 2026
Wendy Lane |  |  |  |
/s/ T IMOTHY S CANNELL |  | Director |  | February 26, 2026
Timothy Scannell |  |  |  |
/s/ D ARLENE S OLOMON |  | Director |  | February 26, 2026
Darlene Solomon |  |  |  |

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
MASIMO CORPORATION

Consolidated Financial Statements |
Reports of Independent Registered Public Accounting Firm | F-2
Consolidated Balance Sheets as of January 3, 2026 and December 28, 2024 | F-7
Consolidated Statements of Operations for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 | F-8
Consolidated Statements of Comprehensive (Loss) Income for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 | F-9
Consolidated Statements of Stockholders’ Equity for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 | F-10
Consolidated Statements of Cash Flows for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 | F-11
Notes to Consolidated Financial Statements | F-12
Schedule |
Schedule II - Valuation and Qualifying Accounts | F-56

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Masimo Corporation
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Masimo Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of January 3, 2026 and December 28, 2024, the related consolidated statements of operations, comprehen sive (loss) income, stockholders’ equity, and cash flows for the years ended January 3, 2026, December 28, 2024, and December 30, 2023, and the related notes and fin ancial statement schedule included under Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 3, 2026 and December 28, 2024, and the results of its operations and its cash flows for the years ended January 3, 2026, December 28, 2024, and December 30, 2023, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in a ccordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 3, 2026, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 26, 2026 expressed an unqualified opinion.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2006.
San Francisco, California
February 26, 2026
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Masimo Corporation
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Masimo Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of January 3, 2026, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 3, 2026, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 3, 2026, and our report dated February 26, 2026 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
San Francisco, California
February 26, 2026
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MASIMO CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)

|  | January 3, 2026 |  | December 28, 2024
ASSETS |  |  |  |
Current assets |  |  |  |
Cash and cash equivalents |  | $ | 152.3 |  |  | $ | 123.6 |
Trade accounts receivable, net of allowance for credit losses of $4.5 and $3.5 at January 3, 2026 and December 28, 2024, respectively |  | 260.9 |  |  | 268.9 |
Related party receivables - (Note 3) |  | 14.9 |  |  | 14.3 |
Assets held-for-sale - (Note 8) |  | — |  |  | 17.4 |
Inventories |  | 380.3 |  |  | 294.8 |
Other current assets |  | 116.6 |  |  | 103.4 |
Other current assets, held-for-sale - (Note 18) |  | 1.0 |  |  | 403.4 |
Total current assets |  | 926.0 |  |  | 1,225.8 |
Lease receivable, non-current |  | 43.1 |  |  | 58.7 |
Deferred costs and other contract assets |  | 62.6 |  |  | 61.0 |
Property and equipment, net |  | 355.1 |  |  | 337.0 |
Intangibles assets, net |  | 52.1 |  |  | 61.6 |
Goodwill |  | 101.0 |  |  | 96.7 |
Deferred tax assets |  | 114.2 |  |  | 118.4 |
Other non-current assets |  | 44.7 |  |  | 51.3 |
Other non-current assets, held-for-sale - (Note 18) |  | 0.1 |  |  | 615.2 |
Total assets |  | $ | 1,698.9 |  |  | $ | 2,625.7 |
LIABILITIES AND STOCKHOLDER'S EQUITY |  |  |  |
Current liabilities |  |  |  |
Accounts payable |  | $ | 103.0 |  |  | $ | 129.0 |
Accrued compensation |  | 83.7 |  |  | 78.7 |
Deferred revenue and other contract-related liabilities, current |  | 73.2 |  |  | 76.9 |
Other current liabilities |  | 109.2 |  |  | 115.4 |
Other current liabilities, held-for-sale - (Note 18) |  | 2.5 |  |  | 217.7 |
Total current liabilities |  | 371.6 |  |  | 617.7 |
Long-term debt |  | 518.0 |  |  | 714.3 |
Deferred tax liabilities |  | 0.2 |  |  | 0.2 |
Other non-current liabilities |  | 87.8 |  |  | 70.9 |
Other non-current liabilities, held-for-sale - (Note 18) |  | 0.1 |  |  | 170.7 |
Total liabilities |  | 977.7 |  |  | 1,573.8 |
Commitments and contingencies - (Note 24) |  |  |  |
Stockholders’ equity |  |  |  |
Preferred stock, $0.001 par value; 5.0 shares authorized; 0.0 shares issued and outstanding |  | — |  |  | — |
Common stock, $0.001 par value; 100.0 shares authorized; 52.1 and 53.6 shares issued and outstanding at January 3, 2026 and December 28, 2024, respectively |  | 0.1 |  |  | 0.1 |
Treasury stock, 22.0 and 19.5 shares at January 3, 2026 and December 28, 2024, respectively |  | (1,534.9) |  |  | (1,169.2) |
Additional paid-in capital |  | 929.1 |  |  | 838.3 |
Accumulated other comprehensive loss |  | (12.5) |  |  | (108.2) |
Retained earnings |  | 1,339.4 |  |  | 1,490.9 |
Total stockholders’ equity |  | 721.2 |  |  | 1,051.9 |
Total liabilities and stockholders’ equity |  | $ | 1,698.9 |  |  | $ | 2,625.7 |

The accompanying notes are an integral part of these consolidated financial statements.
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MASIMO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share information)

| Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Revenue: |  |  |  |  |
Product revenue | $ | 1,408.4 |  |  | $ | 1,281.1 |  |  | $ | 1,181.6 |
Related party revenue - (Note 3) | 118.5 |  |  | 114.1 |  |  | 93.9 |
Total revenue | 1,526.9 |  |  | 1,395.2 |  |  | 1,275.5 |
Cost of goods sold | 581.7 |  |  | 600.9 |  |  | 509.9 |
Gross profit | 945.2 |  |  | 794.3 |  |  | 765.6 |
Operating expenses: |  |  |  |  |
Selling, general and administrative | 506.0 |  |  | 548.6 |  |  | 451.3 |
Research and development | 126.4 |  |  | 182.2 |  |  | 130.5 |
Litigation settlements | 2.8 |  |  | 0.5 |  |  | 17.8 |
Total operating expenses | 635.2 |  |  | 731.3 |  |  | 599.6 |
Operating income | 310.0 |  |  | 63.0 |  |  | 166.0 |
Non-operating loss | (37.4) |  |  | (41.2) |  |  | (53.0) |
Income from continuing operations before provision for income taxes | 272.6 |  |  | 21.8 |  |  | 113.0 |
Provision for income taxes | 64.9 |  |  | 5.6 |  |  | 5.3 |
Net income from continuing operations, net of tax | 207.7 |  |  | 16.2 |  |  | 107.7 |
Net (loss) from discontinued operations, net of tax - (Note 18) | (359.2) |  |  | (321.1) |  |  | (26.2) |
Net (loss) income | $ | (151.5) |  |  | $ | (304.9) |  |  | $ | 81.5 |
Net (loss) income per share: |  |  |  |  |
Basic income per share - continuing operations | $ | 3.88 |  |  | $ | 0.30 |  |  | $ | 2.04 |
Basic (loss) per share - discontinued operations | (6.70) |  |  | (6.02) |  |  | (0.50) |
Basic (loss) income per share | $ | (2.83) |  |  | $ | (5.72) |  |  | $ | 1.54 |
Diluted income per share - continuing operations | $ | 3.83 |  |  | $ | 0.30 |  |  | $ | 1.99 |
Diluted (loss) per share - discontinued operations | (6.63) |  |  | (5.90) |  |  | (0.48) |
Diluted (loss) income per share | $ | (2.80) |  |  | $ | (5.60) |  |  | $ | 1.51 |
Weighted-average shares used in per share calculations: |  |  |  |  |
Basic | 53.6 |  |  | 53.3 |  |  | 52.8 |
Diluted | 54.2 |  |  | 54.4 |  |  | 54.1 |

The accompanying notes are an integral part of these consolidated financial statements.
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MASIMO CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in millions)

| Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Net (loss) income | $ | (151.5) |  |  | $ | (304.9) |  |  | $ | 81.5 |
Other comprehensive (loss) gain, net of tax: |  |  |  |  |
Unrealized gain (loss) from foreign currency translation adjustments | 56.5 |  |  | (61.8) |  |  | (45.1) |
Reclass of unrealized foreign currency translation losses upon disposition of discontinued operations | 44.5 |  |  | — |  |  | — |
Net change in retirement obligations | (0.5) |  |  | 0.2 |  |  | (2.9) |
Unrealized (loss) on cash flow hedge(1) | (4.8) |  |  | (1.3) |  |  | (8.8) |
Total comprehensive (loss) income | $ | (55.8) |  |  | $ | (367.8) |  |  | $ | 24.7 |

______________
(1) See Note 17, “Derivative Instruments and Hedging Activities”, for further details.
The accompanying notes are an integral part of these consolidated financial statements.
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MASIMO CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
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Table of Contents

| Common Stock |  | Treasury Stock |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Income (Loss) |  | Retained Earnings |  |  |  | Total Stockholders’ Equity
Shares |  | Amount |  | Shares |  | Amount |
Balance at December 31, 2022 | 52.5 |  |  | $ | 0.1 |  |  | 19.5 |  |  | $ | (1,169.2) |  |  | $ | 782.2 |  |  | $ | 11.5 |  |  | $ | 1,714.3 |  |  |  |  | $ | 1,338.9 |
Stock options exercised | 0.2 |  |  | — |  |  | — |  |  | — |  |  | 7.1 |  |  | — |  |  | — |  |  |  |  | 7.1 |
Restricted/Performance stock units vested | 0.2 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Shares paid for tax withholding | (0.1) |  |  | — |  |  | — |  |  | — |  |  | (12.9) |  |  | — |  |  | — |  |  |  |  | (12.9) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 7.0 |  |  | — |  |  | — |  |  |  |  | 7.0 |
Net change on pension obligations | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2.9) |  |  | — |  |  |  |  | (2.9) |
Unrealized (loss) on cash flow hedge | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (8.8) |  |  | — |  |  |  |  | (8.8) |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 81.5 |  |  |  |  | 81.5 |
Foreign currency translation adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (45.1) |  |  | — |  |  |  |  | (45.1) |
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 | 0.6 |  |  | — |  |  | — |  |  | — |  |  | 25.2 |  |  | — |  |  | — |  |  |  |  | 25.2 |
Restricted/Performance stock units vested | 0.3 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Shares paid for tax withholding | (0.1) |  |  | — |  |  | — |  |  | — |  |  | (11.8) |  |  | — |  |  | — |  |  |  |  | (11.8) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 41.5 |  |  | — |  |  | — |  |  |  |  | 41.5 |
Net change on pension obligations | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0.2 |  |  | — |  |  |  |  | 0.2 |
Unrealized (loss) on cash flow hedge | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1.3) |  |  | — |  |  |  |  | (1.3) |
Net (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (304.9) |  |  |  |  | (304.9) |
Foreign currency translation adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (61.8) |  |  | — |  |  |  |  | (61.8) |
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 | 0.8 |  |  | — |  |  | — |  |  | — |  |  | 71.4 |  |  | — |  |  | — |  |  |  |  | 71.4 |
Restricted/Performance stock units vested | 0.3 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Shares paid for tax withholding | (0.1) |  |  | — |  |  | — |  |  | — |  |  | (18.0) |  |  | — |  |  | — |  |  |  |  | (18.0) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 37.4 |  |  | — |  |  | — |  |  |  |  | 37.4 |
Repurchases of common stock | (2.5) |  |  | — |  |  | 2.5 |  |  | (365.7) |  |  | — |  |  | — |  |  | — |  |  |  |  | (365.7) |
Reclassification of unrealized foreign currency translation losses upon disposition of discontinued operations | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 44.5 |  |  | — |  |  |  |  | 44.5 |
Net change on pension obligations | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (0.5) |  |  | — |  |  |  |  | (0.5) |
Unrealized (loss) on cash flow hedge | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4.8) |  |  | — |  |  |  |  | (4.8) |
Net (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (151.5) |  |  |  |  | (151.5) |
Foreign currency translation adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 56.5 |  |  | — |  |  |  |  | 56.5 |
Balance at January 3, 2026 | 52.1 |  |  | $ | 0.1 |  |  | 22.0 |  |  | $ | (1,534.9) |  |  | $ | 929.1 |  |  | $ | (12.5) |  |  | $ | 1,339.4 |  |  |  |  | $ | 721.2 |

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

| Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Cash flows from operating activities: |  |  |  |  |
Net (loss) income | $ | (151.5) |  |  | $ | (304.9) |  |  | $ | 81.5 |
Loss from discontinued operations, net of tax | (359.2) |  |  | (321.1) |  |  | (26.2) |
Net income from continuing operations, net of tax | 207.7 |  |  | 16.2 |  |  | 107.7 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |  |  |  |  |
Depreciation and amortization | 38.8 |  |  | 48.5 |  |  | 38.9 |
Stock-based compensation | 35.8 |  |  | 36.1 |  |  | 6.1 |
Amortization of debt issuance costs | 3.0 |  |  | 1.9 |  |  | 1.9 |
Loss on disposal of inventory, equipment and other assets | 7.0 |  |  | 96.8 |  |  | 0.8 |
Provision for credit losses | 3.0 |  |  | 1.2 |  |  | 1.1 |
Benefit from deferred income taxes | 11.8 |  |  | (23.3) |  |  | (19.8) |
Changes in operating assets and liabilities: |  |  |  |  |
(Increase) decrease in trade accounts receivable | 2.2 |  |  | (55.3) |  |  | 54.4 |
(Increase) decrease in related party receivable | (0.7) |  |  | (7.0) |  |  | 4.0 |
(Increase) decrease in inventories | (112.1) |  |  | (22.5) |  |  | (106.4) |
(Increase) decrease in other current assets | 11.5 |  |  | 7.8 |  |  | 31.2 |
(Increase) decrease in lease receivable, net | 15.7 |  |  | 12.7 |  |  | 1.7 |
(Increase) decrease in deferred costs and other contract assets | (2.5) |  |  | (3.9) |  |  | (14.6) |
(Increase) decrease in other non-current assets | 5.5 |  |  | (2.0) |  |  | 3.9 |
Increase (decrease) in accounts payable | (27.1) |  |  | 10.6 |  |  | (8.4) |
Increase (decrease) in accrued compensation | 12.2 |  |  | 22.2 |  |  | (11.8) |
Increase (decrease) in deferred revenue and other contract-related liabilities | 3.7 |  |  | 17.9 |  |  | 8.8 |
Increase (decrease) in income taxes payable | 3.9 |  |  | (5.4) |  |  | 0.2 |
Increase (decrease) in accrued liabilities | (7.3) |  |  | 15.6 |  |  | 0.3 |
Increase (decrease) in other non-current liabilities | 5.1 |  |  | (5.6) |  |  | (0.4) |
Net cash provided by (used in) operating activities from continuing operations | 217.2 |  |  | 162.5 |  |  | 99.6 |
Net cash provided by (used in) operating activities from discontinued operations | 0.6 |  |  | 33.9 |  |  | (5.5) |
Net cash provided by (used in) operating activities | 217.8 |  |  | 196.4 |  |  | 94.1 |
Cash flows from investing activities: |  |  |  |  |
Purchases of property and equipment | (19.4) |  |  | (21.1) |  |  | (38.4) |
Proceeds from the disposal of property and equipment | 19.6 |  |  | 13.5 |  |  | — |
Increase in intangible assets | (5.3) |  |  | (17.2) |  |  | (23.4) |
Other strategic investing activities | 1.7 |  |  | (0.1) |  |  | (1.0) |
Net cash provided by (used in) investing activities from continuing operations | (3.4) |  |  | (24.9) |  |  | (62.8) |
Net cash provided by (used in) investing activities from discontinued operations | 278.5 |  |  | (26.3) |  |  | (18.4) |
Net cash provided by (used in) investing activities | 275.1 |  |  | (51.2) |  |  | (81.2) |
Cash flows from financing activities: |  |  |  |  |
Borrowings under revolving line of credit and term loan | 1,077.4 |  |  | 89.0 |  |  | 173.3 |
Repayments under revolving line of credit and term loan | (1,281.5) |  |  | (235.8) |  |  | (238.4) |
Proceeds from issuance of common stock | 71.4 |  |  | 25.2 |  |  | 7.0 |
Repurchases of common stock | (363.7) |  |  | — |  |  | — |
Payroll tax withholdings on behalf of employees for stock options | (18.0) |  |  | (11.8) |  |  | (12.9) |
Debt issuance costs | (3.7) |  |  | — |  |  | — |

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Net cash provided by (used in) financing activities from continuing operations | (518.1) |  |  | (133.4) |  |  | (71.0) |
Net cash provided by (used in) financing activities from discontinued operations | (2.6) |  |  | 7.8 |  |  | 13.9 |
Net cash provided by (used in) financing activities | (520.7) |  |  | (125.6) |  |  | (57.1) |
Effect of foreign currency exchange rates on cash | (0.3) |  |  | (6.4) |  |  | 2.8 |
Net increase in cash, cash equivalents and restricted cash | (28.1) |  |  | 13.2 |  |  | (41.4) |
Cash, cash equivalents and restricted cash at beginning of period | 181.4 |  |  | 168.2 |  |  | 209.6 |
Cash, cash equivalents and restricted cash at end of period | $ | 153.3 |  |  | $ | 181.4 |  |  | $ | 168.2 |

The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of the Company
Masimo Corporation (the “Company”) is a global medical technology company that develops and produces a wide array of industry-leading patient monitoring technologies, including innovative measurements, sensors, and patient monitors. Powered by the Masimo Hospital Automation and Masimo SafetyNet platforms, Masimo connectivity, automation, telehealth and telemonitoring solutions are improving and automating care both in the hospital and beyond. As of January 3, 2026, the Company operates one reportable segment: healthcare. See Note 25, “Segment and Enterprise Reporting” for additional information about reportable segment.
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 former non-healthcare consumer business incorporated audio and home integration technologies, which were 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. As of March 29, 2025, as the sales evaluation process progressed, 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 sell Viper Holdings Corporation, a Delaware corporation which previously owned and operated the Company’s non-healthcare business (together with its subsidiaries, “Sound United”) to Harman International Industries, Incorporated, a wholly-owned subsidiary of Samsung Electronics., Ltd. On September 23, 2025, the Company completed the sale of Sound United. For additional information with respect to the non-healthcare consumer business separation, discontinued operations of this business and sale, 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 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), and include the accounts of the Company and its wholly-owned or controlled subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
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 consolidated financial statements are fiscal years unless otherwise noted.
Reclassifications
Certain amounts for the current and comparative periods in the accompanying consolidated financial statements have been reclassified or recast to conform to the discontinued operations presentation, including certain balance sheets, statements of operations, statements of comprehensive (loss) income, and statements of cash flows in the consolidated financial statements for the year ended December 28, 2024 and December 30, 2023, see Note 18, “Discontinued Operations”.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 the Company’s non-healthcare business, 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 Sound United to Harman International Industries, Incorporated, a wholly-owned subsidiary of Samsung Electronics., Ltd. On September 23, 2025, the Company completed the sale of Sound United.
The non-healthcare business results for the periods presented are reflected in our consolidated statements of operations and consolidated statement of cash flows as discontinued operations. Additionally, the related assets and liabilities are classified as held-for-sale in our 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 business, and we have recast prior period amounts to conform to this discontinued operations presentation.
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 CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following tables represent the Company’s financial assets, measured at fair value on a recurring basis at January 3, 2026:

|  |  | Fair Value Measurement Hierarchy
(in millions) | Total Carrying Value |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 55.5 |  |  | $ | 55.5 |  |  | $ | — |  |  | $ | — |
Money market funds | 96.8 |  |  | 96.8 |  |  | — |  |  | — |
Pension assets |  |  |  |  |  |  |
Cash and cash equivalents(1) | (0.9) |  |  | (0.9) |  |  | — |  |  | — |
Equity securities | 9.8 |  |  | 9.8 |  |  | — |  |  | — |
Debt securities | 8.4 |  |  | 8.4 |  |  | — |  |  | — |
Real estate funds | 4.7 |  |  | 4.7 |  |  | — |  |  | — |
Alternative investments | 1.9 |  |  | — |  |  | 1.9 |  |  | — |
Other | 0.9 |  |  | — |  |  | 0.9 |  |  | — |
Derivative instruments - cash flow hedges(2) | 1.0 |  |  | 1.0 |  |  | — |  |  | — |
Total assets | $ | 178.1 |  |  | $ | 175.3 |  |  | $ | 2.8 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |
Derivative instruments - cash flow hedges | $ | 1.4 |  |  | $ | 1.4 |  |  | $ | — |  |  | $ | — |
Pension benefit obligation | 30.3 |  |  | 30.3 |  |  | — |  |  | — |
Total liabilities | $ | 31.7 |  |  | $ | 31.7 |  |  | $ | — |  |  | $ | — |

______________
(1) Due to the timing of a cash transfer, there was a payable as of January 3, 2026, resulting in a negative allocation as of year end.
(2) Includes accrued interest.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

|  |  | Fair Value Measurement Hierarchy
(in millions) | Total Carrying Value |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 51.0 |  |  | $ | 51.0 |  |  | $ | — |  |  | $ | — |
Money market funds | 72.6 |  |  | 72.6 |  |  | — |  |  | — |
Pension assets |  |  |  |  |  |  |
Cash and cash equivalents(1) | (1.3) |  |  | (1.3) |  |  | — |  |  | — |
Equity securities | 6.9 |  |  | 6.9 |  |  | — |  |  | — |
Debt securities | 8.5 |  |  | 8.5 |  |  | — |  |  | — |
Real estate funds | 3.6 |  |  | — |  |  | 3.6 |  |  | — |
Alternative investments | 1.4 |  |  | — |  |  | 1.4 |  |  | — |
Other | 0.1 |  |  | — |  |  | 0.1 |  |  | — |
Derivative instruments - cash flow hedges(2) | 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) Due to the timing of a cash transfer, there was a payable as of December 31, 2024, resulting in a negative allocation as of year end.
(2) 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 consolidated balance sheets, in accordance with GAAP and its accounting policies.
The Company maintains certain derivative investments whose prices are based on quoted market prices in an active market and 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.
Furtherm ore, 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 years ended January 3, 2026 and December 28, 2024.
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Table of Contents
MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Cash and Cash Equivalents
The 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, net of allowance for credit losses as of January 3, 2026, December 28, 2024 and December 30, 2023 were $275.8 million, $283.2 million, and $224.2 million, respectively. 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, 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.
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 others | 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.
F-15

Table of Contents
MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 consolidated statements of operations. For intangibles purchased in an asset acquisition or business combination, which mainly include patents, trademarks, customer relationships, acquired and developed technologies and contractual licenses, 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.
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. As of January 3, 2026, the Company has one reporting unit, 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.
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Table of Contents
MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.
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 consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive (loss) 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 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.
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.
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Table of Contents
MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.
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 ag reements 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.
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Table of Contents
MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 consolidated statements of operations. Charges for shipping and handling billed to customers are included as a component of revenue.
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:

| Year Ended
(in millions) | January 3, 2026 |  | December 28, 2024 |  | December 30, 2023
Product warranty accrual, beginning of period | $ | 5.5 |  |  | $ | 3.0 |  |  | $ | 2.0 |
Accrual for warranties issued | 1.0 |  |  | 1.9 |  |  | 1.8 |
Changes in pre-existing warranties (including changes in estimates) | 3.5 |  |  | 5.2 |  |  | 1.3 |
Settlements made | (3.9) |  |  | (4.6) |  |  | (2.1) |
Product warranty accrual, end of period | $ | 6.1 |  |  | $ | 5.5 |  |  | $ | 3.0 |

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Table of Contents
MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 consolidated statements of operations. Advertising costs for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, were $9.4 million, $19.1 million and $18.8 million, respectively.
Research and Development
Costs related to research and development activities are expensed as incurred. These costs include personnel costs, materials, depreciation and amortization on associated tangible and intangible assets and an allocation of facility costs, all of which are directly related to research and development activities.
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 liti gation 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 Saudi Riyal and European Euro.
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 o f accumulated other comprehensive (loss) income within the accompanying 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 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 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 (loss) income. When the hedged items are recorded to income (loss), the associated deferred gains (losses) of the derivatives in accumulated other comprehensive (loss) income 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.
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Table of Contents
MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Comprehensive (Loss) Income
Comprehensive (loss) income 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.
Net Income (Loss) Per Share
A computation of basic and diluted net income (loss) per share is as follows:

| Year Ended
(in millions, except per share amounts) | January 3, 2026 |  | December 28, 2024 |  | December 30, 2023
Net income from continuing operations, net of tax | $ | 207.7 |  |  | $ | 16.2 |  |  | $ | 107.7 |
Net (loss) from discontinued operations, net of tax - (Note 18) | (359.2) |  |  | (321.1) |  |  | (26.2) |
Net (loss) income | $ | (151.5) |  |  | $ | (304.9) |  |  | $ | 81.5 |
Basic net (loss) income per share: |  |  |  |  |
Weighted-average shares outstanding - basic | 53.6 |  |  | 53.3 |  |  | 52.8 |
Continuing operations per basic share | $ | 3.88 |  |  | $ | 0.30 |  |  | $ | 2.04 |
Discontinued operations per basic share | (6.70) |  |  | (6.02) |  |  | (0.50) |
Basic (loss) income per share | $ | (2.83) |  |  | $ | (5.72) |  |  | $ | 1.54 |
Diluted net (loss) income per share: |  |  |  |  |
Weighted-average shares outstanding - basic | 53.6 |  |  | 53.3 |  |  | 52.8 |
Diluted share equivalents: stock options, RSUs and PSUs | 0.6 |  |  | 1.1 |  |  | 1.3 |
Weighted-average shares outstanding - diluted | 54.2 |  |  | 54.4 |  |  | 54.1 |
Continuing operations per diluted share | $ | 3.83 |  |  | $ | 0.30 |  |  | $ | 1.99 |
Discontinued operations per diluted share | (6.63) |  |  | (5.90) |  |  | (0.48) |
Diluted (loss) income per share | $ | (2.80) |  |  | $ | (5.60) |  |  | $ | 1.51 |

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 s hare 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. In periods when the Company has a net loss, equity awards are excluded from the calculation of earnings per share as their inclusion would have an antidilutive effect. Potential shares include incremental shares of stock issuable upon the exercise of stock options and the vesting of both restricted share units (RSUs) and perfo rmance stock units (PSUs). For each of the years ended January 3, 2026, December 28, 2024 and December 30, 2023, weighted options to purchase 0.6 million, 1.1 million and 1.2 million shares of common stock, respectively, were outstanding but not included in the computation of diluted net (loss) 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 for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, 2.7 million weighted-average shares related to such RSUs have been excluded from the calculation of potential shares.
On October 24, 2024, following an external legal review, 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 shares 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 CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Supplemental Cash Flow Information
Supplemental cash flow information includes the following:

| Year Ended
(in millions) | January 3, 2026 |  | December 28, 2024 |  | December 30, 2023
Cash paid during the year for: |  |  |  |  |
Interest expense: |  |  |  |  |
Continuing operations | $ | 32.8 |  |  | $ | 36.7 |  |  | $ | 46.1 |
Discontinued operations | 1.5 |  |  | 2.4 |  |  | 4.9 |
Income taxes: |  |  |  |  |
Continuing operations | 28.5 |  |  | 35.9 |  |  | 20.4 |
Discontinued operations | 8.8 |  |  | 6.0 |  |  | 34.0 |
Operating lease liabilities: |  |  |  |  |
Continuing operations | 10.1 |  |  | 10.9 |  |  | 10.4 |
Discontinued operations | 10.4 |  |  | 13.7 |  |  | 12.0 |
Non-cash operating activities: |  |  |  |  |
ROU assets obtained in exchange for lease liabilities: |  |  |  |  |
Continuing operations | $ | 11.1 |  |  | $ | 10.2 |  |  | $ | 5.0 |
Discontinued operations | 0.6 |  |  | 18.4 |  |  | 11.3 |
Non-cash investing activities - continuing operations: |  |  |  |  |
Unpaid purchases of property and equipment | $ | 1.7 |  |  | $ | 0.7 |  |  | $ | 0.2 |
Non-cash financing activities - continuing operations: |  |  |  |  |
Unpaid excise taxes on stock repurchases | $ | 2.0 |  |  | $ | — |  |  | $ | — |
Unpaid debt issuance costs | 0.3 |  |  | — |  |  | — |
Reconciliation of cash, cash equivalents and restricted cash: |  |  |  |  |
Cash and cash equivalents: |  |  |  |  |
Continuing operations | $ | 152.3 |  |  | $ | 123.6 |  |  | $ | 120.8 |
Discontinued operations | 1.0 |  |  | 54.0 |  |  | 42.2 |
Restricted cash: |  |  |  |  |
Continuing operations | — |  |  | 2.7 |  |  | 4.1 |
Discontinued operations | — |  |  | 1.1 |  |  | 1.1 |
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | 153.3 |  |  | $ | 181.4 |  |  | $ | 168.2 |

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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Recently Adopted Accounting Pronouncements
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.
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 prospectively adopted this standard during the fiscal year ended January 3, 2026. See Note 23, “Income Taxes”, for further details on the impact of the adoption of this standard.
Recently Announced Accounting Pronouncements
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.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide entities with a practical expedient to simplify the estimation of expected credit losses on current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606 by allowing the assumption that current conditions as of the balance sheet date will not change during the remaining life of the asset. ASU 2025-05 is effective for annual periods beginning after December 15, 2025 and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of this amended standard on its consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This new standard simplifies the capitalization guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods. ASU 2025-06 is effective for annual periods beginning after December 15, 2027, including interim periods within those fiscal years, though early adoption is permitted. The Company is currently evaluating the impact of this amended standard on its consolidated financial statements.
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. This new standard expands hedge accounting eligibility, including provisions for choose-your-rate debt instruments. The ASU 2025-09 is effective for annual periods beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of this amended standard on its consolidated financial statements.
3. Related Party Transactions
On October 24, 2024, following an external legal review, 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.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. Mr. Kiani, the Company’s former Chairman and CEO, is also the Executive Chairman of Willow. Effective October 24, 2024, Willow is no longer considered a related party relationship due to the termination of Mr. Kiani.
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 purports to govern each party’s rights to certain intellectual property currently held by the two companies. The Cross-Licensing Agreement, by its terms, purports to obligate the Company to pay certain annual minimum aggregate royalties 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, when Mr. Kiani is not the CEO of either company, the Company’s purported annual minimum royalty obligation was $5.0 million. On October 24, 2024, Mr. Kiani’s employment as the Company’s CEO was terminated. Following Mr. Joe Kiani’s termination, the Company paid Willow (i) a $2.5 million license fee for technology for use in blood glucose monitoring; and (ii) minimum aggregate annual royalties for carbon monoxide, methemoglobin fractional arterial oxygen saturation, hemoglobin and/or glucose measurements in the amount of $15.0 million, plus $2.0 million for an additional parameter. See Note 9, “Intangible Assets, net”, for further details. As described in Note 24, “Commitments and Contingencies—Litigation”, the Company is in a dispute with Willow regarding the Cross-Licensing Agreement and payments under the Cross-Licensing Agreement. 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 $22.6 million, $20.4 million and $19.2 million for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, 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 and fully amortized as of January 3, 2026. During the fourth quarter 2025, Willow elected to invoice the Company approximately $27.0 million, consisting of Willow’s calculation of the 2026 minimum royalty and other amounts Willow claims are due. Following a legal review, the amount due was determined to be approximately $17.0 million, which the Company believes represents the actual amount due under the terms of Cross-Licensing Agreement. This amount was recorded as a liability and remained unpaid as of January 3, 2026, and was subsequently paid on January 30, 2026.
•Administrative Services Agreement - The Company was a party to an administrative services agreement with Willow (G&A Services Agreement), which governed certain general and administrative services that the Company provided to Willow. Amounts charged by the Company pursuant to the G&A Services Agreement were $0.1 million, $0.5 million and $0.5 million for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively. On March 31, 2025, Willow provided the Company 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 year ended January 3, 2026. The Company recognized approximately $1.2 million of lease income for each year ended December 28, 2024 and December 30, 2023, respectively.
Net amounts accrued and unpaid to Willow were approximately $6.4 million and $4.9 million as of January 3, 2026 and December 28, 2024, 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 former 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 CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the fiscal year ended January 3, 2026, the Company made zero cash contributions to the Masimo Foundation. For the fiscal year ended December 28, 2024 and December 30, 2023, the Company made cash contributions of approximately $2.5 million and $1.0 million to the Masimo Foundation, respectively. 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, Company entered into a marketing service agreement with LMMV for audiovisual production services promoting brand awareness, including television commercials and digital advertising. During the fourth quarter of 2024, the Company terminated the marketing services agreement with LMM V. No payment was due in connection with the termination of this agreement. For the fiscal year ended January 3, 2026 and December 28, 2024, the Company incurred no marketing expenses to LMMV under the marketing service agreement. During the fiscal year ended December 30, 2023, the Company incurred $1.5 million in marketing expenses to LMMV under the marketing service 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 basis. The agreement provided that Mr. Kiani would pay the Company for personal use based on agreed upon reimbursement rates. During each of the fiscal years ended December 28, 2024 and December 30, 2023, 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 each of the fiscal years ended January 3, 2026, December 28, 2024 and December 30, 2023, the Company paid $0.1 million, $27.6 million, and $18.0 million to Politan, respectively. For the fiscal year ended January 3, 2026, the Company received a $2.0 million payment from Politan related to legal expenses.
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 as the Chairman of the Board. Ms. Brennan also sits on the board of directors of Cardinal Health, Inc. (Cardinal). For the fiscal years ended January 3, 2026, December 28, 2024 and December 30, 2023, sales to Cardinal were approximately $118.5 million, $114.1 million and $93.9 million, respectively. As of January 3, 2026 and December 28, 2024, amounts owed from Cardinal were approximately $14.9 million and $14.3 million, respectively.
4. Inventories
Inventories consist of the following:

(in millions) | January 3, 2026 |  | December 28, 2024
Raw materials | $ | 152.8 |  |  | $ | 151.0 |
Work-in-process | 21.8 |  |  | 19.2 |
Finished goods | 205.7 |  |  | 124.6 |
Total inventories | $ | 380.3 |  |  | $ | 294.8 |

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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Other Current Assets
Other current assets consist of the following:

(in millions) | January 3, 2026 |  | December 28, 2024
Prepaid expenses | $ | 24.1 |  |  | $ | 19.7 |
Lease receivable, current | 22.8 |  |  | 26.6 |
Prepaid rebates and royalties, current(1) | 21.8 |  |  | 4.6 |
Indirect taxes receivable | 20.9 |  |  | 18.5 |
Prepaid income taxes | 16.1 |  |  | 17.6 |
Contract assets, current | 8.0 |  |  | 11.4 |
Other current assets | 2.9 |  |  | 2.3 |
Restricted cash(2) | — |  |  | 2.7 |
Total other current assets | $ | 116.6 |  |  | $ | 103.4 |

______________
(1) Prepaid rebates and royalties, current includes $17.0 million of royalty related to Willow. See Note 3, “Related Party Transactions” for further details.
(2) Restricted cash includes funds received from the Bill and Melinda Gates Foundation (BMGF). 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. As of January 3, 2026, the Company ceased research and development related to this project, and returned any unused funds to the BMGF.
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 recorded as part of revenue in the accompanying consolidated statements of operations. For the years ended January 3, 2026 and December 28, 2024, lease revenue was approximately $45.0 million and $44.0 million, respectively. Costs related to embedded leases within the Company’s deferred equipment agreements are included in cost of goods sold in the accompanying consolidated statements of operations.
Lease receivable from sales-type leases consists of the following:

(in millions) | January 3, 2026 |  | December 28, 2024
Lease receivable | $ | 66.1 |  |  | $ | 85.5 |
Allowance for credit losses | (0.2) |  |  | (0.2) |
Lease receivable, net | 65.9 |  |  | 85.3 |
Less: current portion of lease receivable | (22.8) |  |  | (26.6) |
Lease receivable, non-current | $ | 43.1 |  |  | $ | 58.7 |

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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of January 3, 2026, 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
2026 (balance of year) | $ | 22.8 |  |  | $ | 21.7 |
2027 | 17.3 |  |  | 20.0 |
2028 | 11.7 |  |  | 16.2 |
2029 | 7.8 |  |  | 12.7 |
2030 | 3.9 |  |  | 7.2 |
Thereafter | 2.4 |  |  | 10.6 |
Total | $ | 65.9 |  |  | $ | 88.4 |
Less: imputed interest(1) | — |  |  |
Present value of total lease payments | $ | 65.9 |  |  |

______________
(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) | January 3, 2026 |  | December 28, 2024
Deferred commissions | $ | 26.2 |  |  | $ | 25.0 |
Unbilled contract receivables | 21.3 |  |  | 20.2 |
Prepaid contract allowances | 14.3 |  |  | 14.5 |
Deferred equipment agreements, net | 0.8 |  |  | 1.3 |
Deferred costs and other contract assets | $ | 62.6 |  |  | $ | 61.0 |

For the year ended December 30, 2023, total deferred costs and other contracts were $57.3 million.
For the years ended January 3, 2026, December 28, 2024 and December 30, 2023, deferred commission amortization expense was $8.5 million, $7.6 million and $5.8 million, respectively.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. Property and Equipment, net
Property and equipment, net, consists of the following:

(in millions) | January 3, 2026 |  | December 28, 2024
Operating lease assets | $ | 204.1 |  |  | $ | 148.6 |
Building and building improvements | 151.8 |  |  | 143.5 |
Machinery, equipment, tooling and others | 150.6 |  |  | 147.1 |
Land | 47.7 |  |  | 47.7 |
Computer equipment and software | 41.3 |  |  | 38.7 |
Leasehold improvements | 34.3 |  |  | 31.2 |
Construction-in-progress (CIP) | 24.5 |  |  | 29.0 |
Furniture and office equipment | 16.5 |  |  | 15.8 |
Demonstration units | 0.5 |  |  | 0.5 |
Total property and equipment(1) | 671.3 |  |  | 602.1 |
Accumulated depreciation | (316.2) |  |  | (265.1) |
Property and equipment, net | $ | 355.1 |  |  | $ | 337.0 |

______________
(1) In October 2024, the Company grounded the corporate aircraft and started exploring disposition strategies. In December 2024, the Company entered into an letter of intent to sell the aircraft, and classified the asset as held for sale within the healthcare segment as of December 28, 2024. On January 29, 2025, the Company completed the sale of the corporate aircraft for $19.5 million.
For the years ended January 3, 2026, December 28, 2024 and December 30, 2023, depreciation expense of property and equipment was $25.5 million, $30.1 million and $28.6 million, respectively.
For the years ended January 3, 2026, December 28, 2024 and December 30, 2023, depreciation expense of operating lease assets was $28.1 million, $24.0 million and $19.6 million, respectively.
For the years ended January 3, 2026 and December 28, 2024, and December 30, 2023, equipment leased to customers was amortized to cost of goods sold was $27.9 million, $23.0 million and $18.5 million, respectively.
As of January 3, 2026 and December 28, 2024, accumulated amortization of equipment leased to customers was $74.1 million and $46.2 million, respectively.
The balance in CIP at January 3, 2026 and December 28, 2024, related primarily to the capitalized implementation costs related to a new enterprise resource planning software system costs, machinery, equipment, and the underlying assets for which have not been completed or placed into service.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. Intangible Assets, net
Intangible assets, net, consist of the following:

| January 3, 2026 |  | 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 | $ | 46.6 |  |  | $ | (19.8) |  |  | $ | 26.8 |  |  | $ | 44.0 |  |  | $ | (17.5) |  |  | $ | 26.5 |
Acquired technologies | 28.6 |  |  | (20.7) |  |  | 7.9 |  |  | 27.9 |  |  | (15.8) |  |  | 12.1 |
Customer relationships | 24.6 |  |  | (14.7) |  |  | 9.9 |  |  | 24.6 |  |  | (13.3) |  |  | 11.3 |
Trademarks | 14.0 |  |  | (9.2) |  |  | 4.8 |  |  | 13.7 |  |  | (7.2) |  |  | 6.5 |
Licenses-related party | 7.5 |  |  | (7.4) |  |  | 0.1 |  |  | 7.5 |  |  | (7.1) |  |  | 0.4 |
Licenses | 2.3 |  |  | (1.6) |  |  | 0.7 |  |  | 2.3 |  |  | (1.2) |  |  | 1.1 |
Other | 6.6 |  |  | (4.7) |  |  | 1.9 |  |  | 8.1 |  |  | (4.4) |  |  | 3.7 |
Total intangible assets subject to amortization, net | $ | 130.2 |  |  | $ | (78.1) |  |  | $ | 52.1 |  |  | $ | 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 years ended January 3, 2026, December 28, 2024 and December 30, 2023, was $13.3 million, $18.4 million and $9.5 million, respectively.
The total costs of patents not yet amortizing for the years ended January 3, 2026 and December 28, 2024, was $12.2 million $13.0 million and $12.1 million, respectively.
The total costs of trademarks not yet amortizing for the years ended January 3, 2026 and December 28, 2024, was $0.5 million, $0.8 million and $1.0 million, respectively.
Total renewal costs capitalized for patents and trademarks for the years ended January 3, 2026 and December 28, 2024 were $1.2 million and $1.2 million, respectively. As of January 3, 2026, 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)
2026 | $ | 6.9 |
2027 | 5.9 |
2028 | 5.2 |
2029 | 4.7 |
2030 | 4.3 |
Thereafter | 25.1 |
Total | $ | 52.1 |

Indefinite-lived intangible assets are subject to annual impairment testing, unless circumstances dictate more frequent testing, if impairment indicators ex ist. For goodwill, the Company performs a qualitative assessment during the fourth quarter of each year, for its annual impairment analysis. In the fourth quarter of 2025, the Company performed its annual impairment analysis, and concluded that it was more likely than not that the fair value was greater than its carrying value. Accordingly, no further testing was required.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. Goodwill
Changes in goodwill were as follows:

(in millions) | January 3, 2026 |  | December 28, 2024 |  |
Goodwill, beginning of period | $ | 96.7 |  |  | $ | 98.6 |  |  |
Foreign currency translation adjustment | 4.3 |  |  | (1.9) |  |  |
Goodwill, end of period | $ | 101.0 |  |  | $ | 96.7 |  |  |

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 applicable discount rate used to determine the net present value of lease payments based on available information at the lease commencement date. For the years ended January 3, 2026 and December 28, 2024, the weighted-average discount rate used by the Company for all operating leases was approximately 3.4% and 4.0%, respectively.
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 |  | January 3, 2026 |  | December 28, 2024 |  |
Lessee ROU assets | Other non-current assets |  | $ | 32.6 |  |  | $ | 29.2 |  |  |
Lessee current lease liabilities | Other current liabilities |  | 8.1 |  |  | 9.7 |  |  |
Lessee non-current lease liabilities | Other non-current liabilities |  | 26.9 |  |  | 23.3 |  |  |
Total operating lease liabilities |  |  | $ | 35.0 |  |  | $ | 33.0 |  |  |

For the years ended January 3, 2026 and December 28, 2024, accumulated amortization for lessee ROU assets was $27.8 million and $32.4 million, respectively.
The decrease in accumulated amortization at January 3, 2026 was primarily attributable to the expiration of an operating lease, which was not renewed.
For the years ended January 3, 2026 and December 28, 2024, the weighted-average remaining lease term for the Company’s operating leases was 5.6 years and 4.4 years, respectively.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of January 3, 2026, estimated future operating lease payments for each of the following fiscal years were as follows:

Fiscal year | Amount (in millions)
2026 | $ | 9.3 |
2027 | 7.9 |
2028 | 6.7 |
2029 | 4.8 |
2030 | 2.7 |
Thereafter(1) | 7.1 |
Total | 38.5 |
Imputed interest | (3.5) |
Present value | $ | 35.0 |

______________
(1) Includes optional renewal period for certain leases.
For the years ended January 3, 2026, December 28, 2024 and December 30, 2023, the Company’s operating lease costs were approximately $8.5 million, $12.0 million and $14.9 million, respectively.
12. Other Non-Current Assets
Other non-current assets consist of the following:

(in millions) | January 3, 2026 |  | December 28, 2024
Lessee ROU assets, net | $ | 32.6 |  |  | $ | 29.2 |
Strategic investments | 5.9 |  |  | 6.6 |
Prepaid deposits and others | 5.2 |  |  | 6.8 |
Derivative assets - non-current(1) | 1.0 |  |  | 6.2 |
Equity investments - fair value | — |  |  | 2.0 |
Other non-current assets | — |  |  | 0.5 |
Total non-current assets | $ | 44.7 |  |  | $ | 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) | January 3, 2026 |  | December 28, 2024
Deferred revenue | $ | 61.5 |  |  | $ | 61.9 |
Accrued rebates and allowances | 26.0 |  |  | 23.0 |
Accrued customer reimbursements | 8.7 |  |  | 10.1 |
Total deferred revenue and other contract liabilities | 96.2 |  |  | 95.0 |
Less: Non-current portion of deferred revenue | (23.0) |  |  | (18.1) |
Deferred revenue and other contract liabilities, current | $ | 73.2 |  |  | $ | 76.9 |

For the year ended December 30, 2023, total deferred revenue and other current contract liabilities were $77.3 million.
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.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 January 3, 2026, the Company had approximately $1,793.7 million of Unrecognized Contract Revenue related to executed contracts with an original duration of one year or more. The Company expects to recognize approximately $495.5 million of this amount as revenue within the next twelve months and the remaining balance thereafter.
Changes in deferred revenue for the years ended January 3, 2026 and December 28, 2024 were as follows:

(in millions) | January 3, 2026 |  | December 28, 2024
Deferred revenue, beginning of the period | $ | 61.9 |  |  | $ | 48.5 |
Revenue deferred during the period | 52.2 |  |  | 42.5 |
Recognition of revenue deferred in prior periods | (52.6) |  |  | (29.1) |
Deferred revenue, end of the period | $ | 61.5 |  |  | $ | 61.9 |

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

(in millions) | January 3, 2026 |  | December 28, 2024
Related party payables(1) | $ | 23.5 |  |  | $ | 5.3 |
Accrued indirect taxes payable | 22.7 |  |  | 17.9 |
Income tax payable | 16.7 |  |  | 12.4 |
Accrued legal fees | 14.5 |  |  | 14.6 |
Accrued expenses | 9.1 |  |  | 24.2 |
Lessee lease liabilities, current | 8.1 |  |  | 9.7 |
Long-term debt, current | 6.3 |  |  | 15.0 |
Accrued warranty | 6.1 |  |  | 5.5 |
Other current liabilities | 2.2 |  |  | 10.8 |
Total other current liabilities | $ | 109.2 |  |  | $ | 115.4 |

______________
(1) Related party payables includes $23.5 million of royalty related to Willow. See Note 3, “Related Party Transactions” for further details.
15. Debt

(in millions) | January 3, 2026 |  | December 28, 2024
Term loan - current portion | $ | 6.3 |  |  | $ | 15.0 |
Short-term debt | 6.3 |  |  | 15.0 |
Revolver - long-term | 280.0 |  |  | 456.0 |
Term loan - long-term | 238.0 |  |  | 258.3 |
Long-term debt | 518.0 |  |  | 714.3 |
Total debt | $ | 524.3 |  |  | $ | 729.3 |

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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2022 Credit Facility
On April 11, 2022, the Company entered into an unsecured credit agreement (the 2022 Credit Facility) with financial institutions as 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 2022 Credit Facility provided a $300.0 million term loan (the 2022 Term Loan) and $500.0 million of in revolving commitments, with an accordion feature allowing for up to $400.0 million in additional commitments, (plus unlimited amounts if certain incurrence tests were met), subject to certain conditions. The Company recorded debt issuance costs of $8.4 million as a reduction to the carrying amount of the 2022 Credit Facility, and amortized them to interest expense using the straight-line amortization method.
On September 23, 2025, the Company repaid the $270.0 million outstanding balance on the 2022 Term Loan balance and recorded a charge of $0.9 million for the associated unamortized debt issuance costs.
2025 Credit Facility
On December 1, 2025, the Company entered into a five-year unsecured credit agreement (the 2025 Credit Facility) with financial institutions as initial lenders, Bank of America, N.A. as Administrative Agent. BofA Securities, Inc., JPMorgan Chase Bank, N.A., Citibank, N.A., U.S. Bank National Association, and PNC Capital Markets LLC as joint lead arrangers and joint bookrunners. BofA Securities, Inc., JPMorgan Chase Bank, N.A., Citibank, N.A., U.S. Bank National Association, and PNC Bank National Association as co-syndication agents. BMO Bank N.A., DNB Bank ASA, New York Branch, and KeyBank National Association as co-documentation agents.
The 2025 Credit Facility consists of a $250.0 million term loan (the Term Loan) and a $750.0 million revolving credit facility (the Revolver), with an accordion feature allowing for up to $400.0 million in additional commitments (plus unlimited amounts if certain incurrence tests are met), subject to certain conditions. The 2025 Credit Facility includes a $50.0 million letter of credit sublimit, and matures on December 1, 2030.
The Company recorded a charge of $0.4 million for debt issuance costs related to lenders that did not continue from the 2022 Credit Facility, and recorded debt issuance costs of $4.6 million as a reduction to the carrying amount of the 2022 Credit Facility and amortized them to interest expense using the straight-line amortization method.
The Company used initial proceeds from the Term Loan and Revolver to pay off the remaining obligations under the 2022 Credit Facility and related fees. Subsequent Revolver borrowings will be used for general corporate purposes.
Borrowings under the 2025 Credit Facility will bear interest, at the Company’s election, at either: (a) an Alternate Base Rate (ABR) Loan, plus a spread of 0.000% to 0.750%, or (b) a Term SOFR Loan plus a spread of 1.000% to 1.750%, based on the Company’s net leverage ratios as set forth in the 2025 Credit Facility. ABR equals, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate plus 1/2 of 1%, (b) Bank of America’s prime rate, (c) Term SOFR plus 1.00%, or (d) a floor of 0.00%. Term SOFR equals the Term SOFR Screen Rate (as defined in the 2025 Credit Facility) for the applicable interest period, with a 0% floor. As of January 3, 2026, the effective interest rate on the 2025 Credit Facility was 4.7%.
The Company pays an unused fee ranging from 0.150% to 0.275% per annum on the unutilized Revolver balance, based on the Company’s net leverage ratios under the 2025 Credit Facility.
The 2025 Credit Facility contains financial covenants related to a net leverage ratio and an interest coverage ratio, and customary negative covenants, affirmative covenants, representations and warranties, and events of default. Upon any event of default, the Administrative Agent may, and at the request of required lenders shall take either or both of the following actions: (a) immediately terminate the commitments, or (b) declare the outstanding loans immediately due and payable in full.
The Company was in compliance with all covenants related to the 2025 Credit Facility as of January 3, 2026.
As of January 3, 2026, the Company had approximately $467.6 million of available borrowing capacity (net of approximately $2.4 million in outstanding letters of credit) under the Credit Facility.
For the years ended January 3, 2026, December 28, 2024 and December 30, 2023, the Company incurred total interest expense of $33.2 million, $41.2 million and $47.1 million, respectively, under the Credit Facilities.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of January 3, 2026, the aggregate maturities of principal on the Credit Facility for each of the next five years and thereafter are as follows:

Fiscal year | Amount (in millions)
2026 | $ | 6.3 |
2027 | 6.3
2028 | 6.3
2029 | 6.3 |
2030 | 499.1
Thereafter | 0.0
Total | $ | 524.3 |

16. Other Non-Current Liabilities
Other non-current liabilities consist of the following:

(in millions) | January 3, 2026 |  | December 28, 2024
Lessee non-current lease liabilities | $ | 26.9 |  |  | $ | 23.3 |
Unrecognized tax benefits | 26.2 |  |  | 23.7 |
Deferred revenue, non-current | 23.0 |  |  | 18.1 |
Projected benefit obligation | 5.5 |  |  | 5.4 |
Income tax payable, non-current | 4.7 |  |  | — |
Other | 1.5 |  |  | 0.4 |
Total other non-current liabilities | $ | 87.8 |  |  | $ | 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 the Company’s outstanding debt. The interest rate swaps reduce the variability of cash flow payments for the Company by converting a portion of its variable interest rate to an average fixed interest rate of 3.16% as of January 3, 2026. 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 (loss) income. 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 consolidated balance sheets for presentation purposes. The following table summarizes the fair value of the hedging instruments, presented on a gross basis, as of January 3, 2026 and December 28, 2024.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

|  |  |  | Consolidated Balance Sheets
(in millions) |  | Balance sheet classification |  | January 3, 2026 |  | December 28, 2024
Interest rate contracts, inclusive of accrued interest |  | Other non-current assets |  | $ | 1.0 |  |  | $ | 6.8 |
Interest rate contracts, inclusive of accrued interest |  | Other non-current liabilities |  | (1.4) |  |  | (0.1) |
Total |  |  |  | $ | (0.4) |  |  | $ | 6.7 |

The following table summarizes the gains reclassified from accumulated other comprehensive (loss) income to the consolidated statements of operations for the years ended January 3, 2026, December 28, 2024 and December 30, 2023.

Cash flow hedges |  |  |  | Consolidated Statement of Operations
(in millions) |  | Location of gains |  | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Interest rate contracts |  | Non-operating gains |  | $ | 5.2 |  |  | $ | 14.7 |  |  | $ | 14.9 |
Total |  |  |  | $ | 5.2 |  |  | $ | 14.7 |  |  | $ | 14.9 |

The following tables summarize the changes in accumulated other comprehensive (loss) income related to the hedging instruments:

(in millions) |  | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Beginning balance |  | $ | 6.0 |  |  | $ | 7.8 |  |  | $ | 19.3 |
Amount recognized in other comprehensive (loss) income |  | (1.1) |  |  | 12.9 |  |  | 3.4 |
Amount reclassified into earnings |  | (5.2) |  |  | (14.7) |  |  | (14.9) |
Ending balance |  | $ | (0.3) |  |  | $ | 6.0 |  |  | $ | 7.8 |

For the years ended January 3, 2026, December 28, 2024 and December 30, 2023, the unrealized (loss), net of tax was $(4.8) million, $(1.3) million and $(8.8) million, respectively.
For the years ended January 3, 2026, December 28, 2024 and December 30, 2023, the tax (benefit) related to the cash flow hedges was $(1.5) million, $(0.5) million and $(2.7) million, respectively.
The Company expects to reclassify a net amount of gains of $0.1 million from accumulated other comprehensive (loss) income gain 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 the non-healthcare business, 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 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 was expected to have a major effect on the Company’s overall operations and financial results. Accordingly, the accompanying consolidated financial statements for all periods presented reflect the non-healthcare business as a discontinued operation. Applicable amounts in the prior periods have been recast to conform to this discontinued operations presentation.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the first quarter of 2025, the non-healthcare business was classified as held-for-sale and was 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.
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 Sound United for an aggregate purchase price of $350 million in cash, subject to certain adjustments. On September 23, 2025, the Company completed the sale and received net cash of approximately $328 million, pending final customary adjustments.
Interest expense from sp ecifically identifiable debt associated with the non-healthcare business has been included in discontinued operations. No interest expense from the healthc are business was allocated to discontinued operations. As a result of the separation of the non-healthcare business, the Company incurred $1.5 million and $2.4 million in direc t costs during each of the years ended January 3, 2026 and December 28, 2024, respectively, which are reflected in earnings from discontinued operations, net of income taxes in the accompanying 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:
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions) | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Revenues | $ | 414.9 |  |  | $ | 699.1 |  |  | $ | 772.6 |
Cost of sales | 309.3 |  | 489.1 |  | 534.7
Gross profit | 105.6 |  | 210.0 |  | 237.9
Selling, general and administrative expenses | 108.4 |  | 195.1 |  | 212.7
Research and development expenses | 27.5 |  |  | 40.6 |  |  | 44.7 |
Intangible assets impairment charges | 251.5 |  |  | 304.0 |  |  | 10.0 |
Operating loss | (281.8) |  |  | (329.7) |  |  | (29.5) |
Loss on disposition | (101.1) |  |  | — |  |  | — |
Reclass of unrealized foreign currency translation losses upon disposition of discontinued operations | (44.5) |  |  | — |  |  | — |
Other non-operating (loss) income | (4.7) |  |  | 2.6 |  |  | 4.6 |
Loss from discontinued operations, before income taxes | (432.1) |  |  | (327.1) |  |  | (24.9) |
(Benefit) provision for income taxes | (72.9) |  |  | (6.0) |  |  | 1.3 |
Loss from discontinued operations, net of income taxes | $ | (359.2) |  |  | $ | (321.1) |  |  | $ | (26.2) |

Assets and liabilities of the discontinued operations of the non-healthcare business classified as held-for-sale remaining in the consolidated balance sheets as of January 3, 2026 and December 28, 2024 consist of the following:

(in millions) | January 3, 2026 |  | December 28 2024
Cash and cash equivalents | $ | 1.0 |  |  | $ | 54.0 |
Trade receivable, net of credit allowances | — |  |  | 143.3 |
Inventories, net | — |  |  | 164.4 |
Other current assets | — |  |  | 41.7 |
Total current assets, held-for-sale | 1.0 |  |  | 403.4 |
Property and equipment, net | — |  |  | 44.6 |
Intangible assets, net | — |  |  | 496.6 |
Deferred tax assets | — |  |  | 25.2 |
Other non-current assets | 0.1 |  |  | 48.8 |
Total non-current assets, held-for-sale | 0.1 |  |  | 615.2 |
Total assets held-for-sale - discontinued operations | $ | 1.1 |  |  | $ | 1,018.6 |
Accounts payable | $ | 0.5 |  |  | $ | 123.8 |
Accrued compensation | 0.9 |  |  | 4.9 |
Deferred revenue and other contract liabilities, current | — |  |  | 18.6 |
Other current liabilities | 1.1 |  |  | 70.4 |
Total current liabilities, held-for-sale | 2.5 |  |  | 217.7 |
Long-term debt | — |  |  | 13.6 |
Deferred tax liabilities | — |  |  | 99.9 |
Other non-current liabilities | 0.1 |  |  | 57.2 |
Total non-current liabilities, held-for-sale | 0.1 |  |  | 170.7 |
Total liabilities held-for-sale - discontinued operations | $ | 2.6 |  |  | $ | 388.4 |

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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 (the 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 Chief Financial Officer (CFO) through open market purchases, one or more Rule 10b5-1 trading plans, block trades and privately negotiated transactions. Approximately 2.5 million shares were repurchased pursuant to the 2022 Repurchase Program during the year ended January 3, 2026. As of January 3, 2026, approximately 2.5 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 during the years ended January 3, 2026, December 28, 2024 and December 30, 2023:

| Years Ended
(in millions, except per share amounts) | January 3, 2026 |  | December 28, 2024 |  | December 30, 2023
Share repurchased(1) | 2.5 |  | (1) | — |  |  | — |
Average cost per share | $ | 146.91 |  |  | $ | — |  |  | $ | — |
Value of shares repurchased(2) | $ | 363.7 |  |  | $ | — |  |  | $ | — |

______________
(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.
(2) Excludes excise taxes on share repurchases.
20. Stock-Based Compensation
Equity Incentive Plans
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 (the 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.
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.
Total stock-based compensation expense during the years ended January 3, 2026, December 28, 2024, and December 30, 2023 was $35.8 million, $36.1 million and $6.1 million respectively.
Additional information related to the Company’s current equity incentive plans, stock-based award activity and valuation of stock-based awards is included below.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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:

| Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
(in millions, except for weighted-average exercise prices) | Shares |  | Weighted-Average Exercise Price |  | Shares |  | Weighted-Average Exercise Price |  | Shares |  | Weighted-Average Exercise Price
Options outstanding, beginning of period(1) | 1.6 |  |  | $ | 110.43 |  |  | 2.7 |  |  | $ | 87.58 |  |  | 2.8 |  |  | $ | 83.87 |
Granted(2) | 0.1 |  |  | 163.33 |  |  | 0.1 |  |  | 126.49 |  |  | 0.1 |  |  | 182.43 |
Canceled(3) | (0.2) |  |  | 183.18 |  |  | (0.6) |  |  | 82.38 |  |  | — |  |  | 163.96 |
Exercised | (0.8) |  |  | 87.34 |  |  | (0.6) |  |  | 39.47 |  |  | (0.2) |  |  | 43.22 |
Options outstanding, end of period | 0.7 |  |  | $ | 117.87 |  |  | 1.6 |  |  | $ | 110.43 |  |  | 2.7 |  |  | $ | 87.58 |
Options exercisable, end of period | 0.6 |  |  | $ | 113.14 |  |  | 1.5 |  |  | $ | 105.05 |  |  | 2.4 |  |  | $ | 73.80 |

(1) The Company recorded $0.1 million, $0.2 million and $0.1 million of stock option expense for discontinued operations for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively.
(2) No stock options were granted for discontinued operations for the year ended January 3, 2026.
(3) On September 23, 2025, in connection with the completion of the sale of Sound United, all outstanding unvested stock options held by employees of the sold business were canceled.
Total stock option expense for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 was $1.3 million, $4.4 million and $8.7 million, respectively. As of January 3, 2026, the Company had $3.3 million of unrecognized compensation cost related to non-vested stock options that are expected to vest over a weighted-average period of approximately 3.2 years.
The number and weighted-average exercise price of outstanding and exercisable stock options segregated by exercise price ranges were as follows:

| Year Ended January 3, 2026 |  | Year Ended December 28, 2024
(in millions, except range of exercise prices and average remaining contractual life) | Options Outstanding |  | Options Exercisable |  | Options Outstanding |  | Options Exercisable
Range of Exercise Prices | Number of Options |  | Average Remaining Contractual Life |  | Number of Options |  | Number of Options |  | Average Remaining Contractual Life |  | Number of Options
$15.00 to $50.00 | 0.1 |  |  | 0.2 |  | 0.1 |  |  | 0.3 |  |  | 0.8 |  | 0.3 |
$50.01 to $80.00 | — |  |  | 0.7 |  | — |  |  | — |  |  | 1.7 |  | — |
$80.01 to $120.00 | 0.3 |  |  | 1.8 |  | 0.3 |  |  | 0.7 |  |  | 1.5 |  | 0.7 |
$120.01 to $160.00 | 0.2 |  |  | 4.6 |  | 0.1 |  |  | 0.4 |  |  | 2.2 |  | 0.3 |
$160.01 to $200.00 | 0.1 |  |  | 5.6 |  | 0.1 |  |  | 0.2 |  |  | 2.5 |  | 0.2 |
$200.01 to $230.00 | — |  |  | 4.2 |  | — |  |  | — |  |  | 4.5 |  | — |
$230.01 to $280.00 | — |  |  | 4.9 |  | — |  |  | — |  |  | 2.4 |  | — |
Total | 0.7 |  |  | 3.0 |  | 0.6 |  |  | 1.6 |  |  | 1.7 |  | 1.5 |

As of January 3, 2026 and December 28, 2024, the weighted-average remaining contractual term of options outstanding was 3.0 years and 1.7 years, respectively. As of January 3, 2026 and December 28, 2024, the weighted-average remaining contractual term of options exercisable with an exercise price less than the closing price of the Company’s common stock was 1.9 years and 2.2 years respectively.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

RSUs
The number of RSUs issued and outstanding under all of the Company’s equity plans are as follows:

| Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
(in millions, except for weighted-average grant date fair value) | Units |  | Weighted-Average Grant Date Fair Value |  | Units |  | Weighted-Average Grant Date Fair Value |  | Units |  | Weighted-Average Grant Date Fair Value
RSUs outstanding, beginning of period(1) | 0.7 |  |  | $ | 135.21 |  |  | 3.4 |  |  | $ | 104.81 |  |  | 3.0 |  |  | $ | 105.02 |
Granted(2) | 0.3 |  |  | 163.02 |  |  | 0.2 |  |  | 130.85 |  |  | 0.5 |  |  | 121.79 |
Canceled(3) | (0.2) |  |  | 142.75 |  |  | (2.7) |  |  | 96.40 |  |  | — |  |  | 179.81 |
Vested | (0.2) |  |  | 141.48 |  |  | (0.2) |  |  | 146.27 |  |  | (0.1) |  |  | 177.93 |
RSUs outstanding, end of period | 0.6 |  |  | $ | 145.71 |  |  | 0.7 |  |  | $ | 135.21 |  |  | 3.4 |  |  | $ | 104.81 |

___________________________
(1) The Company recorded $2.5 million, $4.4 million and $2.3 million of RSU related expense for discontinued operations for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively.
(2) No RSUs were granted for discontinued operations for the year ended January 3, 2026.
(3) On September 23, 2025, in connection with the completion of the sale of Sound United, all outstanding unvested RSUs held by employees of the sold business were canceled.
Total RSU expense for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 was $32.0 million, $29.8 million and $17.8 million, respectively. As of January 3, 2026, the Company had $68.5 million of unrecognized compensation cost related to non-vested RSU awards expected to be recognized and vest over a weighted-average period of approximately 3.1 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 January 3, 2026, 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:

| Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
(in millions, except for weighted-average grant date fair value) | Units |  | Weighted-Average Grant Date Fair Value |  | Units |  | Weighted-Average Grant Date Fair Value |  | Units |  | Weighted-Average Grant Date Fair Value
PSUs outstanding, beginning of period(1) | 0.2 |  |  | $ | 172.50 |  |  | 0.3 |  |  | $ | 195.42 |  |  | 0.3 |  |  | $ | 186.83 |
Granted(2) | 0.1 |  | (3) | 179.89 |  |  | 0.1 |  | (4) | 164.19 |  |  | 0.1 |  | (5) | 204.67 |
Canceled(6) | (0.2) |  |  | 171.39 |  |  | (0.2) |  |  | 187.52 |  |  | — |  |  | 193.50 |
Vested | — |  |  | — |  |  | — |  |  | 250.73 |  |  | (0.1) |  |  | 179.42 |
PSUs outstanding, end of period | 0.1 |  |  | $ | 180.65 |  |  | 0.2 |  |  | $ | 172.50 |  |  | 0.3 |  |  | $ | 195.42 |

(1) The Company recorded $(1.0) million, $0.8 million and $(1.5) million of PSU (benefit) expense for discontinued operations for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively.
(2) No PSUs were granted for discontinued operations for the year ended January 3, 2026.
(3) 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.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(4) On February 26, 2024, the Audit Committee approved the weighted payout percentage of 28% for the 2021 PSU awards (three-year performance period), which were based upon the Company’s actual fiscal year 2023 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.
(5) On February 27, 2023, the Audit Committee approved the weighted payout percentage of 100% for the 2020 PSU awards (three-year performance period), which were based upon the Company’s actual fiscal year 2022 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.
(6) On September 23, 2025, in connection with the completion of the sale of Sound United, all outstanding unvested PSUs held by employees of the sold business were canceled.
During the year ended December 30, 2023, the Company awarded 95,170 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) component, in the year following the evaluation and confirmation of the performance achievement criteria. The Company’s TSR is based on the Company’s common stock percentile ranking relative to the constituents of the Nasdaq Composite Index for the performance period beginning on January 1, 2023 and ending on December 31, 2025. The number of shares that may be earned can range from 0% to 200% of the target amount.
During the year ended December 28, 2024, the Company awarded 142,254 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) component, in the year following the evaluation and confirmation of the performance achievement criteria. The Company’s TSR is based on the Company’s common stock percentile ranking relative to the constituents of the Nasdaq Composite Index for the performance period beginning on January 1, 2024 and ending on December 31, 2026. The number of shares that may be earned can range from 0% to 200% of the target amount.
During the year ended January 3, 2026, the Company awarded 90,397 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 the 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 (benefit) for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 was $2.5 million, $1.9 million and $(20.4) million, respectively. The PSU expense (benefit) amounts for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 relate to adjustments for the expected life-to-date performance of the PSU. As of January 3, 2026, the Company had $12.5 million of unrecognized compensation cost related to non-vested PSU awards expected to be recognized and vest over a weighted-average period of approximately 1.8 years.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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:

| Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Risk-free interest rate | 3.9% to 4.1% |  | 3.3% to 4.2% |  | 3.6% to 4.2%
Expected term (in years) | 5.8 years |  | 4.6 years to 5.9 years |  | 5.1 years to 5.9 years
Estimated volatility | 40.5% to 43.1% |  | 33.3% to 42.6% |  | 31.6% to 36.7%
Expected dividends | 0% |  | 0% |  | 0%
Weighted-average fair value of options granted | $68.57 per share to $78.81 per share |  | $59.60 per share |  | $75.08 per share

Risk-free interest rate. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with a remaining term approximately equal to the expected term of the Company’s stock options.
Expected term. The expected term represents the average period that the Company’s stock options are expected to be outstanding. The expected term is based on both the Company’s specific historical option exercise experience, as well as expected term information available from a peer group of companies with a similar vesting schedule.
Estimated volatility. The estimated volatility is the amount by which the Company’s share price is expected to fluctuate during a period. The Company’s estimated volatilities for the years ended January 3, 2026, December 28, 2024, and December 30, 2023 are based on historical and implied volatilities of the Company’s share price over the expected term of the option.
Expected dividends. The Board may from time to time declare, and the Company may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law. Any determination to declare and pay dividends will be made by the Board and will depend upon the Company’s results of operations, earnings, capital requirements, financial condition, business prospects, contractual restrictions and other factors deemed relevant by the Board. In the event a dividend is declared, there is no assurance with respect to the amount, timing or frequency of any such dividends. The dividend declared in 2012 was deemed to be a special dividend and there is no assurance that special dividends will be declared again during the expected term. Based on this uncertainty and unknown frequency, for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, no dividend rate was used in the assumptions to calculate the stock-based compensation expense.
The Company has elected to recognize stock-based compensation expense on a straight-line basis over the requisite service period for the entire award, net of forfeitures. Forfeitures of stock-based awards are recognized as they occur. The total fair value of all options that vested during the years ended January 3, 2026, December 28, 2024 and December 30, 2023 was $2.7 million, $8.2 million and $9.5 million, respectively.
The aggregate intrinsic value of options is calculated as the positive difference, if any, between the market value of the Company’s common stock on the date of exercise or the respective period end, as appropriate, and the exercise price of the options. The aggregate intrinsic value of options outstanding, with an exercise price less than the closing price of the Company’s common stock as of January 3, 2026 was $18.6 million. The aggregate intrinsic value of options exercisable with an exercise price less than the closing price of the Company’s common stock, as of January 3, 2026 was $18.6 million. The aggregate intrinsic value of options exercised during the years ended January 3, 2026, December 28, 2024 and December 30, 2023 was $63.1 million, $58.2 million and $19.0 million, respectively.
The total income tax benefit recognized in the consolidated statements of operations for stock-based compensation expense was $5.8 million, $5.7 million and $2.9 million for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents the total stock-based compensation expense that is included in each functional line item of the consolidated statements of operations:

(in millions) | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Cost of goods sold | $ | 0.7 |  |  | $ | 1.0 |  |  | $ | 1.1 |
Selling, general and administrative | 21.9 |  |  | 20.3 |  |  | (2.0) |
Research and development | 13.2 |  |  | 14.8 |  |  | 7.0 |
Total | $ | 35.8 |  |  | $ | 36.1 |  |  | $ | 6.1 |

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 $3.7 million, $3.9 million and $4.1 million to the MRSP for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively, all in the form of matching contributions.
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 $2.3 million, $2.4 million and $2.1 million for the years ended January 3, 2026, December 28, 2024, and December 30, 2023, 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 consolidated statement of operations. All other cost components are recorded in other income (expense), net in the consolidated statement of operations.
The following table sets forth the funded status and amounts recognized in the consolidated balance sheet for the Company’s defined benefit plans.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions) |  | January 3, 2026 |  |  | December 28, 2024 |  |  |  |  |
Plan Assets |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of year |  | $ | 19.2 |  |  |  | $ | 16.7 |  |  |  |  |  |
Employer contributions |  | 2.4 |  |  |  | 1.8 |  |  |  |  |  |
Participant contributions |  | 0.9 |  |  |  | 0.7 |  |  |  |  |  |
Realized net gains (losses) on plan assets |  | 0.3 |  |  |  | 0.1 |  |  |  |  |  |
Benefits paid |  | (0.6) |  |  |  | (1.2) |  |  |  |  |  |
Foreign currency revaluation and translation gains and (losses) |  | 2.6 |  |  |  | 1.1 |  |  |  |  |  |
Fair value of plan assets at end of year |  | $ | 24.8 |  |  |  | $ | 19.2 |  |  |  |  |  |
Projected Benefit Obligation |  |  |  |  |  |  |  |  |  |
Projected benefit obligation at beginning of year |  | $ | 24.6 |  |  |  | $ | 20.9 |  |  |  |  |  |
Service cost |  | 1.7 |  |  |  | 1.5 |  |  |  |  |  |
Participant contributions |  | 0.9 |  |  |  | 0.7 |  |  |  |  |  |
Interest cost |  | 0.3 |  |  |  | 0.3 |  |  |  |  |  |
Actuarial gains (losses) |  | (0.4) |  |  |  | 0.5 |  |  |  |  |  |
Benefits paid |  | (0.6) |  | (1) |  | (1.2) |  |  |  |  |  |
Foreign currency revaluation and translation gains and (losses) |  | 3.8 |  |  |  | 1.9 |  |  |  |  |  |
Projected benefit obligation at end of year |  | $ | 30.3 |  |  |  | $ | 24.6 |  |  |  |  |  |
Funded status |  | $ | (5.5) |  |  |  | $ | (5.4) |  |  |  |  |  |

______________
(1) Due to the timing of a cash transfer, there was a payable as of January 3, 2026, resulting in a negative allocation as of year end.
The net increase in the fair value of the Company’s plan assets for the year ended January 3, 2026 was principally driven by higher foreign currency revaluation of $1.5 million and higher employer contributions of $0.6 million on the plan assets.
The net increase in the Company’s projected benefit obligation for the year ended January 3, 2026 was primarily driven by higher foreign currency revaluation of $1.9 million on the projected benefit obligation, partially offset by lower benefits paid of $0.6 million on the projected benefit obligation.
The underfunded balance of $5.5 million and $5.4 million was included in the long-term other liabilities on the consolidated balance sheets as of January 3, 2026 and December 28, 2024, respectively.
The Company’s consolidated statement of operations reflect the following components of net periodic defined benefit costs:

(in millions) |  | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023 |
Service cost |  | $ | 1.7 |  |  | $ | 1.5 |  |  | $ | 1.2 |  |
Interest cost |  | 0.3 |  |  | 0.3 |  |  | 0.5 |  |
Amortization of net losses |  | 0.2 |  |  | 0.1 |  |  | — |  |
Amortization of prior service costs (credits) |  | — |  |  | (0.1) |  |  | — |  |
Expected (gains) on plan assets |  | (0.8) |  |  | (0.7) |  |  | (0.7) |  |
Net periodic defined benefit plan cost |  | $ | 1.4 |  |  | $ | 1.1 |  | $ | 1.0 |

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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The amounts provided above for amortization of prior service costs (credits) and amortization of net losses represent the reclassifications of prior service cost (credits) and net actuarial gain (losses) that were recognized in accumulated other comprehensive (loss) income in prior periods.
Classification of amounts recognized in the consolidated balance sheets are as follows:

(in millions) |  | January 3, 2026 |  | December 28, 2024
Non-current liability |  | $ | 5.5 |  |  | $ | 5.4 |

International defined benefit plans with accumulated benefit obligations in excess of fair value of plan assets consist of the following:

(in millions) |  | January 3, 2026 |  | December 28, 2024
Projected benefit obligation |  | $ | 30.3 |  |  | $ | 24.6 |
Accumulated benefit obligation |  | 28.1 |  |  | 22.8 |
Fair value of plan assets |  | 24.8 |  |  | 19.2 |

Plan Assumptions
The Company determines actuarial assumptions on an annual basis. The actuarial assumptions used for the Company’s defined benefit plans for international participants will vary depending on the applicable country. On a weighted-average basis, the following assumptions were used to determine benefit obligations and to determine net periodic benefit cost:

|  | Year Ended January 3, 2026 |  | Year Ended December 28, 2024
Assumptions - benefit obligations: |  |  |  |
Discount rate |  | 1.0 | % |  | 1.5 | %
Rate of compensation increase |  | 1.5 |  |  | 1.5 |
Assumptions - net periodic benefit costs: |  |  |  |
Discount rate |  | 1.0 | % |  | 1.5 | %
Rate of compensation increase |  | 1.5 |  |  | 1.5 |
Expected long-term return on plan assets(1) |  | 3.5 |  |  | 3.7 |
Interest credit rate |  | 1.3 |  |  | 1.5 |

______________
(1) The pension expected return on assets assumption is derived primarily from underlying investment allocations and historical risk premiums per each plan, adjusted for current and future expectations, such as easing of global inflationary pressure.
Plan Assets
The weighted-average asset allocations at year end by asset category were as follows:

|  |  |  | Actual Allocation
Asset category |  |  |  | January 3, 2026 |  | December 28, 2024
Cash and cash equivalents(1) |  |  |  | (3.7) | % |  | (6.8) | %
Equity securities |  |  |  | 39.6 |  |  | 36.0 |
Debt securities |  |  |  | 33.7 |  |  | 44.1 |
Other |  |  |  | 30.4 |  |  | 26.7 |

______________
(1) Due to the timing of a cash transfer, there was a payable as of January 3, 2026 and December 28, 2024, resulting in a negative allocation as of year end.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Plan invests in a diversified portfolio of assets intended to minimize risk of poor returns while maximizing expected portfolio returns. The actual portfolio investment mix may, from time to time, deviate from the established target mix due to various factors such as normal market fluctuations, the reliance on estimates in connection with the determination of allocations and normal portfolio activity such as additions and withdrawals. The target allocations are subject to periodic review, including a review of the asset portfolio’s performance, by the named fiduciary of the plans. Such plans have local independent fiduciary advisors with responsibility for the development and oversight of the investment policy, including asset allocation decisions. In making such decisions, consideration is given to local regulations, investment practices and funding rules. The fair value of investments is included in the fair value hierarchy, see Note 2, “Summary of Significant Accounting Policies”. While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Plan Contributions
The Company determines expected funding needs of its defined benefit pension plans based on legal funding requirements, plus any additional amounts that may be appropriate considering the funded status of the plans, tax consequences, the cash flow generated by the Company and other factors. The Company made $2.4 million and $1.8 million contributions to its defined benefit plans for the years ended January 3, 2026 and December 28, 2024, respectively. The Company expects to contribute $1.5 million for the fiscal year 2026.
Estimated Future Benefit Payments
The estimated future benefit payments, based upon the same assumptions used to measure the benefit obligations and expected future employee service, were as follows:

(in millions) |  | Year Ended January 3, 2026
2026 |  | $ | 1.2 |
2027 |  | 1.2 |
2028 |  | 1.2 |
2029 |  | 2.1 |
2030 |  | 1.2 |
Thereafter |  | 7.8 |
Total |  | $ | 14.7 |

22. Non-operating Loss
Non-operating loss consists of the following:

(in millions) | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Interest income | $ | 3.4 |  |  | $ | 4.4 |  |  | $ | 2.9 |
Realized and unrealized foreign currency (losses) | (7.6) |  |  | (4.4) |  |  | (8.8) |
Interest expense | (33.2) |  |  | (41.2) |  |  | (47.1) |
Total non-operating loss | $ | (37.4) |  |  | $ | (41.2) |  |  | $ | (53.0) |

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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

23. Income Taxes
The components of income before (benefit) provision for income taxes are as follows:

(in millions) | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
United States | $ | 133.9 |  |  | $ | (17.8) |  |  | $ | 56.3 |
Foreign | 138.7 |  |  | 39.6 |  |  | 56.7 |
Total | $ | 272.6 |  |  | $ | 21.8 |  |  | $ | 113.0 |

The following table presents the current and deferred (benefit) provision for income taxes:

(in millions) | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Current: |  |  |  |  |
Federal | $ | 23.5 |  |  | $ | 17.3 |  |  | $ | 12.6 |
State | 4.1 |  |  | 3.0 |  |  | 3.4 |
Foreign | 25.5 |  |  | 8.6 |  |  | 9.1 |
Subtotal | $ | 53.1 |  |  | $ | 28.9 |  |  | $ | 25.1 |
Deferred: |  |  |  |  |
Federal | $ | 6.1 |  |  | $ | (19.0) |  |  | $ | (5.4) |
State | 6.4 |  |  | (5.6) |  |  | (6.3) |
Foreign | (0.7) |  |  | 1.3 |  |  | (8.1) |
Subtotal | 11.8 |  |  | (23.3) |  |  | (19.8) |
Total | $ | 64.9 |  |  | $ | 5.6 |  |  | $ | 5.3 |

Included in the fiscal year 2025, 2024 and 2023 tax (benefit) provisions are increases of $2.8 million, $3.2 million and $5.7 million, respectively, for tax and accrued interest related to uncertain tax positions for each fiscal year.
The reconciliation of the U.S. federal statutory tax rate to the Company’s effective tax rate after the adoption of ASU 2023-09 is as follows:
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

| Year Ended January 3, 2026
| (in millions) |  | Percent
Statutory regular federal income tax rate | $ | 57.1 |  |  | 21.0 | %
State and local income taxes, net of federal income tax effect (a) | 8.3 |  |  | 3.1 |
Foreign tax effects: |  |  |
Switzerland |  |  |
Statutory tax rate differential | (17.6) |  |  | (6.5) |
Cantonal taxes | 5.0 |  |  | 1.8 |
Impairment | (4.3) |  |  | (1.6) |
Cross-border tax laws | 4.7 |  |  | 1.7 |
Other | 2.3 |  |  | 0.8 |
Other foreign jurisdictions | 5.7 |  |  | 2.1 |
Effects of cross-board tax laws |  |  |
Foreign GILTI, net with FTC | 2.4 |  |  | 0.9 |
Other | 0.8 |  |  | 0.3 |
Tax credits |  |  |
R&D credits | (4.8) |  |  | (1.8) |
Nontaxable and nondeductible items |  |  |
Excess stock-based compensation | (5.0) |  |  | (1.8) |
Other | 7.5 |  |  | 2.8 |
Changes in unrecognized tax benefit | 2.8 |  |  | 1.0 |
Effective tax rate | $ | 64.9 |  |  | 23.8 | %

____________
(a) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Illinois, Massachusetts, New York, and Texas.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:

| Year Ended December 28, 2024 |  | Year Ended December 30, 2023 |  |
Statutory regular federal income tax rate | 21.0 | % |  | 21.0 | % |  |
State provision, net of federal benefit | (12.1) |  |  | (2.0) |  |  |
U.S. tax on foreign income, net | 42.5 |  |  | 5.3 |  |  |
Foreign income taxed at different rates | 8.0 |  |  | (2.4) |  |  |
Research and development tax credits | (16.7) |  |  | (3.4) |  |  |
Tax credit | — |  |  | (7.3) |  |  |
Excess stock-based compensation | (26.3) |  |  | (2.3) |  |  |
Nondeductible executive compensation | 16.9 |  |  | (1.7) |  |  |
Derecognition of uncertain tax position | (15.5) |  |  | (1.6) |  |  |
Other | 7.9 |  |  | (0.9) |  |  |
Total | 25.7 | % |  | 4.7 | % |  |

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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of January 3, 2026, the Company has accumulated undistributed earnings generated by its foreign subsidiaries of approximately $613.7 million. Because such earnings have previously been subject to U.S. tax or are eligible for a dividends received deduction when repatriated, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of its foreign investments would generally be limited to foreign withholding and state taxes. The Company considers $86.5 million of these accumulated undistributed earnings as no longer permanently reinvested and has accrued foreign withholding and state taxes, net of estimated foreign tax credits, of $2.3 million. The Company intends, however, to indefinitely reinvest the remaining $527.2 million of earnings. If the Company decides to distribute such permanently reinvested earnings, the Company would accrue estimated additional income tax expense of up to approximately $25.0 million.
The components of the deferred tax assets are as follows:

(in millions) | January 3, 2026 |  | December 28, 2024
Deferred tax assets: |  |  |
Capital loss | $ | 134.2 |  |  | $ | — |
Accrued liabilities | 35.7 |  |  | 28.6 |
Capitalized R&D | 29.5 |  |  | 41.2 |
Tax credits | 30.6 |  |  | 31.5 |
Deferred revenue | 24.8 |  |  | 27.5 |
Net operating losses | 16.8 |  |  | 10.9 |
Operating lease liabilities | 7.4 |  |  | 5.6 |
Stock-based compensation | 5.6 |  |  | 8.4 |
Intangible assets | 1.6 |  |  | 6.4 |
Other | 6.2 |  |  | 5.8 |
Total | 292.4 |  |  | 165.9 |
Valuation allowance | (145.1) |  |  | (15.2) |
Total deferred tax assets | $ | 147.3 |  |  | $ | 150.7 |
Deferred tax liabilities: |  |  |
Property and equipment | $ | (8.4) |  |  | $ | (12.2) |
Withholding taxes on undistributed foreign earnings | (3.5) |  |  | (3.1) |
ROU assets | (7.3) |  |  | (5.2) |
State taxes and other | (14.1) |  |  | (12.0) |
Total deferred tax liabilities | (33.3) |  |  | (32.5) |
Net deferred tax assets | $ | 114.0 |  |  | $ | 118.2 |

As of January 3, 2026, the Company has $0.8 million and $2.7 million of net operating losses from federal and various state jurisdictions, which will begin to expire in 2037 and 2038, respectively. Additionally, the Company has $68.7 million of net operating losses from foreign jurisdictions that will begin to expire in 2032. The Company also has state research and development tax credits of $38.7 million that will carryforward indefinitely, $0.2 million of foreign tax credits on research and development expenditures that will begin to expire in 2044 and $3.6 million of Swiss tax credits that will begin to expire in 2026. In assessing the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not that all or some portion of the deferred tax assets will not be realized. In making this determination, the Company considered all available positive and negative evidence, including scheduled reversals of liabilities, projected future taxable income, tax planning strategies and recent financial performance.
During the year ended December 30, 2023, the Company established a valuation allowance to reduce the deferred tax assets relating to certain acquired operating losses in certain foreign jurisdictions that the Company believes are not likely to be realized. During the year ended January 3, 2026, there was an increase in the valuation allowance of $129.9 million, primarily due to capital losses and the losses of certain foreign operations and certain state jurisdictions that the Company believes are not likely to be realized.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

(in millions) | Year Ended January 3, 2026 |  | Year Ended December 28, 2024
Unrecognized tax benefits (gross), beginning of period | $ | 33.4 |  |  | $ | 30.2 |
Increase from tax positions in prior period | 0.5 |  |  | 1.8 |
Increase from tax positions in current period | 7.3 |  |  | 4.9 |
Lapse of statute of limitations | (5.3) |  |  | (3.5) |
Unrecognized tax benefits (gross), end of period | $ | 35.9 |  |  | $ | 33.4 |

The amount of unrecognized benefits which, if ultimately recognized, could favorably affect the tax rate in a future period was $33.3 million and $30.8 million as of January 3, 2026 and December 28, 2024, respectively.
For the year ended January 3, 2026 the Company recorded an expense of $0.4 million for interest and penalties related to unrecognized tax benefits as part of income tax expense. For the year ended December 28, 2024, the Company recorded a benefit of $0.6 million for interest and penalties related to unrecognized tax benefits as part of income tax expense. For the year ended December 30, 2023, the Company recorded a benefit of $1.0 million for interest and penalties related to unrecognized tax benefits as part of income tax expense.
Total accrued interest and penalties related to unrecognized tax benefits as of January 3, 2026 and December 28, 2024 were $3.1 million and $2.7 million, respectively.
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 2021. 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.
The amounts of cash income tax paid by the Company were as follows:

(in millions) | Year Ended January 3, 2026
Federal | $ | 13.4 |
Foreign |
Switzerland | 6.9 |
Mexico | 2.0 |
All other foreign | 4.2 |
State and local | 2.0 |
Income taxes, net of amounts refunded | $ | 28.5 |

The amount of cash income taxes paid by the Company during the years ended December 28, 2024 and December 30, 2023 was $35.9 million and $20.4 million, respectively.
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 OBBBA did not have a material impact on the consolidated financial statements for the year ended January 3, 2026, and the Company will continue to monitor its impacts on future years.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 or 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 consolidated financial statements upon the occurrence of a Qualifying Termination under the 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).
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.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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, had 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 Interim 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 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 September 27, 2025, the Company had three severance plan participation agreements with executive officers. The participation 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 or she is terminated by the Company without cause or if he or she terminates his or her employment for good reason under certain circumstances. Each executive officer is also required to give the Company six months’ advance notice of his or her resignation under certain circumstances.
Willow Cross-Licensing Agreement Provisions
The Company’s Cross-Licensing Agreement with Willow purports to require the Company to pay annual minimum aggregate royalties for the use of the rainbow® licensed technology, which is a perpetual global license. On October 24, 2024, Mr. Kiani’s employment as the Company’s CEO was terminated. Following Mr. Kiani’s termination, the Company paid Willow (i) a $2.5 million license fee for technology for use in blood glucose monitoring; and (ii) minimum aggregate annual royalties for carbon monoxide, methemoglobin, fractional arterial oxygen saturation, hemoglobin and/or glucose measurements in the amount of $15.0 million, plus $2.0 million for an additional parameter. As described in Note 24, “Commitments and Contingencies — Litigation”, the Company is in a dispute with Willow regarding the Cross-Licensing Agreement and Payments under the Cross-Licensing Agreement. No additional accruals or payments were made in connection with the termination of Mr. Kiani’s employment under the Willow Cross-Licensing Agreement.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Purchase Commitments
Pursuant to contractual obligations with vendors, the Company had $258.4 million of purchase commitments as of January 3, 2026 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 January 3, 2026, the Company had approximately $4.1 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 January 3, 2026, the Company had not incurred any significant costs related to contractual indemnification of its customers.
Fee Agreement
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) 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. 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 January 3, 2026, no amounts were outstanding in connection with this Fee Agreement.
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 January 3, 2026, the Company had $152.3 million of bank balances, of which $4.2 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 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 years ended January 3, 2026, December 28, 2024 and December 30, 2023, revenue from the sale of the Company’s healthcare products to customers that are members of U.S. GPOs approximated 57.2%, 56.9% and 53.2% of healthcare revenue, respectively.
For the years ended January 3, 2026, December 28, 2024 and December 30, 2023, the Company had sales through one just-in-time healthcare distributor that represented 18.8%, 18.5%, and 18.1% of healthcare revenue, respectively.
As of January 3, 2026, two healthcare customers represented 26.5% and 10.1%, respectively, of the Company’s healthcare accounts receivable balance. The receivable balance related to one of these two healthcare customers 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.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. The District Court held a jury trial on the patent infringement claims in November of 2025 and the jury returned a verdict of $634 million. The parties are currently briefing post-trial motions regarding the jury verdict.
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 January 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 challenged claims were found valid, while others were found invalid. Appeals of the IPRs for the two patents were initiated, but are not being pursued in view of reexamination proceedings at the Patent Office. On January 12, 2024, the U.S. Customs and Border Protection Exclusion Order Enforcement Branch (Enforcement Branch) issued a ruling letter allowing importation of certain Apple Watches with the blood oxygen feature disabled. On January 7, 2025, the Enforcement Branch issued a second ruling letter declining entry of a second redesigned Apple Watch. On August 1, 2025, following an ex parte proceeding initiated by Apple, the Enforcement Branch issued a ruling letter allowing importation of the second redesigned Apple Watch. On August 20, 2025, the Company initiated an action against Customs and Border Protection and certain government officials (in their official capacity) in the U.S. District Court for the District of Columbia asserting, among other things, a violation of the Administrative Procedures Act in connection with Apple’s ex parte proceeding. On the same day, the Company filed a motion for temporary restraining order and preliminary injunction to prohibit Customs and Border Protection from permitting the importation of the Apple Watches subject to the August 1, 2025 letter ruling. That motion remains pending. On September 8, 2025, the Company filed a request before the ITC seeking clarification or, in the alternative, modification of the LEO to confirm that the LEO covers second redesigned Apple Watches being imported pursuant to the August 1, 2025 ruling letter. On November 14, 2025, the ITC instituted a combined enforcement and modification proceeding to evaluate Apple’s second redesigned watch that was the subject of Customs and Border Protection’s August 1, 2025 ruling letter. The U.S Administrative Law Judge who conducted the evidentiary hearing in the underlying ITC investigation conducted an evidentiary hearing in the enforcement proceeding on January 28, 2026. The Initial Enforcement Determination by the Administrative Law Judge is expected by March 18, 2026, and the Final Enforcement Determination from the ITC is expected by May 18, 2026.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. On August 14, 2025, plaintiffs filed a motion for preliminary approval of class action settlement, which the Court granted on February 2, 2026. A Settlement Hearing is scheduled for May 5, 2026.
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 (the Exchange Act) (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.
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 Complaint. Defendants’ deadline to respond to the Amended Complaint is March 17, 2026.
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 has formed a review committee, currently consisting of Dr. Solomon and Ms. Lane, to consider and assess the remaining demand.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 from a former employee within the Company’s accounting department of potential accounting irregularities, internal control deficiencies, and improper whistleblower restrictions.
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 the 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 relief 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. On December 12, 2024, the Company filed its answer to the amended complaint, as well as a motion to stay the proceedings. On July 21, 2025, the Court denied the Company’s motion to stay. On September 23, 2025, Mr. Kiani filed a second amended complaint, which does not bring new claims but, among other things, adds allegations that Mr. Kiani was improperly denied the ability to exercise certain stock options. The case is now in discovery.
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, Dr. 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. On July 2, 2025, Defendants filed their Answer to the Complaint. On July 12, 2025, Defendants filed a motion to stay all proceedings citing, among other things, the ongoing litigation in Delaware and Mr. Kiani’s action against the Company in Orange County Superior Court. On December 23, 2025, Defendants filed a Motion for Judgment on the Pleadings. On January 19, 2026, Defendants’ motion to stay was denied.
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.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. 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 (together, the RTW Defendants) and Mr. Kiani, 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. On August 5, 2025, the Company voluntarily dismissed its sole claim against Mr. Kiani without prejudice and, on August 6, 2025, the Court granted the Parties’ joint stipulation to voluntarily dismiss Plaintiff’s Section 13(d) claim against the RTW Defendants, leaving only the Section 16(b) claim. On August 18, 2025, the Court denied in full the RTW Defendants’ motion to dismiss. The RTW Defendants filed their Answer to the amended complaint on September 3, 2025. 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 empty 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. The case has now proceeded to discovery.
On May 26, 2025, Willow filed a demand for arbitration (the Demand) against the Company with the American Arbitration Association. Willow asserts in the Demand, and Statements of Additional Claims filed on November 28, 2025 and January 16, 2026, that it is entitled to declaratory judgment on the parties’ respective rights under the Cross-Licensing Agreement, described in Note 3, “Related Party Transactions”, including that Willow does not owe the Company repayment for any past royalty overpayments. Willow also claims the Company breached the Cross-Licensing Agreement, including by failing to pay adequate royalties, provide Willow with pricing for certain products, place certain technology in escrow, and provide Willow with engineering support. Willow seeks, among other things, (i) monetary damages of at least $6.1 million and (ii) specific performance compelling the Company to provide price lists for certain products, permit Willow’s chosen auditor to conduct an audit of the Company’s books and records, place certain technology in escrow, and provide Willow with engineering support.
The Company has asserted counterclaims against Willow and the Company’s former CEO Joe Kiani, seeking, among other things, (i) repayment of historical royalty overpayments, (ii) for Willow to re-assign to the Company intellectual property rights that are owned by the Company, (iii) declaratory judgment that provisions under the Cross-Licensing Agreement are not enforceable, and (iv) to the extent the agreement is enforceable, declaratory judgment on the parties’ respective rights under the Cross-Licensing Agreement, including the scope of the Company’s royalty obligations, if any.
We believe the Company has strong defenses to Willow’s claims, and that the Company’s counterclaims are meritorious. However, there is no guarantee that the Company will prevail in its dispute with Willow.
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 consolidated financial statements. Gain contingencies, when applicable, are recognized upon being realized or realizable.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 effect on its consolidated financial position, results of operations or cash flows.
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 January 3, 2026, the Company operates under one reportable segment, the healthcare business. Earlier this year, the non-healthcare consumer audio business was classified as held-for-sale, and as a result was excluded from the segment and enterprise reporting herein for all periods presented. On September 23, 2025, the Company completed the sale of its non-healthcare business.
The Company’s CODM uses segment gross profit, as presented in the Company’s 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 years ended January 3, 2026, December 28, 2024 and December 30, 2023:

(in millions) | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Revenues: |  |  |  |  |
Healthcare | $ | 1,524.1 |  |  | $ | 1,395.2 |  |  | $ | 1,275.5 |
Other(1) | 2.8 |  |  | — |  |  | — |
Total revenues | $ | 1,526.9 |  |  | $ | 1,395.2 |  |  | $ | 1,275.5 |
Cost of goods: |  |  |  |  |
Healthcare | $ | 573.8 |  |  | $ | 581.7 |  |  | $ | 498.3 |
Other(1) | 7.9 |  |  | 19.2 |  |  | 11.6 |
Total costs of good sold | $ | 581.7 |  |  | $ | 600.9 |  |  | $ | 509.9 |
Gross profit: |  |  |  |  |
Segment gross profit | $ | 950.3 |  |  | $ | 813.6 |  |  | $ | 777.1 |
Acquired asset amortization(1)(2) | (6.6) |  |  | (1.8) |  |  | (1.9) |
Business transition and related costs(1)(3) | 1.5 |  |  | (14.8) |  |  | (4.9) |
Acquisitions, integrations, divestitures, and related costs(1)(4) | — |  |  | (0.1) |  |  | — |
Other(1) | — |  |  | (2.6) |  |  | (4.7) |
Total gross profit | $ | 945.2 |  |  | $ | 794.3 |  |  | $ | 765.6 |

__________________
(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.
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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For each of the years ended January 3, 2026, December 28, 2024 and December 30, 2023, total depreciation and amortization expense for the healthcare segment was $38.8 million, $48.5 million and $38.1 million, respectively.
The Company’s total assets by segment are as follows:

(in millions) | January 3, 2026 |  | December 28, 2024
Total assets by segment: |  |  |
Healthcare | $ | 1,697.8 |  |  | $ | 1,589.7 |
Asset held-for-sale | 1.1 |  |  | 1,036.0 |
Total assets by segment | $ | 1,698.9 |  |  | $ | 2,625.7 |

The Company’s consolidated long-lived assets (tangible non-current assets) by geographic area are as follows:

(in millions, except percentages) | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  |
Total long-lived assets by geographic area: |  |  |  |  |  |  |  |  |  |  |
United States | $ | 307.7 |  |  | 86.5 | % |  | $ | 312.5 |  |  | 87.9 | % |  |  |  |
International | 48.2 |  |  | 13.5 |  |  | 43.2 |  |  | 12.1 |  |  |  |  |
Total long-lived assets by geographic area | $ | 355.9 |  |  | 100.0 | % |  | $ | 355.7 |  |  | 100.0 | % |  |  |  |

The following schedule presents an analysis of the Company’s revenues based upon the geographic area (ship to location):

(in millions, except percentages) | Year Ended January 3, 2026 |  | Year Ended December 28, 2024 |  | Year Ended December 30, 2023
Total revenue by geographic area: |  |  |  |  |  |  |  |  |  |  |
United States (U.S.) | $ | 956.6 |  |  | 62.7 | % |  | $ | 889.3 |  |  | 63.7 | % |  | $ | 796.9 |  |  | 62.5 | %
Europe, Middle East and Africa | 391.4 |  |  | 25.6 |  |  | 349.7 |  |  | 25.1 |  |  | 312.3 |  |  | 24.5 |
Asia and Australia | 119.6 |  |  | 7.8 |  |  | 105.2 |  |  | 7.5 |  |  | 117.6 |  |  | 9.2 |
North and South America (excluding U.S.) | 59.3 |  |  | 3.9 |  |  | 51.0 |  |  | 3.7 |  |  | 48.7 |  |  | 3.8 |
Total revenue by geographic area | $ | 1,526.9 |  |  | 100.0 | % |  | $ | 1,395.2 |  |  | 100.0 | % |  | $ | 1,275.5 |  |  | 100.0 | %

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MASIMO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

26. Subsequent Event
Merger Agreement
On February 16, 2026, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Danaher Corporation, a Delaware corporation (Parent), and Mobius Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (Merger Sub), pursuant to which, among other things, Merger Sub will merge with and into the Company (the Merger), with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent.
As set forth in the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $0.001 per share, of the Company (other than any shares owned by Parent, Merger Sub or the Company, or any of their wholly owned subsidiaries or shares in respect of which appraisal has been duly demanded, and not effectively withdrawn or otherwise waived or lost, pursuant to Section 262 of the General Corporation Law of the State of Delaware) issued and outstanding immediately prior to the effective time of the Merger will be automatically converted into the right to receive $180.00 in cash, without interest.
The completion of the Merger is subject to various conditions, including, among others, customary conditions relating to: (i) the adoption of the Merger Agreement by the Company’s stockholders; (ii) expiration or termination of any applicable waiting periods (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of certain non-U.S. antitrust and foreign direct investment approvals; (iii) the absence of any law or order making unlawful or restraining, enjoining or otherwise prohibiting consummation of the Merger; (iv) the absence of any material adverse effect with respect to the Company; and (v) other customary conditions relating to the accuracy of representations and warranties and performance of covenants.
The Merger Agreement also contains customary representations, warranties and covenants of the Company, Parent and Merger Sub, including, among others, covenants regarding the operation of the business of the Company and its subsidiaries prior to the effective time of the Merger.
If the Merger is completed, the shares will be delisted from the Nasdaq Stock Market and deregistered under the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable following the effective time of the Merger.
Contingent or Discretionary Fees
The Company entered into certain contingent or discretionary fee agreements with various service providers, advisors and consultants in connection with the sale transaction. A $5.0 million fee was due upon the announcement of a sale transaction, and another $10.0 million fee will be due upon the consummation of the sale transaction.
The Company is unable to reasonably estimate any other contingent fees due under these agreements at this time. Amounts due will be recognized when probable and reasonably estimable.
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Schedule II
MASIMO CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years ended January 3, 2026, December 28, 2024 and December 30, 2023
(in millions)

Description |  | Balance at Beginning of Period |  | Additions Charged to Expense and Other Accounts |  | Amounts Charged Against Reserve |  | Balance at End of Period
Year ended January 3, 2026 |  |  |  |  |  |  |  |
| Allowance for credit losses |  | $ | 3.7 |  |  | $ | 3.0 |  |  | $ | (2.0) |  |  | $ | 4.7 |
| Allowance for sales returns |  | 2.4 |  | 3.0 |  |  | (1.5) |  |  | 3.9 |
Year ended December 28, 2024 |  |  |  |  |  |  |  |
| Allowance for credit losses |  | 2.7 |  |  | 1.1 |  |  | (0.1) |  |  | 3.7 |
| Allowance for sales returns |  | 1.4 |  |  | 2.1 |  |  | (1.1) |  |  | 2.4 |
Year ended December 30, 2023 |  |  |  |  |  |  |  |
| Allowance for credit losses |  | 2.4 |  |  | 0.4 |  |  | (0.1) |  |  | 2.7 |
| Allowance for sales returns |  | 1.8 |  |  | — |  |  | (0.4) |  |  | 1.4 |

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