MASIMO CORP (MASI)

CIK: 0000937556. SIC: 3845 Electromedical & Electrotherapeutic Apparatus. Latest 10-K as of: 2026-02-27.

SIC breadcrumb: Manufacturing > SIC Major Group 38 > SIC 3845 Electromedical & Electrotherapeutic Apparatus

SEC company page: https://www.sec.gov/edgar/browse/?CIK=937556. Latest filing source: 0000937556-26-000017.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-27. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000937556.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-05. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000937556.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0000937556-26-000063.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-05. Report date: 2026-04-04.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. Such forward-looking statements include any expectation of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; matters relating to future board and management leadership; factors that may affect our operating results or financial condition; statements concerning new products, technologies or services; statements related to future capital expenditures; statements related to future economic conditions or performance; statements related to our stock repurchase program; statements related to our proposed merger with Danaher, and any associated impact, if at all on the business, revenues or operations; statements as to industry trends and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may” or “will,” the negative versions of these terms and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the fiscal year ended January 3, 2026, which we filed with the SEC on February 27, 2026. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Recent Developments

Sale of Non-Healthcare Business

On May 6, 2025, we announced that we had 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, we completed the sale of Sound United.

Discontinued Operations

Our results for all periods presented, as discussed further in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are presented on a continuing operations basis. Results related to our non-healthcare consumer audio business are reported as discontinued operations for all periods presented. See Note 18, “Discontinued Operations” to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to discontinued operations.

Cybersecurity Incident

On April 27, 2025, we identified unauthorized activity on our on-premise network. Upon detection, we activated incident response protocols and implemented containment measures, including proactively isolating impacted systems. We promptly commenced an investigation to assess, mitigate, and remediate the incident with the assistance of third-party cybersecurity professionals. We also notified law enforcement.

As a result of the incident, certain of our manufacturing facilities and our customer order acceptance processes were temporarily operating at less than normal capacity, which had an impact on our ability to process, fulfill, and ship customer orders timely. We worked diligently to bring the affected portions of its network back online, restore normal business operations and mitigate the impact of the incident.

As of May 27, 2025, our manufacturing operations were running at near full capacity, and our critical order taking, distribution and shipping systems are fully operational. We continued to optimize these systems to ensure that any delayed orders were being processed in a timely manner.

As of June 28, 2025, all our manufacturing operations have returned to normal operations. There were no selling, general and administrative expenses incurred related to the cybersecurity incident for each of the three months ended April 4, 2026 and March 29, 2025.

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Recent Tax Law Changes

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing the impact of the OBBBA on our consolidated financial statements.

Merger Agreement

On February 16, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Danaher Corporation, a Delaware corporation (“Danaher”) and Mobius Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Danaher (“Merger Sub”), pursuant to which among other things, Merger Sub will merge with and into us (the “Merger”), with us 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 our common stock, par value $0.001 per share, (other than any shares owned by Danaher, Merger Sub or any of our 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 2026, subject to customary closing conditions, including approval by our stockholders and the receipt of required regulatory approvals. On May 1, 2026, our stockholders adopted the Merger Agreement at a special meeting of stockholders.

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.

In connection with the proposed Merger, we incurred approximately $17.9 million in selling, general and administrative expenses during the first quarter of fiscal 2026, and we expect to incur additional financial advisory, legal, accounting, and other professional fees in connection with the Merger.

Additional information about the Merger Agreement and the Merger is set forth in the Company’s Definitive Proxy Statement on Schedule 14A that was filed with the SEC on April 1, 2026.

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.

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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.

Economic Trends and Developments Effecting Our Business

Economic Trends

The healthcare market we operate in is highly competitive, dynamic, and experienced a number of headwinds 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.

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, Canad

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-27. Report date: 2026-01-03.

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 increase. 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 included 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 potentially 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.