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What changed in MASIMO CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of MASIMO CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+452 added−487 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-28)

Top changes in MASIMO CORP's 2025 10-K

452 paragraphs added · 487 removed · 308 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

64 edited+15 added−29 removed145 unchanged
Biggest changeDescription: Use: Distribution Channel: • Patients receive a multi-day supply of disposable sensors or reusable devices, along with access to the Masimo SafetyNet ™ mobile application • Sold directly to end-users and through distributors • Robust secure video conferencing to the remote patient management and connectivity platform to offer a comprehensive telehealth and telemonitoring solution • Sold directly to end-users and through distributors • Disposable thermometers, disposable fingertip sensors for sleep monitoring, fingertip pulse oximeter • Sold directly to consumers through the Masimo Personal Health website and through consumer retailers 17 Table of Contents Home Wellness and Remote Patient Monitoring Solutions to Extend Care from the Hospital to the Home - (Continued) Description: Use: Distribution Channel: • Available for prescription use to continuously monitor babies at home as a medical device for healthy or sick babies • Sensor technology nests within the Stork ™ Boot, which is made from an ultra-soft medical-grade silicone that conforms gently to the baby’s skin and is available in three sizes to ensure a perfect fit as the child grows • Sold directly to consumers through the Masimo Personal Health website and through consumer retailers • Pulse oximeter cable and sensor for use with an iPhone, iPad, iPod touch and select Android smart phones • Sold directly to consumers through the Masimo Personal Health website and through consumer retailers • Provides real-time monitoring to identify the risk of opioid-induced respiratory depression, sends alerts to the patient and their emergency contacts, followed by an automated wellness call • Sold directly to consumers through the Masimo Personal Health website and through consumer retailers 18 Table of Contents Home Wellness and Remote Patient Monitoring Solutions to Extend Care from the Hospital to the Home - (Continued) Description: Use: Distribution Channel: • For patients experiencing opioid withdrawal symptoms while undergoing treatment for opioid use disorder when initiating treatment, transitioning treatment or tapering off medication-assisted treatment • Sold directly to end-users and through distributors, and provided to end users through healthcare providers • For consumers wanting to make better informed health and lifestyle decisions, improve their fitness or track their health data on their own or with friends and family • Sold directly to consumers through the Masimo Personal Health website and consumer retailers 19 Table of Contents Hearables and wearables- (e.g.
Biggest changeDescription: Use: Distribution Channel: • Patients receive a multi-day supply of disposable sensors or reusable devices, along with access to the Masimo SafetyNet ® mobile application • Sold directly to end-users and through distributors 16 Table of Contents Home Wellness and Remote Patient Monitoring Solutions to Extend Care from the Hospital to the Home - (Continued) Description: Use: Distribution Channel: • Robust secure video conferencing to the remote patient management and connectivity platform to offer a comprehensive telehealth and telemonitoring solution • Sold directly to end-users and through distributors • Disposable thermometers, disposable fingertip sensors for sleep monitoring, fingertip pulse oximeter • Sold directly to consumers through the Masimo Personal Health website and through consumer retailers • Pulse oximeter cable and sensor for use with an iPhone, iPad, iPod touch and select Android smart phones • Sold directly to consumers through the Masimo Personal Health website and through consumer retailers • Provides real-time monitoring to identify the risk of opioid-induced respiratory depression, sends alerts to the patient and their emergency contacts, followed by an automated wellness call • Sold directly to consumers through the Masimo Personal Health website and through consumer retailers 17 Table of Contents Home Wellness and Remote Patient Monitoring Solutions to Extend Care from the Hospital to the Home - (Continued) Description: Use: Distribution Channel: • To provide accurate personal health tracking of vitals, including SpO 2 , pulse rate and relative hydration along with recovery and sleep indexes • Sold directly to consumers through the Masimo Consumer and individual brand websites and through consumer retailers Willow Laboratories, Inc.
We primarily sell our healthcare products to hospitals, emergency medical service (EMS) providers, home care providers, physician offices, veterinarians, long-term care facilities and consumers through our direct sales force, distributors and original equipment manufacturer (OEM) partners, such as GE Healthcare, Hillrom, Mindray, Philips, Physio-Control, Zoll, among others.
We primarily sell our healthcare products to hospitals, emergency medical service (EMS) providers, home care providers, physician offices, veterinarians, long-term care facilities and consumers 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.
Other companies’ promotional activities for their FDA-regulated products have been the subject of 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.
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.
Other regulations which affect the product content, manufacturing, and packaging 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.
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.
Description: Use: Distribution Channel: • Line of disposables to measure gas parameters using mainstream and sidestream capnography • Sold directly to end-users, through distributors and to OEM partners who sell to end-users Proprietary Measurements (e.g., SpHb ® , SpCO ® , SpMet ® , PVi ® , RRa ® , RRp ® , ORi ™ , 3D Alarms ® and Adaptive Threshold Alarm) Description: Use: Distribution Channel: • rainbow ® measurements and other proprietary features • Licensed directly to end-users and through OEM partners who sell to new and existing end-users 12 Table of Contents 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.
Description: Use: Distribution Channel: • Line of disposables to measure gas parameters using mainstream and sidestream capnography • Sold directly to end-users, through distributors and to OEM partners who sell to end-users 11 Table of Contents Proprietary Measurements (e.g., SpHb ® , SpCO ® , SpMet ® , PVi ® , RRa ® , RRp ® , ORi ™ , 3D Alarms ® and Adaptive Threshold Alarm) Description: Use: Distribution Channel: • rainbow ® measurements and other proprietary features • Licensed directly to end-users and through OEM partners who sell to new and existing end-users 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.
Description: Use: Distribution Channel: • Extensive line of both single-patient, reusable and rainbow ® sensors • Patient cables, as well as adapter cables, that enable the use of our sensors on certain competitors’ monitors • Sold directly to end-users, through distributors and to OEM partners who sell to end-users • Extensive line of both single-patient, reusable and rainbow ® sensors • Sold directly to end-users, through distributors and to OEM partners who sell to end-users • Patient cables, as well as adapter cables, that enable the use of our sensors on certain competitors’ monitors • Sold directly to end-users, through distributors and to OEM partners who sell to end-users 11 Table of Contents Capnography and Gas Monitoring (e.g., Rad-97 ® with NomoLine ® Capnography, Root ® with Capnography, IRMA ™ CO2, IRMA AX+ and EMMA ® ( shown below ) ) 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.
Description: Use: Distribution Channel: • Extensive line of both single-patient, reusable and rainbow ® sensors • Patient cables, as well as adapter cables, that enable the use of our sensors on certain competitors’ monitors • Sold directly to end-users, through distributors and to OEM partners who sell to end-users • Extensive line of both single-patient, reusable and rainbow ® sensors • Sold directly to end-users, through distributors and to OEM partners who sell to end-users 10 Table of Contents Sensors - (Continued) Description: Use: Distribution Channel: • Patient cables, as well as adapter cables, that enable the use of our sensors on certain competitors’ monitors • Sold directly to end-users, through distributors and to OEM partners who sell to end-users Capnography and Gas Monitoring (e.g., Rad-97 ® with NomoLine ® Capnography, Root ® with Capnography, IRMA ™ CO2, IRMA AX+ and EMMA ® ( shown below ) ) 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.
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. 30 Table of Contents Research and Product Development We believe that ongoing research and product development (R&D) efforts are essential to our success.
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. 25 Table of Contents Research and Product Development We believe that ongoing research and product development (R&D) efforts are essential to our success.
Description: Use: Distribution Channel: • Bedside, handheld and wireless monitoring devices that incorporate Masimo SET ® with and without licensed Masimo rainbow SET ® technology, noninvasive blood pressure and capnography • Sold directly to end-users, through distributors and, in some cases, to our OEM partners who sell to end-users 8 Table of Contents Description: Use: Distribution Channel: • Rad-G ® with Temperature measures physiological parameters, including oxygen saturation (SpO2), pulse rate (PR), perfusion index (Pi), pleth variability index (PVi ® ), respiration rate from the pleth (RRp ® ), and temperature (Temp).
Description: Use: Distribution Channel: • Bedside, handheld and wireless monitoring devices that incorporate Masimo SET ® with and without licensed Masimo rainbow SET ® technology, noninvasive blood pressure and capnography • Sold directly to end-users, through distributors and, in some cases, to our OEM partners who sell to end-users 7 Table of Contents Monitors and Devices - (Continued) Description: Use: Distribution Channel: • Rad-G ® with Temperature measures physiological parameters, including oxygen saturation (SpO2), pulse rate (PR), perfusion index (Pi), pleth variability index (PVi ® ), respiration rate from the pleth (RRp ® ), and temperature (Temp).
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. 27 Table of Contents Recently, we have seen a global rise in scrutiny and legislative activity in connection with data breaches of health information in medical devices.
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.
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 Chairman and Chief Executive Officer, is also the Chairman and Chief Executive Officer of Willow.
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.
Unanticipated changes in existing regulatory requirements, adoption of new requirements and increased compliance costs could hurt our business, financial condition and results of operations. 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.
Unanticipated changes in existing regulatory requirements, adoption of new requirements and increased compliance costs could hurt our business, financial condition and results of operations. 22 Table of Contents 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.
Some suits filed under the FCA, known as “qui tam” actions, can be 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.
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.
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 nine of the top ten hospitals according to the 2022-2023 U.S. News & World Report Best Hospitals Honor Roll.
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 2023-2024 U.S. News & World Report Best Hospitals Honor Roll.
Description: Use: Distribution Channel: • Signal processing apparatus for all Masimo technology platforms • Mainstream and sidestream capnography and gas monitoring • Incorporated and sold to OEM partners who incorporate our circuit boards into their patient monitoring systems 7 Table of Contents Description: Use: Distribution Channel: Monitors and Devices (e.g., Radical-7 ® , Rad-97 ® with NomoLine ® Capnography, Rad-G ® with Temperature (shown below) ) We offer a variety of continuous bedside monitoring and transport devices suitable for all patient populations.
Description: Use: Distribution Channel: • Signal processing apparatus for all Masimo technology platforms • Mainstream and sidestream capnography and gas monitoring • Incorporated and sold to OEM partners who incorporate our circuit boards into their patient monitoring systems 6 Table of Contents Circuit Boards and Modules - (Continued) Description: Use: Distribution Channel: Monitors and Devices (e.g., Radical-7 ® , Rad-G ® with Temperature (shown below) ) We offer a variety of continuous bedside monitoring and transport devices suitable for all patient populations.
Information regarding certain device clinical trials must also be submitted to a public database maintained by the National Institutes of Health. After a device is approved and placed on the market, numerous regulatory requirements continue to apply.
Information regarding certain device clinical trials must also be submitted to a public database maintained by the National Institutes of Health. 19 Table of Contents After a device is approved and placed on the market, numerous regulatory requirements continue to apply.
This was the only customer that represented 10% or more of our healthcare revenue for the year ended December 30, 2023. Importantly, this distributor takes and fulfills orders from our direct healthcare customers, many of which have signed long-term sensor purchase agreements with us.
This was the only customer that represented 10% or more of our healthcare revenue for the year ended December 28, 2024. Importantly, this distributor takes and fulfills orders from our direct healthcare customers, many of which have signed long-term sensor purchase agreements with us.
We deliver value to our customers and stockholders through: • our differentiated and clinically superior technologies; • our proven track record of innovation; • our customer-driven approach to product development; • our robust product portfolio and pipeline that addresses unmet needs of healthcare professionals, patients, and consumers; and • our scaled and integrated platforms to continuously monitor and deliver health information and other data, applications and experiences.
We deliver value to our customers and stockholders through: • our differentiated and clinically superior technologies; • our proven track record of innovation; • our customer-driven approach to product development; • our patient-centered product portfolio and pipeline that addresses the needs of healthcare professionals, patients, and consumers; and • our scaled and integrated platforms to continuously monitor and deliver health information and other data, applications and experiences.
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.
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.
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 December 30, 2023, one just-in-time healthcare distributor represented approximately 18.1% of our total healthcare revenue.
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 December 28, 2024, one just-in-time healthcare distributor represented approximately 18.5% of our total healthcare revenue.
The majority of our current regulated medical products fit into Class II product categories, requiring 510(k) clearance, while some have been deemed Class I devices or exempt from a 510(k) clearance.
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.
We are a party to a cross-licensing agreement with Willow, which was amended and restated effective January 1, 2007 (the Cross-Licensing Agreement), which governs each party’s rights to certain intellectual property held by the two companies. The following table outlines our rights under the Cross-Licensing Agreement relating to specific end-user markets and the related technology applications of specific measurements.
We are a party to a cross-licensing agreement with Willow (the Cross-Licensing Agreement), which governs each party’s rights to certain intellectual property held by the two companies. The following table outlines our rights under the Cross-Licensing Agreement relating to specific end-user markets and the related technology applications of specific measurements.
Key General Safety and Performance requirements are that the medical device achieves 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.
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.
The adoption of certain of our recently introduced healthcare products that are marketed and sold directly to end-user consumers, including Opioid Halo ™ , Stork ™ , and W1 ™ , partially depends on the ability of consumers to have the cost of these products reimbursed by Medicare, Medicaid or their private health insurance provider.
The adoption of certain of our healthcare products that are marketed and sold directly to end-user consumers, partially depends on the ability of consumers to have the cost of these products reimbursed by Medicare, Medicaid or their private health insurance provider.
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. Markets Competitive Conditions We compete in both healthcare and non-healthcare electronic markets throughout the globe.
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. 23 Table of Contents Markets Competitive Conditions We compete in many healthcare electronic markets across the globe.
Our healthcare and non-healthcare segments are joined by the common goal of improving lives by providing patient-centered solutions to healthcare providers, expanding outside of the hospital and into the home and delivering innovative, high-quality information and experiences to consumers. We beli eve that people and infrastructures are ready for actionable patient care outside of the hospital.
Our healthcare segment has a goal of improving lives by providing patient-centered solutions to healthcare providers, expanding outside of the hospital and into the home and delivering innovative, high-quality information to consumers. We beli eve that people and infrastructures are ready for actionable patient care outside of the hospital.
Description: Use: Distribution Channel: • High-acuity care areas like an operating room • Sold directly to end-users and through distributors 16 Table of Contents Minimally Invasive and Noninvasive Advanced Hemodynamic Monitoring Solutions - (Continued) Description: Use: Distribution Channel: • High-acuity care areas like an operating room • Sold directly to end-users and through distributors Home Wellness and Remote Patient Monitoring Solutions to Extend Care from the Hospital to the Home (e.g., Masimo SafetyNet ™ , Radius T° ® , Opioid Halo ™ , Stork ™ , MightySat ® with PVi ® and RRp ® , iSpO 2 ® , Bridge ™ , and Masimo W1 ® ) 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.
Description: Use: Distribution Channel: • High-acuity care areas like an operating room • Sold directly to end-users and through distributors • High-acuity care areas like an operating room • Sold directly to end-users and through distributors Home Wellness and Remote Patient Monitoring Solutions to Extend Care from the Hospital to the Home (e.g., Masimo SafetyNet ® , Radius T° ® , MightySat ® with PVi ® and RRp ® , iSpO 2 ® , Bridge ™ , and Masimo W1 ® with Sleep (shown below) ) 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.
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.
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.
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. Products that cannot meet the 510(k) requirements are automatically classified as Class III medical devices that require a PMA.
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.
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. 24 Table of Contents 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.
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.
Leveraging our expertise in hospital-grade technologies, we have expanded our suite of products intended for use outside the hospital and products for home wellness to include Masimo Sleep, a sleep quality solution; the Masimo Radius Tº ™ wireless, a wireless wearable continuous thermometer; Radius PCG ® , a wireless tetherless capnograph; the Masimo W1 ™ , and Masimo Freedom ™ biosensing and smart watches; Masimo Opioid Halo ™ , an opioid overdose prevention and alert system; and the Masimo Stork ™ , a baby monitoring system.
Leveraging our expertise in hospital-grade technologies, we have expanded our suite of products intended for use outside the hospital and products for home wellness to include Masimo Sleep ™ , a sleep quality solution; the Masimo Radius Tº ® wireless, a wireless wearable continuous thermometer; Radius PCG ® , a wireless tetherless capnograph; the Masimo W1 ® smart watch .
The FDA determines the appropriate process based on the risk classification of the medical device. There are three classifications, from Class I to Class III. For certain Class I and Class II medical devices, the FDA’s 510(k) clearance process can be used.
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.
Masimo SET ® 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.
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.
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. 25 Table of Contents 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.
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.
Some of our key strategic initiatives are summarized below: • continue to expand our market share across our product categories; • continue to innovate and maintain our technology leadership position; • expand connectivity, hearables and wearables in hospitals and into the home and consumer market; • utilize our existing customer base and OEM relationships to market additional product offerings; • define and leverage shared Masimo product platforms to scale resources and connected technologies; • diversify products to ensure continued innovation; • expand sales and marketing infrastructure to aid in future growth initiatives; • increase efficiency and capacity through internal manufacturing capabilities combined with proven outsourced manufacturing partners; • grow our international presence through brand awareness and marketing; • expand our direct-to-consumer efforts through existing channel partners and prospective customers; • supplement our internal growth and expand our product portfolio with strategic acquisitions, investments, licensing agreements and partnerships; and • drive an efficient capital structure and strong shareholder returns.
Some of our key strategic initiatives are summarized below: • continue to expand our market share across our product categories; • focus our engineering efforts on innovation and maintaining our technology leadership position; • allocate our research and development resources on projects that drive unmet patient needs; • enhance our long-term growth; • expand our connectivity platforms throughout the hospital, care facilities and into the home market; • utilize our existing customer base and OEM relationships to expand product offerings; • define and leverage shared Masimo product platforms to scale resources and connected technologies; • diversify products to ensure continued innovation; • refocus the sales, engineering and marketing infrastructure to drive future growth initiatives; • increase efficiency and capacity through internal manufacturing capabilities combined with proven outsourced manufacturing partners; • continue cost reduction efforts through continuous value engineering; • grow our international presence through brand awareness and marketing; • supplement our internal growth and expand our product portfolio with strategic acquisitions, investments, licensing agreements and partnerships; and • drive an efficient capital structure and long-term shareholder returns.
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” and bears a CE Mark.
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.
Following the introduction of our rainbow SET ® platform, we have continued to expand our technology offerings by introducing additional noninvasive measurements, technologies, platforms and other solutions to create new market opportunities in both hospital and non-hospital care settings, as well as into consumer home health and wellness settings, including the Masimo Hospital Automation ™ Platform, other connectivity platforms, nasal high-flow ventilation, neuromodulation therapeutics, an opioid overdose prevention and alert solution, telehealth solutions, hearable and wearables, and the premium and luxury home audio setting, which are described in more detail below.
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, as well as into home health and wellness settings, including the Masimo Hospital Automation ® Platform, along with other connectivity platforms and telehealth solutions, which are described in more detail below.
Patient Monitoring and Connectivity Platform (e.g., Root ® with Radius VSM ™ , Root ® with NIBP and Root ® with Next Generation SedLine ® (shown below) ) 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.
Without any additional bedside equipment, network infrastructure, or tethered connections, Radius VSM integrates a variety of technologies, modules noninvasive sensors. • Sold directly to end-users and through distributors Patient Monitoring and Connectivity Platform (e.g., Root ® with Radius VSM ™ , Root ® with NIBP and Root ® with Next Generation SedLine ® (shown below) ) 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.
Description: Use: Distribution Channel: • Radius VSM ™ monitors a wide range of measurements on a modular form; components can be customized based on each patient’s monitoring needs • 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 • Sold directly to end-users and through distributors 9 Table of Contents Description: Use: Distribution Channel: • Integrates noninvasive blood pressure (NIBP) and temperature • Connects third-party devices such as IV pumps, ventilators, beds and other patient monitors to automate data transfer to the EMR • Sold directly to end-users and through distributors 10 Table of Contents Sensors (e.g.
Description: Use: Distribution Channel: • Radius VSM ® monitors a wide range of measurements on a modular form; components can be customized based on each patient’s monitoring needs • 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 • Sold directly to end-users and through distributors 8 Table of Contents Patient Monitoring and Connectivity Platform - (Continued) Description: Use: Distribution Channel: • Radius VSM ® monitors a wide range of physiological measurements on a modular platform.
Many of our competitors in the non-healthcare consumer market have more broadly diversified product lines, well established supply and distribution systems, loyal customer bases and significant financial, marketing, research, development and other resources. 28 Table of Contents 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; • access to integrated delivery networks, third party retailers, sales channels, e-commerce, distributors, retailers and omni-channel retailers; and • patent protection.
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; • access to integrated delivery networks, third party retailers, sales channels, e-commerce, distributors, retailers and omni-channel retailers; and • patent protection.
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 ®.
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).
Description: Use: Distribution Channel: • Software and hardware enables third-party devices to connect through Patient SafetyNet ™ and to document data in the EMR • Sold directly to end-users 13 Table of Contents Hospital Automation ™ and Connectivity Suite - (Continued) 14 Table of Contents Hospital Automation ™ and Connectivity Suite - (Continued) Description: Use: Distribution Channel: • Network-linked, wired or wireless, multiple patient floor monitoring solutions • Standalone wireless alarm notification solutions • Sold directly to end-users • Connectivity hub for the aggregation and transmission of patient data to the EMR • Sold directly to end-users • Early warning indicator designed to identify possible sepsis in patients monitored remotely with Patient SafetyNet TM • Sold directly to end-users 15 Table of Contents Nasal High Flow Ventilation (e.g., Masimo softFlow ® 50 and Masimo softFlow ® junior (shown below) ) Therapy with Nasal Insufflation (TNI) generates a precisely regulated, stable high flow from room air or a mix of room air and oxygen.
Description: Use: Distribution Channel: • Software and hardware enables third-party devices to connect through Patient SafetyNet ™ and to document data in the EMR • Sold directly to end-users 12 Table of Contents Hospital Automation ® and Connectivity Suite - (Continued) Description: Use: Distribution Channel: 13 Table of Contents Hospital Automation ® and Connectivity Suite - (Continued) Description: Use: Distribution Channel: 14 Table of Contents Hospital Automation ™ and Connectivity Suite - (Continued) Description: Use: Distribution Channel: • Network-linked, wired or wireless, multiple patient floor monitoring solutions • Standalone wireless alarm notification solutions • Sold directly to end-users • Connectivity hub for the aggregation and transmission of patient data to the EMR • Sold directly to end-users • Early warning indicator designed to identify possible sepsis in patients monitored remotely with Patient SafetyNet TM • Sold directly to end-users 15 Table of Contents Minimally Invasive and Noninvasive Advanced Hemodynamic Monitoring Solutions (e.g., Masimo LiDCO ® Hemodynamic Monitoring system, Double Channel Pressure Transducer and Stimpod NMS450X Peripheral Nerve Stimulator (shown below) ) 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.
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 with the EU MDR. Individual countries within the EU also have their own notification or registration processes in order to import medical devices into their countries.
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.
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.
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.
Additionally, the rainbow SET ® platform also allows for the calculation of Oxygen Content (SpOC) and Oxygen Reserve Index ™ (ORi ™ ). SpfO 2 ™ has received CE Marking, but is not currently available for sale in the U.S.
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.
See Note 3 , “ Related Parties 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.
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.
In return for the GPOs putting our healthcare products on contract, we have agreed to pay the GPOs a percentage of our healthcare revenue from their member hospitals. In 2023 and 2022, healthcare revenues from the sale of our pulse oximetry products to hospitals that are associated with GPOs amounted to $678.1 million and $721.3 million, respectively.
In return for the GPOs putting our healthcare products on contract, we have agreed to pay the GPOs a percentage of our healthcare revenue from their member hospitals.
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.
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.
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 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. 20 Table of Contents 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.
As a result, demand for our healthcare products is dependent in part on the coverage and reimbursement policies of these payers.
As a result, demand for our healthcare 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.
The UK exited the EU on December 31, 2020 (Brexit). The UK has adopted its own medical device regulations and has a requirement that medical devices must be registered with the UK Medicines and Healthcare Products Regulatory Agency (MHRA) before placing them on the market in Great Britain (England, Scotland and Wales).
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).
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.
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.
We continue to invest significant resources in our marketing and brand development efforts, including investing in capital expenditures on product displays to support our channel marketing through our retail partners. 29 Table of Contents Seasonality Our quarterly revenues for the healthcare and non-healthcare segments are influenced by many factors, including new product releases, acquisitions, regulatory approvals, holiday schedules, hospital census, the timing of influenza season, consumer discretionary spending, inflation, competitive pricing, adaption of new technologies and consumer loyalty, among other factors.
In 2024 and 2023, healthcare revenues from the sale of our pulse oximetry products to hospitals that are associated with GPOs amounted to $794.0 million and $678.1 million, respectively. 24 Table of Contents Seasonality Our quarterly revenues for the healthcare and non-healthcare segments are influenced by many factors, including new product releases, acquisitions, regulatory approvals, holiday schedules, hospital census, the timing of influenza season, consumer discretionary spending, inflation, competitive pricing, adaption of new technologies and consumer loyalty, among other factors.
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.
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.
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. 26 Table of Contents Because a large percentage of our healthcare products are used by Medicare beneficiaries, Medicare’s coverage and reimbursement policies are particularly significant to our healthcare business.
Because a large percentage of our healthcare products are used by Medicare beneficiaries, Medicare’s coverage and reimbursement policies are particularly significant to our healthcare business.
To date, these products are generally not covered by public or private payers and we do not intend to seek reimbursement for these products at this time.
To date, these products are generally not covered by public or private payers and we do not intend to seek reimbursement for these products at this time. 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.
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. 23 Table of Contents 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 clearance of a 510(k) premarket notification, a premarket approval (PMA), or a De Novo grant.
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.
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.
A summary of certain critical aspects of our regulatory environment is included below. 18 Table of Contents 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.
ITEM 1. BUSINESS Overview We are a global technology company dedicated to improving lives. We seek to accelerate our growth strategies and strengthen our focus on patient care via two business segments: healthcare and non-healthcare.
ITEM 1. BUSINESS Overview We are a global technology company dedicated to improving lives.
Currently, the UK will accept a CE Mark medical device to be registered; however, in the future, medical devices marketed in Great Britain must 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.
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.
Our physical retail distribution relies on third-party retailers and our ability to maintain our efficiency in our manufacturing processes. 2 Table of Contents Our Strategy We are an organization engineered to improve life. We exist for people who care, care about others, care about quality, care about precision and care about excellence.
See “ Separation of Non-Healthcare Operations ” under Part I, Item 1—“Business” for additional details. 2 Table of Contents Our Strategy We are an organization engineered to improve life and patient outcomes ™ . We exist for people who care, care about others, care about quality, care about precision and care about excellence.
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, the newly enacted Foreign Extortion Prevention Act of 2023 and other anti-corruption laws.
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. 21 Table of Contents Anti-Corruption Laws Our international operations are subject to the U.S. Foreign Corrupt Practices Act of 1977 (FCPA), the U.K.
The De Novo process requires us to show the device does not fit into an existing product category and that special controls can be used to support the favorable benefit to risk profile so that the product can be classified lower than Class III. 510(k), PMA and De Novo submissions are subject to user fees.
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.
For medical devices that are classified as Class III due to lack of a product category, the De Novo process can be used.
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.
We commenced reporting under this new structure effective for the quarter ended July 2, 2022 as a result of the Viper Holdings Corporation d/b/a Sound United acquisition (Sound United acquisition). 1 Table of Contents Healthcare Our healthcare business develops, manufactures and markets a variety of noninvasive patient monitoring technologies, hospital automation and connectivity solutions, remote monitoring devices and consumer health products.
We aim to accelerate our growth strategies by continuously innovating and prioritizing patient care with a lens toward value-creation initiatives, including our Board of Directors’ (Board) commitment to a strategic review of all business activities. 1 Table of Contents Healthcare Our healthcare business develops, manufactures and markets a variety of noninvasive patient monitoring technologies, hospital automation ® and connectivity solutions, remote monitoring devices and consumer health products.
Removed
Non-healthcare Our non-healthcare business develops, manufactures, markets, sells premium home sound integration technologies and accessories, along with licensing complete high performance in-vehicle audio systems under iconic consumer brands such as Bowers & Wilkins ™ , Denon ™ , Marantz ™ , HEOS ™ , Classe ™ , Polk Audio ™ , Boston Acoustics ™ , and Definitive Technology ™ , which offer products with unparalleled quality and performance to consumers, professional sound studios and audiophiles worldwide.
Added
We have partnered with Qualcomm Technologies and Google to develop a next-generation smartwatch reference platform for OEMs building Wear OS by Google smartwatches.
Removed
Our products are sold direct-to-consumers or through authorized retailers and wholesalers. We also license our audio technology to select luxury automotive manufacturers such as Aston Martin ® , BMW ® , Maserati ® , McLaren ® , Polestar ® and Volvo ® .
Added
Non-healthcare On September 25, 2024, we announced that our Board remains committed to the previously announced review of alternatives for both our consumer audio and consumer healthcare businesses, and that our Board had engaged Centerview Partners and Morgan Stanley as financial advisors and Sullivan & Cromwell as a legal advisor.
Removed
We continue to expand our collaborations and brand partnerships, which include certain airlines for bespoke headphones, allowing for the best in-flight audio experience; certain computer and laptop manufacturers, allowing for a new experience within computer audio; and certain high-performance TV manufacturers allowing for a range of integrated discreet audio devices and enclosures.
Added
As of year-end, our non-healthcare consumer audio products business remained part of our continuing operations and as an important part of our broader ecosystem. Subsequently, the sales process has progressed in 2025, and the Sound United business will be classified as held-for-sale and will be reported in discontinued operations in the first quarter of 2025.
Removed
While we seek to increase sales through our direct-to-consumer sales channel, we expect that our partnerships with third-party retailers and custom installers will continue to be an important part of our ecosystem. We will continue to seek retail partners that can deliver differentiated in-store experiences to support customer demand for product demonstrations.
Added
In partnership with Samsung Electronics America, Inc., the Masimo SafetyNet ® Patient App is available on select Samsung smartphones, pre-installed and pre-configured.
Removed
We believe that Masimo rainbow ® Pulse CO-Oximetry products will become widely adopted for the noninvasive monitoring of these measurements in the future.
Added
Patient Monitoring and Connectivity Platform (e.g., Radius VSM ® ) 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.
Removed
Nasal High-Flow Ventilation The Masimo softFlow ™ technology provides respiratory support by generating a precisely regulated, stable and high flow of room air or a mix of room air and oxygen through the nose of the patient by means of thin nasal prongs. Controlled oxygen supply ensures oxygenation while, at the same time, the respiratory airways are humidified.
Added
Radius VSM ® is intended for a range of care areas including: the waiting room, emergency room departments, critical care and ambulatory surgery centers.
Removed
A stable air flow is essential for treating hypoxemic and hypercapnic respiratory failure. Together with the Masimo softflow ™ nasal applicator, the Masimo softflow ™ generator provides a constant air flow and in doing so, it is completely independent of external pneumatic systems.
Added
Components can be quickly added or removed depending on each patient’s monitoring needs.
Removed
Due to this, the Masimo softFlow ™ technology is able to treat respiratory insufficiency and allows therapy at home in a manner that is as reliable and efficient as in the hospital. Neuromodulation Therapeutic Bridge ™ is the first FDA-cleared, drug-free, non-surgical device to use neuromodulation to aid in the reduction of symptoms associated with opioid withdrawal.
Added
Description: Use: Distribution Channel: • Integrates noninvasive blood pressure (NIBP) and temperature • Connects third-party devices such as IV pumps, ventilators, beds and other patient monitors to automate data transfer to the EMR • Sold directly to end-users and through distributors 9 Table of Contents Patient Monitoring and Connectivity Platform - (Continued) Description: Use: Distribution Channel: Sensors (e.g.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

141 edited+73 added−103 removed287 unchanged
Biggest changeMany 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. • We may experience conflicts of interest with Willow with respect to business opportunities and other matters. • We will be required to assign to Willow and pay Willow for the right to use certain products and technologies we develop that relate to the monitoring of non-vital sign parameters, including improvements to Masimo SET ® . • 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 would be adversely affected. • Rights provided to Willow in the Cross-Licensing Agreement may impede a change in control of our company. • 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 initiatives, including acquisitions of businesses and strategic investments, 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, including as a result of our acquisition of Sound United could fail to attract or retain users or generate revenue and profits.
Biggest changeMany 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. • We will be required to assign to Willow and pay Willow for the right to use certain products and technologies we develop that relate to the monitoring of non-vital sign parameters, including improvements to Masimo SET ® . • 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 would 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 have incurred impairment charges for other intangible assets and goodwill, and may incur further impairment charges in the future, which would negatively impact our operating results. • 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. • A dispute with our former Chairman and CEO, Mr.
Cybersecurity attacks in particular are evolving and include, but are not limited to: threats, 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.
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.
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 healthcare products in the U.S., which could severely harm our business. • If our healthcare 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 healthcare products. • Promotion of our healthcare products using claims that are off-label, unsubstantiated, false or misleading could subject us to substantial penalties. 33 Table of Contents • The regulatory environment governing information, data security and privacy is increasingly demanding and evolving.
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 healthcare products in the U.S., which could severely harm our business. 30 Table of Contents • If our healthcare 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 healthcare products. • Promotion of our healthcare 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.
Furthermore, the Israel-Palestine war could result in disruption in the Middle East more broadly and 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.
Furthermore, the Israel-Palestine-Iran war could result in disruption in the Middle East more broadly and 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.
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; 47 Table of Contents • 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.
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.
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. 58 Table of Contents Changes to government immigration regulations may materially affect our workforce and limit our supply of qualified professionals, or increase our cost of securing workers.
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. 53 Table of Contents Changes to government immigration regulations may materially affect our workforce and limit our supply of qualified professionals, or increase our cost of securing workers.
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.
Any claims of patent or other intellectual property infringement against us, even those without merit, could: 36 Table of Contents • 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.
Accordingly, the three-year term for the Class I directors elected at our 2023 annual meeting of stockholders will expire at our 2026 annual meeting of stockholders, the three-year term for the Class II directors elected at our 2021 annual meeting of stockholders will expire as originally scheduled at our 2024 annual meeting of stockholders and the three-year term for the Class III directors elected at our 2022 annual meeting of stockholders will expire as originally scheduled at our 2025 annual meeting of stockholders.
Accordingly, the three-year term for the Class I directors elected at our 2023 Annual Meeting of Stockholders will expire at our 2026 Annual Meeting of Stockholders, the three-year term for the Class II directors elected at our 2021 Annual Meeting of Stockholders expired as originally scheduled at our 2024 Annual Meeting of Stockholders and the three-year term for the Class III directors elected at our 2022 Annual Meeting of Stockholders will expire as originally scheduled at our 2025 Annual Meeting of Stockholders.
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; • 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.
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; • creating certain liens; • consolidating, merging, selling or otherwise disposing of all or substantially all of our assets; and 45 Table of Contents • entering into certain transactions with any of our affiliates.
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 ongoing conflict between Ukraine and Russia, the global impact of restrictions and sanctions imposed on Russia and the Israel-Palestine war; • financial and civil unrest worldwide; 59 Table of Contents • 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.
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; 54 Table of Contents • 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 and the Israel-Palestine-Iran war; • 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.
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 shareholder litigation.
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.
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. 61 Table of Contents 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.
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. 56 Table of Contents 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.
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 48% of our net sales from international operations. In addition, we purchase a portion of our raw materials and components from international sources.
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 46% of our net sales from international operations. In addition, we purchase a portion of our raw materials and components from international sources.
Dollars, can vary depending on average monthly exchange rates during a respective period. 60 Table of Contents 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, can vary depending on average monthly exchange rates during a respective period. 55 Table of Contents 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.
We are also unable to predict how changing global economic conditions or potential global health concerns will affect our critical customers, suppliers and distributors. Any negative impact of such matters on our critical customers, suppliers or distributors may also have an adverse impact on our results of operations or financial condition.
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.
A regional or global recession and other negative macro-economic trends could adversely affect our consumer business. Our consumer products are generally considered non-essential, discretionary products. As such, many of these products can be especially sensitive to general downturns in the economy.
A regional or global recession and other negative macro-economic trends could adversely affect our consumer businesses. Our consumer products are generally considered non-essential, discretionary products. As such, many of these products can be especially sensitive to general downturns in the economy.
The impact of the Russian invasion of Ukraine, and the war in Israel, on the 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, and the war in Israel are difficult to predict at this time.
The impact of the Russian invasion of Ukraine, and the Israel-Palestine-Iran war, on the 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, and the war in Israel are difficult to predict at this time.
Similarly, our non-healthcare revenues in the fourth quarter of a fiscal year generally produce a higher percentage of our segment revenues than the other quarters of our fiscal year due to the holiday shopping season and our corresponding promotional activities. Our promotional discounting activity may negatively impact our gross margin during the holiday periods.
Similarly, our non-healthcare revenues in the fourth quarter of a fiscal year generally produce a higher percentage of our segment revenues than the other quarters of our fiscal year due to the holiday shopping season and our corresponding promotional activities. Our promotional discounting activity may negatively impact our gross margin.
For additional information, see the discussion of “Impairment Charge” in Part II, Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations. ” 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.
For additional information, see the discussion of “Impairment Charge” in Part II, Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ”. 46 Table of Contents 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 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.
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.
If we fail to maintain adequate internal controls over financial reporting, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act.
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.
Shipments of our pulse oximetry products to customers that are members of GPOs represent approxim a tely 95% of our U.S. healthcare product sales. Our failure to renew our contracts with GPOs may cause us to lose market share in our healthcare business and could have a material adverse effect on our business, financial condition and results of operations.
Shipments of our pulse oximetry products to customers that are members of GPOs represent approxim a tely 98.0% of our U.S. healthcare product sales. Our failure to renew our contracts with GPOs may cause us to lose market share in our healthcare business and could have a material adverse effect on our business, financial condition and results of operations.
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. 42 Table of Contents 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.
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.
If a large number of these shares are sold in the public market, the sales could reduce the trading price of our stock. 65 Table of Contents 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.
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.
With such rights, preferred stockholders could make it more difficult for a third-party to acquire us. In addition, our certificate of incorporation previously provided for a staggered Board, whereby directors serve for three-year terms, with one-third of the directors coming up for reelection each year.
With such rights, preferred stockholders could make it more difficult for a third-party to acquire us. 48 Table of Contents In addition, our certificate of incorporation previously provided for a staggered Board, whereby directors serve for three-year terms, with one-third of the directors coming up for reelection each year.
The lack of adequate coverage and reimbursement for our healthcare products or the procedures in which our healthcare 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 healthcare products or the procedures in which our healthcare products are used.
The lack of adequate coverage and reimbursement for our healthcare products or the procedures in which our healthcare products are used may deter customers from purchasing our products. 33 Table of Contents We cannot guarantee that governmental or third-party payers will reimburse or begin reimbursing a customer for the cost of our healthcare products or the procedures in which our healthcare products are used.
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 ongoing operating and capital expenditures, working capital requirements, and other operational funding needs for the next 12 months.
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.
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. 41 Table of Contents We believe competitors may currently be violating and may in the future violate our intellectual property rights.
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.
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 GPOs, sales of our healthcare products would decline. • Inadequate levels of coverage or reimbursement from governmental or other third-party payers for our healthcare products, or for procedures using our healthcare 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, 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. • Competition and other conflicts with our non-healthcare distribution partners could harm our business and operating results. • 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. • We believe competitors may currently be violating and may in the future violate our intellectual property rights.
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 GPOs, sales of our healthcare products would decline. • Inadequate levels of coverage or reimbursement from governmental or other third-party payers for our healthcare products, or for procedures using our healthcare 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. • We believe competitors may currently be violating and may in the future violate our intellectual property rights.
Our ongoing 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.
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.
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 will significantly impact European patents, including those granted before the introduction of the system.
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.
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 clearance through the de novo classification review process or obtaining approval of a premarket approval (PMA) application.
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.
(Willow), formerly known as Cercacor Laboratories, Inc., which may impair our growth and adversely affect our business, financial condition and results of operations. • We depend on our domestic and international OEM partners for a portion of our revenue.
(Willow), formerly known as Cercacor Laboratories, Inc., 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.
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.
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. 37 Table of Contents The traditional FDA 510(k) clearance process for our medical devices has generally taken between four to nine months.
The grant of future equity awards by us to our employees and other service providers may further dilute our stockholders. Future resales of our stock, including those by our insiders and a few investment funds, may cause our stock price to decline.
The grant of future equity awards by us to our employees and other service providers may further dilute our stockholders. 60 Table of Contents Future resales of our stock, including those by our insiders and a few investment funds, may cause our stock price to decline.
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. 37 Table of Contents These negotiated prices are made available to a GPO’s members.
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.
These include the new EU Medical Devices Regulation (EU) 2017/745 (MDR), which came into effect on May 26, 2021 and a regulatory regime in the UK effective since January 1, 2021 as a result of the UK’s exit from the EU (Brexit).
These include the new EU Medical Devices Regulation (EU) 2017/745 (MDR), which came into effect on May 26, 2021 and a regulatory regime in the UK effective since January 1, 2021 as a result of the UK’s exit from the EU (Brexit), which is continuing to evolve.
Healthcare facilities and hospitals experienced fewer flu-related hospitalizations and medical office visits, which decreased consumption of our single-patient use sensors and consumables. The corresponding delays in reordering for our single-patient use sensors and consumables had an adverse impact on our second, third and fourth quarter 2023 healthcare revenue.
Healthcare facilities and hospitals experienced fewer flu-related hospitalizations and medical office visits, which decreased consumption of our single-patient use sensors and consumables. The corresponding delays in reordering for our single-patient use sensors and consumables had an adverse impact on our healthcare revenue for the second half of 2023.
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 ongoing systems implementation work.
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. 58 Table of Contents 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.
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 the U.S., Mexico, Asia and Europe that may be affected by natural or man-made disasters.
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, Europe and Asia that may be affected by natural or man-made disasters.
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; 64 Table of Contents • 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; • ongoing 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; • effects of public health crises, epidemics and pandemics, such as the COVID-19 pandemic; • sales of stock by us or members of our management team, our Board or certain institutional stockholders; • shareholder activism; • 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.
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; • the success or perceived success of our strategic realignment initiative; • 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; • effects of public health crises, epidemics and pandemics, such as the COVID-19 pandemic; • 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.
Further, this increased focus on ESG issues may result in new regulations and/or third-party requirements that could adversely impact our business or certain shareholders reducing or eliminating their holdings of our stock, causing our stock price to decline. 66 Table of Contents
Further, this increased focus on ESG issues may result in new regulations and/or third-party requirements that could adversely impact our business, or certain stockholders reducing or eliminating their holdings of our stock, causing our stock price to decline.
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 certain data sales to third parties and targeted advertising, restricting certain uses and disclosures of sensitive data, and requesting access, deletion, or correction of 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).
We will be required to assign to Willow and pay Willow for the right to use certain products and technologies we develop that relate to the monitoring of non-vital sign parameters, including improvements to Masimo SET ® .
Risks Related to Our Business and Operations We will be required to assign to Willow and pay Willow for the right to use certain products and technologies we develop that relate to the monitoring of non-vital sign parameters, including improvements to Masimo SET ® .
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.
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.
Even if we complete acquisitions, there are many factors that could affect whether such acquisition, including our acquisition of Sound United, 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; • 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.
Even if we complete acquisitions, there are many factors that could affect whether such acquisition, including our acquisition of Sound United, 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; • 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. 44 Table of Contents Further, our ability to benefit from future acquisitions and/or external strategic investments, joint ventures or any other business separation 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.
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 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. 57 Table of Contents If product liability claims are brought against us, we could face substantial liability and costs.
On February 14, 2024, we initiated the voluntary recall. On February 21, 2024, we received a subpoena from the Department of Justice 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 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 ® .
The implementation of the declassification of our Board will commence at our 2024 annual meeting of stockholders. Director nominees standing for election at our 2024 annual meeting of stockholders and each annual meeting of stockholders thereafter will be elected to serve a one-year term. Beginning with our 2026 annual meeting of stockholders, all directors would stand for annual elections.
The implementation of the declassification of our Board commenced at our 2024 Annual Meeting of Stockholders. Directors elected at our 2024 Annual Meeting of Stockholders and each Annual Meeting of Stockholders thereafter will be elected to serve a one-year term. Beginning with our 2026 Annual Meeting of Stockholders, all directors will stand for annual elections.
Such risks include, but are not limited to, adverse effects on macro-economic conditions, including inflation; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; our ability to maintain or increase our product prices; disruptions in global supply chains ; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could negatively affect our business and financial condition.
Such risks include, but are not limited to, adverse effects on macro-economic conditions, including inflation; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; our ability to maintain or increase our product prices; disruptions in global supply chains ; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could negatively affect our business and financial condition. 59 Table of Contents Our stock price may be volatile, and your investment in our stock could suffer a decline in value.
In addition, counterparties to SVB credit agreements and arrangements, and third parties such as beneficiaries of letters of credit (among others), may experience direct impacts from the closure of SVB and uncertainty remains over liquidity concerns in the broader financial services industry. Similar impacts have occurred in the past, such as during the 2008-2010 financial crisis.
In addition, counterparties to SVB credit agreements and arrangements, and third parties such as beneficiaries of letters of credit (among others), may experience direct impacts from the closure of SVB and uncertainty remains over liquidity concerns in the broader financial services industry.
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.
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.
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.
Similar impacts have occurred in the past, such as during the 2008-2010 financial crisis. 51 Table of Contents 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.
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.
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.
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.
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.
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: • 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. 43 Table of Contents In addition, many of our healthcare and non-healthcare products are subject to various laws, regulations and legal requirements, including those governing consumer protection, product import and export, hazardous materials usage and discharge, product related energy consumption, electrical safety, wireless emissions, e-commerce, packaging and recycling.
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: 38 Table of Contents • 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.
As of December 30, 2023, approximately 9.9 million shares of our common stock were reserved for issuance under our equity incentive plans, of which approximately 2.7 million shares were subject to options outstanding at such date at a weighted-average exercise price of $87.79 per share, approximately 3.5 million shares were subject to outstanding RSUs, approximately 0.3 million shares were subject to outstanding PSUs and approximately 3.4 million shares were available for future awards under our 2017 Equity Incentive Plan.
As of December 28, 2024, approximately 6.1 million shares of our common stock were reserved for issuance under our equity incentive plans, of which approximately 1.6 million shares were subject to options outstanding at such date at a weighted-average exercise price of $110.70 per share, approximately 0.8 million shares were subject to outstanding RSUs, approximately 0.2 million shares were subject to outstanding PSUs and approximately 3.5 million shares were available for future awards under our 2017 Equity Incentive Plan.
Since 1998, we have been a party to a cross-licensing agreement with Willow (as amended, the Cross-Licensing Agreement), under which we 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 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 we refer to as the “Willow Market”; and • 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”.
Since 1998, we have been a party to a cross-licensing agreement with Willow (as amended, the Cross-Licensing Agreement), under which we 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 we refer 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”. 32 Table of Contents 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.
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. 55 Table of Contents 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.
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.
The loss of any large customer or distributor, an increase in distributor fees, or the risks associated with selling directly to our customers could have a material adverse effect on our business, financial condition and results of operations.
While we were ultimately able to reach an agreement with this distributor, the loss of any large customer or distributor, an increase in distributor fees, or the risks associated with selling directly to our customers, distributors or international tenders, could have a material adverse effect on our business, financial condition and results of operations.
In addition, regulation or legislation impacting the workforce, such as the proposed rule published by the Federal Trade Commission which would, if issued, generally prevent employers from entering into non-competition agreements with employees and require employers to rescind existing non-competition agreements, may lead to increased uncertainty in hiring and competition for talent.
In addition, regulation or legislation impacting the workforce, such as the rule published by the Federal Trade Commission (FTC) purporting to generally prevent employers from entering into non-competition agreements with employees and require employers to rescind existing non-competition agreements, may lead to increased uncertainty in hiring and competition for talent. On July 3, 2024, the U.S.
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.
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.
If our healthcare 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 healthcare products.
This could have an adverse effect on our business, financial condition and results of operations. 39 Table of Contents If our healthcare 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 healthcare products.
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.
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.
For example, in February 2024, we initiated a voluntary recall on select Rad-G ® devices in connection with an issue that can result in an unintentional change in the power state of the device.
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.
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.
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. 49 Table of Contents 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.
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. Rights provided to Willow in the Cross-Licensing Agreement may impede a change in control of our company.
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.
As a result, 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.
Although the cyber incidents experienced to date have not had a material impact, 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.
Such uncertainty may have an impact on our business, from the demand for our products to our costs of compliance in the manufacturing and servicing of our products, all of which may impact our results of operations.
There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. Such uncertainty may have an impact on our business, from the demand for our products to our costs of compliance in the manufacturing and servicing of our products, all of which may impact our results of operations.
We sell consumer versions of our iSpO 2 ® and MightySat ® pulse oximeters, that are not intended for medical use. 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.
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.
The occurrence of any of the foregoing could adversely affect our business, financial condition and results of operations. 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.
Such loss of, and the failure to attract and retain, qualified key personnel could adversely affect our business, results of operations, financial condition and the price of our common stock. 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.
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.
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.
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.
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.
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.
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.
As a result of the royalties that we must 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.
As a result of the royalties that we must 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. 43 Table of Contents Accordingly, we may not be able to sell products incorporating licensed rainbow ® technology at a price the market is willing to accept.
If we are unable to comply, or are unable to cause our suppliers to comply, with such policies or provisions, a customer may cease purchasing products from us, and may take legal action against us, which could harm our reputation, revenue and results of operations.
If we are unable to comply, or are unable to cause our suppliers to comply, with such policies or provisions, a customer may cease purchasing products from us, and may take legal action against us, which could harm our reputation, revenue and results of operations. 61 Table of Contents Further, increased public awareness and concern regarding global climate change may result in new or enhanced legal requirements.
Promotion of our healthcare 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.
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.
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 impose limitations on the intended use of any cleared product as a condition of clearance.
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.
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.
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.
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.
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe following is a summary of our material facilities: Location Ownership Status (Owned/Leased) Approximate Square Footage Lease Term Business Segment Primary Usage Fukushima, Japan Owned 358,000 N/A Non-healthcare Manufacturing and distribution Irvine, California Owned 314,000 N/A Healthcare Executive offices, engineering, research and development Mexicali, Mexico Leased 266,000 June 2024, August 2024 Healthcare Manufacturing, warehousing and distribution Irvine, California Leased 230,000 August 2025, November 2026, January 2032 Healthcare Sales and administrative, warehousing, manufacturing and distribution Memphis, Tennessee Leased 180,000 January 2027 Non-healthcare Warehousing and distribution Worthing, United Kingdom Leased 151,000 August 2036 Non-healthcare Warehousing, manufacturing and distribution Zhuhai, China Leased 142,000 May 2026 Non-healthcare Manufacturing, warehousing and distribution Pasir Gudang, Malaysia Leased 133,000 October 2027 Healthcare Manufacturing, warehousing and distribution Kawasaki, Japan Leased 115,000 September 2024 Non-healthcare 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 San Luis Ray, Mexico Leased 68,000 June 2024 Healthcare Manufacturing, warehousing and distribution Eindhoven, Netherlands Leased 17,000 December 2033 Non-healthcare Sales and administrative Worthing, United Kingdom Owned 15,000 N/A Non-healthcare Engineering, research and development, sales and administrative We also lease and occupy various other facilities throughout the world to operate our business.
Biggest changeThe following is a summary of our material facilities: Location Ownership Status (Owned/Leased) Approximate Square Footage Lease Term Business Segment Primary Usage Fukushima, Japan Owned 358,000 N/A Non-healthcare Manufacturing and distribution 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 December 2025, May 2027, August 2029 Healthcare Manufacturing, warehousing and distribution Irvine, California Leased 230,000 August 2025, November 2026, January 2032 Healthcare Sales and administrative, warehousing, manufacturing and distribution Shepherdsville, Kentucky Leased 223,000 February 2029 Non-healthcare Warehousing and distribution Worthing, United Kingdom Leased 151,000 August 2036 Non-healthcare Warehousing, manufacturing and distribution Zhuhai, China Leased 142,000 May 2026 Non-healthcare Manufacturing, warehousing and distribution Kawasaki, Japan Leased 115,000 September 2027 Non-healthcare 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 Carlsbad, California Leased 50,000 June 2030 Non-healthcare Sales and administrative Riyadh, Saudi Arabia Leased 33,000 April 2026, October 2026 Healthcare Manufacturing, warehousing, distribution and trading Eindhoven, Netherlands Leased 17,000 December 2033 Non-healthcare Sales and administrative Worthing, United Kingdom Owned 15,000 N/A Non-healthcare Engineering, research and development, sales and administrative 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.
Consistent with our internal policies, our executive team is responsible for apprising the Nominating, Compliance, and Corporate Governance Committee of cybersecurity incidents consistent with our incident response plan. ITEM 2. PROPERTIES Our U.S. corporate headquarters is located in Irvine, California. We manage our global operations based on two reporting segments.
In accordance with our incident response plan, any material cybersecurity incidents are promptly reported to the Audit Committee to maintain transparency and oversight. 63 Table of Contents ITEM 2. PROPERTIES Our U.S. corporate headquarters is located in Irvine, California. We manage our global operations based on two reporting segments.
ITEM 1C. CYBERSECURITY Risk Management & Strategy Cybersecurity is a critical component of risk management. We rely on information technology and any failure, inadequacy, interruption or security lapse of such technology, including any cybersecurity incidents, could harm our ability to operate our business effectively. Management regularly performs risk assessments relating to cybersecurity risks.
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. 62 Table of Contents To address these risks, we maintain a comprehensive, risk-based cybersecurity program focused on protecting sensitive data and systems.
We employ an appropriate encryption and tokenization platform for all online and direct-to-consumer sales from our websites, ensuring no credit card data is stored in our internal systems. 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”.
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”. To date, no cybersecurity incidents or risks from cybersecurity threats have materially impacted our business strategy, results of operations, or financial condition.
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We have a risk-based cybersecurity program, dedicated to protecting our data and data that may be collected from patient monitoring devices. We utilize a defense-in-depth strategy with multiple layers of security controls to protect our data and systems.
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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. • 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.
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We mitigate cybersecurity risks by employing a number of measures, including employee training, systems monitoring and testing and maintenance of protective systems and contingency plans. As part of our cybersecurity risk management processes, management engages external auditors and consultants to assess our program and controls.
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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.
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We evaluate ourselves for appropriate business continuity and disaster recovery planning, with test scenarios that include simulations and penetration tests. We also install and regularly update antivirus software on all of our Company-managed systems to detect malicious code and prevent it from impacting our systems. We require cybersecurity awareness training for all staff members with access to our network.
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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, Global Information Security, a seasoned expert with over a decade of experience. This role ensures continuous program improvement and alignments with evolving threats and standards.
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We also maintain cyber liability insurance coverage to further reduce our risk profile. Security of our financial data and other sensitive information remains a high priority for us, led by our global information security team.
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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.
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Except as disclosed therein, risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and are not reasonably likely to materially affect our company, including our business strategy, results of operations, or financial condition.
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Our cybersecurity program is focused on the following: • Cybersecurity Awareness : We identify and assess cyber risks through the dissemination of information from industry groups and third-party experts. • Training : We provide annual cybersecurity training for company personnel with network access and conduct periodic simulated phishing exercises. • Technical Safeguards : We deploy measures to protect our network perimeter and internal information technology platforms, such as internal and external firewalls, network intrusion detection and prevention, penetration testing, vulnerability assessments, threat intelligence, anti-malware and access controls. • Vendor Management : We maintain data protection agreements with our vendors that contain contractual provisions requiring safeguards for the protection of personal information.
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In addition, vendors are screened for data security measures as part of our vendor due diligence process. • Incident Response Plans : We maintain and update incident response plans that address the life cycle of a cyber incident (i.e., detection, response and recovery), as well as data breach response plans, and test those plans annually with tabletop exercises. • Mobile Security : We deploy controls to prevent loss of data through mobile devices. • Security Standards : Our program leverages security standards such as HIPAA, HITRUST, NIST CSF, ISO 27001, and PCI DSS. • Insurance : We maintain a cybersecurity insurance program with established and respected insurance companies. 67 Table of Contents Governance Our Nominating, Compliance, and Corporate Governance Committee is responsible for overseeing the Company’s information security risk management, including cybersecurity, data privacy, and other information technology risks, controls and procedures, and the Company’s plans to mitigate cybersecurity risks and to respond to data breaches.
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The Company’s Senior Director of Information Security, who has more than a decade of experience in IT and cybersecurity-related roles, assists in assessing the Company’s cybersecurity risks and has the relevant expertise necessary for such assessment.
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Pursuant to the Company’s internal policies, executive management team members, which may include the General Counsel, Chief Financial Officer, and Chief Information Officer, are briefed on cybersecurity trends, potential risks, ways to improve the Company’s risk posture, as well as changes to the legal and regulatory landscape relative to cybersecurity and data privacy.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn 2021 and 2022, we were certified as a Great Place to Work ® . In addition, for 2021 and 2022, we were recognized on Fortune Best Workplaces in Manufacturing & Production ™ . To assess and improve employee retention and engagement, we survey employees and take actions to address areas of employee concerns. • Inclusion and Diversity.
Biggest changeTo assess and improve employee retention and engagement, we survey employees and take actions to address areas of employee concerns. • Inclusion and Diversity. In fiscal 2024, our full-time employees decreased from approximately 3,800 as of December 30, 2023 to 3,600 as of December 28, 2024.
Organizations that our employees have supported in recent years include Doctors Without Borders, Smile Train, Feeding America, Patient Safety Movement Foundation and the Sound Start Foundation. 31 Table of Contents 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.
Organizations that our employees have supported in recent years include Doctors Without Borders, Smile Train, Feeding America, Patient Safety Movement Foundation, the Sound Start Foundation, and March of Dimes. 26 Table of Contents 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 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 business leaders, focusing on our high-performing and high potential talent, diversity, and the succession planning for critical roles. • Employee Feedback and Retention.
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. • Employee Feedback and Retention.
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.
Kiani was charged in a manner consistent with the terms of the aircraft time share agreement. 28 Table of Contents 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. 32 Table of Contents
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 . 29 Table of Contents
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.
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.
Of our full-time employees, approximately 67% were male and 33% were female, and women represented approximately 25% of our management/leadership roles. Minorities represented approximately 49% of our U.S. workforce, and approximately 37% of our management/leadership roles.
Our dedicated contract personnel worldwide increased from approximately 5,200 as of December 30, 2023 to approximately 5,600 as of December 28, 2024. Of our full-time employees, approximately 66% were male and 34% were female, and women represented approximately 27% of our management/leadership roles. Minorities represented approximately 50% of our U.S. workforce, and approximately 36% of our management/leadership roles.
Through the partnerships with organizations like the World Health Organization and the Masimo Foundation, 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.
In addition, our employees also actively support causes by raising awareness and funds for non-profit organizations.
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In fiscal 2023, our full-time employees decreased from approximately 4,000 as of December 31, 2022 to 3,800 as of December 30, 2023. Our dedicated contract personnel worldwide decreased from approximately 5,900 as of December 31, 2022 to approximately 5,200 as of December 30, 2023.
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Governance Our Board and board committees provide oversight on certain human capital resource matters.
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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.
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Strategic Realignment Initiative During the fourth quarter of 2024, our Board approved a strategic realignment initiative of our healthcare segment to drive progress towards a more streamlined and efficient organization, which included right-sizing the organization, cost rationalization, driving research and development efficiencies and enhancing key launch and innovation processes. For further details, see “ Part II, Item 7.
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Item Management Di scussion and Ana ly si s of Financi a l C on dition and Results of Operations ” in this Annual Report on Form 10-K. 27 Table of Contents Separation of Non-Healthcare Operations Our non-healthcare business develops, manufactures, markets, and sells premium home sound integration technologies and accessories, along with complete high performance in-vehicle audio systems under iconic consumer brands such as Bowers & Wilkins ™ , Denon ™ , Marantz ™ , HEOS ™ , Classe ™ , Polk Audio ™ , Boston Acoustics ™ , and Definitive Technology ™ , which offer products with unparalleled quality and performance to consumers, professional sound studios and audiophiles worldwide.
Added
To date, our products have been sold direct-to-consumers or through authorized retailers and wholesalers. We have also licensed our audio technology to select luxury automotive manufacturers such as Aston Martin ® , BMW ® , Maserati ® , McLaren ® , Polestar ® and Volvo ® .
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Currently, we sell our non-healthcare products primarily through over 20,000 points of global retail distribution and our products are distributed in more than 130 countries. The majority of our non-healthcare sales are transacted through traditional physical retailers, third party distributors and big box resellers, including on their websites.
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We also sell through online retailers and custom installers and directly through our individual brand websites. In the non-healthcare market, we compete with Sonos, Bang & Olufsen, Sony, Samsung (and its subsidiaries), Apple, Alphabet, Amazon and others.
Added
Many of our competitors in the non-healthcare consumer market have more broadly diversified product lines, well established supply and distribution systems, loyal customer bases and significant financial, marketing, research, development and other resources.
Added
On September 25, 2024, we announced that our Board remains committed to the previously announced review of alternatives for both our consumer audio and consumer healthcare businesses, and that our Board had engaged Centerview Partners and Morgan Stanley as financial advisors and Sullivan & Cromwell as a legal advisor.
Added
As of year-end, our non-healthcare consumer audio products business remained part of our continuing operations and as an important part of our broader ecosystem. Subsequently, the sales process has progressed in 2025, and the Sound United business will be classified as held-for-sale and will be reported in discontinued operations in the first quarter of 2025.
Added
Recent Developments Developments in the RTW Litigation: Masimo Corporation v. Kiani et al On October 25, 2024, the Company commenced litigation in the United States District Court for the Southern District of New York against Mr. Kiani, Roderick Wong, Naveen Yalamanchi, RTW Investment, LP, RTW Investments GP, LLC, RTW Master Fund, Ltd,.
Added
RTW Offshore Fund One, Ltd., RTW Onshore Fund One, LP, RTW Innovation Master Fund, Ltd,. RTW Innovation Offshore Fund, Ltd,. RTW Innovation Onshore Fund, LP, and RTW Fund Group GP, LLC, seeking disgorgement of short-swing profits pursuant to Section 16(b) of the Exchange Act (the SDNY Litigation).
Added
The Company filed an amended complaint in the SDNY Litigation on December 30, 2024.
Added
In the SDNY 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.
Added
Kiani’s favor for the Company’s 2024 Annual Meeting of Stockholders. Collectively, the group of defendants formed held as much as 19% of the Company’s outstanding common stock. The Company alleges that, in coordination with Mr.
Added
Kiani, RTW secretly increased its long position in the Company through share purchases in advance of each the two record dates used in the 2024 proxy contest (June 13 and August 12, 2024) to maximize its voting power in favor of Mr. Kiani while offsetting its economic exposure from its increased long position by engaging in short selling.
Added
RTW then reduced its long position through share sales and covered its short position after each of the two record dates. Thus for each of the two record dates, RTW artificially and temporarily inflated its voting power to benefit Mr. Kiani.
Added
The trading RTW used in this scheme constitutes short-swing trading under Section 16(b) and any profits from such trading within a six-month period must be disgorged to the Company.
Added
Under Section 16(b), disgorgeable profits are calculated by matching the highest sales prices within a six month period with the lowest purchase prices, with the goal of identifying the maximum possible disgorgeable profit from the relevant transactions, regardless of any actual profit or loss from trading.
Added
Given that RTW, on two separate occasions, increased its holdings from less than 3% to 9.9% of Masimo’s outstanding common stock and reduced its holdings back to less than 3% within a six-month period, the Company believes the total amount of RTW’s disgorgeable profits could be substantial. Investigation Into Mr.
Added
Kiani’s Use of Aircraft Reimbursement The Company is currently investigating any non-reimbursement or under-reimbursement by Mr. Kiani under the aircraft time share agreement with Mr. Kiani. Based on the Company’s subsequent review of records, it is unclear whether Mr. Kiani reimbursed all or any portion of the amounts charged to him or if Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−0 removed6 unchanged
Biggest changeShares withheld to satisfy tax withholding obligations for the years ended December 30, 2023 and December 31, 2022 were as follows (in millions, except shares withheld and per share amounts): Three Months Ended Year Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Shares withheld 1,215 62 72,817 112,298 Average cost per share $ 92.15 $ 133.93 $ 177.89 $ 226.22 Value of shares withheld $ 0.1 $ — (1) $ 13.0 $ 25.4 ___________________________ (1) Total value of shares withheld was less than $0.1 million for the three months ended on December 31, 2022.
Biggest changeShares withheld to satisfy tax withholding obligations for the years ended December 28, 2024 and December 30, 2023 were as follows (in millions, except shares withheld and per share amounts): Three Months Ended Year Ended December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023 Shares withheld 34,976 1,215 80,643 72,817 Average cost per share $ 166.69 $ 92.15 $ 149.58 $ 177.89 Value of shares withheld $ 5.8 $ 0.1 $ 12.1 $ 13.0
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. No shares were repurchased pursuant to the Repurchase Program during the quarter ended December 30, 2023.
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. No shares were repurchased pursuant to the Repurchase Program during the quarter ended December 28, 2024.
The stock performance shown on the graph below is not necessarily indicative of future price performance. 69 Table of Contents COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Masimo Corporation, the Nasdaq Market Composite Index, and the Nasdaq Health Care Index *$100 invested on 12/29/2018 in stock or in index, including 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 65 Table of Contents *$100 invested on 12/28/2019 in stock or in index, including reinvestment of dividends.
The following stock performance graph compares total stockholder returns for our common stock from December 29, 2018 through December 30, 2023 against the Nasdaq Market Composite Index and Nasdaq Health Care Index, assuming a $100 investment made on December 29, 2018. Each of the two comparative measures of cumulative total return assumes reinvestment of dividends.
The following stock performance graph compares total stockholder returns for our common stock from December 28, 2019 through December 28, 2024 against the Nasdaq Market Composite Index and Nasdaq Health Care Index, assuming a $100 investment made on December 28, 2019. Each of the two comparative measures of cumulative total return assumes reinvestment of dividends.
As of January 26, 2024, t he closing price of our stock was $127.28 per share, and the number of stockholders of record, excluding persons whose stock is in nominee or “street name” accounts through brokers, was 22. Dividend Policy We have historically not paid dividends to our stockholders.
As of January 24, 2025, the closing price of our stock was $170.24 per share, and the number of stockholders of record, excluding persons whose stock is in nominee or “street name” accounts through brokers, was 22. Dividend Policy We have historically not paid dividends to our stockholders.
As of December 30, 2023, 5.0 million shares remained available for repurchase pursuant to the Repurchase Program. 70 Table of Contents Withholdings of Equity Securities During the year ended December 30, 2023, 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.
Withholdings of Equity Securities During the year ended December 28, 2024, 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.
Added
As of December 28, 2024, 5.0 million shares remained available for repurchase pursuant to the Repurchase Program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

77 edited+29 added−36 removed75 unchanged
Biggest changeDollar amounts and as a percentage of revenue: Year Ended December 30, 2023 Year Ended December 31, 2022 Amount (in millions) % of Revenue Amount (in millions) % of Revenue Revenue $ 2,048.1 100.0 % $ 2,035.8 100.0 % Cost of goods sold 1,044.6 51.0 977.0 48.0 Gross profit 1,003.5 49.0 1,058.8 52.0 Operating expenses: Selling, general and administrative 664.0 32.4 657.4 32.3 Research and development 175.2 8.6 191.4 9.4 Litigation settlements 17.8 0.9 — — Impairment charge 10.0 0.5 — — Total operating expenses 867.0 42.3 848.8 41.7 Operating income 136.5 6.6 210.0 10.2 Non-operating loss (48.4) (2.4) (16.6) (0.8) Income before provision for income taxes 88.1 4.3 193.4 9.5 Provision for income taxes 6.6 0.3 49.9 2.5 Net income $ 81.5 4.0 % $ 143.5 7.0 % Comparison of the Year ended December 30, 2023 to the Year ended December 31, 2022 Revenue .
Biggest changeDollar amounts and as a percentage of revenue: Year Ended December 28, 2024 Year Ended December 30, 2023 Amount (in millions) % of Revenue Amount (in millions) % of Revenue Revenue: Product revenue $ 1,980.3 94.6 % $ 1,954.2 95.4 % Related party revenue - (Note 3) 114.1 5.4 93.9 4.6 Total revenue 2,094.4 100.0 2,048.1 100.0 Cost of goods sold 1,090.0 52.0 1,044.6 51.0 Gross profit 1,004.4 48.0 1,003.5 49.0 Operating expenses: Selling, general and administrative 743.8 35.6 664.0 32.4 Research and development 222.8 10.6 175.2 8.6 Litigation settlements 0.5 — 17.8 0.9 Impairment charges, including intangible assets and goodwill - (Note 9 and Note 10) 304.0 14.5 10.0 0.5 Total operating expenses 1,271.1 60.7 867.0 42.3 Operating (loss) income (266.7) (12.7) 136.5 6.6 Non-operating loss (38.6) (1.8) (48.4) (2.4) (Loss) income before provision for income taxes (305.3) (14.6) 88.1 4.3 (Benefit) provision for income taxes (0.4) — 6.6 0.3 Net (loss) income $ (304.9) (14.6) % $ 81.5 4.0 % Comparison of the Year ended December 28, 2024 to the Year ended December 30, 2023 Revenue .
Cash provided by operating activities was approximately $94.1 million for the year ended December 30, 2023, generated primarily from net income from operations of $81.5 million.
For the year ended December 30, 2023, cash provided by operating activities was approximately $94.1 million, generated primarily from net income from operations of $81.5 million.
Cash used in financing activities for the year ended December 30, 2023 was approximately $57.1 million, consisting primarily of repayments on the line of credit of approximately $240.2 million, and withholding of shares for employee payroll taxes for vested equity awards of approximately $12.9 million, which were offset by proceeds from borrowings under the line of credit of approximately $189.0 million and the issuance of common stock related to employee equity awards of approximately $7.0 million.
For the year ended December 30, 2023, cash used in financing activities was approximately $57.1 million, consisting primarily of repayments on the line of credit of approximately $240.2 million, and withholding of shares for employee payroll taxes for vested equity awards of approximately $12.9 million, which were offset by proceeds from borrowings under the line of credit of approximately $189.0 million and the issuance of common stock related to employee equity awards of approximately $7.0 million.
At the same time, we also revisited our revenue forecasts to reflect the current lower than expected U.S. hospital inpatient census, elevated sensor inventory levels at some customers due to discounting in prior quarters, and other factors that negatively affected revenues in 2023.
At the same time, we also revisited our revenue forecasts to reflect the current lower than expected U.S. hospital inpatient census, elevated sensor inventory levels at some customers due to discounting in prior quarters, and other factors that negatively affected revenues.
Our healthcare 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 elective procedures utilizing our healthcare products.
Our healthcare revenues in the third quarter of our fiscal years have 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 elective procedures utilizing our healthcare products.
We currently maintain a Credit Facility, which provides for $705.0 million of unsecured borrowings. The Credit Facility also provides for a sublimit of up to $50.0 million for the issuance of letters of credit. Proceeds from the Credit Facility are being used for general corporate, capital investment and expenditures and working capital needs.
We currently maintain a Credit Revolving Facility, which provides for $705.0 million of unsecured borrowings. The Credit Facility also provides for a sublimit of up to $50.0 million for the issuance of letters of credit. Proceeds from the Credit Facility are being used for general corporate, capital investment and expenditures and working capital needs.
Estimates and assumptions used in the income approach to calculate projected future discounted cash flows included revenue growth rates, operating margins and a discount rate for the reporting unit. Discount rates were determined using a weighted average cost of capital for risk factors specific to the reporting unit and other market and industry data.
Estimates and assumptions used in the income approach to calculate projected future discounted cash flows included revenue growth rates, operating margins and a discount rate for the reporting unit. The discount rate was determined using a weighted average cost of capital for risk factors specific to the reporting unit and other market and industry data.
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 continue to switch to Masimo technology at rapid rates.
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.
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.
Changes in judgments on these assumptions and estimates could materially impact the timing of revenue recognition. 76 Table of Contents 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.
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 81 Table of Contents 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.
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.
Other major changes in operating assets and liabilities include decreases in accounts receivable, accrued compensation, accrued liabilities, accounts payable, income taxes payable and lease receivable of $90.2 million, $26.8 million, $22.8 million, $19.6 million, $15.1 million and $1.7 million, respectively, primarily due to the Company’s cost reduction strategy; an increase in inventories, other non-current liabilities, other non-current assets, deferred costs and other contract assets, other current assets and deferred revenue and other contract-related liabilities of $69.2 million, $3.6 million, $3.0 million, $14.4 million, $8.6 million and $7.1 million, respectively, primarily due to timing of payments and inventory build-up.
Other major changes in operating assets and liabilities include decreases in accounts receivable, accrued compensation, accrued liabilities, accounts payable, income taxes payable and lease receivable of $88.2 million, $26.8 million, $22.8 million, $19.6 million $15.1 million and $1.7 million, respectively, primarily due to the our cost reduction strategy; an increase in inventories, other non-current liabilities, other non-current assets, deferred costs and other contract assets, other current assets and deferred revenue and other contract-related liabilities of $69.2 million, $14.4 million, $8.6 million, $7.1 million, $3.6 million and $3.0 million, respectively, primarily due to timing of payments and inventory build-up.
Our non-healthcare revenues in the fourth quarter of a fiscal year generally produce a higher percentage of our segment revenues than the other quarters of our fiscal year due to the holiday shopping season and our corresponding promotional activities.
Our non-healthcare revenues in the fourth quarter of a fiscal year historically produce a higher percentage of our segment revenues than the other quarters of our fiscal year due to the holiday shopping season and our corresponding promotional activities.
We use a combination of both an income and a market approach to determine the fair value of the reporting unit. The income approach utilized the estimated discounted cash flows for the reporting unit, while the market approach utilized comparable company information.
We used a combination of both an income and a market approach to determine the fair value of the reporting unit. The income approach utilized the estimated discounted cash flows for the reporting unit, while the market approach utilized comparable company information.
Seasonality Each of our business segments is individually 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, holiday seasons, consumer pressures, inflationary and recessionary pressures, consumer demand and preferences, and competitors’ marketing promotions and sales incentives; among many other factors.
Seasonality Each of our business segments is individually 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, holiday seasons, consumer pressures, fluctuations in interest rates, inflationary and recessionary pressures, consumer demand and preferences, competitors’ marketing promotions and sales incentives; among many other factors.
We have made no provision for U.S. income taxes or foreign withholding taxes on approximately $789.0 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.
We have made no provision for U.S. income taxes or foreign withholding taxes on approximately $911 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.
Healthcare ecosystems are rapidly evolving and becoming visibly more interconnected. Accelerated by the need to adapt to the post-pandemic world, more patient care is moving closer to consumers’ homes. The widespread caregiver shortage demands transformative changes in the current healthcare space.
Healthcare ecosystems are rapidly evolving and becoming visibly more interconnected. Accelerated by the need to adapt to the post-pandemic world, more patient care is moving closer to the home. The widespread caregiver shortage demands transformative changes in the current healthcare space.
If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, there is no need to perform any further testing.
If, after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, there is no need to perform any further testing.
Recent Accounting Pronouncements For details regarding any recently adopted and recently issued accounting standards, see Note 2 to our accompanying consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K. 85 Table of Contents
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. 79 Table of Contents
For goodwill, the Company has the option to first assess 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 one or more of its reporting units is greater than its carrying amount.
For goodwill, we have the option to first assess 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 one or more of our reporting units is greater than its carrying amount.
Impairment Charge: Impairment charge consists of charges or writedowns of the carrying value of goodwill or other intangibles that exceed their estimated fair value, or recoverability, as applicable.
Impairment Charge: Impairment charge consists of charges or write downs of the carrying value of goodwill or other intangibles that exceed their estimated fair value, or recoverability, as applicable.
Our physical retail distribution relies on third-party retailers and our ability to maintain our efficiency in our manufacturing processes. 72 Table of Contents Outlook and Strategy We are excited about the long-term prospects of patient care, hospital automation and advancing our initiatives of making hospital quality patient monitoring available in the home to meet consumer healthcare and home wellness needs.
Our physical retail distribution relies on third-party retailers and our ability to maintain our efficiency in our manufacturing processes. Outlook and Strategy We are excited about the long-term prospects of patient care, hospital automation ® and advancing our initiatives of making hospital quality patient monitoring available in the home and for home wellness needs.
Cash used in investing activities for the year ended December 30, 2023 was approximately $81.2 million, consisting primarily of approximately $44.0 million for purchases of property and equipment, approximately $43.7 million of capitalized intangible asset costs related primarily to patent and trademark costs and license fees, and approximately $1.0 million of strategic investments, which were offset by approximately $7.5 million from escrow funds associated with a business combination.
Cash used in investing activities for the year ended December 28, 2024 was approximately $51.2 million, consisting primarily of approximately $31.1 million of capitalized intangible asset costs related primarily to software development, approximately $20.0 million for purchases of property and equipment and approximately $0.1 million of strategic investments. 75 Table of Contents For the year ended December 30, 2023, cash used in investing activities was approximately $81.2 million, consisting primarily of approximately $44.0 million for purchases of property and equipment, approximately $43.7 million of capitalized intangible asset costs related primarily to patent and trademark costs and license fees, and approximately $1.0 million of strategic investments, which were offset by approximately $7.5 million from escrow funds associated with a business combination.
Comparison of the Year ended December 30, 2023 to the Year ended December 31, 2022 For a discussion regarding our financial condition and results of operations for the year ended December 30, 2023 as compared to the year ended December 31, 2022, refer to the discussion under the heading “Comparison of the Year ended December 30, 2023 to the Year ended December 31, 2022” in Item 7, which should be read in conjunction with Item 7, in each case, of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023 .
Comparison of the Year ended December 28, 2024 to the Year ended December 30, 2023 For a discussion regarding our financial condition and results of operations for the year ended December 28, 2024 as compared to the year ended December 30, 2023, refer to the discussion under the heading “Comparison of the Year ended December 28, 2024 to the Year ended December 30, 2023” in Item 7, which should be read in conjunction with Item 7, in each case, of our Annual Report on Form 10-K for the year ended December 30, 2023, filed with the SEC on February 28, 2024 .
Through the second and third quarter of 2023, we expanded these actions by streamlining operations, including the consolidation and rationalization of business activities and facilities, workforce reductions, suspension of incentive bonus compensation and merit, transfers of product lines between manufacturing facilities, and the transfer of other business activities between sites.
Through the second and third quarters of 2023, we expanded these actions by streamlining operations, including the consolidation and rationalization of business activities and facilities, workforce reductions, suspension of incentive bonus compensation and annual salary adjustments, transfers of product lines between manufacturing facilities, and the transfer of other business activities between facilities.
Based on this assessment, we concluded that it was more likely than not that the healthcare reporting unit was greater than its carrying value. Accordingly, no further testing was required on this reporting unit. For the non-healthcare reporting unit, we performed a quantitative assessment of goodwill impairment during the fourth quarter.
We performed a qualitative assessment for our healthcare reporting unit during the fourth quarter of 2024. Based on this assessment, we concluded that it was more likely than not that the healthcare reporting unit was greater than its carrying value. Accordingly, no further testing was required on this reporting unit.
For additional information regarding the Credit Facility, 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. In managing our day-to-day liquidity and capital structure, we generally do not rely on foreign earnings as a source of funds.
For further information 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. In managing our day-to-day liquidity and capital structure, we generally do not rely on foreign earnings as a source of funds.
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.
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.
Litigation settlements for the years ended December 30, 2023 and December 31, 2022 were as follows: Litigation Settlements (in millions, except percentages) Year Ended December 30, 2023 Percentage of Revenues Year Ended December 31, 2022 Percentage of Revenues Increase/ (Decrease) Percentage Change $17.8 0.9% $— —% $17.8 100.0% Litigation settlements were $17.8 million for the year ended December 30, 2023, as compared to zero for the year ended December 31, 2022.
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 0.9% $(17.3) (173.0)% Litigation settlements decreased $17.3 million to $0.5 million for the year ended December 28, 2024, as compared to $17.8 million for the year ended December 30, 2023.
Any difference in the assumptions, judgments and estimates mentioned above could results in changes to our results of operations. 84 Table of Contents 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.
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.
Selling, general and administrative expenses for the years ended December 30, 2023 and December 31, 2022 were as follows: Selling, General and Administrative (in millions, except percentages) Year Ended December 30, 2023 Percentage of Revenues Year Ended December 31, 2022 Percentage of Revenues Increase/ (Decrease) Percentage Change $664.0 32.4% $657.4 32.3% $6.6 1.0% Selling, general and administrative expenses increased $6.6 million, or 1.0%, to $664.0 million for the year ended December 30, 2023, from $657.4 million for the year ended December 31, 2022.
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 Revenues Year Ended December 30, 2023 Percentage of Revenues Increase/ (Decrease) Percentage Change $743.8 35.6% $664.0 32.4% $79.8 12.0% Selling, general and administrative expenses increased $79.8 million, or 12.0%, to $743.8 million for the year ended December 28, 2024, from $664.0 million for the year ended December 30, 2023.
Non-operating loss for the years ended December 30, 2023 and December 31, 2022 was as follows: Non-operating Loss (in millions, except percentages) Year Ended December 30, 2023 Percentage of Revenues Year Ended December 31, 2022 Percentage of Revenues Increase/ (Decrease) Percentage Change $(48.4) (2.4)% $(16.6) (0.8)% $(31.8) 191.6% Non-operating loss was $48.4 million for the year ended December 30, 2023 compared to $16.6 million of non-operating loss for the year ended December 31, 2022.
Non-operating loss for the years ended December 28, 2024 and December 30, 2023 was as follows: Non-operating Loss (in millions, except percentages) Year Ended December 28, 2024 Percentage of Revenues Year Ended December 30, 2023 Percentage of Revenues (Decrease)/ Increase Percentage Change $(38.6) (1.8)% $(48.4) (2.4)% $9.8 (20.2)% Non-operating loss was $38.6 million for the year ended December 28, 2024 compared to $48.4 million of non-operating loss for the year ended December 30, 2023.
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.
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.
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.
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.
As of December 30, 2023, we had cash totaling $66.2 million held outside of the U.S., of which approximately $12.9 million was accessible without additional tax cost and approximately $53.3 million was accessible at an incremental estimated tax cost of up to $0.3 million.
As of December 28, 2024, we had cash totaling $78.2 million held outside of the U.S., of which approximately $28.6 million was accessible without additional tax cost and approximately $49.6 million was accessible at an incremental estimated tax cost of up to $0.3 million.
Leveraging our expertise in hospital-grade technologies, we are also expanding our suite of products intended for use outside the hospital and products for home wellness, including Masimo Sleep ™ , a sleep quality solution; the Radius Tº ® , a wireless wearable continuous thermometer; Radius PCG ® , a wireless tetherless capnograph; and the Masimo W1 ® and Masimo Freedom ™ biosensing smart watches; Masimo Opioid Halo ™ , an opioid overdose prevention and alert system, and the Masimo Stork ™ a baby monitoring system.
Leveraging our expertise in hospital-grade technologies, we are also expanding our suite of products intended for use outside the hospital and products for home wellness, including Masimo Sleep ™ , a sleep quality solution; the Radius Tº ® , a wireless wearable continuous thermometer; Radius PCG ® , a wireless tetherless capnograph; and the Masimo W1 ® smart watch.
Cash Flows The following table summarizes our cash flows (in millions): Year Ended December 30, 2023 December 31, 2022 Net cash provided by (used in): Operating activities $ 94.1 $ 29.4 Investing activities (81.2) (1,057.7) Financing activities (57.1) 520.4 Effect of foreign currency exchange rates on cash 2.8 (30.9) Increase in cash, cash equivalents, and restricted cash $ (41.4) $ (538.8) Operating Activities .
Cash Flows The following table summarizes our cash flows (in millions): Year Ended December 28, 2024 December 30, 2023 Net cash provided by (used in): Operating activities $ 196.4 $ 94.1 Investing activities (51.2) (81.2) Financing activities (125.6) (57.1) Effect of foreign currency exchange rates on cash (6.4) 2.8 Increase in cash, cash equivalents, and restricted cash $ 13.2 $ (41.4) Operating Activities .
In an effort to bolster our long-term financial position, during the first quarter of 2023, we initiated various cost reduction actions to better optimize our cost structure with near-term revenue to enhance our operating cash flow, and improve our profitability for both segments going forward.
During 2023, we initiated various cost reduction actions to better optimize our cost structure with near-term revenue to enhance our operating cash flow, and improve our profitability for both segments going forward.
Furthermore, recoverability tests performed for other long-lived assets with finite lives indicated no recoverability issues. During the fourth quarter, we performed our annual indefinite-lived intangibles impairment analysis and, based on this assessment, we determined the carrying value of certain indefinite-lived trademarks in the non-healthcare reporting unit were impaired by approximately $3.0 million.
During the fourth quarter of 2023, we performed our annual indefinite-lived intangibles impairment analysis and, based on this assessment, we determined the carrying value of certain indefinite-lived trademarks in the non-healthcare reporting unit were impaired by approximately $3.0 million.
For certain of these intangibles, the discount rate assumed in the analysis was 15.0%, and a 1.0% change would equate to approximately $12.0 million in fair value, all other variables remaining constant. 77 Table of Contents We review goodwill, other intangibles and other long-lived assets with finite lives for impairment at least annually in the fourth quarter of the year or more frequently if an event occurs indicating the potential for impairment, and should our stock price, macro-economic market conditions or related forecast revisions market conditions continue to deteriorate, the result of such review may indicate additional declines in the fair value of goodwill or intangible assets, requiring additional impairment charges in the future.
We review goodwill, other intangibles and other long-lived assets with finite lives for impairment at least annually in the fourth quarter of the year or more frequently if an event occurs indicating the potential for impairment, and should our stock price, macro-economic market conditions or related forecast revisions market conditions continue to deteriorate, the result of such review may indicate additional declines in the fair value of goodwill or intangible assets, requiring additional impairment charges in the future.
Research and development expenses for the years ended December 30, 2023 and December 31, 2022 were as follows: Research and Development (in millions, except percentages) Year Ended December 30, 2023 Percentage of Revenues Year Ended December 31, 2022 Percentage of Revenues Increase/ (Decrease) Percentage Change $175.2 8.6% $191.4 9.4% $(16.2) (8.5)% Research and development expenses decreased $16.2 million, or 8.5%, to $175.2 million for the year ended December 30, 2023 from $191.4 million for the year ended December 31, 2022, primarily due to lower compensation and employee-related costs of approximately $9.0 million, lower engineering project costs of approximately $7.6 million, and lower professional fees of approximately $1.4 million, offset by higher occupancy and other office-related costs of approximately $4.3 million.
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 Revenues Year Ended December 30, 2023 Percentage of Revenues Increase/ (Decrease) Percentage Change $222.8 10.6% $175.2 8.6% $47.6 27.2% Research and development expenses increased $47.6 million, or 27.2%, to $222.8 million for the year ended December 28, 2024 from $175.2 million for the year ended December 30, 2023, primarily due to higher write off of certain capitalized research and development costs for projects and products of approximately $22.9 million, higher compensation and employee-related costs of approximately $20.3 million, higher patent and other amortization costs of approximately $7.1 million and higher occupancy and other office-related costs of approximately $3.7 million, offset by lower engineering project costs of approximately $4.8 million, and lower professional fees of approximately $1.8 million.
Our core measurement technologies are our breakthrough Measure-through Motion and Low Perfusion ™ pulse oximetry, known as Masimo Signal Extraction Technology ® (SET ® ) pulse oximetry, and advanced rainbow ® Pulse CO-Oximetry parameters such as noninvasive hemoglobin (SpHb ® ), alongside many other modalities, including brain function monitoring, hemodynamic monitoring, regional oximetry, acoustic respiration rate monitoring, capnography and gas monitoring, nasal high-flow respiratory support therapy, patient position and activity tracking, neuromodulation technology, an opioid overdose prevention and alert solution, and telehealth solutions.
Our core measurement technologies are our breakthrough Measure-through Motion and Low Perfusion ™ pulse oximetry, known as Masimo Signal Extraction Technology ® (SET ® ) pulse oximetry, and advanced rainbow ® Pulse CO-Oximetry parameters such as noninvasive hemoglobin (SpHb ® ), alongside many other modalities, including brain function monitoring, hemodynamic monitoring, regional oximetry, acoustic respiration rate monitoring, capnography and gas monitoring, nasal high-flow respiratory support therapy, patient position and activity tracking, neuromodulation technology, an opioid overdose prevention and alert solution, and telehealth solutions. 66 Table of Contents 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.
Ongoing Russian-Ukraine Conflict and Israel-Palestine War We continue to monitor the uncertainty from conflicts and wars in Russia, the Ukraine and Israel, with respect to ongoing 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.
We remain confident that sensor utilization and sensor revenue growth rates will return to normal levels. 68 Table of Contents Ongoing Russian-Ukraine Conflict and Israel-Palestine-Iran War We continue to monitor the uncertainty from conflicts and wars in Russia, the Ukraine and Israel, 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.
Revenues from our OEM channel decreased $17.1 million, or 11.6%, to $130.5 million for the year ended December 30, 2023, as compared to $147.6 million for the year ended December 31, 2022. 75 Table of Contents During the year ended December 30, 2023, we shipped approximately 263,000 noninvasive technology board monitors, a decrease of approximately 44,600 units, or 14.5%, over the year ended December 31, 2022.
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. 70 Table of Contents 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.
Our provision for income taxes for the years ended December 30, 2023 and December 31, 2022 were as follows: Provision for Income Taxes (in millions, except percentages) Year Ended December 30, 2023 Percentage of Revenues Year Ended December 31, 2022 Percentage of Revenues Increase/ (Decrease) Percentage Change $6.6 0.3% $49.9 2.5% $(43.3) (86.8)% 78 Table of Contents Our provision for income taxes was $6.6 million for the year ended December 30, 2023 compared to $49.9 million for the year ended December 31, 2022.
Our (benefit) provision for income taxes for the years ended December 28, 2024 and December 30, 2023 were as follows: (Benefit) Provision for Income Taxes (in millions, except percentages) Year Ended December 28, 2024 Percentage of Revenues Year Ended December 30, 2023 Percentage of Revenues Increase/ (Decrease) Percentage Change $(0.4) —% $6.6 0.3% $(7.0) (106.1)% Our (benefit) provision for income taxes was $(0.4) million for the year ended December 28, 2024 compared to $6.6 million for the year ended December 30, 2023.
This higher non-operating loss of approximately $31.8 million was primarily due to interest expense incurred under our Credit Facility of approximately $47.0 million, which was offset by $3.0 million of interest income on cash deposits in combination with approximately $1.0 million of net realized and unrealized foreign currency denominated transactions during the year ended December 30, 2023.
This reduction in non-operating loss of approximately $9.8 million was primarily due to interest expense incurred under our various lines of credit and the borrowing facility of approximately $43.6 million, which was offset by $4.8 million of interest income on cash deposits in combination with approximately $0.2 million of net realized and unrealized foreign currency denominated transactions during the year ended December 28, 2024. 73 Table of Contents (Benefit) Provision for Income Taxes .
For the year ended December 31, 2022, cash used in financing activities was approximately $520.4 million, consisting primarily of proceeds from borrowings under the line of credit of approximately $1,083.9 million, and the issuance of common stock related to employee equity awards of approximately $8.1 million, which were partially offset by repurchases of our common stock of approximately $401.5 million, repayments under the revolving line of credit of approximately $135.4 million, withholding of shares for employee payroll taxes for vested equity awards of approximately $25.4 million and debt issuance costs of approximately $9.3 million.
Cash used in financing activities for the year ended December 28, 2024 was approximately $125.6 million, consisting primarily of repayments on the line of credit of approximately $237.8 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 $98.8 million and the issuance of common stock related to employee equity awards of approximately $25.2 million.
As of December 30, 2023, we had approximately $668.1 million in working capital, of which approximately $163.0 million was in cash and cash equivalents.
As of December 28, 2024, we had approximately $608.1 million in working capital, of which approximately $177.6 million was in cash and cash equivalents.
For further details regarding our commitment and contingencies, see Note 24 to our accompanying consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
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.
In addition to net working capital, we had approximately $110.2 million of available borrowing capacity (net of outstanding letters of credit) under our Credit Facility as compared to approximately $678.6 million in working capital and approximately $202.9 million in cash and cash equivalents at December 31, 2022.
In addition to net working capital, we had approximately $245.5 million of available borrowing capacity (net of outstanding letters of credit) under our Credit Revolving Facility as compared to approximately $668.1 million in working capital and approximately $163.0 million in cash and cash equivalents at December 30, 2023.
However, if the Company concludes otherwise, then it is required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit.
However, if we conclude otherwise, then we are required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded based on that difference.
Consumers will naturally gravitate toward products that can extend the reach of physicians without any compromise on the quality of care.
Patients continue to gravitate toward products that can extend the reach of physicians without any compromise on the quality of care after a hospital visit or discharge.
This increase was primarily attributable to higher legal and professional fees of approximately $42.2 million, higher advertising and marketing-related expenses of approximately $13.8 million, and higher occupancy and other office-related costs of approximately $9.3 million, offset by lower transaction-related costs of approximately $24.3 million, various insurance recoveries aggregating to approximately $17.6 million and l ower compensation and other employee-related costs of approximately $17.9 million.
This increase was primarily attributable to higher legal and professional fees of approximately $35.3 million, higher compensation and other employee-related costs of approximately $29.2 million, higher transaction-related costs of approximately of $19.0 million, and a write down of the capitalized costs associated with the property in Vancouver, British Columbia of approximately $16.0 million, offset by various insurance recoveries aggregating to approximately $10.0 million, lower occupancy and other office-related costs of approximately $9.7 million, and lower advertising and marketing-related expenses of approximately $0.3 million.
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.
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.
For the three and twelve months ended December 30, 2023, sales derived from customers based in Russia represented an immaterial percentage of our total revenue. 74 Table of Contents Results of Operations The following table sets forth, for the periods indicated, our results of operations expressed as U.S.
For the three and twelve months ended December 28, 2024 sales derived from customers based in Russia represented an immaterial percentage of our total revenue.
The following table details our revenues by segment for each of the year ended December 30, 2023 and December 31, 2022: Segment Revenue ( in millions, except percentages) Year Ended December 30, 2023 Year Ended December 31, 2022 Increase/ (Decrease) Percentage Change Healthcare $ 1,275.5 62.3 % $ 1,340.3 65.8 % $ (64.8) (4.8) % Non-healthcare 772.6 37.7 695.5 34.2 77.1 11.1 Revenue by segment $ 2,048.1 100.0 % $ 2,035.8 100.0 % $ 12.3 0.6 % Revenue for our healthcare segment declined in 2023 and was well below our expectations at the beginning of the year.
The following table details our revenues by segment for each of the year ended December 28, 2024 and December 30, 2023: Segment Revenue ( in millions, except percentages) Year Ended December 28, 2024 Year Ended December 30, 2023 Increase/ (Decrease) Percentage Change Healthcare $ 1,395.2 66.6 % $ 1,275.5 62.3 % $ 119.7 9.4 % Non-healthcare 699.2 33.4 772.6 37.7 (73.4) (9.5) Revenue by segment $ 2,094.4 100.0 % $ 2,048.1 100.0 % $ 46.3 2.3 % Revenue for our healthcare segment 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.
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. 79 Table of Contents Despite recent acquisitions and strategic investment expenditures, 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.
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.
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.
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.
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.
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. 77 Table of Contents 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.
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.
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. 74 Table of Contents 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.
The fair value of RSU and PSU awards is the closing price of our common stock on the grant date.
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.
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.
These expenses also include third-party fees paid to consultants, prototype and engineering supply expenses and the costs of clinical trials.
All of these have affected the global economic environment, along with the healthcare facility spending trends and consumer spending behaviors which ultimately affect the Company’s performance.
All of these have affected the global economic environment, along with the healthcare facility spending trends and consumer spending behaviors which ultimately affected our performance. While we experienced volatility in both our healthcare and non-healthcare segments, we continue to be optimistic about our long-term growth and prospects.
Our effective tax rate was 7.4% for the year ended December 30, 2023 compared to 25.8% for the year ended December 31, 2022. This decrease in our effective tax rate for the year ended December 30, 2023 resulted primarily from an increase in income tax credits and decrease in non-deductible stock-based compensation expense from the year ended December 31, 2022.
This decrease in our effective tax rate for the year ended December 28, 2024 resulted primarily from an increase in a non-deductible goodwill impairment, partially offset by a decrease in income tax credits from the year ended December 30, 2023.
Revenue by segment: Revenue by segment is comprised of healthcare and non-healthcare segments. The healthcare segment consists of hospital products and services. The non-healthcare segment consists of consumer audio visual and sound related products.
Revenue increased $46.3 million, or 2.3%, to $2,094.4 million for the year ended December 28, 2024, from $2,048.1 million for the year ended December 30, 2023. Revenue by segment: Revenue by segment is comprised of healthcare and non-healthcare segments. The healthcare segment consists of hospital products and services. The non-healthcare segment consists of consumer audio visual and sound related products.
This quantitative assessment indicated that the carrying value of certain trademarks in the non-healthcare reporting unit were impaired by approximately $7.0 million. In conjunction with this third quarter interim impairment quantitative assessment, the Company concluded that both the healthcare reporting unit’s and non-healthcare reporting unit’s respective estimated fair values exceeded their carrying values.
In conjunction with this third quarter interim impairment quantitative assessment, we concluded that both the healthcare reporting unit’s and non-healthcare reporting unit’s respective estimated fair values exceeded their carrying values. Furthermore, recoverability tests performed for other long-lived assets with finite lives indicated no recoverability issues.
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.
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 the year ended December 31, 2022, cash provided by operating activities was approximately $29.4 million, which was primarily driven by net income of $143.5 million. This was increased by non-cash activities, including depreciation and amortization of $136.1 million and stock-based compensation of $47.7 million, partially offset by a deferred income tax benefit of $39.3 million.
Cash provided by operating activities was approximately $196.4 million for the year ended December 28, 2024, generated primarily from operations which were increased by non-cash activities, including an impairment charge of $304.0 million, depreciation and amortization of $103.0 million, loss on disposal of inventory, equipment, and other assets of $98.7 million, and stock-based compensation of $41.5 million, which was partially offset by a deferred income tax benefit of $38.2 million.
Economic Trends The healthcare and non-healthcare markets we operate in are highly competitive and dynamic, and have experienced a number of headwinds, including but not limited to inflationary pressures, interest rates volatility, rising energy costs, recessionary trends, and foreign currency fluctuations.
We continue to seek out differentiated growth opportunities to cross-leverage technologies, bringing our core clinically superior solutions into the home and continue to advance our integration technologies into the hospital to advance hospital automation ® connectivity and cloud-based technologies. 67 Table of Contents Economic Trends and Developments Affecting Our Business The healthcare and non-healthcare markets we operate in are highly competitive and dynamic, and experienced a number of headwinds in 2023 and 2024, including but not limited to supply chain constraints, inflationary pressures, interest rates volatility, rising energy costs, transportation shortages, recessionary trends and foreign currency fluctuations.
Revenue generated through our direct and distribution sales channels decreased $49.7 million, or 4.2%, to $1,143.0 million for the year ended December 30, 2023, compared to $1,192.7 million for the year ended December 31, 2022.
Dollar translation of foreign sales that were denominated in various foreign currencies. Revenue generated through our direct and distribution sales channels increased $120.6 million, or 10.6%, to $1,263.6 million for the year ended December 28, 2024, compared to $1,143.0 million for the year ended December 30, 2023.
The positive momentum in hearables has helped to partially offset the macro conditions weighing on the market for high-end audio systems. 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.
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 30, 2023 and December 31, 2022 were as follows: Gross Profit (in millions, except percentages) Year Ended December 30, 2023 Percentage of Revenues Year Ended December 31, 2022 Percentage of Revenues Increase/ (Decrease) Percentage Change $1,003.5 49.0% $1,058.8 52.0% $(55.3) (5.2)% Gross profit decreased to 49.0% for the year ended December 30, 2023, from 52.0% for the year ended December 31, 2022, primarily due to decreased sales volume in the healthcare segment.
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 $1,004.4 48.0% $1,003.5 49.0% $0.9 0.1% Gross profit increased $0.9 million to $1,004.4 million for the year ended December 28, 2024, from $1,003.5 million for the year ended December 30, 2023, primarily due to increased sales volumes from our healthcare segment, which were primarily offset by decreased sales volumes from our non-healthcare segment and 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.
Based on these factors, we determined that there was a triggering event for the three months ended September 30, 2023, which required an interim impairment assessment. Accordingly, we performed an interim impairment test of goodwill and indefinite-lived intangibles, and a recoverability test for other long lived assets with finite lives.
During the third quarter of 2023, we experienced declines in our stock price and certain worsening macro-economic market conditions, which contributed to a significant decline in our market capitalization. Based on these factors, we determined that there was a triggering event for the three months ended September 30, 2023, which required an interim impairment assessment.
Initial trends indicate the installation slowing we experienced since the second quarter will most likely continue at least through early 2024. Despite these obstacles, 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.
The installation challenges we experienced in fiscal 2023 increased our backlog systems installations into fiscal 2024 and is expected to carry over into fiscal 2025. Despite these obstacles, we continue to be vigilant in our efforts to address the labor shortages, including engaging additional third-party installation service providers.
Impairment charges for the years ended December 30, 2023 and December 31, 2022 were as follows: Impairment Charge (in millions, except percentages) Year Ended December 30, 2023 Percentage of Revenues Year Ended December 31, 2022 Percentage of Revenues Increase/ (Decrease) Percentage Change $10.0 0.5% $— —% $10.0 100.0% During the third quarter of 2023, we experienced declines in our stock price and certain worsening macro-economic market conditions, which contributed to a significant decline in our market capitalization.
Impairment charges for the years ended December 28, 2024 and December 30, 2023 were as follows: Impairment Charge (in millions, except percentages) Year Ended December 28, 2024 Percentage of Revenues Year Ended December 30, 2023 Percentage of Revenues Increase/ (Decrease) Percentage Change $304.0 14.5% $10.0 0.5% $294.0 1,651.7% During the fourth quarter of 2024, we performed our annual indefinite-lived intangibles impairment analysis and, based on this assessment, we determined that the carrying value of certain indefinite-lived trademarks and goodwill in the non-healthcare reporting unit were impaired by approximately $304.0 million.
Other factors include lower than expected capital equipment sales and delays in hospital installations. Revenues were unfavorably impacted by approximately $5.8 million of foreign exchange rate movements from the prior year period that increased the U.S. Dollar translation of foreign sales that were denominated in various foreign currencies.
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.
Additional increases in operating cash resulted from changes in accounts payable, deferred costs and other contract assets and lease receivables of approximately $60.5 million, $28.1 million and $12.8 million, respectively, primarily due to the timing of payments.
Other major changes in operating assets and liabilities include decreases in lease receivable, other non-current liabilities and other current assets of $12.7 million, $10.5 million and $6.6 million, respectively; an increase in accounts receivable, accrued compensation, accrued liabilities, accounts payable, deferred revenue and other contract-related liabilities, inventories, deferred costs and other contract assets, other non-current assets, and income taxes payable of $65.0 million, $22.2 million, $17.7 million, $14.8 million, $10.3 million, $7.5 million, $4.0 million, $2.3 million and $2.2 million, respectively, primarily due to timing of payments and costs associated with the strategic realignment initiative.
A 1.0% change in the discount rate would equate to approximately $60.0 million in fair value, all other variables remaining constant. If future actual results adversely deviate from the forecast in the analysis, there will be a materially different assessment.
For certain of these intangibles, the discount rate assumed in the analysis was 15.0%, and a 1.0% change would equate to approximately $12.0 million in fair value, all other variables remaining constant. Non-operating Loss . Non-operating loss consists primarily of interest income, interest expense and foreign exchange gains and losses.
Removed
Executive Overview We are a global technology company dedicated to improving lives. We seek to accelerate our growth strategies and strengthen our focus on patient care via two business segments: healthcare and non-healthcare. We commenced reporting under this new structure effective for the quarter ended July 2, 2022 as a result of the Sound United acquisition.
Added
Executive Overview We are a global technology company dedicated to improving lives. We aim to accelerate our growth strategies by continuously innovating and prioritizing patient care with a lens toward value-creation initiatives, including our Board of Directors’ (Board) commitment to a strategic review of all business activities.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeConsumer demand and discretionary spending continue to be impacted by inflationary pressures, which could materially impact our financial results; in particular, our consumer products and non-healthcare business segment. We are unable to determine the exact impact of inflation on our global business, financial condition or results of operations during the periods presented.
Biggest changeWe 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.
Realized and unrealized foreign currency gains or losses on these transactions are also included in our statements of operations as incurred. 86 Table of Contents The balance sheets of each of our foreign subsidiaries whose functional currency is not the U.S. Dollar are translated into U.S.
Realized and unrealized foreign currency gains or losses on these transactions are also included in our statements of operations as incurred. 80 Table of Contents The balance sheets of each of our foreign subsidiaries whose functional currency is not the U.S. Dollar are translated into U.S.
As of December 30, 2023, 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.
As of December 28, 2024, 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.
A hypothetical 100 basis point change in interest rates would increase or decrease our annual interest expense by approximately $0.7 million based on average debt outstanding, after consideration of our interest rate swap contracts, for the quarter ended December 30, 2023 and approximately $2.4 million based on average debt outstanding, after consideration of our interest rate swap contracts for the year ended December 30, 2023.
A hypothetical 100 basis point change in interest rates would increase or decrease our annual interest expense by approximately $1.0 million based on average debt outstanding, after consideration of our interest rate swap contracts, for the quarter ended December 28, 2024 and approximately $0.4 million based on average debt outstanding, after consideration of our interest rate swap contracts for the year ended December 28, 2024.
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 December 30, 2023 would have resulted in an estimated reduction of $51.6 million in reported pre-tax income for the year ended December 30, 2023.
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 December 28, 2024 would have resulted in an estimated reduction of $47.5 million in reported pre-tax income for the year ended December 28, 2024.
We sponsor multiple defined benefit pension plans covering certain international employees. The aggregate fair value of the plans’ investments was $23.1 million as of December 30, 2023. 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.
We sponsor multiple defined benefit pension plans covering certain international employees. The aggregate fair value of the plans’ investments was $22.8 million as of December 28, 2024. 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.
See Note 17 , “ Derivative I nstruments and Hed ging Activities ”, to our accompanying consolidated financial statements included in Item 15(a) of this Annual Report on Form 10-K for further details.
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.
As our foreign operations continue to grow, our exposure to foreign currency exchange rate risk may become more significant. Inflation Risk Inflation continuously increased in 2023 and is expected to continue to increase for the near future.
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 segments during the year ended 2024, in particular, our consumer products and non-healthcare business segment.
Removed
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could have a material adverse effect on our business, financial condition and results of operations.
Added
Though we believe that the easing of interest rates throughout 2024 had a positive impact on the return of consumer discretionary spending, 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.

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