MASIMO CORP

Masimo Corporation is a global medical technology company that develops and produces a wide array of industry-leading monitoring technologies, including innovative measurements, sensors, and patient monitors. The company operates in the healthcare market, which is described as highly competitive and dynamic, and has experienced a number of headwinds over the past two years including supply chain volatility, inflationary pressures, interest rate volatility, fluctuations in energy costs, recessionary trends, foreign currency fluctuations, tariffs, increases in unemployment rates, geo-political uncertainty and the U.S. government shutdown. The company's core measurement technologies are its breakthrough Measure-through Motion and Low Perfusion pulse oximetry, known as Masimo Signal Extraction Technology (SET) pulse oximetry, and advanced rainbow Pulse CO-Oximetry parameters such as noninvasive hemoglobin (SpHb), alongside many other modalities including brain function monitoring, hemodynamic monitoring, regional oximetry, acoustic respiration rate monitoring, capnography and gas monitoring, and telehealth solutions.

Masimo's primary competitor in the healthcare market is Medtronic plc, who currently holds a substantial share of the pulse oximetry market. Additionally, large technology companies that have not historically operated in the healthcare or medical device space, such as Alphabet Inc., Amazon, Apple Inc., and Samsung Electronics Co., Ltd., have developed or may develop products and technologies that may compete with Masimo's current or future products. The company believes Masimo SET is trusted by clinicians to safely monitor in excess of approximately 200 million patients each year and has been chosen as the primary pulse oximeter technology used by all of the top ten hospitals according to the 2024-2025 U.S. News & World Report Best Hospitals Honor Roll. Masimo has signed contracts with what it believes to be the five largest national GPOs in the U.S., and in 2025 and 2024, revenues from the sale of its pulse oximetry products to hospitals associated with GPOs amounted to $872.8 million ¹ and $794.0 million ², respectively.

Masimo generates revenue primarily through the sale of its healthcare products and patient monitoring solutions, which generally incorporate a monitor or circuit board, proprietary single-patient use or reusable sensors, software and/or cables. The company sells its products to hospitals, emergency medical service providers, home care providers, physician offices, veterinarians, and long-term care facilities through its direct sales force, distributors and original equipment manufacturer (OEM) partners such as GE Healthcare, Hillrom, Mindray, Philips, Physio-Control and Zoll. The company's revenue is comprised of hospital products and services, and it derives the majority of its revenue from four primary sources: direct sales under deferred equipment agreements with end-user hospitals where it provides up-front monitoring equipment at no up-front charge in exchange for a multi-year sensor purchase commitment; other direct sales of noninvasive monitoring solutions; sales to distributors; and sales of integrated circuit boards to OEM customers. For the year ended January 3, 2026, one just-in-time distributor represented approximately 18.8% ³ of total revenue.

Masimo's healthcare business develops, manufactures and markets a variety of noninvasive patient monitoring technologies, hospital automation and connectivity solutions, and remote monitoring devices. The company's core measurement technologies include Masimo Signal Extraction Technology (SET) pulse oximetry, which utilizes five signal processing algorithms, four of which are proprietary, in parallel to deliver high sensitivity and specificity. The Masimo rainbow SET platform leverages Masimo SET technology and incorporates licensed rainbow technology to enable real-time monitoring of additional noninvasive measurements including carboxyhemoglobin (SpCO), methemoglobin (SpMet), and total hemoglobin concentration (SpHb). The Masimo Hospital Automation Platform facilitates data integration, connectivity and interoperability through solutions like Patient SafetyNet, Iris, iSirona, Replica and UniView. The company also offers a variety of continuous bedside monitoring and handheld devices including the Masimo Rad-97 device, the Rad-G handheld spot-check pulse oximeter, and the Rad-67 portable spot-check monitoring device. The 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. The Root patient monitoring and connectivity platform integrates an array of technologies, devices and systems to provide multimodal monitoring and connectivity solutions.

Masimo's product portfolio includes OEM solutions such as circuit boards and modules, with the MX-7 OEM circuit board being its latest and most advanced rainbow SET board, offering more efficient power utilization and designed for integration into more than 200 multi-parameter monitors available from more than 90 OEM partners. The MSX-2040 board uses about a third of the power and is only half the physical size of previously available Signal Extraction Technology pulse oximetry solutions. The company also offers a complete portfolio of capnography and gas monitoring solutions, both sidestream and mainstream. The Masimo SafetyNet platform is a secure, scalable, cloud-based patient management platform featuring clinical-grade spot-checking and continuous measurements, digital care pathways and remote patient surveillance. 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. The company's hospital automation and connectivity suite includes iSirona, a versatile connectivity hub designed to facilitate the physical integration of up to six medical devices at the patient bedside, and Iris Gateway, which bridges the gap between device data generated at the patient bedside and documentation in patient data management systems such as EMRs.

On February 16, 2026, the Company entered into an Agreement and Plan of Merger with Danaher Corporation and Mobius Merger Sub, Inc., pursuant to which Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of Danaher. At the effective time of the Merger, each share of common stock of the Company issued and outstanding immediately prior to the effective time will be automatically converted into the right to receive $180.00 ⁴ in cash, without interest. The Merger is expected to close in the second half of 2026. On May 6, 2025, the Company announced that it entered into a definitive agreement to sell Viper Holdings Corporation, which previously owned and operated the Company's non-healthcare business (Sound United) to Harman International Industries, Incorporated, a wholly-owned subsidiary of Samsung Electronics., Ltd., and on September 23, 2025, the Company completed the sale of Sound United. During the year ended January 3, 2026, the Company repurchased approximately 1.1 million ⁵ shares pursuant to the Repurchase Program, and as of January 3, 2026, 2.5 million ⁶ shares remained available for repurchase. The Company also repurchased 2.5 million ⁷ shares of common stock for $365.7 million ⁸ during the year. In June 2022, the Board approved a stock repurchase program authorizing the purchase of up to 5.0 million ⁹ shares of common stock on or before December 31, 2027 ¹⁰. On April 27, 2025, the Company identified unauthorized activity on its on-premise network, which temporarily impacted certain manufacturing facilities and the ability to process, fulfill, and ship customer orders.

For the year ended January 3, 2026, total revenue was $1,526.9 million ¹¹, compared to $1,395.2 million ¹² for the year ended December 28, 2024, representing an increase of 9.4% ¹³. Net income from continuing operations, net of tax was $207.7 million ¹⁴ for fiscal 2025, compared to $16.2 million ¹⁵ for fiscal 2024. Net loss from discontinued operations, net of tax was $359.2 million ¹⁶ for fiscal 2025, compared to $321.1 million ¹⁷ for fiscal 2024. Net loss was $151.5 million ¹⁸ for fiscal 2025, compared to $304.9 million ¹⁹ for fiscal 2024. Gross profit increased to $945.2 million ²⁰ for fiscal 2025 from $794.3 million ²¹ for fiscal 2024, and gross profit as a percentage of revenue increased to 61.9% ²² from 56.9% ²³. Operating income was $310.0 million ²⁴ for fiscal 2025 compared to $63.0 million ²⁵ for fiscal 2024. Cash provided by operating activities from continuing operations was $217.2 million ²⁶ for fiscal 2025 compared to $162.5 million ²⁷ for fiscal 2024.

A major growth vector for Masimo is the expansion of patient monitoring through the hospital and into other growth markets such as outpatient and ambulatory surgery centers. The company states it is excited about the long-term prospects of patient care, hospital automation, and advancing its initiatives of expanding patient monitoring. The widespread caregiver shortage demands have created transformative changes in the healthcare space, and patients continue to gravitate toward products that can extend the reach of physicians without any compromise on the quality of care. The company continues to seek out differentiated growth opportunities to cross-leverage technologies, while continuing to advance its integration technologies into the hospital to advance hospital automation connectivity and cloud-based technologies. In fiscal 2025, the company achieved a record level of new customer conversions along with expanded hospital agreements with existing customers, which has added to the installation backlogs. The company shipped approximately 270,600 ²⁸ noninvasive technology board monitors in fiscal 2025, an increase of approximately 36,000 ²⁹ units, or 15.3% ³⁰, over fiscal 2024.

Another growth vector is the company's refocused innovation to accelerate growth through what it describes as '3 Waves.' The company's strategy includes targeted growth in its core markets and refocused innovation. The company's product portfolio continues to expand, and it is investing significant resources to enter into, and in some cases, create new markets for its products. The company is continuing to invest in sales and marketing resources to achieve market acceptance of its products. The company also continues to invest in international expansion programs designed to increase its worldwide presence and take advantage of market expansion opportunities around the world. The company currently derives approximately 37% ³¹ of its net sales from international operations.

The company's gross profit as a percentage of revenue increased to 61.9% ³² for fiscal 2025 from 56.9% ³³ for fiscal 2024. The increase in gross profit was driven by the absence of certain strategic realignment initiative charges recognized in fiscal 2024 which did not reoccur in fiscal 2025, improved manufacturing efficiencies from the transition of high volume sensor manufacturing to Malaysia, and a beneficial product mix. Selling, general and administrative expenses decreased $42.6 million ³⁴, or 7.8% ³⁵, to $506.0 million ³⁶ for fiscal 2025 from $548.6 million ³⁷ for fiscal 2024, primarily attributable to lower legal and professional fees of approximately $31.0 million ³⁸, lower occupancy, offices and other expenses of approximately $16.7 million ³⁹, and lower advertising and marketing-related expenses of approximately $12.4 million ⁴⁰. Research and development expenses decreased $55.8 million ⁴¹, or 30.6% ⁴², to $126.4 million ⁴³ for fiscal 2025 from $182.2 million ⁴⁴ for fiscal 2024, primarily due to lower occupancy, offices and other expenses of approximately $33.5 million ⁴⁵, lower compensation and employee-related costs of approximately $22.0 million ⁴⁶, and lower patent and other amortization costs of approximately $5.8 million ⁴⁷.

The company's production footprint includes operations in the U.S., Mexico and Malaysia. The company manufactures products at facilities located in various countries throughout the world and maintains captive contract maquiladora operations for key components. The company's manufacturing facilities in Mexico are authorized to operate under the Mexican Maquiladora (IMMEX) program, which allows the company to import certain items from the U.S. into Mexico duty-free. The company relies on manufacturing facilities in North America, the Middle East and Asia. The company is actively working to mitigate the operating profit impact of tariffs with adjustments to its supply chain and manufacturing, as well as a significant amount of administrative effort to qualify its products for exemptions, including those under the United States-Mexico-Canada Agreement. The company is also pursuing longer-term mitigation measures to further reduce its tariff exposure and evaluating alternative suppliers for raw materials and cables currently sourced from China. In fiscal 2025, the company's full-time employees decreased from approximately 3,600 ⁴⁸ as of December 28, 2024 to 2,200 ⁴⁹ as of January 3, 2026, primarily due to the sale of Sound United. Dedicated contract personnel worldwide decreased from approximately 5,600 ⁵⁰ as of December 28, 2024 to approximately 5,300 ⁵¹ as of January 3, 2026.

Research and development expenses were $126.4 million ⁵² for fiscal 2025, compared to $182.2 million ⁵³ for fiscal 2024. Purchases of property and equipment from continuing operations were $19.4 million ⁵⁴ for fiscal 2025, compared to $21.1 million ⁵⁵ for fiscal 2024. Capitalized intangible asset costs related primarily to patent and trademark costs and license fees were $5.3 million ⁵⁶ for fiscal 2025, compared to $17.2 million ⁵⁷ for fiscal 2024. During the year ended January 3, 2026, the Company repurchased 2.5 million ⁵⁸ shares of common stock for $365.7 million ⁵⁹ under the Repurchase Program. As of January 3, 2026, 2.5 million ⁶⁰ shares remained available for repurchase pursuant to the Repurchase Program, which authorizes the purchase of up to 5.0 million ⁶¹ shares on or before December 31, 2027 ⁶². The Company has historically not paid dividends to its stockholders.

The company faces structural headwinds including supply chain volatility, inflationary pressures, interest rate volatility, fluctuations in energy costs, recessionary trends, foreign currency fluctuations, tariffs, increases in unemployment rates, geo-political uncertainty and the U.S. government shutdown. The company specifically notes that tariffs imposed by the U.S. government on many products imported from China, Canada and Mexico, and retaliatory tariffs from other countries, could adversely impact revenue and profitability. The company states that if additional tariffs come into effect or are adopted, it could incur additional tariff costs that could be material to its revenue and profitability. The company also faces headwinds from labor shortages in hospitals, which previously impacted installations, though it notes that in fiscal 2025 it achieved a record level of new customer conversions. The company also faces risks from the ongoing Russia-Ukraine conflict and Israel-Palestine-Iran conflicts, noting that future orders for Russia have been halted indefinitely.

The company faces execution risks related to the proposed Merger with Danaher, which is subject to customary closing conditions including approval by stockholders and the receipt of required regulatory approvals. The company notes that uncertainties associated with the Merger could adversely affect its business, results of operations, cash flows and financial condition, and that it has incurred and will continue to incur significant costs relating to the Merger. The company also faces risks related to its Cross-Licensing Agreement with Willow Laboratories, Inc., including a dispute that resulted in Willow filing a demand for arbitration on May 26, 2025 ⁶³, seeking monetary damages of at least $6.1 million ⁶⁴ and specific performance. The company also faces risks from a cybersecurity incident identified on April 27, 2025 ⁶⁵, which temporarily impacted manufacturing facilities and the ability to process, fulfill, and ship customer orders.

The company faces material risks related to the proposed Merger with Danaher, including the possibility that the Merger may not be completed within the expected timeframe or at all, which could have an adverse effect on its business, financial results and operations. The Merger is subject to the expiration or termination of applicable waiting periods and the receipt of approvals from several regulatory authorities, and if not obtained, could prevent completion. The Merger Agreement contains provisions that could discourage a potential competing acquirer, and the company may be required to pay a termination fee of $305 million ⁶⁶ to Danaher in certain circumstances. The company also faces significant risks related to its Cross-Licensing Agreement with Willow Laboratories, Inc., including a dispute that resulted in Willow filing a demand for arbitration on May 26, 2025 ⁶⁷, seeking monetary damages of at least $6.1 million ⁶⁸. The company's business is highly dependent upon the continued success and market acceptance of its Masimo SET and Masimo rainbow SET platforms, and if these technologies do not continue to achieve market acceptance, its business would be adversely affected. The company faces risks from tariffs imposed by the U.S. government, noting that certain raw materials are imported from China and certain subassemblies are imported from Malaysia and Mexico, and that if additional tariffs come into effect, the company could incur additional tariff costs that could be material to its revenue and profitability. The company also faces risks from a cybersecurity incident identified on April 27, 2025 ⁶⁹, which temporarily impacted manufacturing facilities and the ability to process, fulfill, and ship customer orders.

Management's message emphasizes that the company is excited about the long-term prospects of patient care, hospital automation, and advancing its initiatives of expanding patient monitoring through the hospital and into other growth markets such as outpatient and ambulatory surgery centers. Management notes that the widespread caregiver shortage demands have created transformative changes in the healthcare space, and that patients continue to gravitate toward products that can extend the reach of physicians without any compromise on the quality of care. The strategic priorities emphasized for the period ahead include refocusing on profitability and maximizing return on invested capital, as demonstrated by the strategic realignment initiative implemented during the fourth quarter of 2024. Management also emphasizes the company's strategy to deliver value through a world-class execution-oriented leadership team, targeted growth strategy in core markets, refocused innovation to accelerate growth, and market-leading growth in EPS and Free Cash Flow. The company's strategy to accelerate growth is described through '3 Waves' of innovation. Management notes that in fiscal 2025, the company achieved a record level of new customer conversions along with expanded hospital agreements with existing customers, which it views as a positive indication that its growth strategy is working.