MASIMO CORPMASI
MASIMO CORP Stock Compensation Disclosure
20. Stock-Based Compensation
Equity Incentive Plans
2007 Stock Incentive Plan
Effective June 1, 2017, upon the approval and ratification of the 2017 Equity Plan, the Company’s 2007 Stock Incentive Plan (the 2007 Equity Plan) terminated, provided that awards outstanding under the 2007 Equity Plan will continue to be governed by the terms of that plan. In addition, upon the effectiveness of the 2017 Equity Plan, an aggregate of 5.0 million shares of the Company’s common stock registered under prior registration statements for issuance pursuant to the 2007 Equity Plan were deregistered and concurrently registered under the 2017 Equity Plan.
2017 Equity Plan
On June 1, 2017, the Company’s stockholders ratified and approved the 2017 Equity Plan. The 2017 Equity Plan permits the grant of stock options, restricted stock, RSUs, stock appreciation rights, PSUs, performance shares, performance bonus awards and other stock or cash awards to employees, directors and consultants of the Company and employees and consultants of any parent or subsidiary of the Company. Upon effectiveness, an aggregate of 5.0 million shares were available for issuance under the 2017 Equity Plan. In May 2020, the Company’s stockholders approved an increase of 2.5 million shares to the 2017 Equity Plan. The aggregate number of shares that may be awarded under the 2017 Equity Plan is 7.5 million shares. The 2017 Equity Plan provides that at least 95% of the equity awards issued under the 2017 Equity Plan must vest over a period of not less than one year following the date of grant. The exercise price per share of each option granted under the 2017 Equity Plan may not be less than the fair market value of a share of the Company’s common stock on the date of grant, which is generally equal to the closing price of the Company’s common stock on the Nasdaq Global Select Market on the grant date.
Total stock-based compensation expense during the years ended January 3, 2026, December 28, 2024, and December 30, 2023 was $35.8 million, $36.1 million and $6.1 million respectively.
Additional information related to the Company’s current equity incentive plans, stock-based award activity and valuation of stock-based awards is included below.
Stock-Based Award Activity
Stock Options
The number and weighted-average exercise price of options issued and outstanding under all of the Company’s equity plans are as follows:
| Year Ended January 3, 2026 | Year Ended December 28, 2024 | Year Ended December 30, 2023 | |||||||||||||||||||||||||||||||||
| (in millions, except for weighted-average exercise prices) | Shares | Weighted-Average Exercise Price | Shares | Weighted-Average Exercise Price | Shares | Weighted-Average Exercise Price | |||||||||||||||||||||||||||||
Options outstanding, beginning of period(1) | 1.6 | $ | 110.43 | 2.7 | $ | 87.58 | 2.8 | $ | 83.87 | ||||||||||||||||||||||||||
Granted(2) | 0.1 | 163.33 | 0.1 | 126.49 | 0.1 | 182.43 | |||||||||||||||||||||||||||||
Canceled(3) | (0.2) | 183.18 | (0.6) | 82.38 | — | 163.96 | |||||||||||||||||||||||||||||
| Exercised | (0.8) | 87.34 | (0.6) | 39.47 | (0.2) | 43.22 | |||||||||||||||||||||||||||||
| Options outstanding, end of period | 0.7 | $ | 117.87 | 1.6 | $ | 110.43 | 2.7 | $ | 87.58 | ||||||||||||||||||||||||||
| Options exercisable, end of period | 0.6 | $ | 113.14 | 1.5 | $ | 105.05 | 2.4 | $ | 73.80 | ||||||||||||||||||||||||||
(1) The Company recorded $0.1 million, $0.2 million and $0.1 million of stock option expense for discontinued operations for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively.
(2) No stock options were granted for discontinued operations for the year ended January 3, 2026.
(3) On September 23, 2025, in connection with the completion of the sale of Sound United, all outstanding unvested stock options held by employees of the sold business were canceled.
Total stock option expense for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 was $1.3 million, $4.4 million and $8.7 million, respectively. As of January 3, 2026, the Company had $3.3 million of unrecognized compensation cost related to non-vested stock options that are expected to vest over a weighted-average period of approximately 3.2 years.
The number and weighted-average exercise price of outstanding and exercisable stock options segregated by exercise price ranges were as follows:
| Year Ended January 3, 2026 | Year Ended December 28, 2024 | ||||||||||||||||||||||||||||||||||
| (in millions, except range of exercise prices and average remaining contractual life) | Options Outstanding | Options Exercisable | Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||||
| Range of Exercise Prices | Number of Options | Average Remaining Contractual Life | Number of Options | Number of Options | Average Remaining Contractual Life | Number of Options | |||||||||||||||||||||||||||||
$15.00 to $50.00 | 0.1 | 0.2 | 0.1 | 0.3 | 0.8 | 0.3 | |||||||||||||||||||||||||||||
$50.01 to $80.00 | — | 0.7 | — | — | 1.7 | — | |||||||||||||||||||||||||||||
$80.01 to $120.00 | 0.3 | 1.8 | 0.3 | 0.7 | 1.5 | 0.7 | |||||||||||||||||||||||||||||
$120.01 to $160.00 | 0.2 | 4.6 | 0.1 | 0.4 | 2.2 | 0.3 | |||||||||||||||||||||||||||||
$160.01 to $200.00 | 0.1 | 5.6 | 0.1 | 0.2 | 2.5 | 0.2 | |||||||||||||||||||||||||||||
$200.01 to $230.00 | — | 4.2 | — | — | 4.5 | — | |||||||||||||||||||||||||||||
$230.01 to $280.00 | — | 4.9 | — | — | 2.4 | — | |||||||||||||||||||||||||||||
Total | 0.7 | 3.0 | 0.6 | 1.6 | 1.7 | 1.5 | |||||||||||||||||||||||||||||
As of January 3, 2026 and December 28, 2024, the weighted-average remaining contractual term of options outstanding was 3.0 years and 1.7 years, respectively. As of January 3, 2026 and December 28, 2024, the weighted-average remaining contractual term of options exercisable with an exercise price less than the closing price of the Company’s common stock was 1.9 years and 2.2 years respectively.
RSUs
The number of RSUs issued and outstanding under all of the Company’s equity plans are as follows:
| Year Ended January 3, 2026 | Year Ended December 28, 2024 | Year Ended December 30, 2023 | |||||||||||||||||||||||||||||||||
| (in millions, except for weighted-average grant date fair value) | Units | Weighted-Average Grant Date Fair Value | Units | Weighted-Average Grant Date Fair Value | Units | Weighted-Average Grant Date Fair Value | |||||||||||||||||||||||||||||
RSUs outstanding, beginning of period(1) | 0.7 | $ | 135.21 | 3.4 | $ | 104.81 | 3.0 | $ | 105.02 | ||||||||||||||||||||||||||
Granted(2) | 0.3 | 163.02 | 0.2 | 130.85 | 0.5 | 121.79 | |||||||||||||||||||||||||||||
Canceled(3) | (0.2) | 142.75 | (2.7) | 96.40 | — | 179.81 | |||||||||||||||||||||||||||||
| Vested | (0.2) | 141.48 | (0.2) | 146.27 | (0.1) | 177.93 | |||||||||||||||||||||||||||||
| RSUs outstanding, end of period | 0.6 | $ | 145.71 | 0.7 | $ | 135.21 | 3.4 | $ | 104.81 | ||||||||||||||||||||||||||
___________________________
(1) The Company recorded $2.5 million, $4.4 million and $2.3 million of RSU related expense for discontinued operations for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively.
(2) No RSUs were granted for discontinued operations for the year ended January 3, 2026.
(3) On September 23, 2025, in connection with the completion of the sale of Sound United, all outstanding unvested RSUs held by employees of the sold business were canceled.
Total RSU expense for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 was $32.0 million, $29.8 million and $17.8 million, respectively. As of January 3, 2026, the Company had $68.5 million of unrecognized compensation cost related to non-vested RSU awards expected to be recognized and vest over a weighted-average period of approximately 3.1 years.
As previously mentioned in Note 2, “Summary of Significant Accounting Policies” under the heading “Net Income Per Share”, 2.7 million shares related to certain RSUs were considered contingently issuable shares as their vesting is contingent upon the occurrence of certain events. As of January 3, 2026, such events were deemed to have not occurred. See Note 24, “Commitments and Contingencies” for additional details.
PSUs
The number of PSUs outstanding under all of the Company’s equity plans are as follows:
| Year Ended January 3, 2026 | Year Ended December 28, 2024 | Year Ended December 30, 2023 | |||||||||||||||||||||||||||||||||
(in millions, except for weighted-average grant date fair value) | Units | Weighted-Average Grant Date Fair Value | Units | Weighted-Average Grant Date Fair Value | Units | Weighted-Average Grant Date Fair Value | |||||||||||||||||||||||||||||
PSUs outstanding, beginning of period(1) | 0.2 | $ | 172.50 | 0.3 | $ | 195.42 | 0.3 | $ | 186.83 | ||||||||||||||||||||||||||
Granted(2) | 0.1 | (3) | 179.89 | 0.1 | (4) | 164.19 | 0.1 | (5) | 204.67 | ||||||||||||||||||||||||||
Canceled(6) | (0.2) | 171.39 | (0.2) | 187.52 | — | 193.50 | |||||||||||||||||||||||||||||
| Vested | — | — | — | 250.73 | (0.1) | 179.42 | |||||||||||||||||||||||||||||
| PSUs outstanding, end of period | 0.1 | $ | 180.65 | 0.2 | $ | 172.50 | 0.3 | $ | 195.42 | ||||||||||||||||||||||||||
(1) The Company recorded $(1.0) million, $0.8 million and $(1.5) million of PSU (benefit) expense for discontinued operations for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively.
(2) No PSUs were granted for discontinued operations for the year ended January 3, 2026.
(3) On February 25, 2025, the Audit Committee approved the weighted payout percentage of 0% for the 2022 PSU awards (three-year performance period), which were based upon the actual fiscal 2024 performance against pre-established performance objectives. Included in the granted amount are those additional PSUs earned based on actual performance achieved. These PSUs were originally awarded at target.
(4) On February 26, 2024, the Audit Committee approved the weighted payout percentage of 28% for the 2021 PSU awards (three-year performance period), which were based upon the Company’s actual fiscal year 2023 performance against pre-established performance objectives. Included in the granted amount are those additional PSUs earned based on actual performance achieved. These PSUs were originally awarded at target.
(5) On February 27, 2023, the Audit Committee approved the weighted payout percentage of 100% for the 2020 PSU awards (three-year performance period), which were based upon the Company’s actual fiscal year 2022 performance against pre-established performance objectives. Included in the granted amount are those additional PSUs earned based on actual performance achieved. These PSUs were originally awarded at target.
(6) On September 23, 2025, in connection with the completion of the sale of Sound United, all outstanding unvested PSUs held by employees of the sold business were canceled.
During the year ended December 30, 2023, the Company awarded 95,170 PSUs that will vest three years from the award date, based on the achievement of certain pre-established multi-year performance criteria approved by the Board. Estimates of stock-based compensation expense for an award with performance conditions are based on the probable outcome of the performance conditions and the cumulative effect of any changes in the probability outcomes is recorded in the period in which the changes occur. If earned, the PSUs granted will vest upon achievement of the performance criteria, which include a relative total shareholder return (TSR) component, in the year following the evaluation and confirmation of the performance achievement criteria. The Company’s TSR is based on the Company’s common stock percentile ranking relative to the constituents of the Nasdaq Composite Index for the performance period beginning on January 1, 2023 and ending on December 31, 2025. The number of shares that may be earned can range from 0% to 200% of the target amount.
During the year ended December 28, 2024, the Company awarded 142,254 PSUs that will vest three years from the award date, based on the achievement of certain pre-established multi-year performance criteria approved by the Board. Estimates of stock-based compensation expense for an award with performance conditions are based on the probable outcome of the performance conditions and the cumulative effect of any changes in the probability outcomes is recorded in the period in which the changes occur. If earned, the PSUs granted will vest upon achievement of the performance criteria, which include a relative total shareholder return (TSR) component, in the year following the evaluation and confirmation of the performance achievement criteria. The Company’s TSR is based on the Company’s common stock percentile ranking relative to the constituents of the Nasdaq Composite Index for the performance period beginning on January 1, 2024 and ending on December 31, 2026. The number of shares that may be earned can range from 0% to 200% of the target amount.
During the year ended January 3, 2026, the Company awarded 90,397 PSUs that will vest three years from the award date, based on the achievement of certain pre-established multi-year performance criteria approved by the Board. Estimates of stock-based compensation expense for an award with performance conditions are based on the probable outcome of the performance conditions and the cumulative effect of any changes in the probability outcomes is recorded in the period in which the changes occur. If earned, the PSUs granted will vest upon achievement of the performance criteria, which include a relative total shareholder return (TSR) modifier, in the year following the evaluation and confirmation of the performance achievement criteria. The Company’s TSR modifier estimate is based on the Masimo’s TSR performance over a 3-year period as a percentile ranking relative to the constituents of the S&P Healthcare Equipment Select Index for the performance period beginning on March 11, 2025 and ending on January 1, 2028. The number of shares that may be earned can range from 0% to 200% of the target amount.
The fair value of market-based RSUs is determined using a Monte Carlo simulation model, which uses multiple input variables to determine the probability of satisfying the market condition requirements. The fair value of performance-based PSUs is determined using the closing price of the Company’s common stock on the grant date. Based on management’s estimate of the number of units expected to vest, total PSU expense (benefit) for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 was $2.5 million, $1.9 million and $(20.4) million, respectively. The PSU expense (benefit) amounts for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 relate to adjustments for the expected life-to-date performance of the PSU. As of January 3, 2026, the Company had $12.5 million of unrecognized compensation cost related to non-vested PSU awards expected to be recognized and vest over a weighted-average period of approximately 1.8 years.
Valuation of Stock-Based Award Activity
The fair value of each RSU and PSU is determined based on the closing price of the Company’s common stock on the grant date.
The Black-Scholes option pricing model is used to estimate the fair value of options granted under the Company’s stock-based compensation plans. The range of assumptions used and the resulting weighted-average fair value of options granted at the date of grant were as follows:
| Year Ended January 3, 2026 | Year Ended December 28, 2024 | Year Ended December 30, 2023 | |||||||||||||||
| Risk-free interest rate | 3.9% to 4.1% | 3.3% to 4.2% | 3.6% to 4.2% | ||||||||||||||
| Expected term (in years) | 5.8 years | 4.6 years to 5.9 years | 5.1 years to 5.9 years | ||||||||||||||
| Estimated volatility | 40.5% to 43.1% | 33.3% to 42.6% | 31.6% to 36.7% | ||||||||||||||
| Expected dividends | 0% | 0% | 0% | ||||||||||||||
| Weighted-average fair value of options granted | $68.57 per share to $78.81 per share | $59.60 per share | $75.08 per share | ||||||||||||||
Risk-free interest rate. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with a remaining term approximately equal to the expected term of the Company’s stock options.
Expected term. The expected term represents the average period that the Company’s stock options are expected to be outstanding. The expected term is based on both the Company’s specific historical option exercise experience, as well as expected term information available from a peer group of companies with a similar vesting schedule.
Estimated volatility. The estimated volatility is the amount by which the Company’s share price is expected to fluctuate during a period. The Company’s estimated volatilities for the years ended January 3, 2026, December 28, 2024, and December 30, 2023 are based on historical and implied volatilities of the Company’s share price over the expected term of the option.
Expected dividends. The Board may from time to time declare, and the Company may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law. Any determination to declare and pay dividends will be made by the Board and will depend upon the Company’s results of operations, earnings, capital requirements, financial condition, business prospects, contractual restrictions and other factors deemed relevant by the Board. In the event a dividend is declared, there is no assurance with respect to the amount, timing or frequency of any such dividends. The dividend declared in 2012 was deemed to be a special dividend and there is no assurance that special dividends will be declared again during the expected term. Based on this uncertainty and unknown frequency, for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, no dividend rate was used in the assumptions to calculate the stock-based compensation expense.
The Company has elected to recognize stock-based compensation expense on a straight-line basis over the requisite service period for the entire award, net of forfeitures. Forfeitures of stock-based awards are recognized as they occur. The total fair value of all options that vested during the years ended January 3, 2026, December 28, 2024 and December 30, 2023 was $2.7 million, $8.2 million and $9.5 million, respectively.
The aggregate intrinsic value of options is calculated as the positive difference, if any, between the market value of the Company’s common stock on the date of exercise or the respective period end, as appropriate, and the exercise price of the options. The aggregate intrinsic value of options outstanding, with an exercise price less than the closing price of the Company’s common stock as of January 3, 2026 was $18.6 million. The aggregate intrinsic value of options exercisable with an exercise price less than the closing price of the Company’s common stock, as of January 3, 2026 was $18.6 million. The aggregate intrinsic value of options exercised during the years ended January 3, 2026, December 28, 2024 and December 30, 2023 was $63.1 million, $58.2 million and $19.0 million, respectively.
The total income tax benefit recognized in the consolidated statements of operations for stock-based compensation expense was $5.8 million, $5.7 million and $2.9 million for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively.
The following table presents the total stock-based compensation expense that is included in each functional line item of the consolidated statements of operations:
(in millions) | Year Ended January 3, 2026 | Year Ended December 28, 2024 | Year Ended December 30, 2023 | ||||||||||||||
| Cost of goods sold | $ | 0.7 | $ | 1.0 | $ | 1.1 | |||||||||||
| Selling, general and administrative | 21.9 | 20.3 | (2.0) | ||||||||||||||
| Research and development | 13.2 | 14.8 | 7.0 | ||||||||||||||
Total | $ | 35.8 | $ | 36.1 | $ | 6.1 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Feb 27, 2026 | Showing above |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 24, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.