Masimo Corporation

05/05/2026 | Press release | Distributed by Public on 05/05/2026 15:10

Quarterly Report for Quarter Ending April 4, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains "forward-looking statements" as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. Such forward-looking statements include any expectation of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; matters relating to future board and management leadership; factors that may affect our operating results or financial condition; statements concerning new products, technologies or services; statements related to future capital expenditures; statements related to future economic conditions or performance; statements related to our stock repurchase program; statements related to our proposed merger with Danaher, and any associated impact, if at all on the business, revenues or operations; statements as to industry trends and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. These statements are often identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may" or "will," the negative versions of these terms and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the fiscal year ended January 3, 2026, which we filed with the SEC on February 27, 2026. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Recent Developments
Sale of Non-Healthcare Business
On May 6, 2025, we announced that we had entered into a definitive agreement to sell Viper Holdings Corporation, a Delaware corporation which previously owned and operated the Company's non-healthcare business (together with its subsidiaries, "Sound United") to Harman International Industries, Incorporated, a wholly-owned subsidiary of Samsung Electronics., Ltd. On September 23, 2025, we completed the sale of Sound United.
Discontinued Operations
Our results for all periods presented, as discussed further in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," are presented on a continuing operations basis. Results related to our non-healthcare consumer audio business are reported as discontinued operations for all periods presented. See Note 18, "Discontinued Operations" to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to discontinued operations.
Cybersecurity Incident
On April 27, 2025, we identified unauthorized activity on our on-premise network. Upon detection, we activated incident response protocols and implemented containment measures, including proactively isolating impacted systems. We promptly commenced an investigation to assess, mitigate, and remediate the incident with the assistance of third-party cybersecurity professionals. We also notified law enforcement.
As a result of the incident, certain of our manufacturing facilities and our customer order acceptance processes were temporarily operating at less than normal capacity, which had an impact on our ability to process, fulfill, and ship customer orders timely. We worked diligently to bring the affected portions of its network back online, restore normal business operations and mitigate the impact of the incident.
As of May 27, 2025, our manufacturing operations were running at near full capacity, and our critical order taking, distribution and shipping systems are fully operational. We continued to optimize these systems to ensure that any delayed orders were being processed in a timely manner.
As of June 28, 2025, all our manufacturing operations have returned to normal operations. There were no selling, general and administrative expenses incurred related to the cybersecurity incident for each of the three months ended April 4, 2026 and March 29, 2025.
Recent Tax Law Changes
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing the impact of the OBBBA on our consolidated financial statements.
Merger Agreement
On February 16, 2026, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Danaher Corporation, a Delaware corporation ("Danaher") and Mobius Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Danaher ("Merger Sub"), pursuant to which among other things, Merger Sub will merge with and into us (the "Merger"), with us continuing as the surviving corporation and a wholly owned subsidiary of Danaher. As set forth in the Merger Agreement, at the effective time of the Merger, each share of our common stock, par value $0.001 per share, (other than any shares owned by Danaher, Merger Sub or any of our wholly owned subsidiaries or shares in respect of which appraisal has been duly demanded, and not effectively withdrawn or otherwise waived or lost, pursuant to Section 262 of the General Corporation Law of the State of Delaware) issued and outstanding immediately prior to the effective time of the Merger will be automatically converted into the right to receive $180.00 in cash, without interest. The Merger is expected to close in 2026, subject to customary closing conditions, including approval by our stockholders and the receipt of required regulatory approvals. On May 1, 2026, our stockholders adopted the Merger Agreement at a special meeting of stockholders.
If the Merger is completed, our common stock will be delisted from the Nasdaq Stock Market and deregistered under the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable following the effective time of the Merger.
In connection with the proposed Merger, we incurred approximately $17.9 million in selling, general and administrative expenses during the first quarter of fiscal 2026, and we expect to incur additional financial advisory, legal, accounting, and other professional fees in connection with the Merger.
Additional information about the Merger Agreement and the Merger is set forth in the Company's Definitive Proxy Statement on Schedule 14A that was filed with the SEC on April 1, 2026.
Executive Overview
We are a global medical technology company that develops and produces a wide array of industry-leading monitoring technologies, including innovative measurements technologies, sensors, and patient monitors. Powered by the Masimo Hospital Automation™ and Masimo SafetyNet® platforms, Masimo connectivity, automation, telehealth and telemonitoring solutions are improving and automating patient care in the hospital.
Healthcare
Our healthcare business develops, manufactures and markets a variety of noninvasive patient monitoring technologies, hospital automation® and connectivity solutions and remote monitoring devices. Our healthcare products and patient monitoring solutions generally incorporate a monitor or circuit board, proprietary single-patient use or reusable sensors, software, cables and other services. We primarily sell our products to hospitals, emergency medical service (EMS) providers, home care providers, physician offices, veterinarians, long-term care facilities and through our direct sales force, distributors and original equipment manufacturer (OEM) partners, such as GE Healthcare, Hillrom, Mindray, Philips, Physio-Control, Zoll, among others.
Our core measurement technologies are our breakthrough Measure-through Motion and Low Perfusion™ pulse oximetry, known as Masimo Signal Extraction Technology® (SET®) pulse oximetry, and advanced rainbow® Pulse CO-Oximetry parameters such as noninvasive hemoglobin (SpHb®), alongside many other modalities, including brain function monitoring, hemodynamic monitoring, regional oximetry, acoustic respiration rate monitoring, capnography and gas monitoring, and telehealth solutions.
Our measurement technologies are available on many types of devices, from bedside hospital monitors like the Root® Patient Monitoring and Connectivity Hub, to various handheld and portable devices, and to the tetherless Radius PPG®, Radius VSM® and Masimo SafetyNet® remote patient surveillance solution. The Masimo Hospital Automation® Platform facilitates data integration, connectivity, and interoperability through solutions like Patient SafetyNet™, Iris®, iSirona®, Replica® and UniView® to facilitate more efficient clinical workflows and to help clinicians provide the best possible care, both in-person and remotely.
Outlook and Strategy
We are excited about the long-term prospects of patient care, hospital automation® and advancing our initiatives of expanding patient monitoring through the hospital, and into other growth markets such as outpatient and ambulatory surgery centers. The widespread caregiver shortage demands have created transformative changes in the healthcare space. Patients continue to gravitate toward products that can extend the reach of physicians without any compromise on the quality of care.
We continue to seek out differentiated growth opportunities to cross-leverage technologies, while continuing to advance our integration technologies into the hospital to advance hospital automation® connectivity and cloud-based technologies.
Economic Trends and Developments Effecting Our Business
Economic Trends
The healthcare market we operate in is highly competitive, dynamic, and experienced a number of headwinds over the past two years. These included, but were not limited to supply chain volatility, inflationary pressures, interest rates volatility, fluctuations in energy costs, recessionary trends, foreign currency fluctuations, tariffs, increases in unemployment rates, geo-political uncertainty and the U.S. government shutdown. All of these have affected the global economic environment costs, along with the healthcare facility spending trends and consumer spending behaviors which ultimately affect our performance. While we experienced volatility in our healthcare business, we continue to be optimistic about our long-term growth and prospects.
Tariffs
During the first quarter of 2025, the U.S. government imposed a series of tariffs on many products imported into the U.S. from China, Canada and Mexico. Since that time the U.S. government has increased some of those tariffs and postponed others. It has threatened to levy additional tariffs on some countries and new tariffs on additional countries, including those of the European Union, Asia and South America. Many of the countries on which those tariffs have been levied have imposed their own retaliatory tariffs or threatened to impose tariffs on goods they import from the U.S.
The Company's production footprint includes operations in the U.S., Mexico and Malaysia. Currently, certain raw materials are imported from China, and certain subassemblies are imported from Malaysia and Mexico. These tariff costs are expected to reflect their impact in the costs of raw materials and subassemblies used in production, as well as costs we may incur on finished goods shipped to our customers. We are actively working to mitigate the operating profit impact of these tariffs with adjustments to our supply chain and manufacturing, as well as a significant amount of administrative effort to qualify our products for exemptions, including those under United States-Mexico-Canada Agreement. We are also pursuing longer-term mitigation measures to further reduce our tariff exposure and evaluating alternative suppliers for raw materials and cables currently sourced from China.
In February 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA), and remanded related matters to the Court of International Trade. Following the Supreme Court's decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business.
We have filed a claim for a refund of certain tariffs with the Court of International Trade and are monitoring the situation closely for further information about how the U.S. government intends to proceed. However, the ability to recover, and the timing and amount of any potential refunds are uncertain, and at this time we cannot reasonably estimate the financial impact to us, if any. As of April 4, 2026, we have not recognized any amounts associated with potential refunds related to these tariffs.
To the extent we are unable to offset the cost from the tariffs, or the tariffs negatively impact demand, our revenue and profitability could be adversely impacted. If additional tariffs come into effect or are adopted, we could incur additional tariff costs that could be material to our revenue and profitability, effecting our financial results.
Seasonality
Our business is influenced by many factors, including but not limited to: new product releases, acquisitions, regulatory approvals, holiday schedules, hospital census, clinicians, nurses and hospital personnel, the timing of the influenza season, fluctuations in interest rates, inflationary and recessionary pressures, among many other factors.
Our healthcare revenues in the third quarter of our fiscal years have historically represented a lower percentage of revenues due to the seasonality of the U.S., European and Japanese markets, where summer vacation schedules normally result in fewer elective procedures utilizing our healthcare products.
On-Going Russian-Ukraine Conflict, Israel-Palestine-Iran Conflicts
We continue to monitor the uncertainty and geopolitical instability resulting from the ongoing Russia-Ukraine conflict, the Israel-Palestine conflict, and the Israel-Iran conflict, including the involvement of the United States, with respect to on-going business in such regions, and are continuing to support existing patient populations while remaining compliant with all applicable U.S. and EU sanctions and regulations, where applicable. While none of Russia, the Ukraine or Israel constitute a material portion of our business, a significant escalation or expansion of economic disruption or the current scope of the conflicts in either geographic region, including the Middle East, could have an impact on our business. Future orders for Russia have been halted indefinitely. For each of the three months ended April 4, 2026 and March 29, 2025, sales derived from customers based in Russia represented an immaterial percentage of our total revenue.
Transactions with Willow Laboratories, Inc.
Willow Laboratories, Inc. (Willow), formerly known as Cercacor Laboratories, Inc., is an independent entity spun off from us to our stockholders in 1998. Our former Chairman and Chief Executive Officer (CEO), Mr. Joe Kiani, is the Chairman and CEO of Willow. 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. See Note 3, "Related Party Transactions", to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to Willow.
Results of Operations
The following table sets forth, for the periods indicated, our results of operations from continued operations, expressed as U.S. Dollar amounts and as a percentage of revenue from continued operations.
Three Months Ended
(in million, except percentages)
April 4,
2026 		Percentage
of Revenue 		March 29,
2025 		Percentage
of Revenue
Total revenue $ 403.6 100.0 % $ 372.0 100.0 %
Cost of goods sold 152.8 37.9 138.0 37.1
Gross profit 250.8 62.1 234.0 62.9
Operating expenses:
Selling, general and administrative 143.4 35.5 119.4 32.1
Research and development 30.0 7.4 33.9 9.1
Litigation settlements - - 2.7 0.7
Total operating expenses 173.4 43.0 156.0 41.9
Operating income 77.4 19.2 78.0 21.0
Non-operating loss (6.1) (1.5) (9.6) (2.6)
Income from continuing operations before provision for income taxes 71.3 17.7 68.4 18.4
Provision for income taxes 15.0 3.7 21.2 5.7
Income from continuing operations, net of tax 56.3 13.9 47.2 12.7
Income from discontinued operations, net of tax
0.8 0.2 (217.9) (58.6)
Net income (loss) $ 57.1 14.1 % $ (170.7) (45.9) %
Comparison of the Three Months ended April 4, 2026 to the Three Months ended March 29, 2025
Revenue. Revenue is comprised of hospital products and services.
Revenue
(in millions, except percentage)
Three Months Ended
April 4, 2026 		Percentage of
Net Revenues 		Three Months Ended
March 29, 2025 		Percentage of
Net Revenues 		Increase/
(Decrease) 		Percentage
Change
$403.6 100.0% $372.0 100.0% $31.6 8.5%
Revenue for the three months ended April 4, 2026 increased $31.6 million, or 8.5%, compared to the three months ended March 29, 2025, driven primarily by increased consumables and service revenue. In addition, revenues were favorably impacted by approximately $5.6 million of foreign exchange rate movements from the prior year period that increased the U.S. Dollar translation of foreign sales that were denominated in various foreign currencies.
Revenue generated through our direct and distribution sales channels increased $33.7 million, or 10.2%, to $365.0 million for the three months ended April 4, 2026 compared to $331.3 million for the three months ended March 29, 2025. Revenues from our OEM channel decreased $2.1 million, or 5.2%, to $38.6 million for the three months ended April 4, 2026 as compared to $40.7 million for the three months ended March 29, 2025.
During the three months ended April 4, 2026, we shipped approximately 76,800 noninvasive technology boards and instruments, compared to approximately 72,200 during the three months ended March 29, 2025.
Gross Profit. Gross profit consists of revenue less cost of goods sold. Cost of goods sold includes labor, material, overhead, tariffs and other similar costs related to the production, supply, distribution and support of our products. Our gross profit for the three months ended April 4, 2026 and March 29, 2025 was as follows:
Gross Profit
(in millions, except percentages)
Three Months Ended
April 4, 2026 		Percentage of
Net Revenues 		Three Months Ended
March 29, 2025 		Percentage of
Net Revenues 		Increase/
(Decrease) 		Percentage
Change
$250.8 62.1% $234.0 62.9% $16.8 7.2%
Cost of goods sold increased $14.8 million for the three months ended April 4, 2026, compared to the three months ended March 29, 2025, primarily due to increased sales volumes and incremental tariff expenses. Gross profit decreased to 62.1% for the three months ended April 4, 2026, compared to 62.9% for the three months ended March 29, 2025, due to $6.7 million of incremental tariffs, which were partially offset by operational efficiencies and product cost reductions.
Selling, General and Administrative. Selling, general and administrative expenses consist primarily of salaries, stock-based compensation and related expenses for sales, marketing and administrative personnel, sales commissions, advertising, marketing, promotion costs, licensing fees, professional fees related to legal, accounting and other outside services, public company costs and other corporate expenses. Selling, general and administrative expenses for the three months ended April 4, 2026 and March 29, 2025 were as follows:
Selling, General and Administrative
(in millions, except percentages)
Three Months Ended
April 4, 2026 		Percentage of
Net Revenues 		Three Months Ended
March 29, 2025 		Percentage of
Net Revenues 		Increase/
(Decrease) 		Percentage
Change
$143.4 35.5% $119.4 32.1% $24.0 20.1%
Selling, general and administrative expenses increased $24.0 million, or 20.1%, for the three months ended April 4, 2026, compared to the three months ended March 29, 2025. The increase was primarily attributable to transaction-related costs from the proposed Merger of approximately $17.9 million, as well as increased compensation and other employee-related costs.
Research and Development. Research and development expenses consist primarily of salaries, stock-based compensation and related expenses for engineers and other personnel engaged in the design and development of our products. These expenses also include third-party fees paid to consultants, prototype and engineering supply expenses and the costs of clinical trials. Research and development expenses for the three months ended April 4, 2026 and March 29, 2025 were as follows:
Research and Development
(in millions, except percentages)
Three Months Ended
April 4, 2026 		Percentage of
Net Revenues 		Three Months Ended
March 29, 2025 		Percentage of
Net Revenues 		Increase/
(Decrease) 		Percentage
Change
$30.0 7.4% $33.9 9.1% $(3.9) (11.5)%
Research and development expenses decreased $3.9 million, or 11.5%, for the three months ended April 4, 2026, compared to the three months ended March 29, 2025. The decrease was primarily attributable to lower compensation and other employee-related costs of approximately $4.9 million, which were offset by higher engineering project costs of approximately $1.1 million.
Litigation Settlements. Litigation settlements consist primarily of litigation related settlements and other legal expenses. Litigation settlements for the three months ended April 4, 2026 and March 29, 2025 were as follows:
Litigation Settlements
(in millions, except percentages)
Three Months Ended
April 4, 2026 		Percentage of
Net Revenues 		Three Months Ended
March 29, 2025 		Percentage of
Net Revenues 		Increase/
(Decrease) 		Percentage
Change
$- -% $2.7 0.7% $(2.7) 100.0%
Litigation settlements decreased $2.7 million for the three months ended April 4, 2026, as compared to $2.7 million for the three months ended March 29, 2025, related to litigation settlements in the prior period, as these settlements vary in their characteristics and frequency.
Non-operating Loss. Non-operating loss consists primarily of interest income, interest expense and foreign exchange gains and losses. Non-operating loss for the three months ended April 4, 2026 and March 29, 2025 was as follows:
Non-operating Loss
(in millions, except percentages)
Three Months Ended
April 4, 2026 		Percentage of
Net Revenues 		Three Months Ended
March 29, 2025 		Percentage of
Net Revenues
Increase/
(Decrease)
Percentage
Change
$(6.1) (1.5)% $(9.6) (2.6)% $3.5 (36.5)%
Non-operating loss was $6.1 million for the three months ended April 4, 2026, as compared to $9.6 million of non-operating loss for the three months ended March 29, 2025. The change in the non-operating loss of approximately $3.5 million was primarily due to interest expense incurred under our various lines of credit and borrowing facilities.
Provision for Income Taxes. Our provision for income taxes for the three months ended April 4, 2026 and March 29, 2025 was as follows:
Provision for Income Taxes
(in millions, except percentages)
Three Months Ended
April 4, 2026 		Percentage of
Net Revenues 		Three Months Ended
March 29, 2025 		Percentage of
Net Revenues 		Increase/
(Decrease) 		Percentage
Change
$15.0 3.7% $21.2 5.7% $(6.2) (29.2)%
For the three months ended April 4, 2026, we recorded a provision for income taxes of approximately $15.0 million, or an effective tax provision rate of 21.0%, as compared to a provision for income taxes of approximately $21.2 million, or an effective tax provision rate of 31.0%, for the three months ended March 29, 2025. The decrease in our income tax rate for the three months ended April 4, 2026 resulted primarily from establishment of a valuation allowance against certain state deferred tax assets from discontinued operations in the prior period, changes in geographic composition of income and certain non-deductible items compared to the three months ended March 29, 2025.
Income (Loss) from Discontinued Operations, Net of Tax. The results of our discontinued operations include the operations of the non-healthcare consumer audio business. See Note 18, "Discontinued Operations" to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to these discontinued operations.
Income (Loss) from Discontinued Operations, Net of Tax
(in millions, except percentages)
Three Months Ended
April 4, 2026 		Percentage of
Net Revenues 		Three Months Ended
March 29, 2025 		Percentage of
Net Revenues 		(Increase)/
Decrease 		Percentage
Change
$0.8 0.2% $(217.9) (58.6)% $218.7 (100.4)%
Income from discontinued operations, net of tax was $0.8 million for the three months ended April 4, 2026, as compared to a loss of from discontinued operations, net of tax of $217.9 million for the three months ended March 29, 2025. The change in the income (loss) from discontinued operations, net of tax was primarily related to the sale of the non-healthcare business which was completed on September 23, 2025.
Liquidity and Capital Resources
Our principal sources of liquidity consist of our existing cash and cash equivalent balances, future funds expected to be generated from operations and available borrowing capacity under our Credit Facility. As of April 4, 2026, we had approximately $545.1 million in working capital, of which approximately $124.6 million was in cash and cash equivalents, as compared to approximately $554.4 million in working capital and approximately $152.3 million in cash and cash equivalents at January 3, 2026. In addition to net working capital, as of April 4, 2026, we had approximately $539.6 million of available borrowing capacity (net of outstanding letters of credit) under our Credit Facility.
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. For additional information regarding the Credit Facility, see Note 15, "Debt", to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
In managing our day-to-day liquidity and capital structure, we generally do not rely on foreign earnings as a source of funds. As of April 4, 2026, we had cash totaling $42.8 million held outside of the U.S., of which approximately $26.3 million was accessible without additional tax cost and approximately $16.5 million was accessible at an incremental estimated tax cost of less than $0.1 million. We currently have sufficient funds on-hand and cash held outside the U.S. that is available without additional tax cost to fund our global operations. In the event funds that are treated as permanently reinvested are repatriated, we may be required to accrue and pay additional U.S. taxes to repatriate these funds.
Our cash requirements depend on numerous factors, including, but not limited to, market acceptance of our technologies, our continued ability to commercialize new products and to create or improve our technologies and applications, acquisitions and/or strategic investments in technologies or technology companies, hedging and derivative activities, investments in property and equipment, the renewal of our Credit Facility, the impact of disruptions to the manufacturing industry supply chain for key components, inflation, repurchases of our stock under our authorized stock repurchase program, costs related to our domestic and international regulatory requirements and other long-term commitments and contingencies. For further information regarding our commitment and contingencies, see Note 24 to our accompanying condensed consolidated financial statements included in Part IV, Item 15(a) of this Quarterly Report on Form 10-Q.
Our total cash and cash equivalents and related cash flows may be affected by certain discretionary actions we may take with customers and suppliers to accelerate or delay certain cash receipts or payments to manage liquidity for our strategic business requirements. These actions can include, among others, negotiating with suppliers to optimize our payment terms and conditions, adjusting the timing of cash flows associated with customer sales programs and collections, managing inventory levels and purchasing practices, and selling certain of our accounts receivables on a non-recourse basis to third party financial institutions.
We anticipate that our existing cash and cash equivalents, amounts available under our Credit Facility and cash provided by operations and, taken together, provide adequate resources to fund on-going operating and capital expenditures, working capital requirements, and other operational funding needs for the next 12 months.
Should we require additional funds in the future to support our working capital requirements or for other purposes, we may seek to raise such additional funds through debt financing, as well as from other sources such as through our effective automatic shelf registration statement on Form S-3 (File No. 333-285240) on file with the SEC, pursuant to which we may offer an unspecified amount of debt, equity, and other securities. No assurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on terms favorable when required.
Cash Flows
The following table summarizes our cash flows from continuing operations:
Three Months Ended
(in millions)
April 4,
2026 		March 29,
2025
Net cash provided by (used in):
Operating activities $ 46.8 $ 37.9
Investing activities (4.2) 15.5
Financing activities (70.2) (47.0)
Effect of foreign currency exchange rates on cash 0.4 1.1
Increase (decrease) in cash, cash equivalents and restricted cash
$ (27.2) $ 7.5
Operating Activities. Cash provided by operating activities was approximately $46.8 million for the three months ended April 4, 2026, generated primarily from net income from operations of $56.3 million. Non-cash activity included depreciation and amortization of approximately $8.1 million and stock-based compensation expense of approximately $8.9 million. Other major changes in operating assets and liabilities included a decrease in accounts receivable, accounts payable, accrued compensation, other current assets, other non-current liabilities, deferred revenue and other contract-related liabilities, and related party receivable of approximately $32.4 million, $31.7 million, $29.9 million, $9.4 million, $4.2 million, $2.3 million and $3.4 million, respectively, primarily due to the timing of payments; an increase in inventories, income tax payable, accrued liabilities, deferred costs and other contract assets, other non-current assets, and lease receivable, of approximately $22.4 million, $7.9 million, $11.1 million, $2.0 million, $0.6 million, and $0.3 million, respectively, primarily due to inventory build-up and the timing of payments.
For the three months ended March 29, 2025, cash provided by operating activities was approximately $37.9 million, generated primarily from net income from operations of $47.2 million. Non-cash activity included depreciation and amortization of approximately $8.6 million and stock-based compensation benefit of approximately $9.1 million. Other major changes in operating assets and liabilities included a decrease in accrued compensation, accrued liabilities, accounts payable, in other current assets, other non-current assets, deferred revenue and other contract-related liabilities, other non-current liabilities, and deferred costs and other contract assets of approximately $17.0 million, $8.1 million, $6.1 million, $5.5 million, $4.4 million, $1.9 million, $0.7 million, and $0.7 million, respectively, primarily due to the timing of payments; an increase in inventories, accounts receivable, lease receivable, and income taxes payable of approximately $6.6 million, $2.9 million, $0.6 million, and $0.2 million, respectively, primarily due to the timing of payments and inventory build-up.
Investing Activities. Cash used in investing activities for the three months ended April 4, 2026 was approximately $4.2 million, consisting primarily of approximately $4.3 million for purchases of property and equipment, $1.0 million of capitalized intangible asset costs related primarily to patent and trademark costs and license fees, which were offset by approximately $1.1 million from return of capital in strategic investments.
For the three months ended March 29, 2025, cash provided in investing activities was approximately $15.5 million, consisting primarily of proceeds from the sale of property and equipment of approximately $19.6 million, which were offset by approximately $1.5 million of capitalized intangible asset costs related primarily to patent and trademark costs and license fees and approximately $2.6 million for purchases of property and equipment.
Financing Activities. Cash used in financing activities for the three months ended April 4, 2026 was approximately $70.2 million, consisting primarily of repayment on the line of credit of approximately $87.6 million, and withholding of shares for employee payroll taxes for vested equity awards of approximately $7.6 million, which were offset by proceeds from borrowings under the line of credit of approximately $15.0 million and the issuance of common stock related to employee equity awards of approximately $10.0 million.
For the three months ended March 29, 2025, cash used in financing activities was approximately $47.0 million, consisting primarily of repayment on the line of credit of approximately $78.8 million, and withholding of shares for employee payroll taxes for vested equity awards of approximately $11.3 million, which were offset by the issuance of common stock related to employee equity awards of approximately $43.1 million.
Capital Resources and Prospective Capital Requirements
We expect to fund our future operating, investing and financing activities through our available cash, future cash from operations, our Credit Facility and other potential sources of capital. In addition to funding our working capital requirements, we anticipate additional capital expenditures primarily related to investments in infrastructure growth. Possible additional uses of cash may include acquisitions of and/or strategic investments in technologies or technology companies, investments in property, repurchases of common stock under our authorized stock repurchase program and continued legal defense of our intellectual property. However, any repurchases of common stock will be subject to numerous factors, including the availability of our common stock, general market conditions, the trading price of our common stock, availability of capital, alternative uses for capital and our financial performance. In addition, the amount and timing of our actual investing activities will vary significantly depending on numerous factors, including the timing and amount of capital expenditures, costs of product development efforts, any stock repurchase activity and costs related to our domestic and international regulatory requirements. Despite these strategic investment requirements and potential expenditures, 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. We may require additional funds in the future to support our working capital requirements or for other purposes and may seek to raise such additional funds through debt financing, as well as from other sources. No assurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on terms favorable when required. For additional information related to our Credit Facility, see Note 15, "Debt", to our accompanying condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of net revenues, expenses, assets and liabilities. We regularly evaluate our estimates and assumptions related to our critical accounting policies, including revenue recognition, inventory valuation, stock-based compensation, intangible assets and goodwill; deferred taxes and related valuation allowances, uncertain tax positions, tax contingencies, litigation costs and loss contingencies.
These estimates and judgments are based on historical experience and on various other factors that we believe to be reasonable under the circumstances, and form the basis for making management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Although we regularly evaluate these estimates and assumptions, changes in judgments and uncertainties relating to these estimates could potentially result in materially different results under different assumptions and conditions. If these estimates differ significantly from actual results, the impact on the condensed consolidated financial statements may be material.
There have been no material changes to any of our critical accounting policies during the three months ended April 4, 2026.
For a description of our critical accounting policies, please refer to "Critical Accounting Estimates" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended January 3, 2026, which was filed with the SEC on February 27, 2026.
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 condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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