10-Q 1 omcl-20240630.htm 10-Q omcl-20240630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________________________
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                
Commission File No. 000-33043
OMNICELL, INC.
(Exact name of registrant as specified in its charter)
Delaware94-3166458
(State or other jurisdiction of
incorporation or organization)		(IRS Employer
Identification No.)
4220 North Freeway
Fort Worth, TX 76137
(Address of registrant’s principal executive offices, including zip code)

(877) 415-9990
(Registrant’s telephone number, including area code)
    Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par valueOMCLNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
               If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ý
As of July 30, 2024, there were 45,993,797 shares of the registrant’s common stock, $0.001 par value, outstanding.

OMNICELL, INC.
TABLE OF CONTENTS
Page

2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OMNICELL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30,
2024		December 31,
2023
(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents$556,781 $467,972 
Accounts receivable and unbilled receivables, net of allowances of $6,474 and $5,564, respectively
241,127 252,025 
Inventories93,262 110,099 
Prepaid expenses22,216 25,966 
Other current assets82,282 71,509 
Total current assets995,668 927,571 
Property and equipment, net110,982 108,601 
Long-term investment in sales-type leases, net50,302 42,954 
Operating lease right-of-use assets26,438 24,988 
Goodwill735,351 735,810 
Intangible assets, net199,425 211,173 
Long-term deferred tax assets40,555 32,901 
Prepaid commissions49,882 52,414 
Other long-term assets83,054 90,466 
Total assets$2,291,657 $2,226,878 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$49,747 $45,028 
Accrued compensation48,940 51,754 
Accrued liabilities158,119 149,276 
Deferred revenues150,316 121,734 
Total current liabilities407,122 367,792 
Long-term deferred revenues67,931 58,622 
Long-term deferred tax liabilities1,326 1,620 
Long-term operating lease liabilities33,739 33,910 
Other long-term liabilities7,514 6,318 
Convertible senior notes, net571,217 569,662 
Total liabilities1,088,849 1,037,924 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued
— — 
Common stock, $0.001 par value, 100,000 shares authorized; 56,277 and 55,822 shares issued; 45,994 and 45,539 shares outstanding, respectively
56 56 
Treasury stock at cost, 10,283 shares outstanding, respectively
(290,319)(290,319)
Additional paid-in capital1,149,533 1,122,292 
Retained earnings358,416 370,357 
Accumulated other comprehensive loss(14,878)(13,432)
Total stockholders’ equity1,202,808 1,188,954 
Total liabilities and stockholders’ equity$2,291,657 $2,226,878 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
3
OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands, except per share data)
Revenues:
Product revenues$156,580 $188,436 $289,875 $374,151 
Service revenues
120,208 110,537 233,064 215,451 
Total revenues276,788 298,973 522,939 589,602 
Cost of revenues:
Cost of product revenues99,381 107,962 191,822 217,489 
Cost of service revenues
63,056 56,568 124,143 112,641 
Total cost of revenues162,437 164,530 315,965 330,130 
Gross profit114,351 134,443 206,974 259,472 
Operating expenses:
Research and development21,102 23,137 43,158 46,015 
Selling, general, and administrative90,025 103,558 182,439 228,672 
Total operating expenses111,127 126,695 225,597 274,687 
Income (loss) from operations3,224 7,748 (18,623)(15,215)
Interest and other income (expense), net4,973 4,461 8,989 6,242 
Income (loss) before income taxes8,197 12,209 (9,634)(8,973)
Provision for income taxes4,462 8,758 2,307 2,576 
Net income (loss)$3,735 $3,451 $(11,941)$(11,549)
Net income (loss) per share:
Basic $0.08 $0.08 $(0.26)$(0.26)
Diluted$0.08 $0.08 $(0.26)$(0.26)
Weighted-average shares outstanding:
Basic45,953 45,125 45,842 45,007 
Diluted46,036 45,472 45,842 45,007 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

4
OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
Net income (loss)$3,735 $3,451 $(11,941)$(11,549)
Other comprehensive income (loss):
Foreign currency translation adjustments(47)1,432 (1,446)2,911 
Other comprehensive income (loss)(47)1,432 (1,446)2,911 
Comprehensive income (loss)$3,688 $4,883 $(13,387)$(8,638)
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
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OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
Common StockTreasury StockAdditional
Paid-In Capital		Retained
Earnings		Accumulated Other
Comprehensive Income (Loss)		Stockholders’
Equity
SharesAmountSharesAmount
(In thousands)
Balances as of December 31, 202355,822 $56 (10,283)$(290,319)$1,122,292 $370,357 $(13,432)$1,188,954 
Net loss— — — — — (15,676)— (15,676)
Other comprehensive loss— — — — — — (1,399)(1,399)
Share-based compensation— — — — 9,381 — — 9,381 
Issuance of common stock under employee stock plans385 — — — 8,042 — — 8,042 
Tax payments related to restricted stock units— — — — (705)— — (705)
Balances as of March 31, 202456,207 56 (10,283)(290,319)1,139,010 354,681 (14,831)1,188,597 
Net income— — — — — 3,735 — 3,735 
Other comprehensive loss— — — — — — (47)(47)
Share-based compensation— — — — 11,010 — — 11,010 
Issuance of common stock under employee stock plans70 — — — 99 — — 99 
Tax payments related to restricted stock units— — — — (586)— — (586)
Balances as of June 30, 202456,277 $56 (10,283)$(290,319)$1,149,533 $358,416 $(14,878)$1,202,808 
Common StockTreasury StockAdditional
Paid-In Capital		Retained
Earnings		Accumulated Other
Comprehensive Income (Loss)		Stockholders’
Equity
SharesAmountSharesAmount
(In thousands)
Balances as of December 31, 202255,030 $55 (10,283)$(290,319)$1,046,760 $390,728 $(17,087)$1,130,137 
Net loss— — — — — (15,000)— (15,000)
Other comprehensive income— — — — — — 1,479 1,479 
Share-based compensation— — — — 15,180 — — 15,180 
Issuance of common stock under employee stock plans322 — — — 12,114 — — 12,114 
Tax payments related to restricted stock units— — — — (1,369)— — (1,369)
Balances as of March 31, 202355,352 55 (10,283)(290,319)1,072,685 375,728 (15,608)1,142,541 
Net income — — — — — 3,451 — 3,451 
Other comprehensive income— — — — — — 1,432 1,432 
Share-based compensation— — — — 15,148 — — 15,148 
Issuance of common stock under employee stock plans136 1 — — 3,088 — — 3,089 
Tax payments related to restricted stock units— — — — (2,096)— — (2,096)
Balances as of June 30, 202355,488 $56 (10,283)$(290,319)$1,088,825 $379,179 $(14,176)$1,163,565 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
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OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30,
20242023
(In thousands)
Operating Activities
Net loss$(11,941)$(11,549)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization42,090 44,054 
Loss on disposal of assets221 993 
Share-based compensation expense18,672 28,131 
Deferred income taxes(7,948)(11,019)
Amortization of operating lease right-of-use assets3,900 4,225 
Impairment and abandonment of operating lease right-of-use assets related to facilities— 7,815 
Inventory write-down5,393 — 
Amortization of debt issuance costs1,943 2,091 
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables10,898 26,463 
Inventories11,160 17,820 
Prepaid expenses3,750 3,576 
Other current assets5,868 773 
Investment in sales-type leases(8,056)(1,707)
Prepaid commissions2,532 4,706 
Other long-term assets1,218 43 
Accounts payable4,751 (15,806)
Accrued compensation(2,814)(20,980)
Accrued liabilities9,247 (4,646)
Deferred revenues22,085 16,540 
Operating lease liabilities(5,512)(5,396)
Other long-term liabilities1,196 (454)
Net cash provided by operating activities108,653 85,673 
Investing Activities
External-use software development costs(7,381)(6,685)
Purchases of property and equipment(18,508)(21,772)
Net cash used in investing activities(25,889)(28,457)
Financing Activities
Proceeds from issuances under stock-based compensation plans8,141 15,203 
Employees’ taxes paid related to restricted stock units(1,291)(3,465)
Change in customer funds, net(11,552)(4,273)
Net cash provided by (used in) financing activities(4,702)7,465 
Effect of exchange rate changes on cash and cash equivalents(802)148 
Net increase in cash, cash equivalents, and restricted cash77,260 64,829 
Cash, cash equivalents, and restricted cash at beginning of period500,979 352,835 
Cash, cash equivalents, and restricted cash at end of period$578,239 $417,664 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
7
OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED)
Six Months Ended June 30,
20242023
(In thousands)
Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents$556,781 $399,464 
Restricted cash included in other current assets21,458 18,200 
Cash, cash equivalents, and restricted cash at end of period$578,239 $417,664 
Supplemental disclosure of non-cash investing activities
Unpaid purchases of property and equipment$656 $464 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
8
OMNICELL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Organization and Summary of Significant Accounting Policies
Business
Omnicell, Inc. was incorporated in California in 1992 under the name Omnicell Technologies, Inc. and reincorporated in Delaware in 2001 as Omnicell, Inc. The Company’s major products and related services are medication management solutions and adherence tools for healthcare systems and pharmacies, which are sold in its principal market, the healthcare industry. The Company’s market is primarily located in the United States and Europe. “Omnicell” or the “Company” refer to Omnicell, Inc. and its subsidiaries, collectively.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the financial position of the Company as of June 30, 2024 and December 31, 2023, the results of operations and comprehensive income (loss) for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) have been condensed or omitted in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024. The Company’s results of operations and comprehensive income (loss) for the three and six months ended June 30, 2024, and cash flows for the six months ended June 30, 2024 are not necessarily indicative of results that may be expected for the year ending December 31, 2024, or for any future period.
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s Condensed Consolidated Financial Statements and accompanying Notes. These estimates are based on historical experience and various other assumptions that management believes to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results may be different from the estimates.
The Company’s critical accounting policies are those that affect its financial statements materially and involve difficult, subjective, or complex judgments by management. As of June 30, 2024, the Company is not aware of any events or circumstances that would require an update to its estimates, judgments, or revisions to the carrying value of its assets or liabilities.
Segment Reporting
The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The CODM allocates resources and evaluates the performance of the Company at the consolidated level using information about its revenues, gross profit, income from operations, and other key financial data. All significant operating decisions are based upon an analysis of the Company as one operating segment, which is the same as its reporting segment.
Recently Adopted Authoritative Guidance
There was no recently adopted authoritative guidance that is expected to have a material impact on the Company’s Condensed Consolidated Financial Statements through the reporting date.
9
Recently Issued Authoritative Guidance
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose significant segment expenses that are regularly provided to the CODM. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280, on an interim and annual basis. The amendments are effective for the Company’s annual periods beginning January 1, 2024, and for interim periods within fiscal years beginning January 1, 2025. Retrospective application is required, with early adoption permitted. The Company is currently evaluating the impact ASU 2023-07 will have on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the impact ASU 2023-09 will have on its consolidated financial statements.
In March 2024, the SEC issued final rules under SEC Release No. 33-11275, “The Enhancement and Standardization of Climate-Related Disclosures for Investors,” to require registrants to disclose certain climate-related information, including Scope 1 and Scope 2 greenhouse gas emissions and other climate-related topics, if material, in registration statements and annual reports. In April 2024, the SEC voluntarily stayed its climate disclosure rules as a result of pending legal challenges to facilitate an orderly judicial resolution. The Company is currently evaluating the impact the SEC’s rule will have on its consolidated financial statements.
There was no other recently issued and effective authoritative guidance that is expected to have a material impact on the Company’s Condensed Consolidated Financial Statements through the reporting date.
Note 2. Revenues
Revenue Recognition
The Company earns revenues from sales of its products and related services, which are sold in the healthcare industry, its principal market. The Company’s customer arrangements typically include one or more of the following revenue categories:
Connected devices, software licenses, and other. Software-enabled connected devices and software licenses that manage and regulate the storage and dispensing of pharmaceuticals, consumables blister cards, and packaging equipment and other supplies. This revenue category is often sold through long-term, sole-source agreements. Solutions in this category include, but are not limited to, XT Series automated dispensing systems and products related to the Central Pharmacy Dispensing Service and IV Compounding Service.
Consumables. Medication adherence packaging, labeling, and other one-time use packaging including multimed adherence packaging and single dose blister cards, which are used by retail, community, and outpatient pharmacies, as well as by institutional pharmacies serving long-term care and other sites outside the acute care hospital, are designed to improve patient engagement and adherence to prescriptions.
Technical services. Post-installation technical support and other related services, including phone support, on-site service, parts, and access to unspecified software updates and enhancements, if and when available. This revenue category is often supported by multi-year or annual contractual agreements.
Advanced Services. Emerging software and service solutions which are offered on a subscription basis with fees typically based either on transaction volume or a fee over a specified period of time. Solutions in this category include, but are not limited to, EnlivenHealth®, Specialty Pharmacy Services, 340B solutions, Inventory Optimization Service, other software solutions, and services related to the Central Pharmacy Dispensing Service and IV Compounding Service.
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The following table summarizes revenue recognition for each revenue category:
Revenue Category
Timing of Revenue Recognition
Income Statement Classification
Connected devices, software licenses, and otherPoint in time, as transfer of control occurs, generally upon installation and acceptance by the customerProduct
Consumables
Point in time, as transfer of control occurs, generally upon shipment to, or receipt by, the customer
Product
Technical servicesOver time, as services are provided, typically ratably over the service termService
Advanced ServicesOver time, as services are providedService
A portion of the Company’s sales are made to customers who are members of Group Purchasing Organizations (“GPOs”) and Federal agencies that purchase under a Federal Supply Schedule Contract with the Department of Veterans Affairs (the “GSA Contract”). GPOs are often fully or partially owned by the Company’s customers, and the Company pays fees to the GPO on completed contracts. The Company also pays the Industrial Funding Fee (“IFF”) to the Department of Veterans Affairs under the GSA Contract. The Company considers these fees consideration paid to customers and records them as reductions to revenue. Fees to GPOs and the IFF were $2.4 million and $2.8 million for the three months ended June 30, 2024 and 2023, respectively, and $4.4 million and $5.9 million for the six months ended June 30, 2024 and 2023, respectively.
Disaggregation of Revenues
The following table summarizes the Company’s revenues disaggregated by revenue type for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
Connected devices, software licenses, and other$134,539 $167,475 $245,608 $332,622 
Consumables22,041 20,961 44,267 41,529 
Technical services59,321 57,191 117,836 110,548 
Advanced Services60,887 53,346 115,228 104,903 
Total revenues$276,788 $298,973 $522,939 $589,602 
The following table summarizes the Company’s revenues disaggregated by geographic region, which is determined based on customer location, for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
United States$255,317 $257,202 $473,493 $513,145 
Rest of world (1)
21,471 41,771 49,446 76,457 
Total revenues$276,788 $298,973 $522,939 $589,602 
_________________________________________________
(1)    No individual country represented more than 10% of total revenues.
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Contract Assets and Contract Liabilities
The following table reflects the Company’s contract assets and contract liabilities:
June 30,
2024		December 31,
2023
(In thousands)
Short-term unbilled receivables, net (1)
$25,122 $22,524 
Long-term unbilled receivables, net (2)
9,901 11,850 
Total contract assets$35,023 $34,374 
Short-term deferred revenues$150,316 $121,734 
Long-term deferred revenues67,931 58,622 
Total contract liabilities$218,247 $180,356 
_________________________________________________
(1)    Included in accounts receivable and unbilled receivables in the Condensed Consolidated Balance Sheets.
(2)    Included in other long-term assets in the Condensed Consolidated Balance Sheets.
The portion of the transaction price allocated to the Company’s unsatisfied performance obligations for which invoicing has occurred is recorded as deferred revenues.
Short-term deferred revenues of $121.7 million as of December 31, 2023 include deferred revenues from product sales and service contracts, net of deferred cost of sales of $12.4 million. During the three and six months ended June 30, 2024, the Company recognized revenues of $34.8 million and $85.0 million, respectively, that were included in the corresponding gross short-term deferred revenues balance of $134.1 million as of December 31, 2023.
Deferred revenues from product sales primarily relate to delivered and invoiced products, pending installation and acceptance. Deferred revenues from service contracts primarily relate to services that have been invoiced, where services have not yet been provided. Short-term deferred revenues are expected to be recognized within the next twelve months. Long-term deferred revenues substantially consist of deferred revenues on long-term technical and Advanced Services contracts which have been invoiced and are expected to be recognized as revenue beyond twelve months, generally not more than ten years. The Company generally invoices customers for products upon shipment. Invoicing associated with the service portion of agreements is generally periodic and is billed on a monthly, quarterly, or annual basis, and in certain circumstances, multiple years are billed at one time. Advanced Services agreements are generally invoiced periodically on a monthly, quarterly or annual basis over the life of the agreement. In certain circumstances, portions of these agreements may be invoiced as a lump sum.
In addition, the Company has remaining performance obligations associated with contracts for which the associated products have been accepted or associated services have started, but where invoicing has not yet occurred and therefore are not reflected in deferred revenue. These remaining performance obligations are comprised of the non-variable portions of technical services and Advanced Services provided under non-cancellable contracts with minimum commitments. Remaining performance obligations which are not included in deferred revenues were $387.7 million as of June 30, 2024. Remaining performance obligations are expected to be recognized ratably over the remaining terms of the associated contracts, which terms vary but are generally not more than ten years. Remaining performance obligations do not include product obligations, services where the associated product has not been accepted, services which have not yet started, variable portions of services, and certain other obligations.
Significant Customers
There were no customers that accounted for more than 10% of the Company’s total revenues for the three and six months ended June 30, 2024 and 2023. Also, there were no customers that accounted for more than 10% of the Company’s accounts receivable balance as of June 30, 2024 and December 31, 2023.
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Note 3. Net Income (Loss) Per Share
The basic and diluted net income (loss) per share calculations for the three and six months ended June 30, 2024 and 2023 were as follows:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands, except per share data)
Net income (loss)$3,735 $3,451 $(11,941)$(11,549)
Weighted-average shares outstanding – basic45,953 45,125 45,842 45,007 
Effect of dilutive securities from stock award plans83 347 — — 
Weighted-average shares outstanding – diluted46,036 45,472 45,842 45,007 
Net income (loss) per share – basic$0.08 $0.08 $(0.26)$(0.26)
Net income (loss) per share – diluted$0.08 $0.08 $(0.26)$(0.26)
Anti-dilutive weighted-average shares related to stock award plans2,719 2,512 3,247 3,530 
Anti-dilutive weighted-average shares related to convertible senior notes and warrants11,816 11,816 11,816 11,816 
Note 4. Cash and Cash Equivalents and Fair Value of Financial Instruments
Cash and cash equivalents of $556.8 million and $468.0 million as of June 30, 2024 and December 31, 2023, respectively, consisted of bank accounts and highly-liquid U.S. Government money market funds held in sweep and asset management accounts with financial institutions of high credit quality. As of June 30, 2024 and December 31, 2023, cash equivalents were $529.3 million and $451.0 million, respectively, which consisted of money market funds held in sweep and asset management accounts.
Fair Value Hierarchy
The Company measures its financial instruments at fair value. The Company’s cash, cash equivalents, and restricted cash are classified within Level 1 of the fair value hierarchy as they are valued primarily using quoted market prices utilizing market observable inputs. The Company’s credit facility is classified within Level 2 as the valuation inputs are based on quoted prices or market observable data of similar instruments. The Company’s convertible senior notes are classified within Level 2 as the valuation inputs are based on quoted prices in an inactive market on the last day in the reporting period. As of June 30, 2024 and December 31, 2023, the fair value of the convertible senior notes was $539.8 million and $527.2 million, respectively, compared to their carrying values of $571.2 million and $569.7 million, respectively, which are net of unamortized debt issuance costs. Refer to Note 9, Debt and Credit Agreement, for further information regarding the Company’s credit facility and Note 10, Convertible Senior Notes, for further information regarding the Company’s convertible senior notes.
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Note 5. Balance Sheet Components
Balance sheet details as of June 30, 2024 and December 31, 2023 are presented in the tables below:
June 30,
2024		December 31,
2023
(In thousands)
Inventories:
Raw materials$39,162 $51,439 
Work in process2,077 1,327 
Finished goods52,023 57,333 
Total inventories$93,262 $110,099 
Other current assets:
Funds held for customers, including restricted cash (1)
$43,488 $43,649 
Net investment in sales-type leases, current portion12,575 11,867 
Prepaid income taxes2,568 8,279 
Other current assets (2)
23,651 7,714 
Total other current assets$82,282 $71,509 
Other long-term assets:
External-use software development costs, net$60,853 $66,659 
Unbilled receivables, net9,901 11,850 
Deferred debt issuance costs3,328 3,718 
Other long-term assets8,972 8,239 
Total other long-term assets$83,054 $90,466 
Accrued liabilities:
Operating lease liabilities, current portion$10,465 $10,518 
Customer fund liabilities43,488 43,649 
Advance payments from customers10,542 10,551 
Rebate liabilities57,056 51,277 
Group purchasing organization fees4,409 4,445 
Taxes payable4,594 2,191 
Other accrued liabilities27,565 26,645 
Total accrued liabilities$158,119 $149,276 
_________________________________________________
(1)    Includes restricted cash of $21.5 million and $33.0 million as of June 30, 2024 and December 31, 2023, respectively.
(2)    Includes deferred cost of sales of $16.1 million as of June 30, 2024.
The following table summarizes the changes in accumulated balances of other comprehensive income (loss), which consisted of foreign currency translation adjustments, for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
Beginning balance$(14,831)$(15,608)$(13,432)$(17,087)
Other comprehensive income (loss)(47)1,432 (1,446)2,911 
Ending balance$(14,878)$(14,176)$(14,878)$(14,176)
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Note 6. Property and Equipment
The following table represents the property and equipment balances as of June 30, 2024 and December 31, 2023:
June 30,
2024		December 31,
2023
(In thousands)
Equipment$102,044 $95,996 
Furniture and fixtures5,191 4,500 
Leasehold improvements17,859 17,919 
Purchased software and internal-use software development costs138,030 118,004 
Construction in progress8,184 11,614 
Property and equipment, gross271,308 248,033 
Accumulated depreciation and amortization(160,326)(139,432)
Total property and equipment, net$110,982 $108,601 
Depreciation and amortization expense of property and equipment was $8.7 million and $6.6 million for the three months ended June 30, 2024 and 2023, respectively, and $17.3 million and $12.9 million for the six months ended June 30, 2024 and 2023, respectively.
The geographic location of the Company’s property and equipment, net, is based on the physical location in which it is located. The following table summarizes the geographic information for property and equipment, net, as of June 30, 2024 and December 31, 2023:
June 30,
2024		December 31,
2023
(In thousands)
United States$106,685 $104,312 
Rest of world
4,297 4,289 
Total property and equipment, net$110,982 $108,601 
Note 7. External-Use Software Development Costs
The carrying amounts of external-use software development costs as of June 30, 2024 and December 31, 2023 were as follows:
June 30,
2024		December 31,
2023
(In thousands)
Gross carrying amount$240,466 $239,038 
Accumulated amortization(179,613)(172,379)
External-use software development costs, net (1)
$60,853 $66,659 
_________________________________________________
(1)     Included in other long-term assets in the Condensed Consolidated Balance Sheets.
The Company recorded $6.4 million and $7.4 million to cost of revenues for amortization of external-use software development costs for the three months ended June 30, 2024 and 2023, respectively, and $13.1 million and $14.8 million for the six months ended June 30, 2024 and 2023, respectively.
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The estimated future amortization expenses for external-use software development costs were as follows:
June 30,
2024
(In thousands)
Remaining six months of 2024$11,975 
202519,772 
202614,331 
20278,398 
20284,541 
Thereafter1,836 
Total$60,853
Note 8. Goodwill and Intangible Assets
Goodwill
The following table represents changes in the carrying amount of goodwill:
(In thousands)
Balance as of December 31, 2023$735,810 
Foreign currency exchange rate fluctuations(459)
Balance as of June 30, 2024$735,351 
Intangible Assets, Net
The carrying amounts and useful lives of intangible assets as of June 30, 2024 and December 31, 2023 were as follows:
June 30, 2024
Gross carrying
amount (1)
Accumulated
amortization		Foreign currency exchange
rate fluctuations		Net carrying
amount		Useful life
(years)
(In thousands, except for years)
Customer relationships$307,418 $(124,314)$(1,352)$181,752 
4 - 30
Acquired technology46,134 (30,380)— 15,754 
4 - 20
Trade names9,200 (8,140)— 1,060 
5 - 12
Patents2,322 (1,463)— 859 
2 - 20
Total intangible assets, net
$365,074 $(164,297)$(1,352)$199,425 
 
December 31, 2023
Gross carrying
amount (1)
Accumulated
amortization		Foreign currency exchange
rate fluctuations		Net carrying
amount		Useful life
(years)
(In thousands, except for years)
Customer relationships$307,418 $(115,232)$(1,326)$190,860 
4 - 30
Acquired technology84,876 (67,033)— 17,843 
4 - 20
Backlog1,800 (1,800)— — 2
Trade names9,200 (7,680)— 1,520 
5 - 12
Patents2,404 (1,454)— 950 
2 - 20
Total intangible assets, net
$405,698 $(193,199)$(1,326)$211,173 
16
_________________________________________________
(1)    The differences in gross carrying amounts between periods are primarily due to the write-off of certain fully amortized intangible assets.
Amortization expense of intangible assets was $5.7 million and $8.1 million for the three months ended June 30, 2024 and 2023, respectively, and $11.7 million and $16.4 million for the six months ended June 30, 2024 and 2023, respectively.
The estimated future amortization expenses for amortizable intangible assets were as follows:
June 30,
2024
(In thousands)
Remaining six months of 2024$11,066 
202521,063 
202618,076 
202716,225 
202815,184 
Thereafter117,811 
Total$199,425 
Note 9. Debt and Credit Agreement
On November 15, 2019, Omnicell, Inc. entered into an Amended and Restated Credit Agreement (as amended, the “Prior A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo Securities, LLC, Citizens Bank, N.A., and JPMorgan Chase Bank, N.A., as joint lead arrangers, and Wells Fargo Bank, National Association, as administrative agent. As referred to herein, “Omnicell, Inc.” refers only to Omnicell, Inc., excluding its subsidiaries. The Prior A&R Credit Agreement provided for (a) a five-year revolving credit facility of $500.0 million (the “Prior Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million (the “Prior Incremental Facility”). In addition, the Prior A&R Credit Agreement included a letter of credit sub-limit of up to $15.0 million and a swing line loan sub-limit of up to $25.0 million. The Prior A&R Credit Agreement was subsequently amended on September 22, 2020 and March 29, 2023, to permit the issuance of the convertible senior notes and the purchase of the convertible note hedge transactions (as described in Note 10, Convertible Senior Notes, of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q), expand the Company’s flexibility to make restricted payments (including common stock repurchases), and replace the total net leverage covenant, as well as to remove and replace the interest rate benchmark based on the London interbank offered rate (“LIBOR”) and related LIBOR-based mechanics with an interest rate benchmark based on the secured overnight financing rate (“SOFR”) as administered by the Federal Reserve Bank of New York and related SOFR-based mechanics.
Omnicell, Inc. entered into a Second Amended and Restated Credit Agreement (the “Second A&R Credit Agreement”) on October 10, 2023, with the lenders from time to time party thereto, Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A., PNC Capital Markets LLC and TD Securities (USA) LLC as joint lead arrangers and Wells Fargo Bank, National Association, as administrative agent. The Second A&R Credit Agreement supersedes the Prior A&R Credit Agreement and provides for (a) a five-year revolving credit facility of $350.0 million (the “Current Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to an amount equal to the sum of (i) the greater of $250.0 million and 100% of the adjusted consolidated EBITDA for the last four quarters and (ii) additional amounts subject to pro forma compliance with certain consolidated secured net leverage ratio (the “Current Incremental Facility”). In addition, the Second A&R Credit Agreement includes a letter of credit sub-limit of up to $15.0 million and a swing line loan sub-limit of up to $25.0 million. The Second A&R Credit Agreement has an expiration date of October 10, 2028, subject to acceleration under certain conditions, upon which date all remaining outstanding borrowings will be due and payable.
Loans under the Current Revolving Credit Facility bear interest, at Omnicell, Inc.’s option, at a rate equal to either (a) the Adjusted Term SOFR (as defined in the Second A&R Credit Agreement), plus an applicable margin ranging from 1.50% to 2.25% per annum based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the Second A&R Credit Agreement), or (b) an alternate base rate equal to the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50%, and (iii) the Adjusted Term SOFR for an interest period of one month plus 1.00%, plus an applicable margin ranging from 0.50% to 1.25% per annum based on the Company’s Consolidated Total Net Leverage Ratio. Undrawn commitments under the Current Revolving Credit Facility are subject to a commitment fee ranging from 0.20% to 0.35% per annum based on the Company’s Consolidated Total Net Leverage Ratio on the average daily unused portion of the Current Revolving Credit Facility. Subject to the terms and conditions of the Current Revolving Credit Facility or Current Incremental Facility Omnicell, Inc. is permitted to make voluntary prepayments at any time without payment of a premium or penalty. The availability of funds under the Current
17
Revolving Credit Facility may be subject to reduction in order to maintain compliance with the financial covenants under the Second A&R Credit Agreement.
The Second A&R Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, dividends, and other distributions. The Second A&R Credit Agreement contains financial covenants that require the Company to not exceed a maximum consolidated secured net leverage ratio (not to exceed 3.00:1) and maintain a minimum consolidated interest coverage ratio (not to be less than 3.00:1). In addition, the Second A&R Credit Agreement contains certain customary events of default including, but not limited to, failure to pay interest, principal, and fees, or other amounts when due, material misrepresentations or misstatements in any representation or warranty, covenant defaults, certain cross defaults to other material indebtedness, certain judgment defaults, and events of bankruptcy.
Omnicell, Inc.’s obligations under the Second A&R Credit Agreement and, at the election of Omnicell, Inc. and the contracting counterparty, any secured swap obligations and banking services obligations owing to a lender (or an affiliate of a lender) are guaranteed by certain of its domestic subsidiaries and secured by substantially all of its and such subsidiary guarantors’ assets. In connection with entering into the Second A&R Credit Agreement, and as a condition precedent to borrowing loans thereunder, Omnicell, Inc. and certain of Omnicell, Inc.’s other direct and indirect subsidiaries have entered into certain ancillary agreements, including, but not limited to, a reaffirmation agreement, which amends certain terms of the existing collateral agreement and reaffirms their obligations under the existing guaranty agreement.
The refinancing of the Prior Credit Agreement on October 10, 2023 was evaluated in accordance with ASC 470-50, Debt - Modifications and Extinguishments. In determining whether the refinancing was to be accounted for as a debt extinguishment or a debt modification, the Company considered whether lenders within the syndicate remained the same or changed and whether the changes in debt terms were substantial. This assessment was performed on an individual lender basis within the syndicate. As a result, the refinancing was accounted for as a modification with the exception of certain lenders that exited the syndicate. The exit of certain lenders resulted in an immaterial write-off of existing unamortized debt issuance costs. The remaining unamortized debt issuance costs related to debt modification, along with the new deferred costs, will be amortized over the remaining term of the Second A&R Credit Agreement. The Company incurred and capitalized an additional $3.0 million of debt issuance costs which are being amortized to interest expense using the straight-line method through 2028.
As of both June 30, 2024 and December 31, 2023, the Company had $350.0 million of funds available under the Current Revolving Credit Facility. As of June 30, 2024 and December 31, 2023, the Company had no outstanding balance under the Current Revolving Credit Facility. The Company was in compliance with all covenants as of June 30, 2024.
Note 10. Convertible Senior Notes
0.25% Convertible Senior Notes due 2025
On September 25, 2020, the Company completed a private offering of $575.0 million aggregate principal amount of 0.25% convertible senior notes (the “Notes”), including the exercise in full of the initial purchasers’ option to purchase up to an additional $75.0 million principal amount of the Notes. The Company received proceeds from the issuance of the Notes of $559.7 million, net of $15.3 million of transaction fees and other debt issuance costs. The Notes bear interest at a rate of 0.25% per year, payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2021. The Notes were issued pursuant to an indenture, dated September 25, 2020 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The Notes are general senior, unsecured obligations of the Company and will mature on September 15, 2025, unless earlier redeemed, repurchased, or converted.
The Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding May 15, 2025, only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ended on December 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Notes on each applicable trading day; (ii) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Notes on each such trading day; (iii) if the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; and (iv) upon the occurrence of specified corporate events, as specified in the Indenture. On or after May 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time, regardless of the foregoing conditions.
18
During the three months ended June 30, 2024 and December 31, 2023, none of the conditional conversion features of the Notes were triggered, and therefore, the Notes are not convertible during the third quarter of 2024, commencing on July 1, 2024, and were not convertible during the first quarter of 2024, commencing on January 1, 2024. Accordingly, the Company classified the Notes as a long-term liability in its Condensed Consolidated Financial Statements as of both June 30, 2024 and December 31, 2023. Whether the Notes will be convertible following the third fiscal quarter of 2024 will depend on the satisfaction of the conversion conditions in the future.
Under the original terms of the Indenture, upon conversion, the Company could satisfy its conversion obligation by paying or delivering cash, shares of its common stock, or a combination thereof, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. On December 13, 2021, the Company irrevocably elected to fix its settlement method to a combination of cash and shares of the Company’s common stock with the specified cash amount per $1,000 principal amount of Notes of at least $1,000. As a result, for Notes converted on or after December 13, 2021, a converting noteholder will receive (i) up to $1,000 in cash per $1,000 principal amount of Notes and (ii) cash and/or shares of the Company’s common stock, at the Company’s option for any conversion consideration in excess of $1,000. In addition, the Company continues to have the ability to set the specified cash amount per $1,000 principal amount of Notes above $1,000. The initial conversion rate for the Notes is 10.2751 shares of the Company’s common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $97.32 per share of the Company’s common stock, subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following certain corporate events that could occur prior to the maturity date of the Notes or if the Company delivers a notice of redemption in respect of the Notes, the Company will, under certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes (or any portion thereof) in connection with such a corporate event or convert its Notes called (or deemed called) for redemption during the related redemption period (as defined in the Indenture), as the case may be.
If the Company undergoes a fundamental change, holders may require, subject to certain exceptions, the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. As of June 30, 2024, none of the criteria for a fundamental change or a conversion rate adjustment had been met.
As of June 30, 2024, the Company may redeem for cash all or any portion of the Notes, at its option, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company redeems less than all of the outstanding Notes, at least $150.0 million aggregate principal amount of Notes must be outstanding and not subject to redemption as of the date of the relevant notice of redemption. No sinking fund is provided for in the Notes.
The debt issuance costs associated with the Notes are being amortized to interest expense over the term of the Notes using an effective interest rate of 0.80%. As of June 30, 2024, the remaining life of the Notes and the related issuance cost accretion is approximately 1.2 years.
The maximum number of shares issuable upon conversion, including the effect of a fundamental change and subject to other conversion rate adjustments, would be 5.9 million shares. As of June 30, 2024, the if-converted value of the Notes did not exceed the principal amount.
The Notes consisted of the following balances reported in the Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023:
June 30,
2024		December 31,
2023
(In thousands)
Principal amount$575,000 $575,000 
Unamortized debt issuance costs(3,783)(5,338)
Convertible senior notes, net$571,217 $569,662 
19
The following table summarizes the components of interest expense resulting from the Notes recognized in interest and other income (expense), net in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
Contractual coupon interest$359 $359 $719 $719 
Amortization of debt issuance costs$778 $772 $1,555 $1,543 
Convertible Note Hedge and Warrant Transactions
In connection with the issuance of the Notes in September 2020, the Company entered into convertible note hedge and warrant transactions with an affiliate of one of the initial purchasers of the Notes and certain other financial institutions (the “option counterparties”) with respect to the Company’s common stock.
The convertible note hedge consists of an option for the Company to purchase up to approximately 5.9 million shares of the Company’s common stock, which is equal to the number of shares of the Company’s common stock underlying the Notes, at an initial strike price of approximately $97.32 per share. The convertible note hedge will expire upon the maturity of the Notes, if not earlier exercised or terminated. The cost of the convertible note hedge was approximately $100.6 million and was accounted for as an equity instrument, which was recorded in additional paid-in capital in the Condensed Consolidated Balance Sheets. The Company recorded a deferred tax asset of $25.8 million at issuance related to the convertible note hedge transaction. The convertible note hedge is expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes.
Separately from the convertible note hedge, in September 2020, the Company entered into warrant transactions to sell to the option counterparties warrants to acquire, subject to customary anti-dilution adjustments, up to approximately 5.9 million shares of its common stock in the aggregate at an initial strike price of $141.56 per share. The warrants require net share or net cash settlement upon the Company’s election. The Company received aggregate proceeds of approximately $51.3 million for the issuance of the warrants, which was recorded in additional paid-in capital at issuance in the Condensed Consolidated Balance Sheets. The warrants could separately have a dilutive effect to the Company’s common stock to the extent that the market price per share of its common stock exceeds the strike price of the warrants.
Note 11. Lessor Leases
Sales-Type Leases
The Company enters into non-cancelable sales-type lease arrangements with the leases varying in length from one to ten years. The Company optimizes cash flows by selling a majority of its sales-type leases, other than those relating to U.S. government hospitals and Advanced Services products, including Central Pharmacy Dispensing Service and IV Compounding Service, to third-party leasing finance companies on a non-recourse basis. The Company has no obligation to the leasing company once the lease has been sold.
The following table presents the Company’s income recognized from sales-type leases for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
Sales-type lease revenues$11,576 $7,856 $18,612 $13,572 
Cost of sales-type lease revenues(7,110)(4,380)(11,297)(7,042)
Selling profit on sales-type lease revenues$4,466 $3,476 $7,315 $6,530 
20
The receivables as a result of these types of transactions are collateralized by the underlying equipment leased and consist of the following components at June 30, 2024 and December 31, 2023:
June 30,
2024		December 31,
2023
(In thousands)
Net minimum lease payments to be received$75,410 $65,017 
Less: Unearned interest income portion(12,533)(10,196)
Net investment in sales-type leases62,877 54,821 
Less: Current portion (1)
(12,575)(11,867)
Long-term investment in sales-type leases, net50,302 42,954 
_________________________________________________
(1)    The current portion of the net investment in sales-type leases is included in other current assets in the Condensed Consolidated Balance Sheets.
The carrying amount of the Company’s sales-type lease receivables is a reasonable estimate of fair value.
The maturity schedule of future minimum lease payments under sales-type leases retained in-house and the reconciliation to the net investment in sales-type leases reported on the Condensed Consolidated Balance Sheets was as follows:
June 30,
2024
(In thousands)
Remaining six months of 2024$8,163 
202514,493 
202612,431 
202710,780 
20289,692 
Thereafter19,851 
Total future minimum sales-type lease payments75,410 
Present value adjustment(12,533)
Total net investment in sales-type leases$62,877 
Operating Leases
The following table represents the Company’s income recognized from operating leases for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
Rental income$711 $1,870 $1,567 $4,129 
Note 12. Lessee Leases
The Company has operating leases for office buildings, data centers, office equipment, and vehicles. The Company’s leases have initial terms of one to twelve years. As of June 30, 2024, the Company did not have any additional material operating leases that were entered into, but not yet commenced.
21
The maturity schedule of future minimum lease payments under operating leases and the reconciliation to the operating lease liabilities reported on the Condensed Consolidated Balance Sheets was as follows:
June 30,
2024
(In thousands)
Remaining six months of 2024$6,354 
202512,278 
202611,426 
20279,478 
20288,174 
Thereafter2,242 
Total operating lease payments49,952 
Present value adjustment(5,748)
Total operating lease liabilities (1)
$44,204 
_________________________________________________
(1)    Amount consists of a current and long-term portion of operating lease liabilities of $10.5 million and $33.7 million, respectively. The current portion of the operating lease liabilities is included in accrued liabilities in the Condensed Consolidated Balance Sheets.
Operating lease costs were $2.6 million and $2.6 million for the three months ended June 30, 2024 and 2023, respectively, and $5.2 million and $5.6 million for the six months ended June 30, 2024 and 2023, respectively. Short-term lease costs and variable lease costs were not material for the three and six months ended June 30, 2024 and 2023. The Company recorded impairment and abandonment charges to operating lease right-of-use assets of $7.8 million during the six months ended June 30, 2023, in connection with restructuring activities to reduce its real estate footprint and for optimization of certain leased facilities. The impairment and abandonment charges were recorded to selling, general, and administrative expenses on the Company’s Condensed Consolidated Statements of Operations. Refer to Note 16, Restructuring Expenses, for additional information regarding the Company’s restructuring activities.
The following table summarizes supplemental cash flow information related to the Company’s operating leases for the six months ended June 30, 2024 and 2023:
Six Months Ended June 30,
20242023
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities$6,765 $6,725 
Right-of-use assets obtained in exchange for new lease liabilities$5,509 $1,608 
The following table summarizes the weighted-average remaining lease term and weighted-average discount rate related to the Company’s operating leases as of June 30, 2024 and December 31, 2023:
June 30,
2024		December 31,
2023
Weighted-average remaining lease term, years 4.24.6
Weighted-average discount rate, %5.8 %5.8 %
Note 13. Commitments and Contingencies
Purchase Obligations
In the ordinary course of business, the Company issues purchase orders based on its current manufacturing needs. As of June 30, 2024, the Company had non-cancelable purchase commitments of $107.9 million, of which $87.3 million are expected to be paid within the year ending December 31, 2024.
Legal Proceedings
The Company is currently involved in various legal proceedings.
22
As required under ASC 450, Contingencies, the Company accrues for contingencies when it believes that a loss is probable and that it can reasonably estimate the amount of any such loss. The Company has not recorded any material accrual for contingent liabilities associated with any current legal proceedings based on its belief that any potential material loss, while reasonably possible, is not probable. Furthermore, any possible range of loss in such matters cannot be reasonably estimated at this time. The Company believes that it has valid defenses with respect to legal proceedings pending against it. However, litigation is inherently unpredictable, and it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of legal proceedings or because of the diversion of management’s attention and the creation of significant expenses, regardless of outcome.
The Company is not a party to any legal proceedings that management believes may have a material impact on the Company’s financial position or results of operations.
Note 14. Income Taxes
The Company generally provides for income taxes in interim periods based on the estimated annual effective tax rate for the year, adjusting for discrete items in the quarter in which they arise. For the six months ended June 30, 2024 and June 30, 2023, the Company recorded a provision for income taxes of $2.3 million and $2.6 million, respectively, by applying its estimated annual effective tax rate to its year-to-date measure of ordinary income and adjusted for $3.3 million and $2.7 million, respectively, of discrete income tax expense primarily from equity compensation.
The effective tax rate for the six months ended June 30, 2024 and 2023, differed from the statutory rate of 21% primarily due to the benefit of the research and development credits and a foreign-derived intangible income benefit deduction, partially offset by the unfavorable impact of the non-deductible compensation, equity charges, and Global Intangible Low-Taxed Income tax inclusion.
The Organization for Economic Co-Operation and Development introduced Base Erosion and Profit Shifting Pillar Two rules that impose a global minimum tax rate of 15% on multi-national corporations. The rules are effective for the Company’s financial year beginning January 1, 2024. These rules did not have an impact on the Company’s provision for income taxes for the six months ended June 30, 2024.
As of June 30, 2024 and December 31, 2023, the Company had gross unrecognized tax benefits of $11.4 million and $10.7 million, respectively. The Company recognizes interest and penalties related to uncertain tax positions in interest and other income (expense), net in the Condensed Consolidated Statements of Operations. Accrued interest and penalties are included within other long-term liabilities on the Condensed Consolidated Balance Sheets. As of June 30, 2024 and December 31, 2023, the amount of accrued interest and penalties was $0.6 million and $0.4 million, respectively.
The Company files income tax returns in the United States and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examinations by taxing authorities, including major jurisdictions such as the United States, Germany, Italy, France, and the United Kingdom. With few exceptions, as of June 30, 2024, the Company was no longer subject to U.S., state, and foreign tax examinations for years before 2020, 2019, and 2019, respectively.
Although the Company believes it has adequately provided for unrecognized tax benefits, the provisions on these positions may change as revised estimates are made or the underlying matters are settled or otherwise resolved. It is not possible at this time to reasonably estimate changes in the unrecognized tax benefits within the next twelve months.
Note 15. Employee Benefits and Share-Based Compensation
Share-Based Compensation Expense
The following table sets forth the total share-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
(In thousands)
Cost of product and service revenues$1,620 $2,268 $3,175 $4,276 
Research and development1,139 1,697 2,214 3,303 
Selling, general, and administrative7,272 10,124 13,283 20,552 
Total share-based compensation expense$10,031 $14,089 $18,672 $28,131 
23
The Company capitalized approximately $1.0 million and $1.1 million during the three months ended June 30, 2024 and 2023, respectively, and $1.7 million and $2.2 million during the six months ended June 30, 2024 and 2023, respectively, of non-cash share-based compensation expense to internal-use and external-use software development costs related to internal labor. The Company did not capitalize any material share-based compensation expense to inventory during the three and six months ended June 30, 2024 and 2023.
Employee Stock Purchase Plan (“ESPP”)
The following assumptions were used to value shares under the ESPP for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Expected life, years
0.5 - 2.0
0.5 - 2.0
0.5 - 2.0
0.5 - 2.0
Expected volatility, %
33.7% - 57.0%
31.7% - 63.9%
33.7% - 57.0%
31.7% - 63.9%
Risk-free interest rate, %
1.5% - 5.5%
0.1% - 5.1%
1.5% - 5.5%
0.1% - 5.1%
Dividend yield, % — %— %— %— %
For the six months ended June 30, 2024 and 2023, employees purchased approximately 334,000 and 209,000 shares of common stock, respectively, under the ESPP at a weighted-average price of $24.06 and $46.96, respectively. As of June 30, 2024, the unrecognized compensation cost related to the shares to be purchased under the ESPP was approximately $0.9 million and is expected to be recognized over a weighted-average period of 1.4 years.
Stock Options
The following assumptions were used to value stock options granted pursuant to the Company’s 2009 Equity Incentive Plan, as amended (the “2009 Plan”) for the six months ended June 30, 2023. There were no stock options granted during the three and six months ended June 30, 2024, and three months ended June 30, 2023.
Six Months Ended June 30,
2023
Expected life, years 3.2
Expected volatility, % 44.8 %
Risk-free interest rate, % 3.7 %
Estimated forfeiture rate, %10.0 %
Dividend yield, % — %
The following table summarizes the stock option activity under the 2009 Plan during the six months ended June 30, 2024:
Number of
Shares		Weighted-Average
Exercise Price		Weighted-Average
Remaining Years		Aggregate
Intrinsic Value
(In thousands, except per share data)
Outstanding at December 31, 20232,023 $67.68 4.6$1,013 
Granted— — 
Exercised(4)27.82 
Expired(163)73.51 
Forfeited(23)63.91 
Outstanding at June 30, 20241,833 $67.29 4.3$— 
Exercisable at June 30, 20241,744 $66.98 4.2$— 
Vested and expected to vest at June 30, 2024 and thereafter1,830 $67.26 4.2$— 
As of June 30, 2024, total unrecognized compensation cost related to unvested stock options was $0.8 million, which is expected to be recognized over a weighted-average vesting period of 0.3 years.
24
Restricted Stock Units (“RSUs”)
The following table summarizes the RSU activity under the 2009 Plan during the six months ended June 30, 2024:
Number of
Shares		Weighted-Average
Grant Date Fair Value		Weighted-Average
Remaining Years		Aggregate
Intrinsic Value
(In thousands, except per share data)
Outstanding at December 31, 20231,078