OMNICELL, Inc [OMCL] Filings

10-Q 1 omcl-20220331.htm 10-Q omcl-20220331

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 March 31, 2022


☐			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)


Delaware			94-3166458
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

590 East Middlefield Road

Mountain View, CA 94043

(Address of registrant’s principal executive offices, including zip code)

(650) 251-6100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

OMCL

NASDAQ 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 transitions 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 April 29, 2022, there were 44,198,195 shares of the registrant’s common stock, $0.001 par value, outstanding.

Table of Contents

OMNICELL, INC.

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2022 and December 31, 2021	3

	Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2022 and 2021	4

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended March 31, 2022 and 2021	5

	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three months ended March 31, 2022 and 2021	6

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2022 and 2021	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40

Item 4.	Controls and Procedures	41

PART II	OTHER INFORMATION	42

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	46

Signature		47

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

OMNICELL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	March 31, 2022		December 31, 2021

	(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	265,008	$	349,051
Accounts receivable and unbilled receivables, net of allowances of $5,278 and $5,272, respectively	290,469		240,894
Inventories	137,056		119,924
Prepaid expenses	24,228		22,499
Other current assets	58,843		48,334
Total current assets	775,604		780,702
Property and equipment, net	77,062		71,141
Long-term investment in sales-type leases, net	19,051		18,391
Operating lease right-of-use assets	43,204		48,549
Goodwill	740,426		738,900
Intangible assets, net	269,427		277,616
Long-term deferred tax assets	16,054		15,883
Prepaid commissions	59,643		63,795
Other long-term assets	122,117		127,519
Total assets	$	2,122,588	$	2,142,496

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	71,645	$	71,513
Accrued compensation	47,271		71,130
Accrued liabilities	139,829		133,167

Deferred revenues, net	127,998		112,196
Convertible senior notes, net	564,269		488,152
Total current liabilities	951,012		876,158
Long-term deferred revenues	24,037		20,194
Long-term deferred tax liabilities	28,173		51,705
Long-term operating lease liabilities	37,273		39,911
Other long-term liabilities	7,352		7,839


Total liabilities	1,047,847		995,807
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; 54,457 and 54,073 shares issued; 44,174 and 44,179 shares outstanding, respectively	54		54
Treasury stock at cost, 10,283 and 9,894 shares outstanding, respectively	(290,319)		(238,109)
Additional paid-in capital	982,675		1,024,580
Retained earnings	393,293		368,571
Accumulated other comprehensive loss	(10,962)		(8,407)
Total stockholders’ equity	1,074,741		1,146,689
Total liabilities and stockholders’ equity	$	2,122,588	$	2,142,496

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three Months Ended March 31,
	2022		2021

	(In thousands, except per share data)
Revenues:
Product revenues	$	225,875	$	178,125
Services and other revenues	92,953		73,718
Total revenues	318,828		251,843
Cost of revenues:
Cost of product revenues	118,338		92,627
Cost of services and other revenues	50,443		36,933
Total cost of revenues	168,781		129,560
Gross profit	150,047		122,283
Operating expenses:
Research and development	25,030		16,080
Selling, general, and administrative	119,933		86,593

Total operating expenses	144,963		102,673
Income from operations	5,084		19,610
Interest and other income (expense), net	(114)		(6,691)
Income before provision for income taxes	4,970		12,919
Benefit from income taxes	(3,243)		(1,208)
Net income	$	8,213	$	14,127
Net income per share:
Basic	$	0.19	$	0.33

Diluted	$	0.17	$	0.30
Weighted-average shares outstanding:
Basic	44,249		42,962
Diluted	47,918		46,367

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended March 31,
	2022		2021

	(In thousands)
Net income	$	8,213	$	14,127
Other comprehensive loss:

Foreign currency translation adjustments	(2,555)		(621)
Other comprehensive loss	(2,555)		(621)
Comprehensive income	$	5,658	$	13,506

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders’ Equity
	Shares	Amount		Shares	Amount

	(In thousands)
Balances as of December 31, 2021	54,073	$	54	(9,894)	$	(238,109)	$	1,024,580	$	368,571	$	(8,407)	$	1,146,689
Net income	—	—		—	—		—		8,213		—		8,213
Other comprehensive loss	—	—		—	—		—		—		(2,555)		(2,555)

Share-based compensation	—	—		—	—		16,208		—		—		16,208
Issuance of common stock under employee stock plans	384	—		—	—		18,951		—		—		18,951
Tax payments related to restricted stock units	—	—		—	—		(4,322)		—		—		(4,322)
Stock repurchases	—	—		(389)	(52,210)		—		—		—		(52,210)
Cumulative effect of a change in accounting principle related to convertible debt	—	—		—	—		(72,742)		16,509		—		(56,233)
Balances as of March 31, 2022	54,457	$	54	(10,283)	$	(290,319)	$	982,675	$	393,293	$	(10,962)	$	1,074,741


	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders’ Equity
	Shares	Amount		Shares	Amount

	(In thousands)
Balances as of December 31, 2020	52,677	$	53	(9,894)	$	(238,109)	$	920,359	$	290,722	$	(5,522)	$	967,503
Net income	—	—		—	—		—		14,127		—		14,127
Other comprehensive loss	—	—		—	—		—		—		(621)		(621)

Share-based compensation	—	—		—	—		11,772		—		—		11,772
Issuance of common stock under employee stock plans	388	—		—	—		20,826		—		—		20,826
Tax payments related to restricted stock units	—	—		—	—		(2,596)		—		—		(2,596)

Balances as of March 31, 2021	53,065	$	53	(9,894)	$	(238,109)	$	950,361	$	304,849	$	(6,143)	$	1,011,011

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Three Months Ended March 31,
	2022		2021

	(In thousands)
Operating Activities
Net income	$	8,213	$	14,127
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	21,124		17,575




Share-based compensation expense	16,208		11,772



Deferred income taxes	(4,858)		(862)
Amortization of operating lease right-of-use assets	3,307		2,895
Impairment of operating lease right-of-use assets	1,753		—
Amortization of debt issuance costs	1,038		849
Amortization of discount on convertible senior notes	—		4,571
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables	(49,994)		(15,427)
Inventories	(17,320)		(1,035)
Prepaid expenses	(1,712)		(1,095)
Other current assets	7,950		3,128
Investment in sales-type leases	(1,097)		925
Prepaid commissions	4,152		2,710
Other long-term assets	2,240		2,177
Accounts payable	312		10,368
Accrued compensation	(23,859)		(17,899)
Accrued liabilities	769		4,661
Deferred revenues	19,786		21,749
Operating lease liabilities	(3,521)		(3,142)
Other long-term liabilities	(487)		(632)
Net cash provided by (used in) operating activities	(15,996)		57,415
Investing Activities

Software development for external use	(3,852)		(8,043)
Purchases of property and equipment	(11,489)		(5,089)
Business acquisition, net of cash acquired	(3,392)		—
Net cash used in investing activities	(18,733)		(13,132)
Financing Activities







Proceeds from issuances under stock-based compensation plans	18,951		20,826
Employees’ taxes paid related to restricted stock units	(4,322)		(2,596)
Change in customer funds, net	5,462		(2,631)
Stock repurchases	(52,210)		—
Net cash provided by (used in) financing activities	(32,119)		15,599
Effect of exchange rate changes on cash and cash equivalents	(411)		(386)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(67,259)		59,496
Cash, cash equivalents, and restricted cash at beginning of period	355,620		489,920
Cash, cash equivalents, and restricted cash at end of period	$	288,361	$	549,416
Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents	$	265,008	$	548,055
Restricted cash included in Other current assets	23,353		1,361
Cash, cash equivalents, and restricted cash at end of period	$	288,361	$	549,416
Supplemental disclosure of non-cash activities
Unpaid purchases of property and equipment	$	703	$	487
Transfers between inventory and property and equipment, net	$	—	$	1,269

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

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 March 31, 2022 and December 31, 2021, and the results of operations, comprehensive income, and cash flows for the three months ended March 31, 2022 and 2021. 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, 2021, filed with the SEC on February 25, 2022, except as discussed in the section entitled “Recently Adopted Authoritative Guidance” below. The Company’s results of operations, comprehensive income, and cash flows for the three months ended March 31, 2022 are not necessarily indicative of results that may be expected for the year ending December 31, 2022, 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.

On January 10, 2022, the Company completed its acquisition of Hub and Spoke Innovations Limited (“Hub and Spoke Innovations”). The Condensed Consolidated Financial Statements include the results of operations of this recently acquired company, commencing as of the acquisition date. The significant accounting policies of the acquired business have been aligned to conform to the accounting policies of Omnicell.

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 March 31, 2022, 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.

Table of Contents

Recently Adopted Authoritative Guidance

In August 2020, the Financial Accounting Standards Board (“FASB“) issued Accounting Standards Update (“ASU“) 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The update simplifies the accounting for convertible debt instruments by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. ASU 2020-06 also requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method is no longer permitted for convertible instruments. This update permits the use of either the modified retrospective or fully retrospective method of transition. The Company adopted ASU 2020-06 on January 1, 2022, using the modified retrospective method of transition. Upon adoption of ASU 2020-06, the previously separated equity component and associated debt issuance costs for the Company’s outstanding convertible senior notes were reclassified to the liability component, thereby eliminating the subsequent amortization of the debt discount as interest expense. In addition, the Company derecognized the deferred tax liability related to the equity component.

In December 2021, the Company made an irrevocable election under the indenture to require the principal portion of the Company’s convertible senior notes to be settled in cash and any conversion consideration in excess of the principal portion in cash and/or shares of the Company’s common stock at the Company’s option upon conversion. Following the irrevocable election, only the amounts expected to be settled in excess of the principal portion are considered dilutive in calculating earnings per share under the if-converted method.

The Company’s adoption of the update impacted the Condensed Consolidated Balance Sheets at the beginning of the period of adoption as follows:


	January 1, 2022
	Pre-ASU 2020-06 Balances		ASU 2020-06 Adoption Impact		Post-ASU 2020-06 Balances

	(In thousands)
Long-term deferred tax assets	$	15,883	$	(452)	$	15,431
Convertible senior notes, net	488,152		75,353		563,505
Long-term deferred tax liabilities	51,705		(19,572)		32,133
Additional paid-in capital	1,024,580		(72,742)		951,838
Retained earnings	368,571		16,509		385,080

Adoption of the update did not have an impact on the Company’s Condensed Consolidated Statements of Operations or Condensed Consolidated Statements of Cash Flows as of January 1, 2022. Refer to Note 10, Convertible Senior Notes, for further information regarding the Company’s convertible senior notes.

Recently Issued Authoritative Guidance

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The update addresses diversity in practice by requiring that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The guidance will be applied prospectively to acquisitions occurring on or after the effective date. ASU 2021-08 will be effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company is currently evaluating the impact ASU 2021-08 will have on its Condensed Consolidated Financial Statements.

No other recently issued and effective authoritative guidance is expected to have a material impact on the Company’s Condensed Consolidated Financial Statements through the reporting date.

Note 2. Business Combinations

The Company accounted for its acquisitions in accordance with ASC 805, Business Combinations. The tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the respective acquisition dates. Intangible assets eligible for recognition separate from goodwill were those that satisfied either the contractual or legal criterion or the separability criterion, each as set forth in the accounting guidance. The preliminary fair values reflect management’s best estimates based on information available at the respective acquisition dates and may change as additional information is received over the measurement period, which will end no later than one year from the respective acquisition date. The Company

Table of Contents

believes that the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that market participants would use. Actual results may differ from these estimates and assumptions.

The Company’s Condensed Consolidated Financial Statements include the results of operations of each acquired company, commencing as of their respective acquisition dates. Acquisition-related costs were expensed as incurred, and are included in selling, general, and administrative expenses in the Company’s Condensed Consolidated Statements of Operations.

2022 Acquisition

Hub and Spoke Innovations

On January 10, 2022, the Company completed the acquisition of all of the outstanding equity interests in Hub and Spoke Innovations, pursuant to the terms and conditions of the Share Purchase Agreement, dated January 10, 2022, by and among Omnicell Limited (a wholly-owned subsidiary of the Company), Hub and Spoke Innovations Limited, and certain beneficial stockholders specified therein for a base purchase price of £2.5 million (approximately $3.4 million based on the exchange rate in effect at the acquisition date), prior to customary adjustments for closing cash, net working capital, and assumed indebtedness. The preliminary purchase price transferred for the transaction, net of cash acquired, was £2.5 million (approximately $3.4 million based on the exchange rate in effect at the acquisition date). Of the purchase price transferred, £1.9 million (approximately $2.5 million based on the exchange rate in effect at the acquisition date) was allocated to goodwill; £0.8 million (approximately $1.1 million based on the exchange rate in effect at the acquisition date) was allocated to intangible assets, which included customer relationships; and the remainder was allocated to net assets acquired. The Hub and Spoke Innovations acquisition is expected to complement Omnicell’s total solution technology portfolio for retail pharmacy in the United Kingdom to help pharmacies improve workflows, offer patients 24/7 access to their medications and provide enhanced patient care.

2021 Acquisitions

MarkeTouch Media

On December 31, 2021, the Company completed the acquisition of all of the outstanding equity interests in MarkeTouch Media, LLC (“MarkeTouch Media”) pursuant to the terms and conditions of the Unit Purchase Agreement, dated December 31, 2021, by and among ateb, Inc. (a wholly-owned subsidiary of the Company), MarkeTouch Media, LLC, MarkeTouch Holdings, Inc., Toucan Enterprises, Inc., and certain beneficial stockholders specified therein for a base purchase price of $82.0 million, prior to customary adjustments for closing cash, net working capital, and assumed indebtedness. The MarkeTouch Media acquisition adds mobile and web-based technology and patient engagement solutions, which is expected to expand the footprint of EnlivenHealth® across the retail pharmacy sector, while enhancing potential growth opportunities in new market segments like specialty pharmacy and pharmacy benefits management.

ReCept

On December 29, 2021, the Company completed the acquisition of all outstanding equity securities of ReCept Holdings, Inc. (“ReCept”) pursuant to the terms and conditions of the Agreement and Plan of Merger, dated December 1, 2021, by and among Omnicell, Inc., ReCept Holdings, Inc., Redfish Acquisition Corp, and the representative of the securityholders for a base purchase price of $100.0 million, prior to customary adjustments for closing cash, net working capital, and assumed indebtedness. The addition of ReCept’s specialty pharmacy management services for health systems, provider groups, and federally qualified health centers expands Omnicell’s Advanced Services portfolio in an effort to address the growing and complex specialty pharmacy market.

FDS Amplicare

On September 9, 2021, the Company completed the acquisition of all of the outstanding equity interests in RxInnovation, Inc., operating as FDS Amplicare (“FDS Amplicare”), pursuant to the terms and conditions of the Agreement and Plan of Merger, dated July 25, 2021, by and among RxInnovation Inc., Omnicell, Inc., Fleming Acquisition Corp., and the representative of the securityholders for a base purchase price of $177.0 million, prior to customary adjustments for closing cash, net working capital, and assumed indebtedness. The FDS Amplicare® acquisition adds a comprehensive and complementary suite of Software-as-a-Service (“SaaS”) financial management, analytics, and population health solutions to the Company’s EnlivenHealth offering.

Table of Contents

The following tables represent the preliminary allocation of the respective purchase price to the assets acquired and the liabilities assumed by the Company as part of each acquisition included in the Company’s Consolidated Balance Sheets, and is reconciled to the respective purchase price transferred:


	FDS Amplicare (1)		ReCept (Preliminary) (2)		MarkeTouch Media (Preliminary)

	(In thousands)
Purchase price transferred:
Base purchase price	$	177,000	$	100,000	$	82,000
Add: Closing cash	465		6,664		191
Add: Net working capital adjustment	1,654		(2,296)		448
Less: Assumed indebtedness	(653)		(1,902)		(13)
Total purchase price transferred	$	178,466	$	102,466	$	82,626

	FDS Amplicare (Preliminary) (1)		ReCept (Preliminary) (2)		MarkeTouch Media (Preliminary)
Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	465	$	—	$	237
Accounts receivable and unbilled receivables	5,330		2,383		2,302
Prepaid expenses	506		192		96
Other current assets	45		13,955		—
Total current assets	6,346		16,530		2,635
Property and equipment	444		172		177
Operating lease right-of-use assets	2,252		773		602
Goodwill	117,374		81,588		42,530
Intangible assets	70,000		28,100		38,000
Other long-term assets	51		200		2,850
Total assets	196,467		127,363		86,794
Accounts payable	950		219		473
Accrued compensation	1,312		1,756		—
Accrued liabilities	1,396		18,499		292
Deferred revenues	1,916		222		347
Long-term deferred tax liabilities	11,377		3,587		—
Long-term operating lease liabilities	920		614		206
Other long-term liabilities	130		—		2,850
Total liabilities	18,001		24,897		4,168
Total purchase price	$	178,466	$	102,466	$	82,626
Total purchase price, net of cash acquired	$	178,001	$	95,897	$	82,389

_________________________________________________

(1) During the fourth quarter of 2021, the Company recorded measurement period adjustments of $1.5 million to goodwill, consisting of an increase in intangible assets, accounts receivable and unbilled receivables, and long-term deferred tax liabilities of $0.4 million, $1.1 million, and $0.1 million, respectively, and a net working capital adjustment of $0.1 million.

(2) Closing cash is included in other current assets due to its restrictive nature as cash held for customers.

Table of Contents

The $117.4 million of goodwill arising from the FDS Amplicare acquisition is primarily attributed to future sales of SaaS solutions and FDS Amplicare’s assembled workforce. None of the FDS Amplicare goodwill is expected to be deductible for tax purposes. The $81.6 million of goodwill arising from the ReCept acquisition is primarily attributed to future sales of its offerings and services and ReCept’s assembled workforce. None of the ReCept goodwill is expected to be deductible for tax purposes. The $42.5 million of goodwill arising from the MarkeTouch Media acquisition is primarily attributed to future sales of SaaS solutions and MarkeTouch Media’s assembled workforce. The full amount of the MarkeTouch Media goodwill is expected to be deductible for tax purposes.

The identifiable intangible assets acquired and their estimated useful lives for amortization are as follows:


	FDS Amplicare (1)			ReCept			MarkeTouch Media
	Fair value		Useful life (years)	Fair value		Useful life (years)	Fair value		Useful life (years)

	(In thousands, except for years)
Customer relationships	$	59,900	23	$	28,100	23	$	34,100	26
Acquired technology	7,700		5 - 7	—		—	2,100		4
Backlog	—		—	—		—	1,800		2
Trade names	2,400		5	—		—	—		—


Total purchased intangible assets	$	70,000		$	28,100		$	38,000

_________________________________________________

(1) During the fourth quarter of 2021, the Company recorded a measurement period adjustment of $0.4 million in customer relationships.

The customer relationships intangible assets represent the fair values of the underlying relationships and agreements with each acquired company’s customers. The acquired technology intangible assets represent the fair values of the portfolio of SaaS solutions that have reached technological feasibility and were part of the respective acquired company’s offerings at their respective acquisition dates. The backlog intangible asset represents contractually committed future billings associated with MarkeTouch Media customer contracts. The trade names intangible asset represents the fair value of brand and name recognition associated with the marketing of certain FDS Amplicare SaaS solutions.

The fair values of the customer relationships and backlog intangible assets were determined based on the excess earnings method, and the fair values of the acquired technology and trade names intangible assets were determined based on the relief-from-royalty method. The key assumptions used in estimating the fair values of intangible assets included forecasted financial information; customer attrition rates; royalty rate of 10.0% for the acquired technology intangible assets for both FDS Amplicare and MarkeTouch Media; royalty rate of 2.0% for the FDS Amplicare trade names intangible asset; discount rate of 13.0% for the FDS Amplicare acquisition; discount rate of 15.0% for the ReCept acquisition; discount rate of 11.5% for the MarkeTouch Media acquisition; and certain other assumptions.

The customer relationships and acquired technology intangible assets are being amortized using a double-declining method of amortization as such method better represents the economic benefits to be obtained. The backlog and trade names intangible assets are being amortized over their respective estimated useful lives using the straight-line method of amortization.

Pro Forma Financial Information

The following table presents certain unaudited pro forma consolidated financial information for the three months ended March 31, 2021 as if the FDS Amplicare, ReCept, and MarkeTouch Media acquisitions had been completed on January 1, 2020. The pro forma effects of the Hub and Spoke Innovations acquisition were not material to the Company’s consolidated results of operations. The unaudited pro forma financial information is presented for informational purposes only, and is not indicative of what would have occurred had the acquisitions taken place on those respective dates. The unaudited pro forma financial information combines the historical results of the acquisitions with the Company’s consolidated historical results and includes certain adjustments including, but not limited to, amortization and depreciation of intangible assets and property and equipment acquired; and certain acquisition-related costs incurred.


	Three Months Ended March 31,
	2021

	(In thousands)
Pro forma revenues	$	268,921
Pro forma net income	$	13,066

Table of Contents

Note 3. 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 with multi-year co-development plans. Solutions in this category include, but are not limited to, XT Series automated dispensing systems, the XR2 Automated Central Pharmacy System, and IV compounding automation solutions.

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.

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, and are designed to improve patient engagement and adherence to prescriptions.

SaaS, subscription software, and technology-enabled 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 inclusive of FDS Amplicare and MarkeTouch Media, 340B solutions, ReCept management services, and services associated with Omnicell One™, Central Pharmacy Dispensing Services, including the XR2 Automated Central Pharmacy System, and Central Pharmacy Compounding Services, including IV compounding automation solutions.

The following table summarizes revenue recognition for each revenue category:

Revenue Category

Timing of Revenue Recognition

Income Statement Classification

Connected devices, software licenses, and other

Point in time, as transfer of control occurs, generally upon installation and acceptance by the customer

Product

Technical services

Over time, as services are provided, typically ratably over the service term

Service

Consumables

Point in time, as transfer of control occurs, generally upon shipment to or receipt by customer

Product

SaaS, subscription software, and technology-enabled services

Over time, as services are provided

Service

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 $4.5 million and $3.4 million for the three months ended March 31, 2022 and 2021, respectively.

Table of Contents

Disaggregation of Revenues

The following table summarizes the Company’s revenues disaggregated by revenue type for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
	2022		2021

	(In thousands)
Connected devices, software licenses, and other	$	208,078	$	159,718
Technical services	49,169		50,860
Consumables	17,797		18,407
SaaS, subscription software, and technology-enabled services	43,784		22,858
Total revenues	$	318,828	$	251,843

The following table summarizes the Company’s revenues disaggregated by geographic region, which is determined based on customer location, for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
	2022		2021

	(In thousands)
United States	$	287,577	$	224,276
Rest of world (1)	31,251		27,567
Total revenues	$	318,828	$	251,843

_________________________________________________

(1) No individual country represented more than 10% of total revenues.

Contract Assets and Contract Liabilities

The following table reflects the Company’s contract assets and contract liabilities:


	March 31, 2022		December 31, 2021

	(In thousands)
Short-term unbilled receivables, net (1)	$	17,348	$	17,208
Long-term unbilled receivables, net (2)	16,316		18,084
Total contract assets	$	33,664	$	35,292

Short-term deferred revenues, net	$	127,998	$	112,196
Long-term deferred revenues	24,037		20,194
Total contract liabilities	$	152,035	$	132,390

_________________________________________________

(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 $128.0 million and $112.2 million include deferred revenues from product sales and service contracts, net of deferred cost of sales of $20.3 million and $22.4 million, as of March 31, 2022 and December 31, 2021, respectively. The short-term deferred revenues from product sales relate to delivered and invoiced products, pending installation and acceptance, expected to occur within the next twelve months. During the three months ended March 31, 2022, the Company recognized revenues of $66.6 million, that were included in the corresponding gross short-term deferred revenues balance of $134.6 million as of December 31, 2021.

Table of Contents

Long-term deferred revenues include deferred revenues from product and service contracts of $24.0 million and $20.2 million as of March 31, 2022 and December 31, 2021, respectively. Remaining performance obligations are primarily recognized ratably over the remaining term of the contract, generally not more than ten years.

Significant Customers

There were no customers that accounted for more than 10% of the Company’s total revenues for the three months ended March 31, 2022 and 2021. Also, there were no customers that accounted for more than 10% of the Company’s accounts receivable balance as of March 31, 2022 and December 31, 2021.

Note 4. Net Income Per Share

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of shares outstanding during the period. In periods of net loss, all potential common shares are anti-dilutive, so diluted net loss per share equals the basic net loss per share. In periods of net income, diluted net income per share is computed by dividing net income for the period by the basic weighted-average number of shares plus any dilutive potential common stock outstanding during the period, using the treasury stock method. Potential common stock includes the effect of outstanding dilutive stock options, restricted stock awards, and restricted stock units, as well as shares the Company could be obligated to issue from its convertible senior notes and warrants, as described in Note 10, Convertible Senior Notes (pre-ASU 2020-06 adoption). For periods prior to the adoption of ASU 2020-06 on January 1, 2022, the Company applied the treasury stock method to calculate the dilutive impact of the convertible senior notes. Upon adoption of ASU 2020-06, effective January 1 2022, the Company is required to apply the if-converted method for calculating the dilutive impact of the convertible senior notes. Refer to Note 1, Organization and Summary of Significant Accounting Policies, for further information. Any anti-dilutive weighted-average dilutive shares related to stock award plans, convertible senior notes, and warrants are excluded from the computation of the diluted net income per share.

The basic and diluted net income per share calculations for the three months ended March 31, 2022 and 2021 were as follows:


	Three Months Ended March 31,
	2022		2021

	(In thousands, except per share data)
Net income	$	8,213	$	14,127
Weighted-average shares outstanding – basic	44,249		42,962
Effect of dilutive securities from stock award plans	1,646		1,980
Effect of convertible senior notes	1,918		1,425
Effect of warrants	105		—
Weighted-average shares outstanding – diluted	47,918		46,367


Net income per share – basic	$	0.19	$	0.33
Net income per share – diluted	$	0.17	$	0.30

Anti-dilutive weighted-average shares related to stock award plans	336		287
Anti-dilutive weighted-average shares related to convertible senior notes and warrants	—		5,908

Note 5. Cash and Cash Equivalents and Fair Value of Financial Instruments

Cash and cash equivalents of $265.0 million and $349.1 million as of March 31, 2022 and December 31, 2021, respectively, consisted of bank accounts and highly-liquid U.S. Government money market funds held in sweep and asset management accounts with major financial institutions. As of March 31, 2022 and December 31, 2021, cash equivalents were $224.8 million and $320.2 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

Table of Contents

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 March 31, 2022, the fair value of the convertible senior notes was $810.5 million, compared to their carrying value of $564.3 million, which is 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.

Note 6. Balance Sheet Components

Balance sheet details as of March 31, 2022 and December 31, 2021 are presented in the tables below:


	March 31, 2022		December 31, 2021

	(In thousands)
Inventories:
Raw materials	$	60,238	$	48,215
Work in process	9,483		11,009
Finished goods	67,335		60,700
Total inventories	$	137,056	$	119,924

Other current assets:
Funds held for customers, including restricted cash (1)	$	38,426	$	20,405
Net investment in sales-type leases, current portion	11,103		10,665
Prepaid income taxes	5,265		6,656
Other current assets	4,049		10,608
Total other current assets	$	58,843	$	48,334

Other long-term assets:
Capitalized software, net	$	94,108	$	96,995
Unbilled receivables, net	16,316		18,084
Deferred debt issuance costs	2,882		3,156
Other long-term assets	8,811		9,284
Total other long-term assets	$	122,117	$	127,519

Accrued liabilities:
Operating lease liabilities, current portion	$	11,809	$	12,947
Customer fund liabilities	38,426		31,727
Advance payments from customers	10,337		8,191
Rebate liabilities	40,344		44,644
Group purchasing organization fees	6,503		7,115
Taxes payable	5,487		3,771
Other accrued liabilities	26,923		24,772
Total accrued liabilities	$	139,829	$	133,167

_________________________________________________

(1) Includes restricted cash of $23.4 million and $6.6 million as of March 31, 2022 and December 31, 2021, respectively.

Table of Contents

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), which consisted of foreign currency translation adjustments, for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
	2022		2021


	(In thousands)
Beginning balance	$	(8,407)		$	(5,522)
Other comprehensive loss	(2,555)			(621)


Ending balance	$	(10,962)		$	(6,143)

Note 7. Property and Equipment

The following table represents the property and equipment balances as of March 31, 2022 and December 31, 2021:


	March 31, 2022		December 31, 2021

	(In thousands)
Equipment	$	90,930	$	89,272
Furniture and fixtures	7,432		7,580
Leasehold improvements	20,913		20,623
Software	67,795		60,856
Construction in progress	16,217		14,757
Property and equipment, gross	203,287		193,088
Accumulated depreciation and amortization	(126,225)		(121,947)
Total property and equipment, net	$	77,062	$	71,141

Depreciation and amortization expense of property and equipment was $5.3 million and $4.8 million for the three months ended March 31, 2022 and 2021, 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 March 31, 2022 and December 31, 2021:


	March 31, 2022		December 31, 2021

	(In thousands)
United States	$	72,803	$	66,788
Rest of world (1)	4,259		4,353
Total property and equipment, net	$	77,062	$	71,141

_________________________________________________

(1) No individual country represented more than 10% of total property and equipment, net.

Note 8. Goodwill and Intangible Assets

Goodwill

The following table represents changes in the carrying amount of goodwill:


	December 31, 2021		Additions (1)	Foreign currency exchange rate fluctuations	March 31, 2022

	(In thousands)
Goodwill	$	738,900	2,549	(1,023)	$	740,426

_________________________________________________

(1) Refer to Note 2, Business Combinations, for further information.

Table of Contents

Intangible Assets, Net