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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 September 30, 2023
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 October 27, 2023, there were 45,469,376 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)
September 30,
2023		December 31,
2022
(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents$446,840 $330,362 
Accounts receivable and unbilled receivables, net of allowances of $5,522 and $5,153, respectively
272,584 299,469 
Inventories116,144 147,549 
Prepaid expenses27,947 27,070 
Other current assets50,236 77,362 
Total current assets913,751 881,812 
Property and equipment, net106,880 93,961 
Long-term investment in sales-type leases, net41,631 32,924 
Operating lease right-of-use assets25,444 38,052 
Goodwill734,328 734,274 
Intangible assets, net218,861 242,906 
Long-term deferred tax assets35,964 22,329 
Prepaid commissions53,950 59,483 
Other long-term assets90,766 105,017 
Total assets$2,221,575 $2,210,758 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$49,920 $63,389 
Accrued compensation44,065 73,455 
Accrued liabilities150,385 172,655 
Deferred revenues, net124,991 118,947 
Total current liabilities369,361 428,446 
Long-term deferred revenues55,053 37,385 
Long-term deferred tax liabilities1,565 2,095 
Long-term operating lease liabilities32,845 39,405 
Other long-term liabilities6,428 6,719 
Convertible senior notes, net568,887 566,571 
Total liabilities1,034,139 1,080,621 
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; 55,746 and 55,030 shares issued; 45,463 and 44,747 shares outstanding, respectively
56 55 
Treasury stock at cost, 10,283 shares outstanding, respectively
(290,319)(290,319)
Additional paid-in capital1,110,096 1,046,760 
Retained earnings384,732 390,728 
Accumulated other comprehensive loss(17,129)(17,087)
Total stockholders’ equity1,187,436 1,130,137 
Total liabilities and stockholders’ equity$2,221,575 $2,210,758 
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 September 30,Nine Months Ended September 30,
2023202220232022
(In thousands, except per share data)
Revenues:
Product revenues$188,755 $246,565 $562,906 $706,246 
Services and other revenues109,908 101,494 325,359 292,027 
Total revenues298,663 348,059 888,265 998,273 
Cost of revenues:
Cost of product revenues106,311 134,023 323,800 374,175 
Cost of services and other revenues60,388 54,941 173,029 156,864 
Total cost of revenues166,699 188,964 496,829 531,039 
Gross profit131,964 159,095 391,436 467,234 
Operating expenses:
Research and development24,281 25,171 70,296 76,556 
Selling, general, and administrative103,971 115,459 332,643 354,644 
Total operating expenses128,252 140,630 402,939 431,200 
Income (loss) from operations3,712 18,465 (11,503)36,034 
Interest and other income (expense), net3,670 (1,148)9,912 (2,973)
Income (loss) before income taxes7,382 17,317 (1,591)33,061 
Provision for (benefit from) income taxes1,829 543 4,405 (995)
Net income (loss)$5,553 $16,774 $(5,996)$34,056 
Net income (loss) per share:
Basic $0.12 $0.38 $(0.13)$0.77 
Diluted$0.12 $0.37 $(0.13)$0.73 
Weighted-average shares outstanding:
Basic45,333 44,441 45,117 44,304 
Diluted45,595 45,819 45,117 46,759 
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 September 30,Nine Months Ended September 30,
2023202220232022
(In thousands)
Net income (loss)$5,553 $16,774 $(5,996)$34,056 
Other comprehensive loss:
Foreign currency translation adjustments(2,953)(6,770)(42)(15,735)
Other comprehensive loss(2,953)(6,770)(42)(15,735)
Comprehensive income (loss)$2,600 $10,004 $(6,038)$18,321 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
5
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, 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 
Net income— — — — — 5,553 — 5,553 
Other comprehensive loss— — — — — — (2,953)(2,953)
Share-based compensation— — — — 16,104 — — 16,104 
Issuance of common stock under employee stock plans258 — — — 7,832 — — 7,832 
Tax payments related to restricted stock units— — — — (2,665)— — (2,665)
Balances as of September 30, 202355,746 $56 (10,283)$(290,319)$1,110,096 $384,732 $(17,129)$1,187,436 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
6
OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) - CONTINUED
Common StockTreasury StockAdditional
Paid-In Capital		Retained
Earnings		Accumulated Other
Comprehensive Income (Loss)		Stockholders’
Equity
SharesAmountSharesAmount
(In thousands)
Balances as of December 31, 202154,073 $54 (9,894)$(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 plans384 — — — 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, 202254,457 54 (10,283)(290,319)982,675 393,293 (10,962)1,074,741 
Net income — — — — — 9,069 — 9,069 
Other comprehensive loss— — — — — — (6,410)(6,410)
Share-based compensation— — — — 17,213 — — 17,213 
Issuance of common stock under employee stock plans114 1 — — 2,171 — — 2,172 
Tax payments related to restricted stock units— — — — (4,148)— — (4,148)
Balances as of June 30, 202254,571 55 (10,283)(290,319)997,911 402,362 (17,372)1,092,637 
Net income— —— — — 16,774 — 16,774 
Other comprehensive loss— —— — — — (6,770)(6,770)
Share-based compensation— —— — 17,310 — — 17,310 
Issuance of common stock under employee stock plans358 — — — 18,416 — — 18,416 
Tax payments related to restricted stock units— — — — (2,972)— — (2,972)
Balances as of September 30, 202254,929 $55 (10,283)$(290,319)$1,030,665 $419,136 $(24,142)$1,135,395 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
7
OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30,
20232022
(In thousands)
Operating Activities
Net income (loss)$(5,996)$34,056 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization65,596 64,843 
Loss on disposal of property and equipment2,110 331 
Share-based compensation expense43,113 50,731 
Deferred income taxes(14,165)(17,061)
Amortization of operating lease right-of-use assets6,238 9,709 
Impairment and abandonment of operating lease right-of-use assets related to facilities7,815 5,390 
Amortization of debt issuance costs3,139 3,121 
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables27,050 (116,895)
Inventories31,690 (32,269)
Prepaid expenses(857)(2,602)
Other current assets1,521 6,692 
Investment in sales-type leases(8,839)(17,336)
Prepaid commissions5,533 8,801 
Other long-term assets2,539 4,189 
Accounts payable(13,358)2,043 
Accrued compensation(29,390)(27,940)
Accrued liabilities3,749 11,678 
Deferred revenues23,628 17,667 
Operating lease liabilities(8,145)(10,966)
Other long-term liabilities(291)1,446 
Net cash provided by (used in) operating activities142,680 (4,372)
Investing Activities
External-use software development costs(10,240)(9,648)
Purchases of property and equipment(32,404)(33,861)
Business acquisition, net of cash acquired— (3,392)
Purchase price adjustments from business acquisitions
— 5,484 
Net cash used in investing activities(42,644)(41,417)
Financing Activities
Proceeds from issuances under stock-based compensation plans23,035 39,539 
Employees’ taxes paid related to restricted stock units(6,130)(11,442)
Change in customer funds, net(6,615)(402)
Stock repurchases— (52,210)
Net cash provided by (used in) financing activities10,290 (24,515)
Effect of exchange rate changes on cash and cash equivalents(464)(1,425)
Net increase (decrease) in cash, cash equivalents, and restricted cash109,862 (71,729)
Cash, cash equivalents, and restricted cash at beginning of period352,835 355,620 
Cash, cash equivalents, and restricted cash at end of period$462,697 $283,891 
Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents$446,840 $266,402 
Restricted cash included in other current assets15,857 17,489 
Cash, cash equivalents, and restricted cash at end of period$462,697 $283,891 
Supplemental disclosure of non-cash investing activities
Unpaid purchases of property and equipment$642 $1,473 
Transfers between inventory and property and equipment, net$— $314 
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 September 30, 2023 and December 31, 2022, the results of operations and comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. 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, 2022, filed with the SEC on March 1, 2023, except as discussed in the section entitled “Recently Adopted Authoritative Guidance” below. The Company’s results of operations and comprehensive income (loss) for the three and nine months ended September 30, 2023, and cash flows for the nine months ended September 30, 2023 are not necessarily indicative of results that may be expected for the year ending December 31, 2023, 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 September 30, 2023, 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
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 Company adopted ASU 2021-08 beginning January 1, 2023 and will apply the guidance prospectively to acquisitions occurring on or after the adoption date.
9
Recently Issued Authoritative Guidance
There was no 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.
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
ConsumablesPoint in time, as transfer of control occurs, generally upon shipment to or receipt by customerProduct
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 $3.6 million and $4.8 million for the three months ended September 30, 2023 and 2022, respectively, and $9.5 million and $13.3 million for the nine months ended September 30, 2023 and 2022, respectively.
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Disaggregation of Revenues
The following table summarizes the Company’s revenues disaggregated by revenue type for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In thousands)
Connected devices, software licenses, and other$167,560 $226,415 $500,182 $650,125 
Consumables21,195 20,150 62,724 56,121 
Technical services57,303 53,914 167,851 156,386 
Advanced Services52,605 47,580 157,508 135,641 
Total revenues$298,663 $348,059 $888,265 $998,273 
The following table summarizes the Company’s revenues disaggregated by geographic region, which is determined based on customer location, for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In thousands)
United States$272,649 $315,755 $785,794 $898,269 
Rest of world (1)
26,014 32,304 102,471 100,004 
Total revenues$298,663 $348,059 $888,265 $998,273 
_________________________________________________
(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:
September 30,
2023		December 31,
2022
(In thousands)
Short-term unbilled receivables, net (1)
$20,275 $25,763 
Long-term unbilled receivables, net (2)
13,159 14,744 
Total contract assets$33,434 $40,507 
Short-term deferred revenues, net$124,991 $118,947 
Long-term deferred revenues55,053 37,385 
Total contract liabilities$180,044 $156,332 
_________________________________________________
(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 $125.0 million and $118.9 million include deferred revenues from product sales and service contracts, net of deferred cost of sales of $12.4 million and $15.8 million, as of September 30, 2023 and December 31, 2022, respectively. During the three and nine months ended September 30, 2023, the Company recognized revenues of $20.1 million and $106.2 million, respectively, that were included in the corresponding gross short-term deferred revenues balance of $134.7 million as of December 31, 2022. Long-term deferred revenues include deferred revenues from product sales and service contracts of $55.1 million and $37.4 million as of September 30, 2023 and December 31, 2022, respectively. 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.
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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 service 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.
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 are $344.8 million as of September 30, 2023. 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 nine months ended September 30, 2023 and 2022. Also, there were no customers that accounted for more than 10% of the Company’s accounts receivable balance as of September 30, 2023 and December 31, 2022.
Note 3. Net Income (Loss) Per Share
The basic and diluted net income (loss) per share calculations for the three and nine months ended September 30, 2023 and 2022 were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In thousands, except per share data)
Net income (loss)$5,553 $16,774 $(5,996)$34,056 
Weighted-average shares outstanding – basic45,333 44,441 45,117 44,304 
Effect of dilutive securities from stock award plans262 943 — 1,293 
Effect of convertible senior notes— 435 — 1,162 
Weighted-average shares outstanding – diluted45,595 45,819 45,117 46,759 
Net income (loss) per share – basic$0.12 $0.38 $(0.13)$0.77 
Net income (loss) per share – diluted$0.12 $0.37 $(0.13)$0.73 
Anti-dilutive weighted-average shares related to stock award plans2,727 810 3,536 689 
Anti-dilutive weighted-average shares related to convertible senior notes and warrants11,816 5,908 11,816 5,908 
Note 4. Cash and Cash Equivalents and Fair Value of Financial Instruments
Cash and cash equivalents of $446.8 million and $330.4 million as of September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022, cash equivalents were $429.7 million and $301.0 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
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September 30, 2023 and December 31, 2022, the fair value of the convertible senior notes was $518.6 million and $501.4 million, respectively, compared to their carrying values of $568.9 million and $566.6 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.
Note 5. Balance Sheet Components
Balance sheet details as of September 30, 2023 and December 31, 2022 are presented in the tables below:
September 30,
2023		December 31,
2022
(In thousands)
Inventories:
Raw materials$56,566 $75,854 
Work in process2,738 9,280 
Finished goods56,840 62,415 
Total inventories$116,144 $147,549 
Other current assets:
Funds held for customers, including restricted cash (1)
$30,967 $56,703 
Net investment in sales-type leases, current portion11,618 11,486 
Prepaid income taxes125 1,702 
Other current assets7,526 7,471 
Total other current assets$50,236 $77,362 
Other long-term assets:
External-use software development costs, net$69,872 $80,760 
Unbilled receivables, net13,159 14,744 
Deferred debt issuance costs1,235 2,058 
Other long-term assets6,500 7,455 
Total other long-term assets$90,766 $105,017 
Accrued liabilities:
Operating lease liabilities, current portion$10,617 $10,761 
Customer fund liabilities30,967 56,703 
Advance payments from customers10,549 11,556 
Rebate liabilities50,878 42,802 
Group purchasing organization fees5,290 7,723 
Taxes payable14,178 9,642 
Other accrued liabilities27,906 33,468 
Total accrued liabilities$150,385 $172,655 
_________________________________________________
(1)    Includes restricted cash of $15.9 million and $22.5 million as of September 30, 2023 and December 31, 2022, respectively.
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The following table summarizes the changes in accumulated balances of other comprehensive income (loss), which consisted of foreign currency translation adjustments, for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In thousands)
Beginning balance$(14,176)$(17,372)$(17,087)$(8,407)
Other comprehensive loss(2,953)(6,770)(42)(15,735)
Ending balance$(17,129)$(24,142)$(17,129)$(24,142)
Note 6. Property and Equipment
The following table represents the property and equipment balances as of September 30, 2023 and December 31, 2022:
September 30,
2023		December 31,
2022
(In thousands)
Equipment$95,891 $91,391 
Furniture and fixtures4,898 5,154 
Leasehold improvements17,821 19,510 
Purchased software and internal-use software development costs97,860 76,327 
Construction in progress28,369 28,223 
Property and equipment, gross244,839 220,605 
Accumulated depreciation and amortization(137,959)(126,644)
Total property and equipment, net$106,880 $93,961 
Depreciation and amortization expense of property and equipment was $6.7 million and $5.8 million for the three months ended September 30, 2023 and 2022, respectively, and $19.6 million and $16.7 million for the nine months ended September 30, 2023 and 2022, 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 September 30, 2023 and December 31, 2022:
September 30,
2023		December 31,
2022
(In thousands)
United States$102,729 $89,989 
Rest of world (1)
4,151 3,972 
Total property and equipment, net$106,880 $93,961 
_________________________________________________
(1)    No individual country represented more than 10% of total property and equipment, net.
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Note 7. External-Use Software Development Costs
The carrying amounts of external-use software development costs as of September 30, 2023 and December 31, 2022 were as follows:
September 30,
2023		December 31,
2022
(In thousands)
Gross carrying amount$236,024 $225,004 
Accumulated amortization(166,152)(144,244)
External-use software development costs, net (1)
$69,872 $80,760 
_________________________________________________
(1)     Included in other long-term assets in the Condensed Consolidated Balance Sheets.
The Company recorded $7.1 million and $7.3 million to cost of revenues for amortization of external-use software development costs for the three months ended September 30, 2023 and 2022, respectively, and $21.9 million and $21.5 million for the nine months ended September 30, 2023 and 2022, respectively.
The estimated future amortization expenses for external-use software development costs were as follows:
September 30,
2023
(In thousands)
Remaining three months of 2023$6,787 
202424,747 
202517,608 
202612,069 
20276,114 
Thereafter2,547 
Total$69,872
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, 2022$734,274 
Foreign currency exchange rate fluctuations54 
Balance as of September 30, 2023$734,328 
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Intangible Assets, Net
The carrying amounts and useful lives of intangible assets as of September 30, 2023 and December 31, 2022 were as follows:
September 30, 2023
Gross carrying
amount		Accumulated
amortization		Foreign currency exchange
rate fluctuations		Net carrying
amount		Useful life
(years)
(In thousands, except for years)
Customer relationships$311,089 $(113,844)$(1,482)$195,763 
4 - 30
Acquired technology84,876 (64,792)— 20,084 
4 - 20
Backlog1,800 (1,575)— 225 2
Trade names9,200 (7,418)— 1,782 
5 - 12
Patents2,430 (1,423)— 1,007 
2 - 20
Non-compete agreements600 (600)— — 3
Total intangibles assets, net$409,995 $(189,652)$(1,482)$218,861 
 
December 31, 2022
Gross carrying
amount		Accumulated
amortization		Foreign currency exchange
rate fluctuations		Net carrying
amount		Useful life
(years)
(In thousands, except for years)
Customer relationships$311,089 $(99,177)$(1,514)$210,398 
4 - 30
Acquired technology92,066 (64,299)— 27,767 
4 - 20
Backlog1,800 (900)— 900 2
Trade names9,200 (6,633)— 2,567 
5 - 12
Patents2,430 (1,306)— 1,124 
2 - 20
Non-compete agreements600 (450)— 150 3
Total intangibles assets, net$417,185 $(172,765)$(1,514)$242,906 
Amortization expense of intangible assets was $7.7 million and $8.7 million for the three months ended September 30, 2023 and 2022, respectively, and $24.1 million and $26.7 million for the nine months ended September 30, 2023 and 2022, respectively.
The estimated future amortization expenses for amortizable intangible assets were as follows:
September 30,
2023
(In thousands)
Remaining three months of 2023$7,483 
202423,093 
202521,056 
202618,061 
202716,754 
Thereafter132,414 
Total$218,861 
Note 9. Debt and Credit Agreement
On November 15, 2019, the Company 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
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agent. 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 had an expiration date of November 15, 2024, upon which date all remaining outstanding borrowings would be due and payable.
On September 22, 2020 and March 29, 2023, the Company entered into amendments to the Prior A&R Credit Agreement to, among other changes, 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, expand the Company’s flexibility to repurchase its common stock and make other restricted payments, and replace the total net leverage covenant with a new secured net leverage covenant that requires the Company to maintain a consolidated secured net leverage ratio not to exceed 3.50:1 for the calendar quarters ending September 30, 2020, December 31, 2020, and March 31, 2021 and 3.00:1 for the calendar quarters ending thereafter, as well as to remove and replace the interest rate benchmark based on the London interbank offered rate (“LIBOR”) and related LIBOR-based mechanics applicable to borrowings under the A&R Credit Agreement 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.
Loans under the Prior Revolving Credit Facility bore interest, at the Company’s option, at a rate equal to either (a) the Adjusted Term SOFR (as defined in the Prior A&R Credit Agreement), plus an applicable margin ranging from 1.25% to 2.00% per annum based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the Prior 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) Adjusted Term SOFR for a one month tenor plus 1.00%, plus an applicable margin ranging from 0.25% to 1.00% per annum based on the Company’s Consolidated Total Net Leverage Ratio. Undrawn commitments under the Prior Revolving Credit Facility were subject to a commitment fee ranging from 0.15% to 0.30% per annum based on the Company’s Consolidated Total Net Leverage Ratio on the average daily unused portion of the Prior Revolving Credit Facility. The applicable margin for, and certain other terms of, any term loans under the Prior Incremental Facility would be determined prior to the incurrence of such loans. The Company was permitted to make voluntary prepayments at any time without payment of a premium or penalty.
The Prior A&R Credit Agreement contained customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, dividends, and other distributions. The Prior A&R Credit Agreement also contained financial covenants that required the Company and its subsidiaries to not exceed a maximum total secured net leverage ratio (as described above) and maintain a minimum interest coverage ratio. In addition, the Prior A&R Credit Agreement contained 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.
Subsequent to the quarter ended September 30, 2023, the Company 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 or 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 million and a swing line loan sub-limit of up to $25 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 the Company’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, the Company is permitted to make voluntary prepayments at any time without payment of a premium or penalty. The availability of funds under the Current
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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 and its subsidiaries, 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 and its subsidiaries 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.
The Company’s obligations under the Second A&R Credit Agreement and, at the election of the Company 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, the Company and certain of the Company’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.
As of both September 30, 2023 and December 31, 2022, the Company had $500.0 million of funds available under the Prior Revolving Credit Facility. As of September 30, 2023 and December 31, 2022, the Company had no outstanding balance under the Prior Revolving Credit Facility. The Company was in compliance with all covenants of the Prior A&R Credit Agreement as of September 30, 2023. Upon entry into the Second A&R Credit Agreement, the Company had $350.0 million of funds available under the Current Revolving Credit Facility.
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.
During the three months ended September 30, 2023 and December 31, 2022, none of the conditional conversion features of the Notes were triggered, and therefore, the Notes are not convertible during the fourth quarter of 2023, commencing on October 1, 2023, and were not convertible during the first quarter of 2023, commencing on January 1, 2023. Accordingly, the Company classified the Notes as a long-term liability in its Condensed Consolidated Financial Statements as of both September 30, 2023 and December 31, 2022. Whether the Notes will be convertible following the fourth fiscal quarter of 2023 will depend on the satisfaction of the conversion conditions in the future.
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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 September 30, 2023, none of the criteria for a fundamental change or a conversion rate adjustment had been met.
As of September 20, 2023, 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 September 30, 2023, the remaining life of the Notes and the related issuance cost accretion is approximately 2.0 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 September 30, 2023, 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 September 30, 2023 and December 31, 2022:
September 30,
2023		December 31,
2022
(In thousands)
Principal amount$575,000 $575,000 
Unamortized debt issuance costs(6,113)(8,429)
Convertible senior notes, net$568,887 $566,571 
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 nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In thousands)
Contractual coupon interest$359 $359 $1,078 $1,078 
Amortization of debt issuance costs$773 $768 $2,316 $2,298 
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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, 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 multi-year, sales-type lease agreements, 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 nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In thousands)
Sales-type lease revenues$14,388 $10,115 $27,960 $34,033 
Cost of sales-type lease revenues(7,141)(5,357)(14,183)(16,963)
Selling profit on sales-type lease revenues$7,247 $4,758 $13,777 $17,070 
The receivables as a result of these types of transactions are collateralized by the underlying equipment leased and consist of the following components at September 30, 2023 and December 31, 2022:
September 30,
2023		December 31,
2022
(In thousands)
Net minimum lease payments to be received$62,470 $50,755 
Less: Unearned interest income portion(9,221)(6,345)
Net investment in sales-type leases53,249 44,410 
Less: Current portion (1)
(11,618)(11,486)
Long-term investment in sales-type leases, net$41,631 $32,924 
_________________________________________________
(1)    The current portion of the net investment in sales-type leases is included in other current assets in the Condensed Consolidated Balance Sheets.
20
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:
September 30,
2023
(In thousands)
Remaining three months of 2023$3,828 
202413,431 
202511,351 
20269,053 
20277,286 
Thereafter17,521 
Total future minimum sales-type lease payments62,470 
Present value adjustment(9,221)
Total net investment in sales-type leases$53,249 
Operating Leases
The following table represents the Company’s income recognized from operating leases for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In thousands)
Rental income$1,330 $2,327 $5,459 $7,220 
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 September 30, 2023, the Company did not have any additional material operating leases that were entered into, but not yet commenced.
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:
September 30,
2023
(In thousands)
Remaining three months of 2023$3,340 
202412,266 
20259,604 
20268,942 
20277,334 
Thereafter8,054 
Total operating lease payments49,540 
Present value adjustment(6,078)
Total operating lease liabilities (1)
$43,462 
_________________________________________________
(1)    Amount consists of a current and long-term portion of operating lease liabilities of $10.6 million and $32.8 million, respectively. The current portion of the operating lease liabilities is included in accrued liabilities in the Condensed Consolidated Balance Sheets.
21
Operating lease costs were $2.6 million and $4.0 million for the three months ended September 30, 2023 and 2022, respectively, and $8.2 million and $12.8 million for the nine months ended September 30, 2023 and 2022, respectively. Short-term lease costs and variable lease costs were not material for the three and nine months ended September 30, 2023 and 2022. The Company recorded impairment and abandonment charges to operating lease right-of-use assets of $7.8 million during the nine months ended September 30, 2023, and $0.3 million and $5.4 million during the three and nine months ended September 30, 2022, respectively, 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 nine months ended September 30, 2023 and 2022: