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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, 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)
Delaware94-3166458
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
2625 Augustine Drive, Suite 301
Santa Clara, CA 95054
(Address of registrant’s principal executive offices, including zip code)

(650251-6100
(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 FilerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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 October 28, 2022, there were 44,649,842 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,
2022
December 31,
2021
(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents$266,402 $349,051 
Accounts receivable and unbilled receivables, net of allowances of $5,012 and $5,272, respectively
354,098 240,894 
Inventories147,096 119,924 
Prepaid expenses24,862 22,499 
Other current assets56,674 48,334 
Total current assets849,132 780,702 
Property and equipment, net88,356 71,141 
Long-term investment in sales-type leases, net33,807 18,391 
Operating lease right-of-use assets44,133 48,549 
Goodwill731,294 738,900 
Intangible assets, net251,004 277,616 
Long-term deferred tax assets16,619 15,883 
Prepaid commissions54,994 63,795 
Other long-term assets110,346 127,519 
Total assets$2,179,685 $2,142,496 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$73,517 $71,513 
Accrued compensation42,799 71,130 
Accrued liabilities146,440 133,167 
Deferred revenues, net113,925 112,196 
Convertible senior notes, net 488,152 
Total current liabilities376,681 876,158 
Long-term deferred revenues34,519 20,194 
Long-term deferred tax liabilities16,140 51,705 
Long-term operating lease liabilities41,862 39,911 
Other long-term liabilities9,285 7,839 
Convertible senior notes, net565,803  
Total liabilities1,044,290 995,807 
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; 54,929 and 54,073 shares issued; 44,646 and 44,179 shares outstanding, respectively
55 54 
Treasury stock at cost, 10,283 and 9,894 shares outstanding, respectively
(290,319)(238,109)
Additional paid-in capital1,030,665 1,024,580 
Retained earnings419,136 368,571 
Accumulated other comprehensive loss(24,142)(8,407)
Total stockholders’ equity1,135,395 1,146,689 
Total liabilities and stockholders’ equity$2,179,685 $2,142,496 
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,
2022202120222021
(In thousands, except per share data)
Revenues:
Product revenues$246,565 $213,970 $706,246 $589,006 
Services and other revenues101,494 82,432 292,027 231,978 
Total revenues348,059 296,402 998,273 820,984 
Cost of revenues:
Cost of product revenues134,023 110,743 374,175 303,597 
Cost of services and other revenues54,941 38,880 156,864 112,027 
Total cost of revenues188,964 149,623 531,039 415,624 
Gross profit159,095 146,779 467,234 405,360 
Operating expenses:
Research and development25,171 19,477 76,556 53,770 
Selling, general, and administrative115,459 97,910 354,644 273,672 
Total operating expenses140,630 117,387 431,200 327,442 
Income from operations18,465 29,392 36,034 77,918 
Interest and other income (expense), net(1,148)(6,065)(2,973)(18,715)
Income before provision for income taxes17,317 23,327 33,061 59,203 
Provision for (benefit from) income taxes543 (5,990)(995)(4,665)
Net income$16,774 $29,317 $34,056 $63,868 
Net income per share:
Basic $0.38 $0.67 $0.77 $1.48 
Diluted$0.37 $0.61 $0.73 $1.35 
Weighted-average shares outstanding:
Basic44,441 43,648 44,304 43,293 
Diluted45,819 48,341 46,759 47,195 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

4

OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(In thousands)
Net income$16,774 $29,317 $34,056 $63,868 
Other comprehensive loss:
Foreign currency translation adjustments(6,770)(2,299)(15,735)(2,268)
Other comprehensive loss(6,770)(2,299)(15,735)(2,268)
Comprehensive income$10,004 $27,018 $18,321 $61,600 
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
Accumulated
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.
6

OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) - CONTINUED
Common StockTreasury StockAdditional
Paid-In Capital
Accumulated
Earnings
Accumulated Other
Comprehensive Income (Loss)
Stockholders’
Equity
SharesAmountSharesAmount
(In thousands)
Balances as of December 31, 202052,677 $53 (9,894)$(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 plans388 — — — 20,826 — — 20,826 
Tax payments related to restricted stock units— — — — (2,596)— — (2,596)
Balances as of March 31, 202153,065 53 (9,894)(238,109)950,361 304,849 (6,143)1,011,011 
Net income— — — — — 20,424 — 20,424 
Other comprehensive income— — — — — — 652 652 
Share-based compensation— — — — 13,039 — — 13,039 
Issuance of common stock under employee stock plans265 — — — 11,517 — — 11,517 
Tax payments related to restricted stock units— — — — (4,071)— — (4,071)
Balances as of June 30, 202153,330 53 (9,894)(238,109)970,846 325,273 (5,491)1,052,572 
Net income— — — — 29,317 — 29,317 
Other comprehensive loss— — — — — (2,299)(2,299)
Share-based compensation— — — 13,666 — — 13,666 
Issuance of common stock under employee stock plans433 1 — — 21,573 — — 21,574 
Tax payments related to restricted stock units— — — — (3,494)— — (3,494)
Balances as of September 30, 202153,763 $54 (9,894)$(238,109)$1,002,591 $354,590 $(7,790)$1,111,336 
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,
20222021
(In thousands)
Operating Activities
Net income$34,056 $63,868 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization64,843 53,140 
Loss on disposal of property and equipment331 297 
Share-based compensation expense50,731 38,477 
Deferred income taxes(17,061)2,042 
Amortization of operating lease right-of-use assets9,709 8,764 
Impairment and abandonment of operating lease right-of-use assets related to facilities5,390  
Amortization of debt issuance costs3,121 2,570 
Amortization of discount on convertible senior notes 13,874 
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables(116,895)(39,561)
Inventories(32,269)(10,138)
Prepaid expenses(2,602)(8,229)
Other current assets6,692 (1,059)
Investment in sales-type leases(17,336)2,686 
Prepaid commissions8,801 (1,030)
Other long-term assets4,189 2,567 
Accounts payable2,043 33,111 
Accrued compensation(27,940)(12,018)
Accrued liabilities11,678 20,149 
Deferred revenues17,667 21,225 
Operating lease liabilities(10,966)(9,392)
Other long-term liabilities1,446 (9,166)
Net cash provided by (used in) operating activities(4,372)172,177 
Investing Activities
Software development for external use(9,648)(24,141)
Purchases of property and equipment(33,861)(17,892)
Business acquisitions, net of cash acquired(3,392)(178,080)
Purchase price adjustments from business acquisitions
5,484  
Net cash used in investing activities(41,417)(220,113)
Financing Activities
Proceeds from issuances under stock-based compensation plans39,539 53,917 
Employees’ taxes paid related to restricted stock units(11,442)(10,161)
Change in customer funds, net(402)(3,059)
Stock repurchases(52,210) 
Net cash provided by (used in) financing activities(24,515)40,697 
Effect of exchange rate changes on cash and cash equivalents(1,425)(492)
Net decrease in cash, cash equivalents, and restricted cash(71,729)(7,731)
Cash, cash equivalents, and restricted cash at beginning of period355,620 489,920 
Cash, cash equivalents, and restricted cash at end of period$283,891 $482,189 
Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents$266,402 $481,549 
Restricted cash included in other current assets17,489 640 
Cash, cash equivalents, and restricted cash at end of period$283,891 $482,189 
Supplemental disclosure of non-cash activities
Unpaid purchases of property and equipment$1,473 $691 
Transfers between inventory and property and equipment, net$314 $1,876 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
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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, 2022 and December 31, 2021, the results of operations and comprehensive income for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 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 and comprehensive income for the three and nine months ended September 30, 2022, and cash flows for the nine months ended September 30, 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 September 30, 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.
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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 BalancesASU 2020-06 Adoption ImpactPost-ASU 2020-06 Balances
(In thousands)
Long-term deferred tax assets$15,883 $(452)$15,431 
Convertible senior notes, net488,152 75,353 563,505 
Long-term deferred tax liabilities51,705 (19,572)32,133 
Additional paid-in capital1,024,580 (72,742)951,838 
Retained earnings368,571 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
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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, now a part of the Company’s Specialty Pharmacy Services (“Specialty Pharmacy 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.
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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 (2) (3)
MarkeTouch Media (4)
(In thousands)
Purchase price transferred:
Base purchase price$177,000 $100,000 $82,000 
Add: Closing cash465 6,569 237 
Add: Net working capital adjustment1,654 (7,357)147 
Less: Assumed indebtedness(653)(1,973)(15)
Total purchase price transferred$178,466 $97,239 $82,369 
FDS Amplicare (1)
ReCept
(Preliminary) (2) (3)
MarkeTouch Media
(Preliminary) (4)
Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents$465 $ $237 
Accounts receivable and unbilled receivables5,330 2,383 2,302 
Prepaid expenses506 192 96 
Other current assets45 12,223  
Total current assets6,346 14,798 2,635 
Property and equipment444 172 177 
Operating lease right-of-use assets2,252 773 602 
Goodwill117,784 77,394 42,273 
Intangible assets70,000 28,100 38,000 
Other long-term assets51 195 2,850 
Total assets196,877 121,432 86,537 
Accounts payable950 219 473 
Accrued compensation1,312 1,756  
Accrued liabilities1,497 18,499 292 
Deferred revenues1,916 222 347 
Long-term deferred tax liabilities11,686 2,883  
Long-term operating lease liabilities920 614 206 
Other long-term liabilities130  2,850 
Total liabilities18,411 24,193 4,168 
Total purchase price$178,466 $97,239 $82,369 
Total purchase price, net of cash acquired$178,001 $90,670 $82,132 
_________________________________________________
(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. During the nine months ended September 30, 2022, the Company recorded a measurement period adjustments of $0.4 million to goodwill, consisting of an increase in long-term deferred tax liabilities and accrued liabilities of $0.3 million and $0.1 million, respectively.
(2)    Closing cash is included in other current assets due to its restrictive nature as cash held for customers.
(3)    During the nine months ended September 30, 2022, the Company recorded measurement period adjustments of $4.2 million to goodwill, consisting of a purchase price adjustment of $5.2 million and a decrease in long-term deferred tax liabilities of $0.7 million, partially offset by a decrease to other current assets of $1.7 million.
(4)    During the second quarter of 2022, the Company recorded a measurement period adjustment of $0.3 million to goodwill related to a purchase price adjustment.
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The $117.8 million of goodwill arising from the FDS Amplicare acquisition is primarily attributed to future sales of SaaS solutions and FDS Amplicare’s assembled workforce. The $77.4 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 FDS Amplicare and ReCept goodwill is expected to be deductible for tax purposes as these acquisitions were treated as stock acquisitions for U.S. tax purposes. The $42.3 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 as this acquisition was treated as an asset acquisition for U.S. tax purposes.
The identifiable intangible assets acquired and their estimated useful lives for amortization are as follows:
FDS Amplicare (1)
ReCeptMarkeTouch Media
Fair valueUseful life
(years)
Fair valueUseful life
(years)
Fair valueUseful life
(years)
(In thousands, except for years)
Customer relationships$59,900 23$28,100 23$34,100 26
Acquired technology7,700 
5 - 7
— 2,100 4
Backlog— — 1,800 2
Trade names2,400 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.
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Pro Forma Financial Information
The following table presents certain unaudited pro forma consolidated financial information for the three and nine months ended September 30, 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 September 30,Nine Months Ended September 30,
20212021
(In thousands)
Pro forma revenues$313,170 $873,061 
Pro forma net income$31,157 $65,050 
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, IVX Station 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, Specialty Pharmacy Services, and services associated with Omnicell One™, Central Pharmacy Dispensing Services, including the XR2 Automated Central Pharmacy System, and Central Pharmacy Compounding Services, including IVX Station and 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