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Item 1A. Risk Factors

2022-02-25 compared with 2021-02-24 · 312 added, 156 removed, 262 unchanged (64% of the section changed)

Summary of Risk Factors

An investment in our company involves various risks.

The following is a summary of these risks, but does not address all of the risks that we face.

Additional discussion of the risks that we face can be found following this summary and should be carefully considered together with all of the other information appearing in this Annual Report on Form 10-K.

Risk Factors Related to our Business and Industry

• COVID-19 Risks.

The impact of the COVID-19 pandemic could continue to adversely affect our workforce and operations, as well as those of our customers and suppliers.

• Technology Risks.

We may be unable to develop new solutions or enhance existing solutions to react to changes in technology and customer requirements in a timely and cost-effective manner.

• Market Risks.

We are subject to continued and increased competition from current and future competitors in the medication management automation solutions market and the medication adherence solutions market, including price competition, industry and competitor consolidation, competitor brand recognition, and in relationships with our suppliers and current and potential customers.

• Economic Conditions and Demand Risks.

Weak economic conditions may adversely impact our business, as well as any reduction in demand for or adoption of Omnicell’s medication management solutions, medication packaging systems, or related services.

• Debt Risks.

We have substantial debt, which could impair our financial flexibility and access to capital, and are subject to covenants in our A&R Credit Agreement (as defined below) that restrict our business and operations.

• Strategic Risks.

Our investments in new business strategies or initiatives, including our transition to selling more products and services on a subscription basis, are inherently risky and may not be successful.

In addition, we may be unable to realize the potential benefits of our acquired businesses, including the 340B Link business of Pharmaceutical Strategies Group, LLC (the “340B Link Business”), RxInnovation Inc., operating as FDS Amplicare (“FDS Amplicare”), ReCept Holdings, Inc.

(“ReCept”), and MarkeTouch Media, LLC (“MarkeTouch Media”) and risks related to investments in new business strategies and initiatives could disrupt ongoing business and present risks not originally contemplated.

• Legal, Regulatory, and Healthcare Industry Risks.

Government regulations, legislative changes, fraud and anti-kickback statues, products liability claims, the outcome of legal proceedings, and other legal obligations related to healthcare, privacy, data protection, and information security, and the costs of compliance with, and potential liability associated with, our actual or perceived failure to comply with such obligations could adversely impact our business and results of operations.

• Data Security Risks.

A significant disruption in our information technology systems, breaches of data security or cyber-attacks on our systems or solutions could adversely impact our business and results of operations.

• International Operations Risks.

Our operations in foreign countries expose us to additional risks, including distribution, management, and systems integration issues, reduced intellectual property protections, adverse changes in international laws, fluctuations in currency exchange rates, political unrest, and pandemics or other major public health crises.

• Workforce Risks.

We may be unable to recruit and retain skilled and motivated personnel.

• Intellectual Property Risks.

Any failure to protect our intellectual property rights could negatively affect our ability to compete.

• Institutional, Retail and Specialty Pharmacy Risks.

We may fail to meet the demands of, or maintain relationships with, our institutional and retail pharmacy customers.

• Materials Risks.

We use raw materials and components that may be subject to price fluctuations, shortages, or interruptions of supply.

• Suppliers/Third-Party Vendors Risks .

We may be unable to obtain an adequate supply of components, equipment, and raw materials on a timely basis.

We depend on technologies provided by third-party vendors.

Risks Related to Ownership of Our Common Stock

• The market price of our common stock may be volatile and the anti-takeover provisions of Delaware law and in our governing documents may make a change in control of our Company more difficult, even if a change in control would be beneficial to our stockholders.

Risks Related to Our Notes

• Any conversion of our Notes may dilute the ownership interest of our stockholders, depress the price of our common stock or, if the conditional conversion feature of the Notes is triggered, adversely affect our financial condition and operating results.

Also, our convertible note hedge transactions may decrease the value of our common stock.

General Risks

• We may be subject to adverse consequences related to tax rates and changes in tax legislation, catastrophic events, and any failure to maintain effective internal control over financial reporting.

We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition or results of operations.

Our business faces significant risks and the risks described below may not be the only risks we face.

Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations.

Additional risks not presently known to us or that we currently believe are not material may also significantly impair our business operations.

If any of these risks occur, our business, results of operations, or financial condition could suffer and the market price of our common stock could decline.

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Risk Factors Related to our Business and Industry

We face risks related to adverse public health epidemics, including the ongoing global COVID-19 pandemic, which had an adverse effect on and, depending on the severity and duration of the pandemic, could continue to adversely affect our business, financial condition, and results of operations.

The continued spread of COVID-19, concerns over the pandemic, and related containment measures have adversely impacted our workforce and operations, as well as those of our customers and suppliers, and had an adverse effect on and, depending on the severity and duration of the ongoing COVID-19 pandemic, could continue to adversely affect our business, financial condition, and results of operations.

In response to the ongoing pandemic, the vast majority of our non-manufacturing and non-customer facing personnel continues to work from home.

We face risks related to adverse public health epidemics, including the ongoing global COVID-19 pandemic (including new variants of the virus), which could continue to adversely affect our business, financial condition, and results of operations.

The continued spread of COVID-19 (including new variants of the virus), concerns over the pandemic, and related containment measures have adversely impacted our workforce and operations, as well as those of our customers and suppliers, and could continue to adversely affect our business, financial condition, and results of operations.

Continued disruption to our suppliers as a result of the COVID-19 pandemic and associated containment measures could significantly disrupt our supply chain, increase our procurement costs, and impact our ability to manufacture our products, which would negatively impact our sales and operating results.

As a result of disruptions in the supply chain, we are experiencing the impact of price inflation, primarily due to semiconductor and other component costs and, to a lesser extent, freight and raw materials.

If significant or critical portions of our workforce are unable to work effectively as a result of the COVID-19 pandemic, including because of illness, quarantines, facility closures, ineffective remote work arrangements, or technology failures or limitations, our operations would be materially adversely impacted.

In addition, if our customers are required to reinstate or implement new restrictions on in-person interaction, whether occasioned by government orders or internal policy changes regarding social distancing and group activity, the ability to install and implement our hardware or software may be impeded, which may have a material impact on our business.

Demand for our solutions, many of which involve a significant initial financial commitment from our customers, is largely dependent on our customers’ financial strength and capital and operating budgets.

As a result of the pandemic, health systems have faced financial pressures which we believe led our customers to delay or defer purchasing decisions and/or installations of our solutions during the first half of 2020.

However, starting in the third quarter of 2020, we began to see our customers returning to pre-pandemic purchasing patterns consistent with long-term strategic investments.

However, any future decisions by our customers to cancel, defer or delay capital expenditure projects, generally reduced capital expenditures by healthcare facilities, and financial losses sustained by health systems as a result of the COVID-19 pandemic, could again decrease demand for our products and related services, resulting in decreased revenue and lower revenue growth rates, which would adversely affect our operating results, perhaps materially.

In addition, although we have not experienced any material disruptions to our supply chain to date, any future prolonged disruption to our suppliers as a result of the COVID-19 pandemic and associated containment measures could significantly disrupt our supply chain and impact our ability to produce our products, which would negatively impact our sales and operating results.

As a result of the pandemic, health systems have faced financial and operational pressures which we believe led our customers to delay or defer purchasing decisions and/or installations of our solutions during the first half of 2020.

Beginning in the third quarter of 2020, we began to see our customers returning to pre-pandemic purchasing patterns consistent with long-term strategic investments and this trend has continued through 2021.

However, as the COVID-19 pandemic continues to evolve, any future decisions by our customers to cancel, defer, or delay capital expenditure projects, generally reduced capital expenditures by healthcare facilities, and financial losses sustained by health systems as a result of the COVID-19 pandemic could, again, decrease demand for our

products and related services, resulting in decreased revenue and lower revenue growth rates, which would adversely affect our operating results—perhaps materially.

Furthermore, the COVID-19 pandemic has significantly increased economic and demand uncertainty and has led to disruption and volatility in the global capital markets, which could increase the cost of capital and adversely impact access to capital not only for us, but also for our customers and suppliers.

Weak economic conditions and inability to access capital in a timely manner, or at all, could reduce our customers’ demand for our products and services, which would adversely affect our operating results—perhaps materially.

The global COVID-19 pandemic continues to rapidly evolve, and the full extent to which COVID-19 will continue to impact our business, results of operations, and financial position will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the severity, resurgences, and duration of the outbreak, travel restrictions, business closures or disruptions, and the effectiveness of actions taken to contain and treat the disease, including the timeline for distribution of vaccinations.

To the extent the COVID-19 pandemic continues to adversely affect our business and financial results, it may also have the effect of heightening certain other risks described in this “Risk Factors” section, including, but not limited to, those relating to unfavorable economic and market conditions, our ability to develop new products or enhance existing products, the need to compete successfully against new product or service entrants, our need to generate sufficient cash flows to service our indebtedness, our tax rates, and our international operations.

Similarly, in the event our access to the capital markets is constrained, our cost of borrowing could increase or we may be unable to obtain new or additional financing or re-financing in the future, either of which could have a material effect on our operations.

The COVID-19 pandemic continues to rapidly evolve, and the full extent to which COVID-19 (including new variants of the virus) will continue to impact our business, results of operations, and financial position will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the severity, resurgences, and duration of outbreaks, travel restrictions, business closures or disruptions, and the effectiveness of actions taken to contain and treat the disease.

While certain COVID-19 vaccinations (including booster vaccinations) have now been approved and are being distributed globally, we are unable to predict the duration of the pandemic and when economic activity and business operations will normalize.

To the extent the COVID-19 pandemic continues to adversely affect our business and financial results, it may also have the effect of heightening certain other risks described in this “Risk Factors” section, including, but not limited to, those relating to unfavorable economic and market conditions, our ability to develop new products or services or enhance existing products or services, the need to compete successfully against new product or service entrants, our need to generate sufficient cash flows to service our indebtedness, our tax rates, and our international operations.

Unfavorable economic and market conditions and a decreased demand in the capital equipment market could adversely affect our operating results.

Customer demand for our products is significantly linked to the strength of the economy.

If decreases in demand for capital equipment caused by weak economic conditions and decreased corporate and government spending, any effects of fiscal budget balancing at the federal level, proposed legislative changes or other uncertainties in connection with the change in administration, deferrals or delays of capital equipment projects, longer timeframes for capital equipment purchasing decisions, or generally reduced expenditures for capital solutions occurs, we will experience decreased revenues and lower revenue growth rates, and our operating results could be materially and adversely affected.

If decreases in demand for capital equipment caused by weak economic conditions and decreased corporate and government spending, any effects of fiscal budget balancing at the federal level or proposed legislative changes, deferrals or delays of capital equipment projects, longer timeframes for capital equipment purchasing decisions, or generally reduced expenditures for capital solutions occur, we will experience decreased revenues and lower revenue growth rates, and our operating results could be materially and adversely affected.

We may fail to develop new solutions or enhance existing solutions to react to changes in technology and customer requirements in a timely and cost-effective manner, or our new or enhanced solutions may not achieve market acceptance.

We must develop new products or enhance existing products to react to evolving technologies and industry standards, and meet changing demands of our customers.

We must develop new products and services or enhance existing products to react to evolving technologies and industry standards, and meet changing demands of our customers.

This process can be time-consuming, costly, and complex, and usually requires us to accurately anticipate technological innovations and market trends.

Our ability to fund product development and enhancements partially depends on our ability to generate revenues from our existing products.

New product and service developments, or product enhancements, may be late, have technical problems (including software defects, errors, or bugs), fail to meet customer or market specifications, not be competitive with other products using alternative technologies that offer comparable performance and functionality, or not be accepted in new or existing markets, which, in any case, could damage our reputation or otherwise harm our business, financial condition, and results of operations.

Our ability to execute successfully on our vision of a fully digitized and autonomous pharmacy depends on our ability to continue to develop and introduce new products or product enhancements, and integrate new products with existing offerings, in furtherance of this vision in a timely manner and on a cost-effective basis.

If we fail to do so, we may be unable to achieve the vision of the autonomous pharmacy, we may not realize the anticipated benefits of our investments in support of this vision, and this could have a material adverse effect on our business, financial condition, and results of operations.

If we inaccurately anticipate technological innovations or market trends or fail to generate sufficient revenue to develop new products or enhance existing products, our ability to generate future revenues or revenue growth may be negatively impacted, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

New product and service developments or enhancements, may be delayed, have technical problems (including software defects or errors), fail to meet customer or market specifications, not be competitive with other products using alternative technologies that offer comparable performance and functionality, or not be accepted in new or existing markets, which, in any case, could damage our reputation or otherwise harm our business, financial condition, and results of operations.

Our ability to execute successfully on the industry vision of the Autonomous Pharmacy depends on our ability to continue to develop and introduce new products and services or product and service enhancements, and integrate new products and services with existing offerings, in furtherance of this vision in a timely manner and on a cost-effective basis.

If we fail to do so, we may be unable to achieve the industry vision of the Autonomous Pharmacy, we may not realize the anticipated benefits of our investments in support of this vision, and this could have a material adverse effect on our business, financial condition, and results of operations.

We operate in highly competitive markets, and we may be unable to compete successfully.

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• current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties, including larger, more established healthcare supply companies, thereby increasing their ability to develop and offer a broader suite of products and services;

• our industry has recently experienced a significant degree of consolidation which could lead to competitors developing new business models that require us to adapt how we market, sell, or distribute our products or could also lead to competitors with greater economies of scale that have lower cost of operations allowing them to sell their products and services at a lower cost;

• certain competitors have greater brand name recognition and a more extensive installed base than we do, and such advantages could be used to increase their market share;

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• our competitors may secure products and services from suppliers on more favorable terms or secure exclusive arrangements with suppliers or buyers that may impede the sales of our products and services.

If we fail to compete successfully against new entrants and established companies, it could materially adversely affect our business, financial condition, results of operations, and cash flows.

Any reduction in the demand for or adoption of our medication management automation solutions, medication packaging systems, or related services would reduce our revenues.

If we fail to compete successfully against current or future competitors, it could materially adversely affect our business, financial condition, results of operations, and cash flows.

Any reduction in the demand for or adoption of our medication management solutions, medication packaging systems, or related services would reduce our revenues.

A significant portion of domestic and international healthcare facilities still use traditional approaches to medication and/or supply management in some form that do not include fully-automated methods of medication management.

As a result, we must continuously educate existing and prospective customers about the advantages of our medication management automation solutions and medication packaging systems, which requires significant sales efforts and can cause longer sales cycles.

As a result, we must continuously educate existing and prospective customers about the potential advantages of our medication management solutions and medication packaging systems, which requires significant sales efforts and can cause longer sales cycles.

Despite our significant efforts and extensive time commitments in sales to healthcare facilities, we cannot be assured that our efforts will result in sales to these customers.

In addition, our medication management automation solutions and our more complex automated packaging systems typically represent a sizable initial capital expenditure for healthcare organizations.

Changes in the budgets of these organizations and the timing of spending under these budgets can have a significant effect on the demand for our medication management automation solutions, medication packaging systems, and related services.

In addition, our medication management solutions and our more complex automated packaging systems typically represent a sizable initial capital expenditure for healthcare organizations.

Changes in the budgets of these organizations and the timing of spending under these budgets can have a significant effect on the demand for our medication management solutions, medication packaging systems, and related services.

These budgets are often supported by cash flows that can be negatively affected by declining investment income and influenced by limited resources, increased operational and financing costs, macroeconomic conditions, and conflicting spending priorities among different departments.

Any decrease in expenditures by healthcare facilities or increased financing costs (including as a result of the impacts of public health crises such as the ongoing COVID-19 pandemic) could decrease demand for our medication management automation solutions, medication packaging systems, and related services, and reduce our revenues.

Also, the continuing gradual transition to value-based reimbursement could shift more of the burden for financial risk onto healthcare provider organizations and could decrease utilization of healthcare per patient.

Value-based reimbursement could also cause a shift in care from traditional venues, such as hospitals and clinics, to the home, and could impact our revenues.

Any decrease in expenditures or change in spending priorities by healthcare facilities or increased financing costs (including as a result of the impacts of public health crises such as the ongoing COVID-19 pandemic) could decrease demand for our medication management solutions, medication packaging systems, and related services, and reduce our revenues.

Also, the continuing gradual transition to a value-based care healthcare delivery model could shift more of the burden for financial risk onto healthcare provider organizations and could decrease utilization of healthcare per patient.

Value-based care could also cause a shift in sites of care from traditional venues, such as hospitals and clinics, to the home, and could impact our revenues.

We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position.

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Bank National Association, as trustee.

We used a portion of the proceeds from the issuance of the Notes to repay all outstanding borrowings under the revolving credit facility.

We used a portion of the proceeds from the issuance of the Notes to repay all outstanding borrowings under the revolving credit facility at the time.

Our debt may limit our ability to borrow additional funds or use our existing cash flow for working capital, capital expenditures, acquisitions, or other general business purposes;

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Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, including the Notes, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.

Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures.

If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as borrowing more money, selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive.

Our business may not continue to, and we cannot provide assurance that our business will, generate cash flow from operations in the future sufficient to fund our cash requirements, service our debt or make necessary capital expenditures.

Our failure to generate sufficient cash flow to pay our debts could have a material adverse effect on our business.

In addition, if we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as borrowing more money, selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive.

Any of these actions still may not be sufficient to allow us to service our debt obligations or may otherwise have an adverse effect on our business.

Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.

We may not be able to engage in any of these activities or do so on desirable terms, which could result in a default on our debt obligations.

We may not be able to engage in any of these activities or to do so on desirable terms, which could result in a default on our debt obligations.

In addition, as more fully described below in the risk factor captioned “ Covenants in our A&R Credit Agreement restrict our business and operations in many ways, and if we do not effectively manage our compliance with these covenants, our financial conditions and results of operations could be adversely affected, ” the A&R Credit Agreement includes customary restrictive covenants that impose operating and financial restrictions on us.

In addition, borrowings under the A&R Credit Agreement bear interest based on the London Interbank Offered Rate (“LIBOR”).

LIBOR is the subject of recent national, international, and other regulatory guidance and proposals for reform.

These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past.

The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of borrowings under the A&R Credit Agreement and other financial contracts that we may enter into that are indexed to LIBOR.

In addition, borrowings under the A&R Credit Agreement currently bear interest based on the London Interbank Offered Rate (“LIBOR”), however as of December 31, 2021, LIBOR has started being phased out, and LIBOR is expected to be entirely discontinued on June 30, 2023.

The phasing out or discontinuance of LIBOR and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past.

In addition, the A&R Credit Agreement provide that upon the occurrence of certain triggering events relating to the end of LIBOR, we and the administrative agent will select a different benchmark rate to replace LIBOR.

The consequences of these developments cannot be entirely predicted, but changes in, or the inability to agree on, an alternative rate or benchmark could result in an increase in the cost of borrowings under the A&R Credit Agreement and other financial contracts that we may enter into that are currently indexed to LIBOR.

The transition to selling more products which include a software as a service or solution as a service subscription presents a number of risks.

We currently offer our IV compounding robots, PakPlus-Rx service, and XR2 Automated Central Pharmacy System together with personnel to operate the equipment and expert services to optimize utilization through subscription agreements.

We also offer Omnicell One (formerly Performance Center), EnlivenHealth Patient Engagement, 340B, and certain other products and solutions as a subscription and/or service.

IVX Workflow also contains a payment stream as part of the license fees in its pricing structure.

As we continue to execute on the autonomous pharmacy vision and grow subscription and cloud-based offerings, we may offer additional products and services on a subscription basis.

We also offer Omnicell One, EnlivenHealth Patient Engagement, 340B, FDS Amplicare, and certain other products and solutions as a subscription and/or service.

As we continue to execute on the industry vision of the Autonomous Pharmacy and grow subscription and cloud-based offerings, we may offer additional products and services on a subscription basis.

The transition to selling more products and services on a subscription basis presents a number of risks.

The shift requires an investment of technical, financial,

compliance, and sales resources, and we cannot guarantee that we will recoup the costs of such investments, or that these investments will improve our long-term growth and results of operations.

If adoption of subscription solutions takes place faster than anticipated, the shift to subscription revenues will change the timing of revenue recognition and we may experience a temporary reduction of revenues.

The shift requires an investment of technical, financial, compliance, and sales resources, and we cannot guarantee that we will recoup the costs of such investments, or that these investments will improve our long-term growth and results of operations.

In addition, our cash flows may be impacted by the timing of invoicing of our subscription solutions.

If any of our subscription solutions do not substantially meet customer requirements, contracts may be modified, causing a decline in revenue.

Customers may elect not to renew their subscriptions upon expiration, or they may attempt to renegotiate pricing or other contractual terms at or prior to renewal on terms that are less favorable to us.

In addition, since revenues are generally recognized over the term of the subscription, any decrease in customer purchases of our subscription-based products and services will not be fully reflected in our operating results until future periods, and it will also be more difficult for us to rapidly increase our revenues through additional subscription sales in any one period.

Delays in installations of our medication management automation solutions or our more complex medication packaging systems could harm our competitive position, results of operations, and financial condition.

The purchase of our medication management automation solutions or our more complex medication packaging systems is often part of a customer’s larger initiative to re-engineer its pharmacy and their distribution and materials management systems.

Customers may elect not to renew their subscriptions upon expiration, or they may attempt to renegotiate pricing or other contractual terms at or prior to renewal on

terms that are less favorable to us.

In addition, since revenues are generally recognized over the term of the subscription, any decrease in customer purchases of our subscription-based products and services will not be fully reflected in our operating results until future periods, which may result in inflated revenue growth rates that do not reflect such decreases initially.

Similarly, any additional subscription sales would not be fully reflected in our operating results until future periods.

Delays in installations of our medication management solutions or our more complex medication packaging systems could harm our competitive position, results of operations, and financial condition.

The purchase of our medication management solutions or our more complex medication packaging systems is often part of a customer’s larger initiative to re-engineer its pharmacy and their distribution and materials management systems.

The purchase of our systems often entails larger strategic purchases by customers that generally require more complex and stringent contractual requirements, involve a significant commitment of management attention and resources by prospective customers, and require the input and approval of many decision-makers.

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We have also experienced fluctuations in our customer and transaction size mix, which makes our ability to forecast our product bookings more difficult.

Because we recognize revenues for our medication management automation solutions and our more complex medication packaging systems only upon installation at a customer’s site, any delay in installation (including as a result of the impacts of public health crises such as the ongoing COVID-19 pandemic) will also cause a delay in the recognition of the revenues for those systems.

Because we recognize revenues for our medication management solutions and our more complex medication packaging systems only upon installation at a customer’s site, any delay in installation (including as a result of the impacts of public health crises such as the ongoing COVID-19 pandemic) will also cause a delay in the recognition of the revenues for those systems.

We are subject to laws, regulations, and other legal obligations related to privacy, data protection, and information security, and the costs of compliance with, and potential liability associated with, our actual or perceived failure to comply with such obligations could harm our business.

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Regulatory focus on data privacy and security concerns continues to increase globally, and laws and regulations concerning the collection, use, and disclosure of personal information are expanding and becoming more complex.

In the United States, these include federal health information privacy laws (such as the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), discussed below), security breach notification laws, and consumer protection laws, as well as state laws addressing privacy and data security (such as the California Consumer Privacy Act of 2018 and the California Privacy Rights Act of 2020).

Internationally, various foreign jurisdictions in which we operate have established, or are developing, their own data privacy and security legal framework with which we or our customers must comply.

In the United States, these include federal health information privacy laws (such as the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), discussed below), security breach notification laws, and consumer protection laws, as well as state laws addressing privacy and data security (such as the California Consumer Privacy Act of 2018 (“CCPA”) and the California Privacy Rights Act of 2020 (“CPRA”)).

While HIPAA does not create a private right of action, its standards have been used as the basis for civil suits and HIPAA is enforced by the Department of Health and Human Services Office for Civil Rights (“OCR”), which can bring actions against entities for noncompliance, including for failures to implement security measures sufficient to reduce risks to electronic protected health information or to conduct an accurate and thorough risk analysis, among other violations.

HIPAA enforcement actions may lead to monetary penalties and costly and burdensome corrective action plans.

We are also required to report known breaches of protected health information consistent with applicable breach reporting requirements set forth in applicable laws and regulations.

Finally, on December 10, 2020, OCR issued proposed revisions to the Privacy Rule aimed at reducing regulatory burdens that may exist in discouraging coordination of care and patient access to their health information, among other changes.

While a final rule has not yet been issued, if adopted, these proposed changes may require us to update our HIPAA policies and procedures to comply with the new requirements.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches which is expected to increase data breach litigation.

Additionally, the CPRA, which goes into effect in January 2023, and imposes additional data protection obligations on companies doing business in California, created a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

Additional compliance investment and potential business process changes may be required.

Laws similar to those in California have passed in Virginia and Colorado, and have been proposed in other states and at the federal level that may ultimately have conflicting requirements that would further complicate compliance.

Furthermore, new health information standards, whether implemented pursuant to HIPAA, the HITECH Act, congressional action or otherwise could have a significant effect on the manner in which we handle health-related information, and the cost of

complying with these standards could be significant.

If we do not comply with existing or new laws and regulations related to patient health information, we could be subject to criminal or civil sanctions.

Internationally, various foreign jurisdictions in which we operate have established, or are developing, their own data privacy and security legal frameworks with which we or our customers must comply.

In certain cases, these international laws and regulations are more restrictive than many regulations in the United States.

For example, within the European Union, the General Data Protection Regulation (“GDPR”) imposes more stringent data protection requirements on U.S.-based companies, such as ours, which receive or process personal information from EU residents, and establishes greater penalties for non-compliance.

Violations of the GDPR can result in penalties up to the greater of €20.0 million or 4% of global annual revenues, and may also lead to damages claims by data controllers and data subjects.

Such penalties are in addition to any civil litigation claims by data controllers, customers, and data subjects.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may legally or contractually apply to us, and other regulatory protections, such as Privacy Shield, may lose their applicability to our business as regulations and legal proceedings continue to evolve globally.

We also expect that

there will continue to be new proposed laws, regulations, and industry standards relating to privacy, data protection, and information security, including in the United Kingdom, where we have business operations, as a result of Brexit.

For example, within the European Union, the General Data Protection Regulation (“EU GDPR”) grants individuals various data protection rights (e.g., the right to erasure of personal data) and imposes stringent data protection requirements on U.S.-based companies, such as ours, which fall within its scope, including inter alia:

(i) accountability and transparency requirements;

(ii) obligations to consider data protection as any new products or services are developed and to limit the amount of personal data processed;

and (iii) obligations to report certain personal data breaches to the supervisory authority without undue delay (and no later than 72 hours where feasible).

In addition, the EU GDPR prohibits the transfer of personal data from the EEA to the United States and other jurisdictions that the European Commission does not recognize as having “adequate” data protection laws unless a data transfer mechanism has been put in place.

In July 2020, the Court of Justice of the European Union limited how organizations could lawfully transfer personal data from the EEA to the United States by invalidating the EU-US Privacy Shield for purposes of international transfers and imposed further restrictions on use of standard contractual clauses (“SCCs”) (i.e., an EU-style data transfer agreement), including a requirement for companies to carry out a transfer privacy impact assessment, which among other things, assesses laws governing access to personal data in the recipient country and considers whether supplementary measures that provide privacy protections additional to those provided under SCCs will need to be implemented to ensure an essentially equivalent level of data protection to that afforded in the EEA.

Moreover, new versions of the SCCs (new “EU SCCs”) have recently been published requiring additional compliance and implementation efforts.

Administrative fines for non-compliance with the EU GDPR can be significant and can amount to fines of up to the greater of €20.0 million or 4% of global annual revenues.

The EU GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the EU GDPR.

Relatedly, following the United Kingdom’s withdrawal from the EU (i.e., “Brexit”), the EU GDPR has been implemented in the United Kingdom (as the “UK GDPR”).

The UK GDPR site alongside the UK Data Protection Act 2018 which implements certain derogations in the EU GDPR into UK law.

The requirements of the UK GDPR are (at this time) largely aligned with those under the EU GDPR and as such, may lead to similar compliance and operational costs with potential fines for non-compliance of up to £17.5 million or 4% of annual worldwide turnover.

As a result, we are potentially exposed to two parallel data protection regimes, each of which authorizes fines and the potential for divergent enforcement actions.

It should also be noted that the new EU SCCs do not automatically apply in the UK since Brexit, and the UK Government has not yet formally acknowledged the new EU SCCs, (i.e., as a valid data transfer mechanism under the UK GDPR).

Indeed, on August 11, 2021, the UK Information Commissioner’s Office launched a public consultation on its draft international data transfer agreement and guidance.

This included the publication of a draft UK addendum that can be used with the new EU SCCs – however, this is not (at this time) finalized and as such, for the time being transfers from the UK to a third country should continue to be made in reliance on the “old” SCCs.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may legally or contractually apply to us, and other regulatory protections may lose their applicability to our business as regulations and legal proceedings continue to evolve globally.

We also expect that there will continue to be new proposed laws, regulations, and industry standards relating to privacy, data protection, and information security, including in the United Kingdom (see above), where we have business operations.

We cannot predict the scope of any such future laws, regulations, and standards that may be applicable to us, or how courts, agencies, or data protection authorities might interpret current ones.

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We rely on information technology (“IT”) systems to keep financial records and corporate records, communicate with staff and external parties, and operate other critical functions, including sales and manufacturing processes.

We also utilize third-party cloud services in connection with our operations.

Our IT systems and third-party cloud services are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses, public health crises such as the ongoing COVID-19 pandemic, other catastrophic events or environmental impact.

Any prolonged system disruption in our IT systems or third-party cloud services could negatively impact the coordination of our sales, planning, and manufacturing activities, which could harm our business.

As our business needs change, we may need to expand or update our IT systems.

We also utilize third-party cloud services in connection with our operations, which also may need to be expanded or updated as our business needs change.

Our systems may also experience vulnerabilities from third-party or open source software code that may be incorporated into our own or our vendors’ systems.

Any prolonged system disruption in our IT systems or third-party services could negatively impact the coordination of our sales, planning, and manufacturing activities, which could harm our business.

In addition, in order to maximize our information technology efficiency, we have physically consolidated our primary corporate data and computer operations.

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Although we maintain offsite back-ups of our data, a disruption of operations at our facilities could materially disrupt our business if we are not capable of restoring function within an acceptable time frame.

Our IT systems and third-party cloud services are potentially vulnerable to cyber-attacks or other data security breaches, by employees or others, which may expose sensitive data to unauthorized persons.

Such data security breaches could lead to the loss of trade secrets or other intellectual property, or to the public exposure of sensitive and confidential information of our employees, customers, suppliers, and others, any of which could have a material adverse effect on our business, financial condition, and results of operations.

Our IT systems and third-party cloud services are potentially vulnerable to cyber-attacks, including ransomware, or other data security incidents, by employees or others, which may expose sensitive data to unauthorized persons.

Such data security incidents could lead to the loss of trade secrets or other intellectual property, or to the public exposure of sensitive and confidential information of our employees, customers, suppliers, and others, any of which could have a material adverse effect on our business, financial condition, and results of operations.

Moreover, a security breach or privacy violation that leads to disclosure or modification of, or prevents access to, patient information, including personally identifiable information or protected health information, could harm our reputation, result in litigation, compel us to comply with federal and/or state breach notification laws, subject us to mandatory corrective action, require us to verify the correctness of database contents, and otherwise subject us to liability under laws and regulations that protect personal data, resulting in increased costs or loss of revenues.

See, “ We are subject to laws, regulations, and other legal obligations related to privacy, data protection, and information security, and the costs of compliance with, and potential liability associated with, our actual or perceived failure to comply with such obligations could harm our business ” for additional information.

In addition, we sell certain solutions that receive, store, and process our customers’ data.

For example, our Omnicell One (formerly Performance Center) solution combines a cloud-based predictive intelligence platform with expert services designed to monitor pharmacy operations and recommend opportunities to help improve efficiency, regulatory compliance, and patient outcomes.

For example, our Omnicell One solution combines a cloud-based predictive intelligence platform with expert services designed to monitor pharmacy operations and recommend opportunities to help improve efficiency, regulatory compliance, and patient outcomes.

As another example, our EnlivenHealth Patient Engagement platform is a private cloud-based solution that supports improving patient adherence goals through a single web-based platform that hosts functionality to guide and track patient notes, interventions, and appointments.

An effective attack on our solutions could disrupt the proper functioning of our solutions, allow unauthorized access to sensitive and confidential information of our customers (including protected health information), and disrupt our customers’ operations.

Any of these events could cause our solutions to be perceived as having security vulnerabilities and reduce demand for our solutions, which could have a material adverse effect on our business, financial condition, and results of operations.

These risks are likely to increase as we continue to grow our cloud-based offerings, including in support of the autonomous pharmacy vision, and as we receive, store, and process more of our customers’ data.

While we have implemented a number of security measures designed to protect our systems and data, including firewalls, antivirus and malware detection tools, patches, log monitors, routine back-ups, system audits, routine password modifications, and disaster recovery procedures, and have designed certain security features into our solutions, such measures may not be adequate or implemented properly to prevent or fully address the adverse effect of such events, and in some cases we may be unaware of an incident or its magnitude and effects as breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm.

Additionally, we use third-party cloud providers in

connection with certain of our cloud-based offerings or third-party providers to host our own data, in which case we rely on the processes, controls, and security such third parties have in place to protect the infrastructure.

In addition to the risks and impacts noted above, any of these events could cause our solutions to be perceived as having security vulnerabilities and reduce demand for our solutions, which could have a material adverse effect on our business, financial condition, and results of operations.

These risks are likely to increase as we continue to grow our cloud-based offerings, including in support of the industry vision of the Autonomous Pharmacy, and as we receive, store, and process more of our customers’ data.

While we have implemented a number of security measures designed to protect our systems and data, including firewalls, antivirus and malware detection tools, patches, log monitors, routine back-ups, system audits, routine password modifications, and disaster recovery procedures, and have designed certain security features into our solutions, we and our third party service providers regularly defend against and respond to data security incidents and such measures may not be adequate or implemented properly to prevent or fully address the adverse effect of such events.

In some cases we may be unaware of an incident or its magnitude and effects as breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm.

In addition, while we possess insurance that currently includes coverage for cyber-attacks, we have seen a trend where the amount of coverage being offered by insurance providers for such cyber-attacks is decreasing while the cost of obtaining such coverage is increasing.

If this trend continues the insurance coverage we possess may not be adequate or the cost to obtain such coverage may become prohibitive.

We use third-party cloud providers in connection with certain of our cloud-based offerings or third-party providers to host our own data, in which case we rely on the processes, controls, and security such third parties have in place to protect the infrastructure.

We also may acquire companies, products, services, and technologies and inherit such risks when we integrate these acquisitions within Omnicell.

Any failure to prevent such security breaches or privacy violations, or implement satisfactory remedial measures, could require us to expend significant resources to remediate any damage, disrupt our operations or the operations of our customers, damage our reputation, or expose us to a risk of financial loss, litigation, regulatory penalties, contractual indemnification obligations, or other liability.

We may fail to realize the potential benefits of acquired businesses, including the 340B Link Business, which could negatively affect our business, financial condition, and operating results.

damage our reputation, damage our relationships with our customers, or expose us to a risk of financial loss, litigation, regulatory penalties, contractual indemnification obligations, or other liability.

We may fail to realize the potential benefits of acquired businesses, including the 340B Link Business, FDS Amplicare, ReCept, and MarkeTouch Media, which could negatively affect our business, financial condition, and operating results.

We have in the past acquired businesses, and expect to continue to seek to acquire businesses, technologies, or products in the future.

For example, we acquired Aesynt Incorporated ("Aesynt") and ateb, Inc.

("Ateb") in 2016, Dixie Drawl, LLC d/b/a InPharmics ("InPharmics") in 2017 and the 340B Link Business in October 2020.

We cannot provide assurance that any acquisition or future transaction we complete will result in long-term benefits to us or our stockholders, or that we will be able to effectively integrate or manage the acquired businesses, including the 340B Link Business.

For example, we acquired the 340B Link Business in October 2020, FDS Amplicare in September 2021 and ReCept and MarkeTouch Media, each in December 2021, respectively.

These transactions may involve significant challenges, uncertainties, and risks, including:

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• difficulties in right-sizing organizations and gaining synergies across acquired operations;

• complying with regulatory requirements, such as those of the FDA, that we were not previously subject to;

• complying with regulatory requirements, such as those of the U.S.

Food and Drug Administration (the “FDA”), the U.S.

Drug Enforcement Administration (the “DEA”), or state boards of pharmacy, that we were not previously subject to;

• failure to understand and compete effectively in markets in which we have limited previous experience;

• substantial costs and diversion of management’s attention when evaluating and negotiating such transactions and then integrating an acquired business, including any unforeseen delays and expenditures that may result;

• discovery, after completion of the acquisition, of liabilities assumed in acquisitions that are broader in scope and magnitude or are more difficult to manage than originally assumed;

• discovery, after completion of the acquisition, of liabilities assumed in acquisitions that are broader in scope and magnitude or are more difficult to manage than originally assumed or identified;

• difficulties assimilating and retaining key personnel of an acquired business;

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If we are not able to successfully integrate or manage the acquired businesses and their operations, or if there are delays in combining the businesses, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected and our business, financial condition, and operating results may be negatively impacted.

If goodwill or other intangible assets that we recorded in connection with the Aesynt, Ateb, InPharmics, and 340B Link Business acquisitions, or other prior acquisitions, become impaired, we could be required to take significant charges against earnings.

In connection with the accounting for the Aesynt and Ateb acquisitions in 2016, the InPharmics acquisition in 2017, and the 340B Link Business acquisition in October 2020, we recorded a significant amount of goodwill and other intangible assets, and we maintain significant goodwill and other intangible assets relating to prior acquisitions, such as our acquisitions of MTS Medication Technologies, Inc., Avantec Healthcare Limited, and Mach4 Automatisierungstechnik GmbH.

As of December 31, 2020, we had recorded approximately $666.0 million net, in goodwill and intangible assets, in connection with past acquisitions.

generally accepted accounting principles, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other indefinite-lived intangible assets has been impaired.

If goodwill or other intangible assets that we recorded in connection with our prior acquisitions become impaired, we could be required to take significant charges against earnings.

In connection with the accounting for the Aesynt and Ateb acquisitions in 2016, the InPharmics acquisition in 2017, the 340B Link Business acquisition in October 2020, the FDS Amplicare acquisition in September 2021 and the ReCept and MarkeTouch Media acquisitions, each in December 2021, respectively, we recorded a significant amount of goodwill and other intangible assets.

In addition, for our prior acquisitions of MTS Medication Technologies, Inc.

(“MTS”), Avantec Healthcare Limited, and Mach4 Automatisierungstechnik GmbH, we continue to maintain a significant amount of goodwill and, with respect to MTS, we also continue to maintain a significant amount of other intangible assets.

As of December 31, 2021, we had recorded approximately $1.015 billion net, in goodwill and intangible assets, in connection with past acquisitions.

Under GAAP, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other indefinite-lived intangible assets has been impaired.

Intangible assets subject to amortization will be assessed for impairment in the event of an impairment indicator.

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government legislation and program rulemaking may cause customers to postpone purchases of our products due to reductions in federal healthcare program reimbursement rates and/or needed changes to their operations in order to meet the requirements of legislation or in anticipation of future rulemaking.

For example, the Budget Control Act of 2011, among other things, resulted in reductions in payments to Medicare providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect into 2031 unless additional Congressional action is taken, with the exception of a temporary suspension of the 2% cut in Medicare payments from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic.

Additionally, the American Taxpayer Relief Act of 2012, among other things, reduced Centers for Medicare & Medicaid Services (“CMS”) payments to several types of providers, including hospitals, and increased the statute of limitations period for the government to recover Medicare overpayments to providers from three to five years.

Our automation solutions often involve a significant financial commitment from our customers and, as a result, our ability to grow our business is largely dependent on our customers’ capital and operating budgets.

To the extent current or proposed legislation and program rules promote spending on other initiatives or healthcare providers’ spending declines or increases more slowly than we anticipate, demand for our products and services could decline.

Healthcare providers have consolidated to create larger healthcare delivery organizations in order to achieve economies of scale and/or greater market power.

In addition, certain healthcare legislation and regulations may be challenged from time to time, in an effort to modify or repeal that legislation or those regulations.

For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the “ACA,” which was passed in March 2010 and substantially changed the way healthcare is financed by both governmental and private insurers, has been subject to numerous judicial, legislative, and regulatory efforts to replace it or to alter its interpretation or implementation.

Most recently, on June 17, 2021, the U.S.

Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the law.

It is unclear how this decision, and other efforts to challenge, repeal, replace, or otherwise modify, or alter the implementation or interpretation of the ACA will affect our business, financial condition and results of operations.

We cannot predict the success of the Company with respect to any such challenges or the effect that subsequent changes or new resulting legislation or regulations would have on our business or the healthcare industry in general.

Any future actions or developments could adversely impact the healthcare industry, including with respect to the cost of prescription drugs, regulation of pharmacy services, the administration of the federal 340B Drug Pricing Program, changes to pharmacy reimbursement rates, or the way we do business, which could have an adverse impact on our business.

Furthermore, healthcare providers have consolidated to create larger healthcare delivery organizations in order to achieve economies of scale and/or greater market power.

If this consolidation continues, it would increase the size of certain target customers, which could increase the cost, effort, and difficulty in selling our products to such customers, or could cause our existing or potential customers to begin utilizing our competitors’ products if such customers are acquired by healthcare providers that prefer our competitors’ products to ours.

In addition, the resulting organizations could have greater bargaining power, which may lead to price erosion.

This consolidation could also result in new entrants in the markets in which we operate, which presents additional risk and could result in adverse impacts on our business, see “ We operate in highly competitive markets, and we may be unable to compete successfully ” above for additional information.

Government regulation of the healthcare industry could reduce demand for our products, or substantially increase the cost to produce our products.

The manufacture and sale of most of our current products are not regulated by the FDA, or the Drug Enforcement Administration (“DEA”).

Through our acquisition of Aesynt, we have both Class I and Class II, 510(k) exempt medical devices which are subject to FDA regulation and require compliance with the FDA Quality System Regulation as well as medical device reporting.

The manufacture and sale of most of our current medication management solutions products are not directly regulated by the FDA or the DEA, although such products are used by other persons (our customers) whose pharmacy, dispensing, and compounding activities may be subject to regulation by those agencies and by state boards of pharmacy.

We have both Class I and Class II products classified as medical devices, which are subject to FDA regulation and require compliance with the FDA Quality System Regulation as well as medical device reporting, including a sterile disposable product requiring FDA 510(k) review and clearance prior to market and distribution.

Medical devices may also be subject to various other regulatory requirements, including as applicable, premarket clearance or approval, clinical trial requirements, establishment registration and device listing, complaint handling, notification and repair, replace, refund, mandatory recalls, unique device identifier (UDI) requirements, reports of removals and corrections, post-marketing surveillance, and device tracking.

Additional products may be regulated in the future by the FDA, DEA, or other federal agencies due to future legislative and regulatory initiatives or reforms.

In addition, certain provisions of the Federal Food, Drug and Cosmetic Act related to the handling, distribution and compounding of pharmaceuticals, govern all parts of the drug distribution chain, which our customers may be required to comply with and which may influence customer demand for our products.

Direct regulation of our business and products by the FDA, DEA, or other federal agencies could substantially increase the cost to produce our products and increase the time required to bring those products to market, reduce the demand for our products, and reduce our revenues.

In addition, our customers include healthcare providers and facilities subject to regulation by the DEA, pharmacies subject to regulation by individual state boards of pharmacy and hospitals subject to accreditation by accrediting organizations approved by the Centers for Medicare & Medicaid Services, such as the Joint Commission, and the rules, regulations, and standards of such regulators and accrediting organizations.

In addition, our

customers include healthcare providers and facilities subject to regulation by the DEA, pharmacies subject to regulation by the FDA and individual state boards of pharmacy and hospitals subject to accreditation by accrediting organizations approved by the CMS, such as the Joint Commission, and the rules, regulations, and standards of such regulators and accrediting organizations.

Any failure of our customers to comply with the applicable rules, regulations, and standards could reduce demand for our products and harm our competitive position, results of operations, and financial condition.

While we have implemented a Privacy and Use of Information Policy and adhere to established privacy principles, use of customer information guidelines, and related federal and state statutes, we cannot assure you that we will be in compliance with all federal and state healthcare information privacy and security laws that we are directly or indirectly subject to, including, without limitation, HIPAA.

Finally, given our customers, products, and industry relationships, we may also be subject to rules, regulations, standards, and enforcement imposed by the U.S.

Department of Health and Human Services (“HHS”), the U.S.

Department of Justice, the HHS Office of Inspector General, CMS, and the Health Resources and Services Administration, among others.

While we have implemented a Privacy and Use of Information Policy and adhere to established privacy principles, use of customer information guidelines, and related federal and state statutes, we cannot assure you that we will be in compliance with all international, federal and state healthcare information privacy and security laws that we are directly or indirectly subject to, including, without limitation, HIPAA.

Under HIPAA, we are considered a “business associate” in relation to many of our customers that are covered entities, and, as such, most of these customers have required that we enter into written agreements governing the way we handle and safeguard certain patient health information we may encounter in providing our products and services, and may impose liability on us for failure to meet our contractual obligations.

Further, pursuant to changes in HIPAA under the American Recovery and Reinvestment Act of 2009, we are covered under HIPAA similar to other covered entities and, in some cases, subject to the same civil and criminal penalties as a covered entity.

Furthermore, pursuant to changes in HIPAA under the American Recovery and Reinvestment Act of 2009, we are covered under HIPAA similar to other covered entities and, in some cases, subject to the same civil and criminal penalties as a covered entity.

A number of states and countries have also enacted privacy and security statutes and regulations that, in some cases, are more stringent than HIPAA and may also apply directly to us.

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These laws could restrict the ability of Omnicell and/or our customers to obtain, use, or disseminate patient information, which could reduce the demand for our products or force us to redesign our products in order to meet regulatory requirements.

For more information, you should also refer to the risk factor captioned “ We are subject to laws, regulations, and other legal obligations related to privacy, data protection, and information security, and the costs of compliance with, and potential liability associated with, our actual or perceived failure to comply with such obligations could harm our business.

Changes to the 340B Program could negatively impact our 340B Program-related services.

Any changes to the 340B Drug Pricing Program, such as changes to the scope of the 340B Program, could negatively impact our 340B Program-related services.

Current litigation brought by multiple manufacturers is challenging the Health Resources and Services Administration’s requirement to offer the 340B ceiling price on drugs dispensed at contract pharmacies.

The decisions that have been issued to date have been narrowly tailored and appeals have been filed in some of the cases.

While the litigation is ongoing a number of manufacturers have restricted access to the 340B ceiling price for drugs dispensed at contract pharmacies.

It is not yet clear how the litigation will resolve.

If 340B ceiling prices are not required to be offered for drugs dispensed at contract pharmacies, our 340B Program-related offerings may become less useful to 340B covered entities and our 340B Program-related businesses could decline.

In addition, Congress has considered legislative changes to the 340B Program.

Any legislative changes to the 340B Program could also affect our 340B Program-related services.

It is unclear how this litigation and any legislative changes would affect our business, financial condition and results of operations.

We must comply with anti-kickback, fraud and abuse, false claims, transparency, and other healthcare laws and regulations.

Our current and future operations are subject to various federal and state healthcare laws and regulations that affect our sales, marketing and other promotional activities by limiting the kinds of financial arrangements we can enter into with respect to our products and services.

They also impose additional administrative and compliance burdens on us.

These laws include, but are not limited to, the healthcare fraud and abuse laws described in the section titled “Business – Government Regulation” above.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, and it is possible that some of our business activities could be subject to challenge under one or more of such laws.

Ensuring that our business arrangements with third parties comply with applicable healthcare laws, as well as responding to investigations by government authorities (which have increased in recent years as the healthcare industry has come under greater scrutiny) can be time and resource consuming and can divert management’s attention from the business.

If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to significant financial penalties and possible exclusion from participation in federal and state funded healthcare programs, and the curtailment or restricting of our operations, as well as additional reporting obligations

and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws.

This could harm our ability to operate our business and our financial results.

Our international operations may subject us to additional risks that can adversely affect our operating results.

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Our international operations subject us to a variety of risks, including:

• our reliance on distributors for the sale of our medication management automation solutions outside the United States, Canada, the United Kingdom, France, and Germany;

• our reliance on distributors for the sale of our medication management solutions outside the United States, Canada, the United Kingdom, France, and Germany;

• remaining uncertainty regarding the consequences of Brexit and the impact on markets, as well as the potential impact on:

(i) our operations;

(ii) our customers’ operations and capital planning;

and (iii) the healthcare industry overall;

• the difficulty of managing an organization operating in various countries;

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We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and other countries (including China), what products may be subject to such actions, or what actions may be taken by the other countries in retaliation.

The adoption and expansion of trade restrictions, the occurrence of a trade war, other governmental action related to tariffs or trade agreements or policies, or the related uncertainties, has the potential to adversely impact our supply chain and costs, which could, in turn, adversely affect our business, financial condition, and results of operations.

The adoption and expansion of trade restrictions, the occurrence of a trade war, other governmental action related to tariffs or trade agreements or policies, or the related uncertainties, has the potential to adversely impact our ability to do business outside of the United States as well as our supply chain and costs, which could, in turn, adversely affect our business, financial condition, and results of operations.

Covenants in our A&R Credit Agreement restrict our business and operations in many ways, and if we do not effectively manage our compliance with these covenants, our financial conditions and results of operations could be adversely affected.

The A&R Credit Agreement contains various customary covenants that limit our ability and/or our subsidiaries’ ability to, among other things, incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;

The A&R Credit Agreement contains various customary covenants that require use to provide financial and other information reporting as well as notice upon certain events and limit or restrict our ability and/or our subsidiaries’ ability to, among other things, incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;

issue redeemable preferred stock;

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and consolidate or merge with or into, or sell substantially all of our assets to, another person.

The A&R Credit Agreement also includes financial covenants requiring us (i) not to exceed a maximum consolidated secured net leverage ratio of 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 and (ii) to maintain a minimum interest coverage ratio of 3.00:1.

The A&R Credit Agreement also includes financial covenants requiring us (i) not to exceed a maximum consolidated secured net leverage ratio of 3.00:1 and (ii) to maintain a minimum interest coverage ratio of 3.00:1.

Our ability to comply with these financial covenants may be affected by events beyond our control.

Our failure to comply with any of the covenants under the A&R Credit Agreement could result in a default under the terms of the A&R Credit Agreement, which could permit the administrative agent or the lenders to declare all or part of any outstanding borrowings to be immediately due and payable, or to refuse to permit additional borrowings under the revolving credit facility, which could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us.

In addition, if we are unable to repay those amounts, the administrative agent and the lenders under the A&R Credit Agreement could proceed against the collateral granted to them to secure that debt, which would seriously harm our business.

Our failure to comply with any of the covenants under the A&R Credit Agreement could result in a default under the terms of the A&R Credit Agreement, which could permit the administrative agent or the lenders to declare all or part of any outstanding borrowings to be immediately due and payable or foreclose on our assets, or to refuse to permit additional borrowings under the revolving credit facility, which could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us.

In addition, if we are unable to repay those amounts, the administrative

agent and the lenders under the A&R Credit Agreement could proceed against the collateral granted to them to secure that debt and foreclose on our assets, which would seriously harm our business.

Climate change, legal, regulatory or market measures to address climate change and related emphasis on environmental, social and corporate governance (“ESG”) matters by various stakeholders may negatively affect our business and results of operations.

Climate changes, such as extreme weather conditions and natural disasters or the occurrence of extreme weather conditions and natural disasters with increased frequency and severity, resulting from increased concentrations of greenhouse gases in the atmosphere, could present risks to our operations by decreasing the availability or increasing cost of materials needed for manufacturing, or increasing insurance and other operating costs.

Natural disasters and extreme weather conditions, such as hurricanes, tornados, earthquakes, wildfires or flooding, may also pose physical risks to our facilities and disrupt the operation of our supply chain.

In addition, increased awareness and concern over climate change may result in new or additional regional and/or federal legal or regulatory requirements designed to reduce greenhouse gas emissions and/or mitigate the effects of climate change on the environment.

Currently, there continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty.

If such laws or regulations are more stringent than current legal or regulatory obligations, we may experience disruption in, or an increase in the costs associated with sourcing, manufacturing and distribution of our products, which may adversely affect our business, results of operations or financial condition

Furthermore, regulators, customers, investors, and employees expectations for ESG matters have been rapidly evolving and increasing.

The enhanced stakeholder focus on these issues requires continuous monitoring of various and evolving standards and the associated reporting requirements.

A failure to adequately meet stakeholder expectations, combined with inconsistent standards by which to measure ESG performance, may result in the loss of business, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent.

Our success is dependent on our ability to recruit and retain skilled and motivated personnel.

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As our installed base of customers increases, we will require additional resources to meet increased demands on our customer service and support personnel.

Furthermore, as we execute on the autonomous pharmacy vision and grow our cloud-based software as a service and solution as a service offerings, more specialized expertise will be required.

Competition for such personnel can be intense, and we may not be successful in attracting and retaining qualified personnel.

Furthermore, as we execute on the industry vision of the Autonomous Pharmacy and grow and develop our cloud-based software as a service and solution as a service offerings, more specialized expertise will be required.

This growth and shift in products and offerings could lead to increased labor costs, and thereby increased costs of our products and offerings, which could result reduced customer demand and our operating results could be materially and adversely affected.

Additionally, competition for specialized and technical personnel can be intense, and the pool of suitable candidates may be limited.

We may not be successful in attracting and retaining qualified personnel.

If we lose the services of one or more of our key personnel we may not be able to find a suitable replacement and our business could be materially adversely affected.

Furthermore, external and internal factors (such as our continued growth) and events related to the COVID-19 pandemic (including new variants of the virus) may result in greater workloads for our employees compared to those at companies with which we compete for personnel, which may lead to higher levels of employee burnout and turnover.

Competitors have in the past attempted, and may in the future attempt, to recruit our employees.

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Our success depends in part on our ability to obtain patent protection for technology and processes, and our ability to preserve our trademarks, copyrights, and trade secrets.

We have pursued patent protection in the United States and foreign jurisdictions for technology that we believe to be proprietary and for technology that offers us a potential competitive advantage for our products.

We have pursued patent protection in the United States and foreign jurisdictions for technology that we believe to be proprietary and for technology that we find offers us a potential competitive advantage for our products.

We intend to continue to pursue such protection in the future.

Our issued patents relate to various features of our medication management automation solutions and medication packaging systems.

Our issued patents relate to various features of our medication management solutions and medication packaging systems.

We cannot assure you that we will file any patent applications in the future and that any of our patent applications will result in issued patents, or that, if issued, such patents will provide significant protection for our technology and processes.

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Members of these GPOs may purchase under the terms of these contracts, which obligate us to pay the GPO a fee.

We also have a Federal Supply Schedule contract with the Department of Veterans Affairs, allowing the Department of Veterans Affairs, the Department of Defense, and other Federal government customers to purchase or lease our products.

These contracts enable us to more readily sell our products and services to customers represented by these organizations.

These contracts enable us to sell our products and services more readily to customers represented by these organizations.

Some of our contracts with these organizations are terminable at the convenience of either party.

The loss of any of these relationships could impact the breadth of our customer base and could impair our ability to meet our revenue targets or increase our revenues.

The loss of any of these relationships could impact the breadth of our customer base and could impair our ability to meet our revenue or revenue growth rate targets or our ability to increase our revenues.

These organizations may not renew our contracts on similar terms, if at all, and they may choose to terminate our contracts before they expire, any of which could cause our revenues to decline.

If we are unable to meet the demands of, or maintain our relationships with, our institutional and retail pharmacy customers, our revenue from sales of medication packages and other consumables may decline .

Approximately 6% of our revenues during the year ended December 31, 2021 were generated from the sale of consumable medication packages, most of which are produced in our St.

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Any disruption in the production capabilities of our St.

Petersburg facilities will adversely affect our ability to ship our consumable medication packages globally and would reduce our revenues.

Petersburg facilities, including as a result of extreme weather conditions or natural disasters, will adversely affect our ability to ship our consumable medication packages globally and would reduce our revenues.

In addition, the institutional pharmacy market consists of significant national suppliers of medications to non-acute care facilities, smaller regional suppliers, and very small local suppliers.

If we are unable to maintain our relationships with the major institutional pharmacies we do business with, they may purchase consumable blister card components from alternative sources, or choose to use alternatives to blister cards for medication control, and our revenues would decline.

Similarly, EnlivenHealth offers a portfolio of web-based patient engagement, medication management, financial management and analytics tools to pharmacies, which is designed to support improvement in health outcomes related to medication use.

The success of these services depends on the trust our customers place in us and our reputation and ability to provide high-quality service.

If we are unable to maintain the satisfaction or meet the expectations of our customers, our reputation with current and potential customers could be harmed, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, if we fail to maintain our relationships with existing customers or are unable to create new relationships with other pharmacies, this could have an adverse effect on our business, financial condition, and results of operations.

Our inability to secure or maintain access to existing and future specialty drugs or pharmacy provider networks for our specialty pharmacy customers could have a material adverse effect on our business.

We provide specialty pharmacy management services to provider groups, federally qualified health centers, and health systems, including providing access to payor networks and limited distribution drugs (“LDD”).

We have historically been able to obtain most of the payor and LDD products through our current network.

However, if we are unable to obtain access to new LDDs or maintain access to current LDDs for our customers, it could have a material adverse effect on our business, profitability, and results of operations.

In addition, if we are not able secure participation in networks of pharmacy providers for our customers at acceptable reimbursement rates or if we lose access to current pharmacy networks, this could result in loss of customers, which could adversely affect our operating results.

We endeavor to demonstrate continued value and growth for each of our customers during the term of their respective contracts with the Company.

However, if any of our customers elect to manage their own specialty pharmacy business, such customers could reduce or cease doing business with us upon the expiration of such customer’s contract term, which could have a material adverse effect on our business, financial condition, and results of operations.

Our products use raw materials and components that may be subject to price fluctuations, shortages, or interruptions of supply, and if we are unable to maintain supply sources for such raw materials and components, or if such sources fail to satisfy our supply requirements, in particular with regard to semiconductor chips, we may experience a loss of sales, increased component costs, and reduced profitability.

Factors that are largely beyond our control, such as the cost, quality, and availability of the raw materials and components utilized in the manufacture of our products, may affect the cost of such products, and we may not be able to pass those costs on to our customers.

Our products use raw materials and components that may be subject to price fluctuations, shortages, or other disruptions of supply for many reasons outside of our control, including as a result of the COVID-19 pandemic.

In addition, we may be dependent upon a limited number of suppliers for certain components which may be unduly affected by supply chain disruptions.

The cost, quality, and availability of these raw materials and components are essential to the successful manufacture and sale of our products.

If we are unable to maintain supply sources of these raw materials and components, or if such sources fail to satisfy our supply requirements, we may lose sales and experience increased component costs.

We have developed and implemented strategies in an effort to mitigate the impact of price fluctuations, shortages, or other disruptions of supply, but these strategies, particularly in a prolonged inflationary environment, may only offset a portion of the adverse impact.

We carry some inventory of critical components and are otherwise working to secure supplies necessary to ensure fulfillment of customer demand, but global shortages could result in our need to secure supplies at higher costs as well as manufacturing delays.

We have recently experienced increased delays in shipments of various components used in the manufacture of our products— particularly with regard to semiconductor chips.

As a result, we have sought alternate sources of certain components, which may be at a higher cost or lower quality.

Because semiconductor chips continue to be subject to an ongoing and significant shortage, our ability to source components that use semiconductor chips has been adversely affected.

These supply interruptions have resulted in increased component delivery lead times and increased costs to obtain components with available semiconductor chips.

As the semiconductor chip shortage continues, or other shortages may continue, the production of our products may be impacted.

If the Company or our suppliers are unable to obtain components from third parties in the quantities and of the quality that we require, on a timely basis and at acceptable prices, we may not be able to deliver our products on a timely or cost-effective basis to our customers, or it may lead to us delivering products that are of a lower quality that may result in increased repair and replacement costs, which could harm our business and reputation, results of operations, and financial condition.

We have also seen a period of sustained price increases for commodities used in the manufacture of our products that may continue as demand increases and supply remains constrained, which has resulted in, and may continue to result in, increased costs for Omnicell and thereby potentially lower profit margins.

If the costs of these commodities increase or remain elevated, it could adversely affect Omnicell’s financial condition, operating results, and cash flow.

We depend on a limited number of suppliers for our products, and our business may suffer if we were required to change suppliers to obtain an adequate supply of components, equipment, and raw materials on a timely basis.

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We engage multiple single source third-party manufacturers to build several of our sub-assemblies.

The risks associated with changing to alternative vendors, if necessary, for any of the numerous components used to manufacture our products could limit our ability to manufacture our products or result in the use of substitute components in our products that could lead to additional complexity or cost in maintaining our products and thereby harm our business.

Due to our reliance on a few single source partners to build our hardware sub-assemblies and on a limited number of suppliers for the raw materials that are necessary in the production of our consumable medication packages, a reduction or interruption in supply from our partners or suppliers, or a significant increase in the price of one or more components could have an adverse impact on our business, results of operations, and financial condition.

In certain circumstances, the failure of any of our suppliers or us to perform adequately could result in quality control issues affecting end users’ acceptance of our products, which could damage customer relationships and harm our business.

The United Kingdom’s withdrawal from the European Union (“Brexit”) could adversely affect us.

The United Kingdom (the “UK”) left the European Union (the “EU”) on January 31, 2020.

The transition period provided for in the withdrawal agreement entered into by the UK and the EU ended on December 31, 2020 (the “Brexit Transition Period”).

In December 2020, the UK and the EU agreed on a trade and cooperation agreement that will apply provisionally after the end of the transition period until it is ratified by the parties to the agreement.

On December 31, 2020, the UK passed legislation giving effect to the trade and cooperation agreement, with the EU expected to formally adopt the agreement in early 2021.

The trade and cooperation agreement covers the general objectives and framework of the relationship between the United Kingdom and the European Union, including as it relates to trade, transport, visas, judicial, law enforcement, and security matters, and provides for continued participation in community programs and mechanisms for dispute resolution.

The effects of Brexit have been and are expected to continue to be far-reaching.

Brexit and the perceptions as to its impact may adversely affect business activity and economic conditions in Europe and globally, continue to contribute to uncertainty regarding the regulation of data protection in the UK, disrupt the free movement of goods, services, and people between the UK and the EU, and lead to legal uncertainty and potentially divergent national laws and regulations for the UK.

We are currently in the process of evaluating our own risks and uncertainty related to ascertaining what financial, trade, regulatory, and legal implications this new Brexit trade deal could have on our UK and European business operations.

This uncertainty also includes the impact on our customers’ business operations and capital planning as well as the overall impact on the healthcare industry.

We have not experienced any direct material financial impact since the 2016 referendum, and while we cannot predict its future implications, we do not currently expect Brexit and its related effects to have an adverse impact on our consolidated financial position and results of operations.

government lease agreements are subject to annual budget funding cycles and mandated unilateral changes, which may affect our ability to enter into such leases or to recognize revenues, and sell receivables based on these leases.

government customers that lease our equipment typically sign contracts with five-year payment terms that are subject to one-year government budget funding cycles.

Further, the government has in certain circumstances mandated unilateral changes in its Federal Supply Services contract that could render our lease terms with the government less attractive.

In our judgment and based on our history with these accounts, we believe these receivables are collectible.

However, in the future, the failure of any of our U.S.

government customers to receive their annual funding, or the government mandating changes to the Federal Supply Services contract could impair our ability to sell lease equipment to these customers or to sell our U.S.

government lease agreements are subject to annual budget funding cycles and mandated changes, which may affect our ability to recognize revenues and sell receivables based on such leases.

Prior to September 2021, U.S.

government customers that leased our equipment typically signed contracts with five-year payment terms that are subject to one-year government budget funding cycles.

Effective September 2021, the government has mandated changes in its Federal Supply Services contract that has resulted in our determination not to enter into future leases with U.S.

government customers.

Our existing leases with U.S.

government customers are unaffected by this change.

a result, our volume of U.S.

government customer leases will decline over time and cease in the future.

The failure of any of our U.S.

government customers to receive their annual funding, or the government mandating changes to the Federal Supply Services contract, could impair our ability to sell equipment to these customers or to sell our U.S.

government receivables to third-party leasing companies.

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Managing our inventory of components and finished products is a complex task.

A number of factors, including, but not limited to, the need to maintain a significant inventory of certain components that are in short supply or that must be purchased in bulk to obtain favorable pricing, the general unpredictability of demand for specific products and customer requests for quick delivery schedules, may result in us maintaining large amounts of inventory.

A number of factors, including, but not limited to, the need to maintain a significant inventory of certain components that are in short supply, especially in response to the current semiconductor chip shortage, or that must be purchased in bulk to obtain favorable pricing, the general unpredictability of demand for specific products and customer requests for quick delivery schedules, may result in us maintaining large amounts of inventory.

Other factors, including changes in market demand, customer requirements, and technology, may cause our inventory to become obsolete.

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Intellectual property claims against us could harm our competitive position, results of operations, and financial condition.

We expect that developers of medication management automation solutions and medication packaging systems will be increasingly subject to infringement claims as the number of products and competitors in our industry grows and the functionality of products in different industry segments overlaps.

We expect that developers of medication management solutions and medication packaging systems will be increasingly subject to infringement claims as the number of products and competitors in our industry grows and the functionality of products in different industry segments overlaps.

In the future, third parties may claim that we have infringed upon, misappropriated, or otherwise violated their intellectual property rights with respect to current or future products.

We do not carry special insurance that covers intellectual property infringement claims;

however, such claims may be covered under our traditional insurance policies.

We do not carry special insurance that covers intellectual property infringement claims, such claims may be covered under our traditional insurance policies.

These policies contain terms, conditions, and exclusions that make recovery for intellectual property infringement claims difficult to guarantee.

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Product liability claims against us could harm our competitive position, results of operations, and financial condition.

Our products include medication management automation solutions and medication adherence products and services for healthcare systems and pharmacies.

Our products include medication management solutions and medication adherence products and services for healthcare systems and pharmacies.

Despite the presence of healthcare and pharmacy professionals as intermediaries between our products and patients, if our products fail to provide accurate and timely information or operate as designed, customers, patients, or their family members could assert claims against us for product liability.

Moreover, failure of health care

facility and pharmacy employees to use our products for their intended purposes could result in product liability claims against us.

Moreover, failure of health care facility and pharmacy employees to use our products for their intended purposes could result in product liability claims against us.

Litigation with respect to product liability claims, regardless of any outcome, could result in substantial cost to us, divert management’s attention from operations, and decrease market acceptance of our products.

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A successful claim brought against us, or any claim or product recall that results in negative publicity about us, could harm our competitive position, results of operations, and financial condition.

Also, in the event that any of our products is defective, we may be required to recall or redesign those products.

Also, in the event that any of our products is defective, we may be required to recall or redesign those products, which could result in increased costs and have an adverse impact on our results of operation.

We are dependent on technologies provided by third-party vendors, the loss of which could negatively and materially affect our ability to market, sell, or distribute our products.

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These factors could negatively and materially affect our ability to market, sell, or distribute our products.

Investment in new business strategies and initiatives could disrupt ongoing business and present risks not originally contemplated.

We have invested, and in the future may invest, in new business strategies or initiatives, including with respect to our software as a service or solution as a service subscription products and services or other subscription and cloud-based offerings.

Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, lack of expertise to effectively execute such strategies or initiatives, insufficient revenue to offset liabilities assumed and expenses associated with a strategy or initiative, inadequate return of capital, and unidentified issues not discovered in our due diligence.

These new ventures may be inherently risky and may not be successful.

Even if successful, they may not have the projected or actual impact that we initially expected.

As a result, such initiatives may materially adversely affect our financial condition and operating results.

Risks Related to Ownership of Our Common Stock

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While this action was concluded in December 2019 following the lead plaintiff's voluntary dismissal as to all defendants, we may in the future be subject to other class action lawsuits, especially following periods of volatility in our stock price.

Our quarterly operating results may fluctuate and may cause our stock price to decline.

Our quarterly operating results may vary in the future.

In addition to other factors discussed in this “Risk Factors” section, factors that may cause our quarterly operating results to fluctuate include, but are not limited to, the following:

• the size, product mix, and timing of orders for our products, and their installation and integration;

Our quarterly and annual operating results may fluctuate, which makes our future operating results difficult to predict, and may cause our stock price to decline.

Our quarterly and annual operating results have varied and may vary in the future.

In addition to other factors discussed in this “Risk Factors” section, factors, many of which are outside of our control and are difficult to predict, that may cause our quarterly or annual operating results to fluctuate include, but are not limited to, the following:

• the size, product mix, and timing of orders for our products, and their installation and integration and whether our estimates for the same were proper;

• our ability to successfully install our products on a timely basis and meet other contractual obligations necessary to recognize revenue;

• fluctuations in customer demand for our products, including due to changes in our customers’ budgets;

• fluctuations in customer demand for our products, including due to changes in our customers’ budgets, and whether customer demand was properly estimated;

• our ability to control costs, including operating expenses, and continue cost reduction efforts;

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• macroeconomic and political conditions, including fluctuations in interest rates, tax increases, availability of credit markets, and trade and tariff actions.

Due to all of these factors, our quarterly revenues and operating results are difficult to predict and may fluctuate, which in turn may cause the market price of our stock to decline.

Due to all of these factors, our quarterly or annual revenues and operating results are difficult to predict and may fluctuate, which in turn may cause the market price of our stock to decline.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or harm our business, financial condition, and results of operations.

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If we raise additional funds from third parties, we may have to relinquish valuable rights to our technologies, or grant licenses on terms that are not favorable to us.

If we are unable to raise additional funds through equity or debt financing when needed, our ability to market, sell, or distribute our products may be negatively impacted and could harm our business, financial condition, and results of operations.

Certain provisions in our charter documents and under Delaware law may delay or prevent an acquisition of us and limit our stockholders’ ability to obtain a favorable judicial forum for certain disputes.

If we are unable to raise additional funds through equity or debt financing when needed, our ability to market, sell, or distribute our products and/or fund our operations may be negatively impacted and could harm our business, financial condition, and results of operations.

Certain provisions in our charter documents and under Delaware law may discourage, delay, or prevent an acquisition of us and limit our stockholders’ ability to obtain a favorable judicial forum for certain disputes.

Certain anti-takeover provisions of Delaware law and our charter documents may make a change in control of our Company more difficult, even if a change in control would be beneficial to the stockholders.

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The Notes are convertible at the option of the holders on or after May 15, 2025 and, in certain circumstances, prior to May 15, 2025.

The initial conversion rate for the Notes is 10.2751 shares of our common stock per $1,000 principal amount of Notes, subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

The initial conversion rate for the Notes is 10.2751 shares of our common stock per $1,000 principal amount of

Notes, subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

On December 13, 2021, we made an irrevocable election under the Indenture to require the principal portion of our Notes to be settled in cash (up to $1,000 in cash per $1,000 principal amount of Notes) and any conversion consideration in excess of $1,000, in cash and/or shares of our common stock, at our option, upon conversion.

The conversion of some or all of the Notes may dilute the ownership interests of our stockholders.

Upon conversion of the Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock.

If we elect to settle our conversion obligation in shares of our common stock or a combination of cash and shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

As we have the option to settle the excess of the principal amount in shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

In addition, the existence of the Notes may encourage short selling of our common stock by market participants because the conversion of the Notes could be used to satisfy short positions, or the anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.

Following our irrevocable election, only the shares of common stock expected to be settled in excess of the principal amount are considered dilutive for calculating earnings per share under the if-converted method.

Accordingly, as the price of our common stock increases, our diluted earnings per share could be adversely affected.

Prior to May 15, 2025, if a circumstance that permits early conversion occurs, holders of the Notes will be entitled to convert their Notes at any time during specified periods at their option.

If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results.

Under Accounting Standards Codification ("ASC") 470-20, Debt with Conversion and Other Options , an entity must separately account for the liability and equity components of convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.

The effect of ASC 470-20 on the accounting for the Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet at issuance, and the value of the equity component is treated as a discount for purposes of accounting for the debt component of the Notes.

As a result, we are required to record a greater amount of non-cash interest expense as a result of the amortization of the discounted carrying value of the Notes to their face amount over the term of the Notes.

We report larger net losses or lower net income in our financial results because ASC 470-20 requires interest to include both the amortization of the debt discount and the instrument’s coupon interest rate, which could adversely affect our reported or future financial results.

In addition, under certain circumstances, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash may be accounted for utilizing the treasury stock method for earnings per share purposes, the effect of which is that the shares issuable upon conversion of the Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Notes exceeds their principal amount.

Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued.

We cannot assure you that we will be eligible, or will continue to be eligible, to account for the Notes using the treasury stock method.

In August 2020, the FASB published an Accounting Standards Update ("ASU") 2020-06, which amends these accounting standards by reducing the number of accounting models for convertible instruments and limiting instances of separate accounting for the debt and equity or a derivative component of the convertible debt instruments.

ASU 2020-06 also will no longer allow the use of the treasury stock method for convertible instruments and instead require application of the “if- converted” method.

Under that method, diluted earnings per share will generally be calculated assuming that all of the Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which could adversely affect our diluted earnings per share.

These amendments will be effective for public companies for fiscal years beginning after December 15, 2021, with early adoption permitted, but no earlier than fiscal years beginning after December 15, 2020.

The adoption of these amendments would have a material impact on our accounting for the Notes, which may impact our reported financial results.

For example, the Notes are currently convertible until March 31, 2022 because our common stock traded above a minimum price specified in our Indenture during the quarter ended December 31, 2021, and may be convertible in the future.

If one or more holders elect to convert their Notes, we will be required to settle at least the principal amount of our conversion obligation through the payment of cash (up to $1,000 in cash per $1,000 principal amount of Notes), which could adversely affect our liquidity.

In addition, as a result of the irrevocable election, in periods when the conditional conversion feature of the Notes is triggered, we must reclassify all of the outstanding principal of the Notes as a current rather than long-term liability, which could result in a material reduction of our net working capital during those periods.

The convertible note hedge and warrant transactions may affect the value of our common stock.

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We also entered into warrant transactions with the option counterparties.

The convertible note hedge transactions are expected generally to

reduce the potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be.

However, the warrant transactions could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the warrants.

The convertible note hedge transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be.

However, the warrant transactions separately have, and could continue to have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the warrants.

In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so in connection with any conversion of the Notes or redemption or repurchase of the Notes), which could cause or avoid an increase or a decrease in the market price of our common stock.

We will also be subject to the risk that these option counterparties may default under the convertible note hedge transactions.

Changes in the credit quality of the option counterparties may affect the efficacy of our hedge and warrant transactions.

By entering into the hedge and warrant transactions, we are subject to the risk that the option counterparties may incur significant financial hardships, potentially resulting in their default under the convertible note hedge transactions.

Our exposure to the credit risk of the option counterparties will not be secured by any collateral.

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In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock.

We can provide no assurances as to the financial stability or viability of the option counterparties.

We can provide no assurances that the hedge or warrant transactions will have the intended effects or as to the financial stability or viability of the option counterparties.

General Risk Factors

Changes in our tax rates, exposure to additional tax liabilities, or the adoption of new tax legislation could adversely affect our business and financial condition.

We are subject to taxes in the United States and foreign jurisdictions.

We are subject to taxes in the United States and foreign jurisdictions in which we operate.

Our future effective tax rates could be affected by several factors, many of which are outside of our control, including:

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We are also subject to examination of our income tax returns by the Internal Revenue Service and other tax authorities.

There can be no assurance that the outcomes from these examinations will not materially adversely affect our financial condition and operating results.

There can be no assurance that the outcomes from these examinations will not materially

adversely affect our financial condition and operating results.

Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be a material difference between the forecasted and the accrued effective tax rates, especially due to the volatility and uncertainty of global economic conditions resulting from the COVID-19 pandemic.

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We rely on our network infrastructure, data centers, enterprise applications, and technology systems for the development, marketing, support, and sales of our products, and for the internal operation of our business.

These systems are susceptible to disruption or failure in the event of a major earthquake, fire, flood, ice and snow storms, cyber-attack, terrorist attack, telecommunications failure, epidemic or pandemic (such as the ongoing COVID-19 pandemic), or other catastrophic event.

Many of these systems are housed or supported in or around our corporate headquarters located in Northern California, near major earthquake faults, and where a significant portion of our research and development activities and other critical business operations take place.

These systems are susceptible to disruption or failure in the event of an extreme weather condition, including earthquake, fire, flood, ice and snow storms or other natural disasters, as well as cyber-attack, terrorist attack, telecommunications failure, epidemic or pandemic (such as the ongoing COVID-19 pandemic), or other catastrophic event.

Many of these systems are housed or supported in or around our corporate headquarters located in Northern California, near major earthquake faults and which may be vulnerable to climate change effects, and where a significant portion of our research and development activities and other critical business operations take place.

Other critical systems, including our manufacturing facilities for our consumable medication packages, are housed in St.

Petersburg, Florida, in communities that have been subject to significant tropical storms.

Petersburg, Florida, in communities that have been subject to significant tropical storms, which tropical storms may be intensified or occur with increasing frequency as a result of climate change.

Disruptions to, or the failure of any of these systems, and the resulting loss of critical data, which is not quickly recoverable by the effective execution of disaster recovery plans designed to reduce such disruption, could cause delays in our product development, prevent us from fulfilling our customers’ orders, and could severely affect our ability to conduct normal business operations, the result of which would adversely affect our operating results.

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If we fail to maintain effective internal control over financial reporting, as such standards are modified, supplemented, or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting.

Should that occur, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

In addition, our failure to timely file our periodic reports could eventually result in the delisting of our common stock, regulatory sanctions from the SEC, and/or the breach of the terms contained in our credit facility, or any preferred equity or debt securities we may issue in the future, any of which could have a material our operations and your investment in our common stock.

UNRESOLVED STAFF COMMENTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors