What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-02-25 compared with 2021-02-24 · 154 added, 138 removed, 321 unchanged (48% of the section changed)

2 unchanged sentences

This may contain forward-looking statements based upon current expectations that involve risks and uncertainties.

Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under

Item 1A “Risk Factors” and elsewhere in this annual report on Form 10-K.

Unless otherwise stated, references in this report to particular years or quarters refer to our fiscal year and the associated quarters of those fiscal years.

Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Unless otherwise stated, references in this Annual Report to particular years or quarters refer to our fiscal year and the associated quarters of those fiscal years.

We have elected to omit discussion of the earliest of the three years covered by the Consolidated Financial Statements presented.

Such omitted discussion can be found under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, located in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 24, 2021, for reference to discussion of the fiscal year ended December 31, 2019, the earliest of the three fiscal years presented.

We are a leader in transforming the pharmacy care delivery model.

Our medication management automation solutions and adherence tools empower healthcare systems and pharmacies to focus on clinical care, rather than administrative tasks.

Our solutions support the vision of a fully autonomous pharmacy, a roadmap designed to improve operational efficiencies through a fully automated, medication management infrastructure.

Our vision is to transform the pharmacy care delivery model through automation designed to replace manual, error-prone processes, combined with a single, cloud-based platform and advanced services offerings.

We believe our connected devices, products, and solutions will help our customers harness the power of data and analytics, and deliver improved patient outcomes.

Over 7,000 facilities worldwide use our automation and analytics solutions which are designed to improve pharmacy workflows, increase operational efficiency, reduce medication errors, deliver actionable intelligence, and improve patient safety.

More than 50,000 institutional and retail pharmacies across North America and the United Kingdom leverage our innovative medication adherence and population health solutions to improve patient engagement, and adherence to prescriptions and vaccine scheduling, helping to reduce costly hospital readmissions.

Omnicell, a leader in transforming the pharmacy care delivery model, is committed to elevating the role of pharmacy within healthcare and transforming medication management as an essential component of the pharmacy care delivery model.

We are doing so with an industry-leading comprehensive intelligent infrastructure, bringing together technology, analytics, and expert services to equip and empower pharmacists and pharmacies to focus on clinical care rather than administrative tasks.

We believe this intelligent infrastructure provides the critical foundation for realizing the industry vision of the Autonomous Pharmacy, a vision defined by pharmacy leaders for improving operational efficiencies and ultimately targeting zero-error medication management.

Facilities worldwide use our automation and analytics solutions to increase operational efficiency, reduce medication errors, deliver actionable intelligence, and improve patient safety.

Institutional and retail pharmacies across North America, the United Kingdom, Germany, and Australia leverage our innovative medication adherence and population health solutions to improve patient engagement and adherence to prescriptions, helping to reduce costly hospital readmissions.

We sell our product and consumable solutions together with related service offerings.

Revenues generated in the United States represented 90% of our total revenues for the year ended December 31, 2021.

Over the past several years, our business has expanded from a single-point solution to a platform of products and services that will help to further advance the vision of the autonomous pharmacy.

This has resulted in larger deal sizes across multiple products, services, and implementations for customers and, we believe, more comprehensive, valuable, and enduring relationships.

Over the past several years, our business has expanded from a single-point solution to a platform of products and services that will help to further advance the industry vision of the Autonomous Pharmacy.

This expansion has resulted in larger deal sizes across multiple products, services, and implementations for customers and, we believe, more comprehensive, valuable, and enduring relationships.

We utilize product bookings as an indicator of the success of our business.

Product bookings generally consist of all firm orders other than for technical services and other less significant items, as evidenced generally by a non-cancelable contract and purchase order for equipment and software products, and by a purchase order for consumables.

The majority of connected devices and software license product bookings are installable within twelve months of booking, and are recorded as revenue upon customer acceptance of the installation or receipt of goods.

Product bookings generally consist of all firm orders other than for technical services and other less significant items, as evidenced generally by a non-cancelable contract and purchase order for equipment, software products, and Advanced Services, and by a purchase order for consumables.

A majority of our connected devices and software license product bookings are installable within twelve months of booking, and are recorded as revenue upon customer acceptance of the installation or receipt of goods.

Revenues from software-as-a-service (“SaaS”), subscription software, and technology-enabled services product bookings are recorded over the contractual term.

Product bookings increased by 23%, from $813 million in 2019 to $1.002 billion in 2020, driven by the success of our growth strategies in our comprehensive platform and differentiated products, as well as expanding our customer portfolio.

Product bookings increased by 21%, from $1.002 billion in 2020 to $1.217 billion in 2021, driven by the success of our growth strategies in our comprehensive platform and differentiated products, as well as expanding our customer portfolio.

In addition to product solution sales, we provide services to our customers.

We provide installation planning and consulting as part of most product sales which is generally included in the initial price of the solution.

We also provide Advanced Services such as Omnicell One, EnlivenHealth, 340B solutions, Central Pharmacy Dispensing Services, and Central Pharmacy Compounding Services.

To help assure the maximum availability of our systems, our customers typically purchase maintenance and support contracts in increments of one to five years.

15 unchanged sentences

(2) Freight revenue and certain other insignificant revenue streams are not included in product bookings.

Our full-time headcount of approximately 2,860 on December 31, 2020, an increase of approximately 160 from December 31, 2019, reflects our efforts to grow our operations, while driving profitability and optimizing resource allocation.

Our full-time employee headcount of approximately 3,800 on December 31, 2021, an increase of approximately 940 employees since December 31, 2020, reflects our efforts to grow Omnicell’s operations, including through the impact of incremental headcount in connection with recent acquisitions, while continuing to drive profitability and optimizing resource allocation.

Operating Segments

3 unchanged sentences

All significant operating decisions are based upon an analysis of Omnicell as one operating segment, which is the same as our reporting segment.

We are committed to being the care provider’s most trusted partner and executing on the vision of the autonomous pharmacy by delivering automation, intelligence, and advanced services, powered by a single, cloud-based platform.

We believe there are significant challenges in pharmacy practice including, but not limited to, medication errors, drug shortages, medication loss due to drug diversion, significant medication waste and expiration costs, a high level of manual steps in the medication management automation process, complexity around compliance requirements, high pharmacy employee turnover rates, hospitalizations from adverse drug events in outpatient settings, high variability in outcomes, and limited inventory visibility.

We believe that these significant challenges in pharmacy practice drive the demand for increased digitization and virtualization, and that our solutions enable this and represent large opportunities in four market categories:

Business Strategy

We are committed to being the care providers’ and retail pharmacies’ most trusted partner and executing on the industry vision of the Autonomous Pharmacy by developing and delivering an intelligent medication management infrastructure composed of devices, digital workflows, analytics, and experts, all powered by the cloud.

We believe there are significant challenges facing the pharmacy practice today including, but not limited to, labor shortages, medication errors, drug shortages, medication loss due to drug diversion, significant medication waste and expiration costs, a high level of manual steps in the medication management process, complexity around compliance requirements, high pharmacy employee turnover rates affecting tenure and expertise, hospitalizations from adverse drug events in outpatient settings, high variability in outcomes, and limited inventory visibility.

We believe that these significant challenges to the pharmacy practice drive the demand for increased digitization, visibility, and insights that our solutions enable, and represent large opportunities in four market categories:

• Point of Care.

As a market leader, we expect to continue expansion of this product category as customers increase use of our dispensing systems in more areas within their hospitals.

In addition, we are early in the replacement, upgrade, and expansion cycle of our XT Series automated dispensing systems which we believe is a significant market opportunity and we expect to continue to focus on further penetrating markets through competitive conversions.

We are more than halfway through the replacement, upgrade, and expansion cycle of older models of automated dispensing systems with our XT Series automated dispensing systems within our own customer base, which we believe is a significant market opportunity.

We have been successful penetrating markets through competitive conversions and expect this success to continue.

We also believe there is an opportunity for us to define a new standard of care for dispensing systems in perioperative settings.

We believe our current portfolio within the Point of Care market and new innovation and services will continue to drive improved outcomes and lower costs for our customers.

• Central Pharmacy.

This market represents the beginning of the medication management process in acute care settings, and, we believe, the next big automation opportunity to replace manual and repetitive processes which are common in the pharmacy today.

Manual processes are prone to significant errors, and products such as IVX Workflow, our IV sterile compounding solutions, and the XR2 Automated Central Pharmacy system automate these manual processes and are designed to reduce the risk of error for our healthcare partners.

We believe new products and innovations, including Omnicell One, in the Central Pharmacy market create opportunities to replace prior generation Central Pharmacy robotics and carousels.

The Central Pharmacy also represents an opportunity to provide technology-enabled services designed to reduce the administrative burden on the pharmacy and allow clinicians to operate at the top of their license.

• 340B Software-Enabled Services.

This market is targeted to covered entities participating in Section 340B of the Public Health Services Act.

The act requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to health care organizations that care for many uninsured and low-income patients and results in a complex compliance environment.

We believe that there are significant opportunities for health systems to improve participation benefits and maximize program savings through software-enabled services

and solutions.

Our Omnicell 340B platform of technology-enabled services includes split billing software, contract pharmacy administration, specialty contract pharmacy administration, and drug discount access solutions.

This market represents the beginning of the medication management process in acute care settings, and, we believe, the next big automation opportunity to replace high volumes of manual and repetitive processes that are common in pharmacies today.

Manual processes are prone to significant errors, and products such as IVX Workflow, our IV Sterile Compounding Service (including IV robotics), and our Central Pharmacy Dispensing Service (including the XR2 Automated Central Pharmacy System), automate these manual processes and are designed to reduce the risk of error for our healthcare partners.

Because automation adoption in the Central Pharmacy is still nascent, we believe that the adoption of solutions will be accelerated by bundling those solutions with technology-enabled services that are designed to deliver specific outcomes and leverage intelligence across the enterprise for more actionable insights, and are expected to reduce administrative burden, allowing clinicians to operate at the top of their license.

We think that these bundled solutions are becoming more

critical than ever as health systems appear to face increasing labor shortages and supply chain disruption following the COVID-19 pandemic.

Additionally, we believe new products, innovations and our expertise in the Central Pharmacy market create opportunities to replace prior generation Central Pharmacy robotics, especially when combining those robotics with carousels and technology-enabled services to increase the percentage of medication managed through the intelligent infrastructure.

• Specialty Pharmacy and 340B Program.

We believe that health systems will invest in more revenue generating activities that improve patient outcomes, and pharmacy will be at the center with specialty pharmacies and the 340B Drug Pricing Program.

Studies have shown that specialty medications represent over 50% of the country’s total spending on retail, mail-order, and provider-administered drugs.

Used for treatment of complex conditions, these medications often require intensive patient management and specialized workflows for dispensing and care coordination.

Specialty pharmacies serve as the connection between patients, prescribing physicians, and payors to ensure streamlined access and adherence to these specialty drugs, helping to maintain continuity of care throughout the process, and are expected to improve margin and profitability for the health system.

The newly acquired ReCept Holdings, Inc.

(“ReCept”) solution provides implementation and managed services for health systems and other provider organizations to optimize their specialty pharmacy programs and the related pharmaceutical aspects of patient care.

The 340B market is targeted to covered entities participating in Section 340B of the Public Health Services Act.

The Public Health Services Act requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to healthcare organizations that care for many uninsured and low-income patients and creates a complex compliance environment.

According to the Health Resources and Services Administration, which is responsible for administering the 340B program, enrolled hospitals and other covered entities can achieve an average savings of 25% to 50% in pharmaceutical purchases.

Due to the complexities of adhering to the administrative process of the 340B program, we believe that there are significant opportunities for health systems to improve participation benefits and maximize program savings through our 340B technology-enabled services.

• Retail, Institutional, and Payer.

We believe the Retail, Institutional, and Payer market represents a large opportunity as the majority of drugs are distributed in the non-acute sector.

New technology and updated state board regulations are leading to innovation at traditional retail providers, which, combined with the move to value-based care, we believe will incentivize the market to adopt solutions to help providers and payers engage patients in new ways that lower the total cost of care.

We believe adoption of our EnlivenHealth (formerly Population Health Solutions) portfolio of software products and services, along with medication adherence packaging, will increase adherence performance rates, increase prescription volume for our customers, and reduce hospital and emergency room visits due to improved adherence.

As retail pharmacies play an increasingly vital role in population health following the onset of the COVID-19 pandemic, EnlivenHealth has extended solutions to assist with vaccination programs, testing protocols, and patient engagement efforts.

There are three main areas of focus:

◦ CareScheduler is an exclusive digital solution that automates the scheduling, reporting, and patient outreach for administering the COVID-19 vaccine and other vaccines and testing procedures.

◦ Medication Synchronization is an appointment-based solution that aligns a patient's medications to a single refill date, designed to improve medication adherence and reduce hospital readmissions.

◦ Medication Therapy Management is a platform that offers intuitive workflow with high-level decision support for efficiently completing CMS-compliant Comprehensive Medication Reviews using pharmacy claims data.

We believe our technology, services, and solutions within these market categories position us well to address the needs of retail, acute, and post-acute pharmacy providers.

We believe the Retail, Institutional, and Payer market represents a significant opportunity as healthcare evolves.

A majority of all prescription drugs are distributed in the non-acute sector.

The COVID-19 pandemic accelerated the shift of primary healthcare settings from hospitals and doctors’ offices to other convenient channels like the home, digital, and retail pharmacies.

We believe adoption of our EnlivenHealth portfolio of software products and services, along with medication adherence packaging, will increase adherence performance rates, increase prescription volume for our customers, and reduce hospital and emergency room visits due to improved adherence.

Our EnlivenHealth portfolio has been expanded with two recent acquisitions that will assist in adoption and drive innovation.

RxInnovation Inc., operating as FDS Amplicare (“FDS Amplicare”), is a leading provider of financial management, analytics, and population health solutions to the retail pharmacy industry, including independent pharmacies.

MarkeTouch Media, LLC (“MarkeTouch Media”) has longstanding pharmacy chain relationships that further broaden EnlivenHealth’s national pharmacy network.

We believe our technology, services, and solutions within these market categories position us well to address the needs of acute, post-acute, ambulatory, and retail pharmacy providers and health plans.

COVID-19 Update

Keeping in mind our role in the healthcare industry, we are continuing to closely monitor the COVID-19 pandemic.

As a result of the COVID-19 pandemic, health systems have faced financial pressures which we believe led our customers to delay or defer purchasing decisions and/or implementation 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.

We continue to closely monitor the COVID-19 pandemic and ongoing impacts on the Company.

During the first half of 2020, as a result of the COVID-19 pandemic, health systems faced financial and operational pressures which we believe led our customers to delay or defer purchasing decisions and/or implementation of our solutions.

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 continued through 2021.

We believe that the challenges that our customers have faced during the COVID-19 pandemic, including the need for robust visibility throughout their pharmacy supply chains, have increased the strategic relevance of our products and services.

Though we expect to continue to face challenges and opportunities brought on by the COVID-19 pandemic, we remain confident in the overall health of our business and in our ability to navigate through these unusual times.

On October 1, 2020, we completed the acquisition of the 340B Link business (the “340B Link Business”) of Pharmaceutical Strategies Group, LLC pursuant to the terms and conditions of the Equity Purchase Agreement, dated August 11, 2020, as amended, by and among the Company, PSGH, LLC, BW Apothecary Holdings, LLC, the sellers identified therein and the seller’s representative for total cash consideration of $225.0 million.

Although COVID-19 vaccines are now available and being widely distributed, there remains significant uncertainty regarding the duration and severity of the continuing impact of the pandemic on the U.S.

and world economies, including the impact of new variants of the COVID-19 virus.

The ongoing impact of the COVID-19 pandemic on our business remains uncertain, and the duration and scope of such impact cannot currently be predicted.

We continue to carefully monitor this

dynamic situation and may adjust our outlook as appropriate.

The ongoing impact of the COVID-19 pandemic may result in increased borrowing costs and other costs of capital or otherwise adversely affect our business, results of operations, financial condition, and liquidity.

However, under current circumstances, we believe that our financial position and resources will allow us to manage the anticipated impact of the COVID-19 pandemic on our business for the foreseeable future.

On December 31, 2021, we completed the acquisition of MarkeTouch Media pursuant to the terms and conditions of the Unit Purchase Agreement, dated December 31, 2021, by and among ateb, Inc.

(a wholly-owned subsidiary of the Company), MarkeTouch Media, LLC, MarkeTouch Holdings, Inc., Toucan Enterprises, Inc., and certain beneficial stockholders specified therein for a base purchase price of $82.0 million, prior to customary adjustments for closing cash, net working capital, and assumed indebtedness.

The MarkeTouch Media acquisition adds mobile and web-based technology and patient engagement solutions, which is expected to expand the footprint of EnlivenHealth across the retail pharmacy sector, while enhancing potential growth opportunities in new market segments like specialty pharmacy and pharmacy benefits management.

The results of the operations of MarkeTouch Media have been included in our consolidated results of operations beginning December 31, 2021.

On December 29, 2021, we completed the acquisition of ReCept pursuant to the terms and conditions of the Agreement and Plan of Merger, dated December 1, 2021, by and among Omnicell, Inc., ReCept Holdings, Inc., Redfish Acquisition Corp, and the representative of the securityholders for a base purchase price of $100.0 million, prior to customary adjustments for closing cash, net working capital, and assumed indebtedness.

The addition of ReCept’s specialty pharmacy management services for health systems, provider groups, and federally qualified health centers expands Omnicell’s Advanced Services portfolio in an effort to address the growing and complex specialty pharmacy market.

The results of the operations of ReCept have been included in our consolidated results of operations beginning December 29, 2021.

On September 9, 2021, we completed the acquisition of FDS Amplicare pursuant to the terms and conditions of the Agreement and Plan of Merger, dated July 25, 2021, by and among RxInnovation Inc., Omnicell, Inc., Fleming Acquisition Corp., and the representative of the securityholders for a base purchase price of $177.0 million, prior to customary adjustments for closing cash, net working capital, and assumed indebtedness.

The FDS Amplicare acquisition adds a comprehensive and complementary suite of SaaS financial management, analytics, and population health solutions to our EnlivenHealth offering.

The results of the operations of FDS Amplicare have been included in our consolidated results of operations beginning September 9, 2021.

On October 1, 2020, we completed the acquisition of the 340B Link business (the “340B Link Business”) of Pharmaceutical Strategies Group, LLC pursuant to the terms and conditions of the Equity Purchase Agreement, dated August 11, 2020, as amended, by and among the Company, PSGH, LLC, BW Apothecary Holdings, LLC, the sellers identified therein and the sellers’ representative for total cash consideration of $225.0 million.

The acquisition adds a comprehensive and differentiated suite of software-enabled services and solutions used by certain eligible hospitals, health systems, clinics, and entities to manage compliance and capture 340B drug cost savings on outpatient prescriptions filled through the eligible entity’s pharmacy or a contracted pharmacy partner.

23 unchanged sentences

It is probable the entity will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer .

We perform a credit check for all significant customers or transactions and where collectability is not probable, payment in full or a substantial down payment is typically required to help assure the full agreed upon contract price will be collected.

We perform a credit check for all significant customers or transactions and where collectability is not probable, payment in full or a substantial down payment prior to shipment is typically required to help assure the full agreed upon contract price will be collected.

Distinct goods or services are identified as performance obligations.

3 unchanged sentences

When performance obligations are included in separate contracts, we consider an entire customer arrangement to determine if separate contracts should be considered combined for the purposes of revenue recognition.

Most of our sales, other than renewals of support and maintenance, contain multiple performance obligations, with a combination of hardware systems, consumables and software products, support and maintenance, and professional services.

Most of our sales, other than renewals of support and maintenance, contain multiple performance obligations, with a combination of hardware systems, software products, consumables, support and maintenance, and professional services.

The transaction price of a contract is determined based on the fixed consideration, net of an estimate for variable consideration such as various discounts or rebates provided to customers.

9 unchanged sentences

For all other products, control generally passes when product has been shipped and title has passed.

For maintenance contracts and certain other services provided on a subscription basis, control passes to the customer over time, generally ratably over the service term as we provide a stand-ready service to service the customer’s equipment.

For maintenance contracts and certain other services, including SaaS, subscription software, and technology-enabled services, provided on a subscription basis, control passes to the customer over time, generally ratably over the service term as we provide a stand-ready service for the customer’s equipment.

Time and material services transfer control to the customer at the time the services are provided.

1 unchanged sentence

Revenues, contract assets, and contract liabilities are recorded net of associated taxes.

We often enter into change orders which modify the product to be received by the customer pursuant to certain contracts.

From time to time, we enter into change orders which modify the product to be received by the customer pursuant to certain contracts.

Changes to any contract are accounted for as a modification of the existing contract to the extent the goods and services to be delivered as part of the contract are generally consistent with the nature and type of those to be provided under the terms of the original contract.

Examples of such change orders include the addition or removal of units of equipment or changes to the configuration of the equipment where the overall nature of the contract remains intact.

Examples of such change orders include the addition or removal of units of equipment

or changes to the configuration of the equipment where the overall nature of the contract remains intact.

Our change orders generally result in the change being accounted for as modifications of existing contracts given the nature of the impacted orders.

4 unchanged sentences

We determine if an arrangement is a lease at inception.

The transaction price is allocated to separate performance obligations, generally consisting of hardware and software products, installation, and post-installation technical support, proportionally based on the standalone selling price of each performance obligation.

The transaction price is allocated to separate performance obligations, generally consisting of a combination of hardware systems, software products, support and maintenance, and professional services, proportionally based on the standalone selling price of each performance obligation.

Standalone selling price is best evidenced by the price we charge for the good or service when selling it separately in similar circumstances to similar customers.

5 unchanged sentences

Failure of the customer to either return the equipment or negotiate a new agreement results in the contract becoming a month-to-month rental.

Certain sales-type leases automatically renew for successive one year periods at the end of each lease term with written notice from the customer.

Certain sales-type leases automatically renew for successive one-year periods at the end of each lease term without written notice from the customer.

Our sales-type lease agreements do not contain any material residual value guarantees.

20 unchanged sentences

Inbound shipping costs are included in cost of inventory.

We regularly monitor inventory quantities on hand and record write-downs for excess and obsolete inventories based on our estimate of demand for our products, potential obsolescence of

technology, product life cycles, and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds its estimated selling price.

We regularly monitor inventory quantities on hand and record write-downs for excess and obsolete inventories based on our estimate of demand for our products, potential obsolescence of technology, product life cycles, and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds its estimated selling price.

These factors are impacted by market and economic conditions, technology changes, and new product introductions and require estimates that may include elements that are uncertain.

Actual demand may differ from forecasted demand and may have a material effect on gross margins.

If inventory is written down, a new cost basis is established that cannot be increased in future periods.

If inventory is written down, a new cost basis is established that

cannot be increased in future periods.

Shipments from suppliers or contract manufacturers before we receive them are recorded as in-transit inventory when title and the significant risks and rewards of ownership have passed to us.

9 unchanged sentences

Lease expense is recognized on a straight-line basis over the lease term.

We do not recognize a right-of-use asset and a lease liability for leases with an initial term of 12 months or less.

We do not recognize a right-of-use asset and a lease liability for leases with an initial term of twelve months or less.

We elected the practical expedient to not separate lease components from nonlease components and applied that practical expedient to all material classes of leased assets.

11 unchanged sentences

Business Combinations

We use the acquisition method of accounting under the authoritative guidance on business combinations.

Each acquired company’s operating results are included in our Consolidated Financial Statements starting on the date of acquisition.

We use the acquisition method of accounting under ASC 805, Business Combinations .

Each acquired company’s operating results are included in our Consolidated Financial Statements starting on the acquisition date.

The purchase price is equivalent to the fair value of consideration transferred.

Tangible and identifiable intangible assets acquired and liabilities assumed as of the date of acquisition are recorded at the acquisition date fair value.

Tangible and identifiable intangible assets acquired and liabilities assumed as of the acquisition date are recorded at the acquisition date fair value.

Goodwill is recognized for the excess of purchase price over the net fair value of assets acquired and liabilities assumed.

2 unchanged sentences

Management makes estimates of fair value based upon assumptions believed to be reasonable and that of a market participant.

These estimates are based on historical experience and information obtained from the management of the acquired companies and the estimates are inherently uncertain.

These estimates are based on available historical information as well as future expectations, and the estimates are inherently uncertain.

The separately identifiable intangible assets generally include customer relationships, acquired technology, backlog, trade names, and non-compete agreements.

6 unchanged sentences

(i) past, current, and projected future earnings and equity;

(ii) recent trends and market conditions;

(ii) recent trends and

market conditions;

and (iii) valuation metrics involving similar companies that are publicly-traded and acquisitions of similar companies, if available.

8 unchanged sentences

Intangible assets are carried at cost less accumulated amortization.

Such amortization is provided on a straight-line basis or on an accelerated basis based on a pattern of economic benefit that is expected to be obtained over the estimated useful lives of the respective assets, generally from one to 30 years.

Amortization for acquired technology and backlog is recognized in cost of revenues, and amortization for customer relationships, trade names, non-compete agreements, and patents is recognized in selling, general, and administrative expenses.

23 unchanged sentences

The fair value of restricted stock units (“RSUs”) is based on the stock price on the grant date.

The fair value of restricted stock awards (“RSAs”) is their intrinsic value, which is the difference between the fair value of the underlying stock at the measurement date and the purchase price.

The fair value of restricted stock awards (“RSAs”) is their intrinsic value, which is the difference between the fair value of the underlying stock

at the measurement date and the purchase price.

The RSUs and RSAs are subject to a service vesting condition and are recognized on a straight-line basis over the requisite service period.

The fair value of performance-based stock unit awards (“PSUs”) with service and market conditions is estimated using a Monte Carlo simulation model applying multiple awards approach.

The fair value of performance-based stock unit awards (“PSUs”) with service and market conditions is estimated using a Monte Carlo simulation model applying a multiple awards approach.

Expense is recognized when it is probable that the performance condition will be met using the accelerated attribution method over the requisite service period.

25 unchanged sentences

Product revenues represented 72% and 71% of total revenues for the years ended December 31, 2021 and 2020, respectively.

Product revenues decreased by $23.6 million, primarily due to the impact of the COVID-19 pandemic as health systems were focusing resources on COVID-19 essential activities during the second and third quarters of 2020.

Product revenues increased by $176.5 million, due to increased customer demand, primarily within our automated dispensing systems business.

In comparison, results for the year ended December 31, 2020 were impacted by the COVID-19 pandemic as health systems were focusing resources on COVID-19 essential activities.

Services and other revenues represented 28% and 29% of total revenues for the years ended December 31, 2021 and 2020, respectively.

Services and other revenues include revenues from technical services, SaaS, subscription software, and technology-enabled services, and other services.

Services and other revenues increased by $18.8 million, primarily due to revenues of $10.2 million from the newly-acquired 340B Link Business, as well as continued growth in our installed customer base.

Services and other revenues include revenues from technical services;

SaaS, subscription software, and technology-enabled services;

and other services.

Services and other revenues increased by $63.3 million, primarily due to incremental revenues of $48.8 million from the recent acquisitions of the 340B Link Business and FDS Amplicare, as well as continued growth in our installed customer base and our expanded portfolio of services and solutions.

Our international sales represented 10% and 11% of total revenues for the years ended December 31, 2021 and 2020, respectively, and are expected to be affected by foreign currency exchange rate fluctuations.

We are unable to predict the extent to which revenues in future periods will be impacted by changes in foreign currency exchange rates.

Our ability to continue to grow revenues is dependent on our ability to continue to obtain orders from customers, our ability to produce quality products and consumables to fulfill customer demand, the volume of installations we are able to complete, our ability to meet customer needs by providing a quality installation experience, and our flexibility in manpower allocations among customers to complete installations on a timely basis.

Our ability to continue to grow revenues is dependent on our ability to continue to obtain orders from customers, our ability to produce quality products and consumables to fulfill customer demand, the volume of installations we are able to complete, our ability to meet customer needs by providing a quality installation experience, our ability to develop new or enhance existing solutions, and our flexibility in workforce allocations among customers to complete installations on a timely basis.

The timing of our product revenues for equipment is primarily dependent on when our customers’ schedules allow for installations.

The effects of the COVID-19 pandemic have had an adverse impact on our revenues for the year ended December 31, 2020.

During the first half of 2020, we experienced delays in implementations and lower product bookings compared to management’s expectations prior to the COVID-19 outbreak.

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.

Future developments with respect to the COVID-19 pandemic remain uncertain and may impact future periods.

Cost of Revenues and Gross Profit

1 unchanged sentence

(i) standard product costs which account for the majority of the product cost of revenues that are provided to customers, and are inclusive of purchased material, labor to build the product, and overhead costs associated with production;

(ii) installation costs as we install our equipment at the customer site and include costs of the field installation personnel, including labor, travel expenses, and other expenses;

(ii) costs of providing services and installation costs, including costs of personnel and other expenses;

and (iii) other costs, including variances in standard costs and overhead, scrap costs, rework, warranty, provisions for excess and obsolete inventory, and amortization of software development costs and intangibles.

12 unchanged sentences

Cost of revenues for the year ended December 31, 2021 compared to the year ended December 31, 2020 increased by $98.4 million, of which $68.9 million was attributed to the increase in cost of product revenues and $29.6 million was attributed to the increase in cost of services and other revenues.

The increase in cost of product revenues is reflective of investments made to drive the customer experience and support expected annual revenue levels which were impacted by the COVID-19 pandemic.

While product revenues decreased by $23.6 million for the year ended December 31, 2020 compared to the year ended December 31, 2019, cost of product revenues increased by $9.1 million primarily due to certain fixed costs, such as labor and overhead.

The increase in cost of product revenues was also driven by an increase of $4.1 million of amortization of capitalized software development costs for

external use and an increase of $2.0 million in employee-related expenses related to restructuring initiatives, partially offset by cost-saving initiatives.

The increase in cost of services and other revenues was primarily driven by the increase in services and other revenues of $18.8 million, including incremental revenues from the newly-acquired 340B Link Business, for the year ended December 31, 2020 compared to the year ended December 31, 2019, as well as additional investments in our service business to support new product offerings, an increase of $1.4 million of amortization of capitalized software development costs for external use, and an increase of $0.6 million in employee-related expenses related to restructuring initiatives.

The overall decrease in gross margin primarily relates to lower revenues during the year ended December 31, 2020 due to the impact of the COVID-19 pandemic, employee-related expenses related to restructuring initiatives, and additional investments in our business, including increased amortization of capitalized software development costs for external use, partially offset by lower costs associated with cost-saving initiatives.

Our gross profit for the year ended December 31, 2020 was $413.3 million compared to $436.9 million for the year ended December 31, 2019.

The effects of the COVID-19 pandemic have had an adverse impact on our cost of revenues and gross margins for the year ended December 31, 2020.

Future developments with respect to the COVID-19 pandemic remain uncertain and may impact future periods.

The increase in cost of product revenues was primarily driven by the increase in product revenues of $176.5 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, as well as increased inventory-related costs due to inflationary impacts during the second half of 2021.

The increase was partially offset by the benefits associated with economies of scale due to higher volumes during the year ended December 31, 2021 compared to the year ended December 31, 2020, as well as a reduction of employee-related expenses for restructuring initiatives.

The increase in cost of services and other revenues was primarily driven by the increase in services and other revenues of $63.3 million, including incremental revenues from the recent acquisitions of the 340B Link Business and FDS Amplicare, for the year ended December 31, 2021 compared to the year ended December 31, 2020, as well as additional investments in our service business to support new service solutions.

The overall increase in gross margin primarily relates to higher revenues for the year ended December 31, 2021 due to increased customer demand, benefits associated with economies of scale due to higher volumes, as well as the reduction of employee-related expenses for restructuring initiatives.

Gross margins during the year ended December 31, 2020 were impacted by the COVID-19 pandemic.

Our gross profit for the year ended December 31, 2021 was $554.7 million, as compared to $413.3 million for the year ended December 31, 2020.

Operating Expenses and Interest and Other Income (Expense), Net

12 unchanged sentences

Research and development expenses increased by $5.6 million for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily attributed to an increase of $3.7 million in employee-related expenses related to restructuring initiatives as well as timing of projects, partially offset by lower consulting expenses and reduced travel costs.

The increase was primarily attributed to an increase in employee-related expenses of approximately $12.6 million due to increased headcount to support the continued development of our intelligent infrastructure, as well as due to incremental headcount from recent acquisitions.

This increase is partially offset by a reduction of $3.6 million in employee-related expenses for restructuring initiatives, as well as various decreases due to the timing of projects.

Selling, General, and Administrative .

Selling, general, and administrative expenses increased $17.7 million for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to overall growth of operations and increase in overall headcount.

The increase was primarily due to an increase of $26.1 million in employee-related expenses primarily related to increased headcount, including the incremental headcount from the 340B Link Business acquisition, an increase of $3.7 million in employee-related expenses related to restructuring initiatives, and an increase of $6.5 million in acquisition-related expenses, partially offset by approximately $18.2 million of certain cost savings, including reduced travel, meetings, trade shows, and commission expenses.

In response to the COVID-19 pandemic, we implemented cost reduction initiatives in all aspects of our business and remain mindful of the uncertainty related to the pandemic.

Selling, general, and administrative expenses increased by $81.8 million for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily due to an increase of approximately $50.4 million in employee-related expenses primarily related to increased headcount, including the incremental headcount from recent acquisitions, as well as an increase in acquisition-related expenses of $5.1 million, and an increase in intangible asset amortization expense of $4.3 million.

The increase was also driven by an increase in shipping and handling costs, as well as higher spending related to travel, recruiting, temporary labor, consulting, maintenance contract expenses, and other operating expenses, most of which were significantly curtailed in 2020 due to the COVID-19 pandemic.

The increase was partially offset by a reduction in employee-related expenses for restructuring initiatives of $2.2 million.

Interest and Other Income (Expense), Net.

Interest and other income (expense), net, changed by $17.3 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by a $16.7 million increase in other expenses.

The increase in other expenses is primarily due to $5.1 million of amortization of discount and interest expense incurred on our convertible senior notes issued in September 2020, partially offset by a decrease of $3.1 million in interest expense on our credit facilities as a result of a lower outstanding balances during the year ended December 31, 2020 as compared to the year ended December 31, 2019, as well as favorable foreign currency fluctuations during the period.

The increase in other expenses during the year ended December 31, 2021 compared to the year ended December 31, 2020 is primarily driven by amortization of discount and debt issuance costs as well as interest expense associated with our convertible senior notes issued in September 2020.

Provision for (Benefit from) Income Taxes

4 unchanged sentences

Effective tax rate on earnings (18)% (10)%

We recorded a benefit for income taxes of $2.8 million and had a negative effective tax rate of 10% for the year ended December 31, 2020 compared to an income tax expense of $12.6 million and an effective tax rate of 17% for the year ended December 31, 2019.

The 2020 annual effective tax rate differed from the statutory tax rate of 21%, and resulted in a decrease as compared to the 2019 annual effective tax rate, primarily due to a favorable impact of the excess tax benefit from equity-based compensation and research and development credits, partially offset by an unfavorable impact from non-deductible compensation and equity charges.

Refer to Note 17, Income Taxes , of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K for more details.

We recorded an income tax benefit of $11.8 million and had a negative effective tax rate of 18% for the year ended December 31, 2021 compared to an income tax benefit of $2.8 million and a negative effective tax rate of 10% for the year ended December 31, 2020.

The 2021 annual effective tax rate differed from the statutory tax rate of 21%, and resulted in a decrease as compared to the 2020 annual effective tax rate, primarily due to a favorable impact of the excess tax benefit from share-based compensation, research and development credits, and the net tax benefit of internal legal entity restructuring for the release of uncertain tax positions, partially offset by an unfavorable impact from non-deductible compensation charges.

Effective January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminates the ability to deduct research and development expenditures and requires those expenditures to be amortized over five years.

While we do not expect this change to materially impact our effective tax rate, it could potentially impact our cash flows and increase the amount of cash taxes we pay.

Refer to Note 17, Income Taxes , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of $349.1 million at December 31, 2021, compared to $485.9 million at December 31, 2020.

All of our cash and cash equivalents are invested in bank accounts and money market funds held in sweep accounts with major financial institutions.

All of our cash and cash equivalents are invested in bank accounts and money market funds held in sweep and asset management accounts with major financial institutions.

Our cash position and working capital at December 31, 2021 and 2020 were as follows:

(In thousands)

Cash $ 485,928 $ 127,210

Working Capital $ 552,991 $ 246,242

Our ratio of current assets to current liabilities was 3.0:1 at December 31, 2020 and 2.0:1 at December 31, 2019.

Cash and cash equivalents $ 349,051 $ 485,928

Working capital (deficit) (1)

$ (95,456) $ 552,991

_________________________________________________

(1) The working capital deficit as of December 31, 2021 is primarily due to the reclassification of our convertible senior notes as a current rather than long-term liability.

Refer to Note 10, Convertible Senior Notes , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Our ratio of current assets to current liabilities was 0.9:1 and 3.0:1 at December 31, 2021 and 2020, respectively.

Sources of Cash

Credit Facilities

On January 5, 2016, we entered into a $400.0 million senior secured credit facility pursuant to a credit agreement with certain lenders, Wells Fargo Securities, LLC as sole lead arranger, and Wells Fargo Bank, National Association, as administrative agent (as subsequently amended as discussed below, the “Prior Credit Agreement”).

The Prior Credit Agreement provided for a $200.0 million term loan facility (the “Prior Term Loan Facility”), and prior to the amendment discussed below, a $200.0 million revolving credit facility (the “Prior Revolving Credit Facility” and, together with the Prior Term Loan Facility, the “Prior Facilities”).

In addition, the Prior Credit Agreement included a letter of credit sub-limit of up to $10.0 million and a swing line loan sub-limit of up to $10.0 million.

On April 11, 2017 and December 26, 2017, we entered into amendments to the Prior Credit Agreement.

Under these amendments, the Prior Revolving Credit Facility was increased from $200.0 million to $315.0 million and certain other modifications were made.

On November 15, 2019, we refinanced the Prior Credit Agreement and entered into an Amended and Restated Credit Agreement (as subsequently amended, as discussed below, the “A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo Securities, LLC, Citizens Bank, N.A., and JPMorgan Chase Bank, N.A., as joint lead arrangers and Wells Fargo Bank, National Association, as administrative agent.

The A&R Credit Agreement replaced the Prior Credit Agreement and provides for (a) a five-year revolving credit facility of $500.0 million (the “Current Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million.

Revolving Credit Facility

On November 15, 2019, we entered into an Amended and Restated Credit Agreement (as subsequently amended, as discussed below, the “A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo Securities, LLC, Citizens Bank, N.A., and JPMorgan Chase Bank, N.A., as joint lead arrangers and Wells Fargo Bank, National Association, as administrative agent.

The A&R Credit Agreement superseded our 2016 senior secured credit facility and provides for (a) a five-year revolving credit facility of $500.0 million (the “Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million.

In addition, the A&R Credit Agreement includes a letter of credit sub-limit of up to $15.0 million and a swing line loan sub-limit of up to $25.0 million.

On November 15, 2019, the $80.0 million outstanding term loan balance under the Prior Facilities was transferred to the Current Revolving Credit Facility.

On September 22, 2020, the parties entered into an amendment (the “Amendment”) to the A&R Credit Agreement to, among other changes, permit the issuance of the convertible senior notes and the purchase of the convertible note hedge transactions described below, expand our flexibility to repurchase our common stock and make other restricted payments and replace the total net leverage covenant with a new secured net leverage covenant that requires us to maintain a consolidated secured net leverage ratio not to exceed 3.50:1 for the calendar quarters ending September 30, 2020, December 31, 2020, and March 31, 2021 and 3.00:1 for the calendar quarters ending thereafter.

As of December 31, 2020, there was no outstanding balance for the Current Revolving Credit Facility and we were in full compliance with all covenants.

Refer to Note 9, Debt and Credit Agreements , of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.

We expect to use future loans under the Current Revolving Credit Facility, if any, for working capital, potential acquisitions, and other general corporate purposes.

On September 22, 2020, the parties entered into an amendment to the A&R Credit Agreement to, among other changes, permit the issuance of the convertible senior notes and the purchase of the convertible note hedge transactions described below, expand our flexibility to repurchase our common stock and make other restricted payments, and replace the total net leverage covenant with a new secured net leverage covenant that required us to maintain a consolidated secured net leverage ratio not to exceed 3.50:1 for the calendar quarters ending September 30, 2020, December 31, 2020, and March 31, 2021 and requires us to maintain a consolidated secured net leverage ratio not to exceed 3.00:1 for the calendar quarters ending thereafter.

As of December 31, 2021, there was no outstanding balance for the Revolving Credit Facility and we were in full compliance with all covenants.

Refer to Note 9, Debt and Credit Agreements , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

We expect to use future loans under the Revolving Credit Facility, if any, for working capital, potential acquisitions, and other general corporate purposes.

Convertible Senior Notes

3 unchanged sentences

The Notes are general senior, unsecured obligations of the Company and will mature on September 15, 2025, unless earlier redeemed, repurchased, or converted.

Refer to Note 10, Convertible Senior Notes, of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.

We used approximately $49.3 million of the net proceeds from the offering to pay the cost of the convertible note hedge transactions (partially offset by proceeds to the Company from the sale of the warrant transactions), approximately $53.0 million of the net proceeds to repurchase shares of our common stock from purchasers of the Notes, $150.0 million of the net proceeds to pay down outstanding borrowings under the Current Revolving Credit Facility, and $225.0 million for the acquisition of the 340B Link Business.

We intend to use the remainder of the net proceeds from this offering for working capital and other general corporate purposes, which may include potential acquisitions, strategic transactions, and potential future repurchases of our common stock.

Distribution Agreement

On November 3, 2017, we entered into a Distribution Agreement (the “Distribution Agreement”) with J.P.

Morgan Securities LLC, Wells Fargo Securities, LLC, and HSBC Securities (USA) Inc., as our sales agents, pursuant to which we may offer and sell from time to time through the sales agents up to $125.0 million maximum aggregate offering price of our common stock.

Sales of the common stock pursuant to the Distribution Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the Nasdaq Stock Market, or sales made to or through a market maker other than on an exchange.

The registration statement under which the shares that could have been sold pursuant to the Distribution Agreement expired on November 3, 2020 and, accordingly, no additional sales will be made pursuant to the Distribution Agreement.

For the year ended December 31, 2019, we received gross proceeds of $38.5 million from sales of our common stock under the Distribution Agreement and incurred issuance costs of $0.7 million on sales of approximately 460,000 shares of our common stock at an average price of approximately $83.81 per share.

For the year ended December 31, 2020, we did not sell any of our common stock under the Distribution Agreement.

Refer to Note 10, Convertible Senior Notes, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

During the fourth quarter of 2020, we used approximately $49.3 million of the net proceeds from the offering to pay the cost of the convertible note hedge transactions (partially offset by the proceeds to we received from the sale of the warrant transactions), approximately $53.0 million of the net proceeds to repurchase shares of our common stock from purchasers of the Notes, $150.0 million of the net proceeds to pay down outstanding borrowings under the Revolving Credit Facility, and $225.0 million for the acquisition of the 340B Link Business.

We intend to use the remainder of the net proceeds from this offering for

working capital and other general corporate purposes, which may include potential acquisitions, strategic transactions, and potential future repurchases of our common stock.

Our future uses of cash are expected to be primarily for working capital, capital expenditures, and other contractual obligations.

1 unchanged sentence

Our stock repurchase programs have a total of $54.9 million remaining for future repurchases as of December 31, 2021, which may result in additional use of cash.

Refer to Note 15, Stock Repurchase Program , of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.

Refer to Note 15, Stock Repurchase Program , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

In September 2020, we repurchased 749,300 shares of our common stock from purchasers of the Notes in the offering in privately negotiated transactions effected through one of the initial purchasers or its affiliate at an average price of $70.78 per share for an aggregate purchase price of approximately $53.0 million.

1 unchanged sentence

The repurchases were separately authorized by the Board of Directors, and did not impact the total remaining for future purchases under the previously authorized stock purchase programs.

There were no stock repurchases during the years ended December 31, 2020 and 2019

including under our stock repurchase programs, other than the separately-authorized one-time stock repurchase concurrent with the offering of the Notes in September 2020.

Based on our current business plan and product backlog, we believe that our existing cash and cash equivalents, our anticipated cash flows from operations, cash generated from the exercise of employee stock options and purchases under our employee stock purchase plan, along with the availability of funds under the Current Revolving Credit Facility will be sufficient to meet our cash needs for working capital, capital expenditures, potential acquisitions, and other contractual obligations for at least the next twelve months.

There were no stock repurchases during the years ended December 31, 2021 and 2020 including under our stock repurchase programs, other than the separately-authorized one-time stock repurchase concurrent with the offering of the Notes in September 2020.

Based on our current business plan and product backlog, we believe that our existing cash and cash equivalents, our anticipated cash flows from operations, cash generated from the exercise of employee stock options and purchases under our Employee Stock Purchase Plan (“ESPP”), along with the availability of funds under the Revolving Credit Facility will be sufficient to meet our cash needs for working capital, capital expenditures, potential acquisitions, and other contractual obligations for at least the next twelve months.

For periods beyond the next twelve months, we also anticipate that our net operating cash flows plus existing balances of cash and cash equivalents will suffice to fund the continued growth of our business.

We believe that our current financial position and resources will allow us to manage the anticipated impact of the COVID-19 pandemic on our business for the foreseeable future, including any potential changes in timing of revenue recognition or potential extensions in customer payments.

However, the future impact of COVID-19 cannot be predicted with certainty and may increase our borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition, and liquidity.

The following table summarizes, for the periods indicated, selected items in our Consolidated Statements of Cash Flows:

6 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents (974) 437

Net increase in cash and cash equivalents $ 362,710 $ 60,018

Net increase (decrease) in cash, cash equivalents, and restricted cash $ (134,300) $ 362,710

Operating Activities

We expect cash from our operating activities to fluctuate in future periods as a result of a number of factors, including the timing of our billings and collections, our operating results, and the timing of other liability payments.

Net cash provided by operating activities was $185.9 million for 2020, primarily consisting of net income of $32.2 million adjusted for non-cash items of $116.4 million and changes in assets and liabilities of $37.3 million.

Net cash provided by operating activities was $231.8 million for the year ended December 31, 2021, primarily consisting of net income of $77.8 million adjusted for non-cash items of $157.3 million, offset by changes in assets and liabilities of $3.3 million.

The non-cash items primarily consisted of depreciation and amortization expense of $73.0 million, share-based compensation expense of $53.2 million, amortization of discount on convertible senior notes of $18.6 million, amortization of operating lease right-of-use assets of $11.9 million, amortization of debt issuance costs of $3.4 million, and a change in deferred income taxes of $3.3 million.

Changes in assets and liabilities include cash outflows from (i) an increase in accounts receivable and unbilled receivables of $41.0 million primarily due to an increase in billings driven by overall business growth and the timing of shipments as well as collections, (ii) an increase in inventories of $25.7 million to support forecasted sales, including advanced purchases of certain components, and higher costs of inventory, (iii) a decrease in other long-term liabilities of $14.9 million primarily due to a $6.2 million release of a certain net unrecognized tax benefit as a result of effective settlement with the tax authorities, as well as the release of deferral of certain payroll taxes related to the CARES Act, (iv) a decrease in operating lease liabilities of $12.5 million, (v) an increase in prepaid commissions of $6.9 million primarily

due to timing of bookings and revenue recognition due to larger deal sizes across multiple products, services, and implementations for customers, (vi) an increase in prepaid expenses of $5.7 million, and (vii) an increase in other long-term assets of $3.3 million.

These cash outflows were partially offset by (i) an increase in accrued liabilities of $34.9 million primarily due to an increase in rebates and lease buyout liabilities, (ii) an increase in accounts payables of $29.1 million primarily due to an overall increase in spending, including inventory spending, as well as timing of payments, (iii) an increase in deferred revenues of $24.2 million primarily due to an increase in billings driven by the timing of shipments in order to meet customers’ implementation schedules and recognition of revenues for products requiring installation, (iv) an increase in accrued compensation of $12.3 million primarily due to an increase in accrued commissions, as well as timing of payroll, (v) a decrease in investment in sales-type leases of $3.3 million, and (vi) a decrease in other current assets of $2.8 million.

Net cash provided by operating activities was $185.9 million for the year ended December 31, 2020, primarily consisting of net income of $32.2 million adjusted for non-cash items of $116.4 million and changes in assets and liabilities of $37.3 million.

The non-cash items primarily consisted of depreciation and amortization expense of $61.1 million, share-based compensation expense of $44.7 million, amortization of operating lease right-of-use assets of $10.5 million, amortization of debt issuance costs of $1.6 million, amortization of discount on convertible senior notes of $4.8 million, and a change in deferred income taxes of $6.5 million.

1 unchanged sentence

These cash inflows were partially offset by (i) a decrease in operating lease liabilities of $9.5 million, (ii) an increase in prepaid commissions of $8.1 million primarily due to an increase in bookings, (iii) an increase in other long-term assets of $7.7 million primarily due to an increase in unbilled receivables, (iv) an increase in other current assets of $6.4 million, (v) a decrease in accounts payables of $6.3 million primarily due to an overall decrease in spending, as well as timing of payments, (vi) an increase in investment in sales-type leases of $2.9 million, and (vii) an increase in prepaid expenses of $2.1 million.

Net cash provided by operating activities was $145.0 million for 2019, primarily consisting of net income of $61.3 million adjusted for non-cash items of $99.5 million offset by changes in assets and liabilities of $15.8 million.

The non-cash items primarily consisted of depreciation and amortization expense of $53.6 million, share-based compensation expense of $34.0 million, amortization of operating lease right-of-use assets of $10.6 million, amortization of debt issuance costs of

$2.2 million, and a change in deferred income taxes of $1.3 million.

Changes in assets and liabilities include cash outflows from (i) an increase in accounts receivable and unbilled receivables of $21.5 million due to increased billings and the timing of billings and collections, (ii) a decrease in operating lease liabilities of $10.0 million, (iii) an increase in inventories of $8.1 million for inventory buildup in support of forecasted sales, (iv) an increase in investment in sales-type leases of $3.7 million, (v) an increase in prepaid commissions of $2.7 million, and (vi) an increase in other current assets of $2.0 million.

These cash outflows were partially offset by (i) an increase in accounts payables of $7.9 million due to increased spending with vendors and increased consulting costs, (ii) an increase in other long-term liabilities of $6.0 million, (iii) an increase in deferred revenues of $5.4 million, (iv) a decrease in other long-term assets of $4.5 million, (v) an increase in accrued liabilities of $3.0 million, (vi) a decrease in prepaid expenses of $2.9 million, and (vii) an increase in accrued compensation of $2.5 million.

Investing Activities

Net cash used in investing activities was $279.9 million for 2020, which consisted of $225.0 million consideration paid for the acquisition of the 340B Link Business, capital expenditures of $22.8 million for property and equipment, and $32.0 million for costs of software development for external use.

Net cash used in investing activities was $61.7 million for 2019, which consisted of capital expenditures of $15.9 million for property and equipment, and $45.8 million for costs of software development for external use.

Net cash used in investing activities was $412.5 million for the year ended December 31, 2021, which consisted of $354.2 million consideration paid for our 2021 acquisitions, net of cash acquired, capital expenditures of $29.0 million for property and equipment, and $29.4 million for costs of software development for external use.

Net cash used in investing activities was $279.9 million for the year ended December 31, 2020, which consisted of $225.0 million consideration paid for the acquisition of the 340B Link Business, capital expenditures of $22.8 million for property and equipment, and $32.0 million for costs of software development for external use.

Financing Activities

Net cash provided by financing activities was $456.3 million for 2020, primarily due to proceeds of $559.7 million from the issuance of the Notes, net of issuance costs, proceeds of approximately $51.3 million from the sale of warrants in connection with the issuance of the Notes, $150.0 million of proceeds under the Current Revolving Credit Facility, $54.3 million in proceeds from employee stock option exercises and employee stock plan purchases, and a net increase in the customer funds balances of $4.0 million, partially offset by repayments of $200.0 million under the Current Revolving Credit Facility, $100.6 million for the purchase of the convertible note hedge in connection with the issuance of the Notes, $53.0 million for repurchases of our stock, $8.7 million in employees’ taxes paid related to restricted stock unit vesting, and payments for debt issuance costs related to the Current Revolving Credit Facility of $0.6 million.

Net cash used in financing activities was $23.5 million for 2019, primarily due to the repayment of $90.0 million of the Prior Facilities and the Current Revolving Credit Facility, $9.7 million in employees’ taxes paid related to restricted stock unit vesting, and payments of debt issuance costs of $2.3 million, partially offset by $40.7 million in proceeds from employee stock option exercises and employee stock plan purchases, and $37.8 million proceeds from sales of our common stock under the Distribution Agreement.

Net cash provided by financing activities was $47.4 million for the year ended December 31, 2021, primarily due to $67.3 million in proceeds from employee stock option exercises and ESPP purchases, partially offset by $16.3 million in employees’ taxes paid related to restricted stock unit vesting and a net decrease in the customer funds balances of $3.7 million.

Net cash provided by financing activities was $456.3 million for the year ended December 31, 2020, primarily due to proceeds of $559.7 million from the issuance of the Notes, net of issuance costs, proceeds of approximately $51.3 million from the sale of warrants in connection with the issuance of the Notes, $150.0 million of proceeds under the Revolving Credit Facility, $54.3 million in proceeds from employee stock option exercises and ESPP purchases, and a net increase in the customer funds balances of $4.0 million, partially offset by repayments of $200.0 million under the Revolving Credit Facility, $100.6 million for the purchase of the convertible note hedge in connection with the issuance of the Notes, $53.0 million for repurchases of our stock, $8.7 million in employees’ taxes paid related to restricted stock unit vesting, and payments for debt issuance costs related to the Revolving Credit Facility of $0.6 million.

Contractual Obligations

11 unchanged sentences

$ 813,031 $ 175,519 $ 36,517 $ 590,083 $ 10,912

_________________________________________________

(1) Commitments under operating leases relate primarily to leased office buildings, data centers, office equipment, and vehicles.

Refer to Note 12, Lessee Leases , of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.

Refer to Note 12, Lessee Leases , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

(2) We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products.

6 unchanged sentences

Any conversion prior to maturity can result in repayment of the principal amounts sooner than the scheduled repayment as indicated in the table above.

Refer to Note 10, Convertible Senior Notes , of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.

(4) Refer to Note 13, Commitments and Contingencies , of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.

Off-Balance Sheet Arrangements

As of December 31, 2020, we had no off-balance sheet arrangements as defined under Regulation S-K 303(a)(4) of the Exchange Act and the instructions thereto.

Refer to Note 10, Convertible Senior Notes , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

(4) Other commitments include various finance leases and other financing arrangements.

(5) Refer to Note 13, Commitments and Contingencies , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

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 7. Management’s Discussion and Analysis