What changed in this filing

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Item 9A. Controls and Procedures

2023-03-01 compared with 2022-02-25 · 312 added, 332 removed, 1477 unchanged (30% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K.

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2021 to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2022 to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

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All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that the objectives of the internal control system are met.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 using the criteria for effective internal control over financial reporting as described in “Internal Control—Integrated Framework,” issued by the Committee of Sponsoring Organization of the Treadway Commission (2013 framework) (the COSO Criteria).

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022 using the criteria for effective internal control over financial reporting as described in “Internal Control—Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO Criteria).

Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2022.

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Index to Financial Statements Page

Reports of Independent Registered Public Accounting Firm (P CAOB ID No.

Reports of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the years ended December 31, 2022, 2021, and 2020

Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020, and 2019

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021, and 2020

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022, 2021, and 2020

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We have audited the accompanying consolidated balance sheets of Omnicell, Inc.

and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America (U.S.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

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• We evaluated whether the excess and obsolete inventory may be understated by evaluating write-off activity of inventory subsequent to December 31, 2022.

Capitalized Software - Software Development Costs for External Use — Refer to Notes 1 and 6 to the financial statements

Capitalized Software - Internal Software Development Costs — Refer to Notes 1 and 7 to the financial statements

Critical Audit Matter Description

The Company capitalizes certain costs for software that is to be sold, leased or otherwise marketed once technological feasibility has been established and amortizes these costs over the estimated lives of the related products.

The Company capitalizes certain costs related to computer software developed or obtained for internal use when costs are incurred in the application development phase and amortizes these costs over the estimated lives of the software.

The determination of whether a project’s software development costs are capitalized or expensed could have a significant impact on the financial statements.

The Company capitalized $29.4 million of software development costs in the year ended December 31, 2021 and had total external capitalized software development costs, net of accumulated amortization, of $97.0 million as of December 31, 2021.

We identified management’s determination of capitalized software development costs to be a critical audit matter.

The Company capitalized $33.0 million of costs related to the application development of enterprise-level software and its subscription and cloud-based offerings in the year ended December 31, 2022.

We identified management’s determination of internal capitalized software development costs to be a critical audit matter.

Evaluating the Company’s determination of the project and related software development activities to be capitalized under relevant accounting guidance, including the extent to which software development costs incurred were capitalized, required subjective auditor judgment.

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• For a sample of software development projects, we obtained an understanding of the new software enhancements and features planned for development by reviewing management’s project documentation and inquiring of project managers and engineers.

• For a sample of software development projects, we tested the timing of software development cost recognition as either a capitalized or an expensed development cost, depending which stage of project development the cost was incurred.

We also inquired of project managers and engineers regarding the date technological feasibility was reached and observed the new features developed in the working model.

Business Acquisitions - Valuation of Customer Relationship Intangible Assets — Refer to Note 1 and 2 to the financial statements

Critical Audit Matter Description

The Company completed the acquisitions of RxInnovation Inc., operating as FDS Amplicare, ReCept Holdings, Inc., and MarkeTouch Media, LLC (“Acquired Companies”) for consideration of $178.5 million, $102.5 million, and $82.6 million on September 9, 2021, December 29, 2021, and December 31, 2021, respectively.

The Company accounted for the acquisitions of the Acquired Companies under the acquisition method.

Accordingly, the purchase price paid for assets acquired and liabilities assumed was allocated, based on relative fair value, to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.

The Company estimated the fair value of Acquired Companies' identifiable intangible assets to be $136.1 million, including $122.1 million related to customer relationships.

There was a high degree of auditor judgment and subjectivity in applying audit procedures relating to the fair value measurement of intangible assets acquired, specifically the customer relationships, and the fair value of the customer relationship intangible assets acquired was estimated by management through a discounted cash flow model using the multi-period excess earnings method, which involved the use of significant estimates and assumptions related to revenue growth rates and other forecasted financial information, discount rates, and customer attrition rates, among certain other assumptions.

The audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the management’s estimates of the fair value of the customer relationships intangible assets included the following, among others:

• We tested the effectiveness of internal controls over business combinations including (i) the controls over the valuation of the acquired intangible assets and (ii) controls over the forecasted financial information including assumptions of revenue growth rates and forecasted financial information, discount rates, and customer attrition rates selected by management.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodologies used and (2) discount rates, including testing the underlying source information, testing the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.

• Compared the customer attrition rate to an independently developed estimate and for a sample of underlying data, agreed information to historical records of the Acquired Companies.

• We evaluated the reasonableness of management’s forecasts of revenue growth rates, gross margin and operating income before taxes by comparing to:

◦ Historical forecasting accuracy for previously acquired companies.

◦ Analyst reports for the Company and the Acquired Companies, as well as industry reports, and comparison of historical rates to companies in the peer group.

◦ Inquiries with appropriate individuals within the Company and Acquired Companies’ operations, engineering, and finance departments regarding the forecasts of revenue growth rates, gross margin and operating income before taxes.

• We evaluated whether the audit evidence obtained through these procedures was consistent with evidence obtained in other areas of the audit.

• For a sample of software development projects, we tested the timing of software development cost recognition as either a capitalized or an expensed development cost.

We also inquired of project managers and engineers regarding when application development was reached and observed the new features developed in the working model.

/s/ Deloitte & Touche LLP

San Jose, California

February 25, 2022

March 1, 2023

We have served as the Company’s auditor since 2014.

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 25, 2022, expressed an unqualified opinion on those financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated March 1, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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San Jose, California

February 25, 2022

March 1, 2023

OMNICELL, INC.

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44,747 and 44,179 shares outstanding, respectively

Treasury stock at cost, 9,894 shares outstanding, respectively

Treasury stock at cost, 10,283 and 9,894 shares outstanding, respectively

( 290,319 ) ( 238,109 )

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Total operating expenses 591,310 465,146 377,766

Income from operations 89,507 35,526 78,352

Income (loss) from operations ( 2,323 ) 89,507 35,526

Interest and other income (expense), net ( 130 ) ( 23,500 ) ( 6,177 )

Income before provision for income taxes 66,007 29,349 73,933

Provision for (benefit from) income taxes ( 11,842 ) ( 2,845 ) 12,595

Income (loss) before provision for income taxes ( 2,453 ) 66,007 29,349

Benefit from income taxes ( 8,101 ) ( 11,842 ) ( 2,845 )

Net income $ 5,648 $ 77,849 $ 32,194

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OMNICELL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended December 31,

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Net income $ 5,648 $ 77,849 $ 32,194

Other comprehensive income (loss), net of reclassification adjustments:

Unrealized loss on interest rate swap contracts, net of tax — — ( 420 )

Other comprehensive income (loss):

Foreign currency translation adjustments ( 8,680 ) ( 2,885 ) 3,924

Other comprehensive income (loss) ( 8,680 ) ( 2,885 ) 3,924

Comprehensive income $ 74,964 $ 36,118 $ 62,746

Comprehensive income (loss) $ ( 3,032 ) $ 74,964 $ 36,118

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

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Common Stock Treasury Stock Additional

Accumulated Other

Earnings Accumulated Other

Comprehensive Income (Loss)

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Other comprehensive income — — — — — — 3,924 3,924

At the market equity offering, net of costs 460 — — — 37,806 — — 37,806

Share-based compensation — — — 44,697 — — 44,697

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Tax payments related to restricted stock units — — — — ( 8,738 ) — — ( 8,738 )

Balances as of December 31, 2019 51,277 51 ( 9,145 ) ( 185,074 ) 780,931 258,792 ( 9,446 ) 845,254

Net income — — — — — 32,194 — 32,194

Other comprehensive income — — — — — — 3,924 3,924

Share-based compensation — — — — 44,697 — — 44,697

Issuance of common stock under employee stock plans 1,400 2 — — 54,268 — — 54,270

Tax payments related to restricted stock units — — — ( 8,738 ) — — ( 8,738 )

Stock repurchases — — ( 749 ) ( 53,035 ) — — — ( 53,035 )

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Balances as of December 31, 2021 54,073 54 ( 9,894 ) ( 238,109 ) 1,024,580 368,571 ( 8,407 ) 1,146,689

Net income — — — — — 5,648 — 5,648

Other comprehensive loss — — — — — — ( 8,680 ) ( 8,680 )

Stock repurchases — — ( 389 ) ( 52,210 ) — — — ( 52,210 )

Share-based compensation — — — — 68,247 — — 68,247

Issuance of common stock under employee stock plans 957 1 — — 40,181 — — 40,182

Tax payments related to restricted stock units — — — — ( 13,506 ) — — ( 13,506 )

Cumulative effect of a change in accounting principle related to convertible debt — — — — ( 72,742 ) 16,509 — ( 56,233 )

Balances as of December 31, 2022 55,030 $ 55 ( 10,283 ) $ ( 290,319 ) $ 1,046,760 $ 390,728 $ ( 17,087 ) $ 1,130,137

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

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Amortization of operating lease right-of-use assets 12,238 11,941 10,528

Impairment and abandonment of operating lease right-of-use assets related to facilities 9,382 — —

Impairment of externally and internally developed capitalized software, net 1,275 — —

Amortization of debt issuance costs 4,164 3,440 1,597

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Business acquisitions, net of cash acquired ( 3,392 ) ( 354,163 ) ( 225,000 )

Purchase price adjustments from business acquisitions 5,463 — —

Net cash used in investing activities ( 58,669 ) ( 412,498 ) ( 279,866 )

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Proceeds from sale of warrants — — 51,290

At the market equity offering, net of offering costs — — 37,806

Proceeds from issuances under stock-based compensation plans 40,182 67,348 54,270

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Income taxes paid (refunds received), net $ 19,005 $ ( 1,733 ) $ 10,343

Supplemental disclosure of non-cash activities

Supplemental disclosure of non-cash investing activities

Unpaid purchases of property and equipment $ 892 $ 883 $ 405

Transfers between inventory and property and equipment, net $ 314 $ 1,876 $ —

Transfers from prepaid expenses to property and equipment $ — $ — $ 3,313

Balance transfer from term loan to revolving credit facility $ — $ — $ 80,000

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

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The Company’s market is primarily located in the United States and Europe.

“Omnicell” or the “Company” collectively refer to Omnicell, Inc.

and its subsidiaries.

“Omnicell” or the “Company” refer to Omnicell, Inc.

and its subsidiaries, collectively.

Basis of Presentation

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All intercompany accounts and transactions have been eliminated in consolidation.

On September 9, 2021, the Company completed its acquisition of RxInnovation Inc., operating as FDS Amplicare (“FDS Amplicare”);

on December 29, 2021, the Company completed its acquisition of ReCept Holdings, Inc.

and on December 31, 2021, the Company completed its acquisition of MarkeTouch Media, LLC (“MarkeTouch Media”).

The Consolidated Financial Statements include the results of operations of these recently acquired companies, commencing as of the respective acquisition dates.

The significant accounting policies of the acquired businesses have been aligned to conform to the accounting policies of Omnicell.

On January 10, 2022, the Company completed its acquisition of Hub and Spoke Innovations Limited (“Hub and Spoke Innovations”).

The Consolidated Financial Statements include the results of operations of this recently acquired company, commencing as of the acquisition date.

The significant accounting policies of the acquired business have been aligned to conform to the accounting policies of Omnicell.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s Consolidated Financial Statements and accompanying Notes.

Management bases its estimates on historical experience and various other assumptions believed to be reasonable.

These estimates are based on historical experience and various other assumptions that management believes to be reasonable.

Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results may be different from the estimates.

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inventory valuation;

capitalized software development costs;

capitalized software development costs for internal and external use;

impairment of goodwill;

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fair value of assets acquired and liabilities assumed in business combinations;

convertible senior notes;

share-based compensation;

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Assets and liabilities denominated in a currency other than the functional currency are remeasured into the respective entity’s functional currency.

Monetary assets and liabilities are remeasured at exchange rates in effect at the end of each period, and non-monetary assets and liabilities are remeasured at historical rates.

Monetary assets and liabilities are remeasured at exchange rates in effect at the end of each period,

and non-monetary assets and liabilities are remeasured at historical rates.

Gains and losses from foreign currency remeasurement of monetary assets and liabilities are recorded in interest and other income (expense), net.

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Software-enabled connected devices and software licenses that manage and regulate the storage and dispensing of pharmaceuticals, consumables blister cards, and packaging equipment and other supplies.

This revenue category is often sold through long-term, sole-source agreements with multi-year co-development plans.

Solutions in this category include, but are not limited to, XT Series automated dispensing systems, the XR2 Automated Central Pharmacy System, and IV compounding automation solutions.

This revenue category is often sold through long-term, sole-source agreements.

Solutions in this category include, but are not limited to, XT Series automated dispensing systems and products related to the Central Pharmacy Dispensing Service and IV Compounding Service.

Medication adherence packaging, labeling, and other one-time use packaging including multimed adherence packaging and single dose blister cards, which are used by retail, community, and outpatient pharmacies, as well as by institutional pharmacies serving long-term care and other sites outside the acute care hospital, are designed to improve patient engagement and adherence to prescriptions.

Technical services.

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This revenue category is often supported by multi-year or annual contractual agreements.

Medication adherence packaging, labeling, and other one-time use packaging including multimed adherence packaging and single dose blister cards which are used by retail, community, and outpatient pharmacies, as well as by institutional pharmacies serving long-term care and other sites outside the acute care hospital, and are designed to improve patient engagement and adherence to prescriptions.

Software-as-a-service (“SaaS”), subscription software, and technology-enabled services.

Advanced Services.

Emerging software and service solutions which are offered on a subscription basis with fees typically based either on transaction volume or a fee over a specified period of time.

Solutions in this category include, but are not limited to, EnlivenHealth inclusive of FDS Amplicare and MarkeTouch Media, 340B solutions, ReCept management services, and services associated with Omnicell One, Central Pharmacy Dispensing Services, including the XR2 Automated Central Pharmacy system, and Central Pharmacy Compounding Services, including IV compounding automation solutions.

The following table summarizes revenue recognition for each revenue category which is further discussed below:

Solutions in this category include, but are not limited to, EnlivenHealth, Specialty Pharmacy Services, 340B solutions, Inventory Optimization Service, other software solutions, and services related to the Central Pharmacy Dispensing Service and IV Compounding Service.

The following table summarizes revenue recognition for each revenue category:

Revenue Category

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

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

Technical services

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

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

SaaS, subscription software, and technology-enabled services

Advanced Services

Over time, as services are provided

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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 .

The Company performs 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.

The Company performs 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 ensure the full agreed upon contract price will be collected.

Distinct goods or services are identified as performance obligations.

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Where a good or service is determined not to be distinct, the Company combines the good or service with other promised goods or services until a bundle of goods or services that is distinct is identified.

To identify its performance obligations, the Company considers all of the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

To identify its performance obligations, the Company considers all products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

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

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

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 the Company provides a stand-ready service for the customer’s equipment.

For maintenance contracts and certain other services, including Advanced Services provided on a subscription basis, control passes to the customer over time, generally ratably over the service term as the Company provides 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.

The portion of the transaction price allocated to the Company’s unsatisfied performance obligations recorded as deferred revenues, net of deferred cost of goods sold, at December 31, 2022 and 2021 were $ 156.3 million and $ 132.4 million, respectively, of which $ 118.9 million and $ 112.2 million, respectively, are expected to be completed within one year and are presented as current deferred revenues, net on the Consolidated Balance Sheets.

Remaining performance obligations primarily relate to maintenance contracts and are recognized ratably over the remaining term of the contract, generally not more than five years .

Remaining performance obligations are primarily recognized ratably over the remaining term of the contract, generally not more than ten years .

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

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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.

The Company’s change orders generally result in the change being accounted for as modifications of existing contracts given the nature of the impacted orders.

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The allowance for sales returns is not material to the Consolidated Financial Statements for any periods presented.

The Company contracts with Group Purchasing Organizations (“GPOs”), each of which functions as a purchasing agent on behalf of member hospitals and other healthcare providers.

A portion of the Company’s sales are made to customers who are members of Group Purchasing Organizations (“GPOs”), each of which functions as a purchasing agent on behalf of member hospitals and other healthcare providers.

The Company also has a Federal Supply Schedule Contract with the Department of Veterans Affairs (the “GSA Contract”), allowing the Department of Veterans Affairs, the Department of Defense, and other Federal government customers to purchase the Company’s products.

Pursuant to the terms of GPO agreements and the GSA Contract, each member or agency contracts directly with Omnicell and can purchase the Company’s products at pre-negotiated contract terms and pricing.

GPOs are often owned fully or in part by the Company’s customers, and the Company pays fees to the GPO on completed contracts.

GPOs are often fully or partially owned by the Company’s customers, and the Company pays fees to the GPO on completed contracts.

The Company also pays the Industrial Funding Fee (“IFF”) to the Department of Veterans Affairs under the GSA Contract.

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The Company has determined that certain incentive portions of its sales commission plans require capitalization since these payments are directly related to sales achieved during a time period.

These commissions are earned on the basis of the total purchase order value of new product bookings.

These commissions are earned on the basis of:

(i) the value of new bookings for connected devices, software products, and Advanced Services, provided that for Advanced Services a commission will only be paid on the amount that represents the minimum commitment and (ii) the value of new orders for consumables.

Since there are no commensurate commissions earned on renewal of the service bookings, the Company concluded that the capitalized asset is related to services provided under both the initial contract and renewal periods.

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Costs to obtain a contract are allocated amongst performance obligations and recognized as sales and marketing expense consistent with the pattern of revenue recognition.

Capitalized costs are periodically reviewed for impairment.

In accordance with GAAP, while certain compensation elements are expensed as incurred, a portion of the pool’s capitalized asset is recorded as an expense over the first five quarters after booking, which represents the estimated period during which the product revenue associated with the contract is recorded.

In accordance with GAAP, while certain compensation elements are expensed as incurred, a portion of the pool’s capitalized asset is recorded as an expense over the first seven quarters after booking, which represents the estimated period during which the product revenue associated with the contract is recorded.

The remaining capitalized contract costs are recorded as expense ratably over the ten year estimated initial and renewal service periods.

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The commission expenses paid or due to be paid as of the consolidated balance sheet date to be recognized in future periods are recorded in long-term prepaid commissions on the Consolidated Balance Sheets.

Capitalized costs are periodically reviewed for impairment.

There was no impairment loss recorded related to capitalized prepaid commissions as of and for the year ended December 31, 2022.

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The Company optimizes cash flows by selling a majority of its non-U.S.

government sales-type leases to third-party leasing finance companies on a non-recourse basis.

government sales-type leases, other than Advanced Services sales-type leases, to third-party leasing finance companies on a non-recourse basis.

The Company has no obligation to the leasing company once the lease has been sold.

Some of the Company’s sales-type leases, mostly those relating to U.S.

government hospitals which comprise approximately 69 % of the lease receivable balance, are retained in-house.

government hospitals which comprise approximately 38 % of the lease receivable balance, and those associated with financed service contracts related to certain Advanced Services products, including Central Pharmacy Dispensing Service and IV Compounding Service, are retained in-house.

Operating Leases

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The allowance for credit losses is measured on a collective (pool) basis by aggregating customer balances with similar risk characteristics.

The Company also records a specific allowance based on an analysis of individual past due balances or customer-specific information, such as a decline in creditworthiness or

The Company also records a specific allowance

based on an analysis of individual past due balances or customer-specific information, such as a decline in creditworthiness or bankruptcy.

Actual collection losses may differ from management’s estimates, and such differences could be material to the Company’s financial position and results of operations.

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Funds Held for Customers and Customer Fund Liabilities

With the acquisition of the 340B Link Business and ReCept, the Company offers certain products and services in which it is customary for pharmacies or insurance payors to owe funds to the Company which are collected on behalf of, and, after a short holding period, disbursed to, the Company’s customers.

With the acquisition of the 340B Link Business and ReCept Holdings, Inc., (“ReCept”), which was subsequently renamed Omnicell Specialty Pharmacy Services, Inc., the Company offers certain products and services in which it is customary for pharmacies or insurance payors to owe funds to the Company which are collected on behalf of, and, after a short holding period, disbursed to, the Company’s customers.

The Company presents amounts due from pharmacies and amounts due to be disbursed to customers on a gross basis within other current assets and accrued liabilities, respectively, in the Consolidated Balance Sheets, as such amounts are expected to be settled within one year.

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Level 3 – Unobservable inputs for financial instruments reflecting Company’s assumptions.

Interest Rate Swap Agreements

The Company uses interest rate swap agreements to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on a portion of its outstanding debt.

The Company does not hold or issue any derivative financial instruments for speculative trading purposes.

The Company's interest rate swap agreements qualify as cash flow hedging instruments in accordance with ASC 815, Derivatives and Hedging .

The Company records its interest rate swap agreements on its Consolidated Balance Sheets at fair value.

The effective portion of changes in fair value are recorded in accumulated other comprehensive loss and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

Any ineffective portion is recognized in earnings.

On a quarterly basis, the Company performs a qualitative assessment to determine effectiveness.

Refer to Note 5, Fair Value of Financial Instruments , for additional information.

As of December 31, 2021, the Company did not have any outstanding interest rate swap agreements.

Inventories are stated at the lower of cost, computed using the first-in, first-out method, and net realizable value.

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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 the Company receives them are recorded as in-transit inventory when title and the significant risks and rewards of ownership have passed to the Company.

Shipments from suppliers or contract manufacturers before the

Company receives them are recorded as in-transit inventory when title and the significant risks and rewards of ownership have passed to the Company.

The Company has a supply agreement with one primary supplier for construction and supply of several sub-assemblies and inventory management of sub-assemblies used in its hardware products.

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The Company capitalizes costs related to computer software developed or obtained for internal use in accordance with ASC 350-40, Internal-Use Software .

Software obtained for internal use includes enterprise-level business and finance software that the Company customizes to meet its specific operational needs, as well as certain costs for the development of its subscription and cloud-based offerings sold to its customers.

Software developed or obtained for internal use includes certain costs for the development of the Company’s subscription and cloud-based offerings sold to its customers, as well as enterprise-level business and finance software that the Company customizes to meet its specific operational needs.

Costs incurred in the application development phase are capitalized and amortized over their useful lives, which is generally five years .

Costs recognized in the preliminary project phase and the post-implementation phase are expensed as incurred.

The Company capitalized $ 12.7 million and $ 6.8 million of costs related to the application development of enterprise-level software and its subscription and cloud-based offerings that were included in property and equipment during the years ended December 31, 2021 and 2020, respectively.

Software Development Costs

The Company capitalized $ 33.0 million and $ 12.7 million of costs related to the application development of enterprise-level software and its subscription and cloud-based offerings, which were included in property and equipment during the years ended December 31, 2022 and 2021, respectively.

Capitalized costs related to computer software developed or obtained for internal use were included in purchases of property and equipment in the Consolidated Statements of Cash Flows.

Software Development Costs for External Use

The Company capitalizes certain software development costs in accordance with ASC 985-20, Costs of Software to Be Sold, Leased, or Marketed , under which those costs incurred subsequent to the establishment of technological feasibility may be capitalized and amortized over the estimated lives of the related products.

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The Company amortizes development costs over the estimated lives of the related products, which is generally five years .

The Company capitalized software development costs of $ 29.4 million and $ 32.0 million, which are included in other long-term assets as of December 31, 2021 and 2020, respectively.

The Company recorded $ 26.4 million, $ 23.1 million, and $ 17.5 million to cost of revenues for amortization of capitalized software development costs for the years ended December 31, 2021, 2020, and 2019, respectively.

All development costs prior to the completion of a detail program design or a working model are recognized as research and development expense.

The Company capitalized software development costs of $ 13.2 million and $ 29.4 million, that were included in other long-term assets as of December 31, 2022 and 2021, respectively.

Lessee Leases

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

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

The Company does not recognize a right-of-use asset and a lease liability for leases with an initial

term of twelve months or less.

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

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When the Company has made a decision to exercise an early termination option, the right-of-use assets and associated lease liabilities are remeasured in accordance with the present value of the remaining cash flows under the lease contract.

Certain building lease agreements include rental payments subject to change annually based on fluctuations in various indexes ( i.e.

Consumer Price Index (“CPI”), Retail Price Index, and other international indexes).

Certain building lease agreements include rental payments subject to change annually based on fluctuations in various indexes (i.e., Consumer Price Index (“CPI”), Retail Price Index, and other international indexes).

Certain data center lease agreements include rental payments subject to change based on usage and CPI fluctuations.

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Goodwill and Acquired Intangible Assets

The Company reviews goodwill for impairment on an annual basis on the first day of the fourth quarter of each year at the reporting unit level.

The Company assesses goodwill for impairment on an annual basis on the first day of the fourth quarter of each year at the reporting unit level.

This assessment is also performed whenever there is a change in circumstances that indicates the carrying value of goodwill may be impaired.

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The impairment charge will be limited to the amount of goodwill.

To determine the reporting unit’s fair value under the quantitative approach, the Company uses a combination of income and market approaches, equally weighting the two approaches, such as estimated discounted future cash flows of the

reporting unit, multiples of earnings or revenues, and analysis of recent sales or offerings of comparable entities.

To determine the reporting unit’s fair value under the quantitative approach, the Company uses a combination of income and market approaches, such as estimated discounted future cash flows of the reporting unit, multiples of earnings or revenues, and analysis of recent sales or offerings of comparable entities.

The Company also considers its market capitalization on the date of the analysis to ensure the reasonableness of its reporting unit’s fair value.

The Company performed a qualitative impairment assessment analysis as of October 1, 2021 for its reporting unit taking into consideration past, current, and projected future earnings, recent trends, market conditions, and valuation metrics involving similar companies that are publicly-traded.

The Company elected to perform a quantitative impairment assessment analysis as of October 1, 2022 for its reporting unit.

The Company determined that the fair value of the reporting unit exceeded the carrying value and thus no impairment was indicated.

Based on the result of this analysis, an impairment does not exist as of December 31, 2022, and there were no accumulated impairment losses.

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The Company evaluates convertible debt instruments and related transactions at inception to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for.

Convertible debt instruments that may be settled in cash are separated into liability and equity components.

The allocation to the liability component is based on the fair value of a similar instrument that does not contain an equity conversion option.

Based on this debt-to-equity ratio, debt issuance costs are then allocated to the liability and equity components in a similar manner.

The difference between the principal amount of the convertible debt instruments and the liability component, inclusive of issuance costs, represents the debt discount, which is amortized to interest expense over the term of instruments.

The determination of the discount rate requires certain estimates and assumptions.

Convertible note hedge and warrant transactions associated with convertible debt instruments are accounted for as equity instruments, and are recorded in additional paid-in capital in the Consolidated Balance Sheet s.

Prior to the adoption of Accounting Standards Update (“ASU”) 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) , convertible debt instruments that could be settled in cash were required to be separated into liability and equity components.

The allocation to the liability component was based on the fair value of a similar instrument that did not contain an equity conversion option.

Based on this debt-to-equity ratio, debt issuance costs were then allocated to the liability and equity components in a similar manner.

The difference between the principal amount of the convertible senior notes and the liability component, inclusive of issuance costs, represented the debt discount, which the Company amortized to interest expense over the term of the convertible senior notes.

The determination of the discount rate required certain estimates and assumptions.

Upon adoption of ASU 2020-06, effective January 1, 2022, the convertible senior notes are no longer separated into liability and equity components, and are accounted for as a single liability, measured at amortized cost in the Consolidated Balance Sheets.

Issuance costs are amortized using the effective interest method over the term of the convertible senior notes.

Refer to “Recently Adopted Authoritative Guidance” section below for further information regarding the Company’s adoption of ASU 2020-06.

Valuation of Share-Based Compensation

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Expense is recognized on a straight-line basis over the requisite service period.

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 units (“RSUs”) and restricted stock awards (“RSAs”) is based on the stock price on the grant date.

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

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Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the periods in which those tax assets and liabilities are expected to be realized or settled.

In the event that these tax rates change, the Company will incur a benefit or detriment on its income tax expense in the period of change.

In the event that these tax rates change, the Company will incur a benefit or detriment on its income tax expense in the period of enactment.

If the Company were to determine that all or part of the net deferred tax assets are not realizable in the future, it will record a valuation allowance that would be charged to earnings in the period such determination is made.

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Recently Adopted Authoritative Guidance

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

The update simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes, as well as improves consistent application of and simplifies the guidance for other areas of ASC 740 by clarifying and amending existing guidance.

The Company adopted ASU 2019-12 on January 1, 2021 on a prospective basis.

The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

Recently Issued Authoritative Guidance

In August 2020, the FASB issued ASU 2020-06 , Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) .

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06 , Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) .

The update simplifies the accounting for convertible debt instruments by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract.

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This update permits the use of either the modified retrospective or fully retrospective method of transition.

The Company will adopt ASU 2020-06 on January 1, 2022, and expects to use the modified retrospective method of transition.

The Company’s adoption of the update is estimated to result in an increase in convertible senior notes, net of issuance costs, of $ 75.4 million;

a decrease in additional paid-in capital of $ 72.7 million;

a decrease of long-term deferred tax liabilities of $ 19.8 million;

a decrease in long-term deferred tax assets of $ 0.5 million;

and an increase in retained earnings of $ 16.7 million, all as of January 1, 2022.

In December 2021, the Company made an irrevocable election under the indenture to require the principal portion of the Company's convertible senior notes to be settled in cash and any conversion consideration in excess of the principal portion in cash and/or shares of the Company's common stock at the Company's option upon conversion.

Following the irrevocable election, only the amounts expected to be settled in excess of the principal portion are considered dilutive in calculating earnings per share under the if-converted method.

The Company adopted ASU 2020-06 on January 1, 2022, using the modified retrospective method of transition.

Upon adoption of ASU 2020-06, the previously separated equity component and associated debt issuance costs for the Company’s outstanding convertible senior notes were reclassified to the liability component, thereby eliminating the subsequent amortization of the debt discount as interest expense.

In addition, the Company derecognized the deferred tax liability related to the equity component.

The Company’s adoption of ASU 2020-06 impacted the Consolidated Balance Sheets at the beginning of the period of adoption as follows:

January 1, 2022

Pre-ASU 2020-06 Balances ASU 2020-06 Adoption Impact Post-ASU 2020-06 Balances

(In thousands)

Long-term deferred tax assets $ 15,883 $ ( 452 ) $ 15,431

Convertible senior notes, net 488,152 75,353 563,505

Long-term deferred tax liabilities 51,705 ( 19,572 ) 32,133

Additional paid-in capital 1,024,580 ( 72,742 ) 951,838

Retained earnings 368,571 16,509 385,080

Adoption of ASU 2020-06 did not have an impact on the Company’s Consolidated Statements of Operations or Consolidated Statements of Cash Flows as of January 1, 2022.

Refer to Note 11, Convertible Senior Notes , for further information regarding the Company’s convertible senior notes.

Recently Issued Authoritative Guidance

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

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The update addresses diversity in practice by requiring that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers.

The guidance will be applied prospectively to acquisitions occurring on or after the effective

ASU 2021-08 will be effective for the Company beginning January 1, 2023, and early adoption is permitted.

The Company is currently evaluating the impact ASU 2021-08 will have on its Consolidated Financial Statements.

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

The Company will apply the guidance prospectively to acquisitions occurring on or after the effective date.

ASU 2021-08 will be effective for the Company beginning January 1, 2023.

The Company does not anticipate that the adoption of ASU 2021-08 will have a material impact on its Consolidated Financial Statements.

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

Business Combinations

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The tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the respective acquisition dates.

Intangible assets eligible for recognition separate from goodwill were those that satisfied either the contractual or legal criterion or the separability criterion in the accounting guidance.

The preliminary fair values assume management’s best estimates based on information available at the respective acquisition date and may change over the measurement period, which will end no later than one year from the respective acquisition date, as additional information is received.

Intangible assets eligible for recognition separate from goodwill were those that satisfied either the contractual or legal criterion or the separability criterion, each as set forth in the accounting guidance.

The Company believes that the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that market participants would use.

Actual results may differ from these estimates and assumptions.

The Company's Consolidated Financial Statements include the results of operations of each acquired company, commencing as of the respective acquisition dates.

The Company’s Consolidated Financial Statements include the results of operations of each acquired company, commencing as of their respective acquisition dates.

Acquisition-related costs were expensed as incurred, and are included in selling, general, and administrative expenses in the Company’s Consolidated Statements of Operations.

2022 Acquisition

Hub and Spoke Innovations

On January 10, 2022, the Company completed the acquisition of all of the outstanding equity interests in Hub and Spoke Innovations pursuant to the terms and conditions of the Share Purchase Agreement, dated January 10, 2022, by and among Omnicell Limited (a wholly-owned subsidiary of the Company), Hub and Spoke Innovations Limited, and certain beneficial stockholders specified therein for a base purchase price of £ 2.5 million (approximately $ 3.4 million based on the exchange rate in effect at the acquisition date), prior to customary adjustments for closing cash, net working capital, and assumed indebtedness.

The purchase price transferred for the transaction, net of cash acquired, was £ 2.5 million (approximately $ 3.4 million based on the exchange rate in effect at the acquisition date).

Of the purchase price transferred, £ 1.9 million (approximately $ 2.5 million based on the exchange rate in effect at the acquisition date) was allocated to goodwill;

£ 0.8 million (approximately $ 1.1 million based on the exchange rate in effect at the acquisition date) was allocated to intangible assets, which included customer relationships;

and the remainder was allocated to net assets acquired.

The Hub and Spoke Innovations acquisition is expected to complement Omnicell’s total solution technology portfolio for retail pharmacy in the United Kingdom to help pharmacies improve workflows, offer patients 24/7 access to their medications and provide enhanced patient care.

2021 Acquisitions

MarkeTouch Media

On December 31, 2021, the Company completed the acquisition of all of the outstanding equity interests in MarkeTouch Media pursuant to the terms and conditions of the Unit Purchase Agreement, dated December 31, 2021, by and among ateb, Inc.

On December 31, 2021, the Company completed the acquisition of all of the outstanding equity interests in MarkeTouch Media, LLC (“MarkeTouch Media”) pursuant to the terms and conditions of the Unit Purchase Agreement, dated December 31, 2021, by and among ateb, Inc.

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

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

The Company incurred approximately $ 1.2 million in acquisition-related costs related to the MarkeTouch Media acquisition during the year ended December 31, 2021.

On December 29, 2021, the Company completed the acquisition of all outstanding equity securities 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 Company incurred approximately $ 2.5 million in acquisition-related costs related to the ReCept acquisition during the year ended December 31, 2021.

The addition of ReCept’s specialty pharmacy management services, now a part of the Company’s Specialty Pharmacy Services, for health

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

FDS Amplicare

On September 9, 2021, the Company completed the acquisition of all of the outstanding equity interests in 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 the Company’s EnlivenHealth offering.

On September 9, 2021, the Company completed the acquisition of all of the outstanding equity interests in RxInnovation, Inc., operating as FDS Amplicare ® (“FDS Amplicare”), pursuant to the terms and conditions of the Agreement and Plan of Merger, dated July 25, 2021, by and among RxInnovation Inc., Omnicell, Inc., Fleming Acquisition Corp., and the representative of the securityholders for a base purchase price of $ 177.0 million, prior to customary adjustments for closing cash, net working capital, and assumed indebtedness.

The FDS Amplicare acquisition adds a comprehensive and complementary suite of software-as-a-service (“SaaS”) financial management, analytics, and population health solutions to the Company’s EnlivenHealth offering.

The Company incurred approximately $ 7.0 million in acquisition-related costs related to the FDS Amplicare acquisition during the year ended December 31, 2021.

Revenues and net losses from the FDS Amplicare operations since the acquisition date through December 31, 2021 were $ 11.3 million and $ 0.9 million, respectively.

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

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

FDS Amplicare (1)

(Preliminary) (2)

ReCept (2) (3)

MarkeTouch Media (4)

(Preliminary)

(In thousands)

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Total purchase price transferred $ 178,466 $ 97,239 $ 82,369

FDS Amplicare (Preliminary) (1)

(Preliminary) (2)

FDS Amplicare (1)

ReCept (2) (3)

MarkeTouch Media (4)

(Preliminary)

Fair value of assets acquired and liabilities assumed:

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_________________________________________________

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

(1) During the year ended December 31, 2021, the Company recorded measurement period adjustments of $ 1.5 million to goodwill, consisting of an increase in intangible assets, accounts receivable and unbilled receivables, and long-term deferred tax liabilities of $ 0.4 million, $ 1.1 million, and $ 0.1 million, respectively, and a net working capital adjustment of $ 0.1 million.

During the year ended December 31, 2022, the Company recorded a measurement period adjustments of $ 0.4 million to goodwill, consisting of an increase in long-term deferred tax liabilities and accrued liabilities of $ 0.3 million and $ 0.1 million, respectively.

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

(3) During the year ended December 31, 2022, the Company recorded measurement period adjustments of $ 3.9 million to goodwill, consisting of a purchase price adjustment of $ 5.2 million, a decrease in long-term deferred tax liabilities of $ 0.2 million and a decrease in accrued liabilities of $ 0.3 million, partially offset by a decrease to other current assets of $ 1.7 million.

(4) During the year ended December 31, 2022, the Company recorded a measurement period adjustment of $ 0.3 million to goodwill related to a purchase price adjustment.

The $ 117.8 million of goodwill arising from the FDS Amplicare acquisition is primarily attributed to future sales of SaaS solutions and FDS Amplicare’s assembled workforce.

None of the FDS Amplicare goodwill is expected to be deductible for tax purposes.

The $ 77.6 million of goodwill arising from the ReCept acquisition is primarily attributed to future sales of its offerings and services and ReCept’s assembled workforce.

None of the ReCept goodwill is expected to be deductible for tax purposes.

None of the FDS Amplicare and ReCept goodwill is expected to be deductible for tax purposes as these acquisitions were treated as stock acquisitions for U.S.

tax purposes.

The $ 42.3 million of goodwill arising from the MarkeTouch Media acquisition is primarily attributed to future sales of SaaS solutions and MarkeTouch Media’s assembled workforce.

The full amount of the MarkeTouch Media goodwill is expected to be deductible for tax purposes.

The full amount of the MarkeTouch Media goodwill is expected to be deductible for tax purposes as this acquisition was treated as an asset acquisition for U.S.

tax purposes.

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

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_________________________________________________

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

(1) During the year ended December 31, 2021, the Company recorded a measurement period adjustment of $ 0.4 million in customer relationships.

The customer relationships intangible assets represent the fair values of the underlying relationships and agreements with each acquired company’s customers.

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Approximately $ 93.7 million of the 340B Link Business goodwill is expected to be deductible for tax purposes.

Tax deductible goodwill for U.S.

tax purposes is attributable to the asset acquisition portion of the transaction.

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

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The fair value of the customer relationships intangible asset was determined based on the excess earnings method;

the fair values of the acquired technology and trade names intangible assets were determined based on the relief-from-royalty method;

the fair values of the acquired technology and trade names intangible assets were determined based on the relief-from-royalty

and the fair value of the non-compete agreements intangible asset was determined based on the lost profits method.

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The following table presents certain unaudited pro forma consolidated financial information for the years ended December 31, 2021 and 2020 as if the FDS Amplicare, ReCept, and MarkeTouch Media acquisitions had been completed on January 1, 2020 and the 340B Link Business acquisition had been completed on January 1, 2019.

The pro forma effects of the Hub and Spoke Innovations acquisition were not material to the Company’s consolidated results of operations.

The unaudited pro forma financial information is presented for informational purposes only, and is not indicative of what would have occurred had the acquisitions taken place on those respective dates.

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Year Ended December 31,

2021 2020 2019

(In thousands)

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Connected devices, software licenses, and other $ 827,917 $ 739,074 $ 560,368

Technical services 206,989 202,383 194,183

Consumables 75,305 73,438 75,663

SaaS, subscription software, and technology-enabled services 112,517 53,794 43,242

Technical services 206,687 206,989 202,383

Advanced Services

186,038 112,517 53,794

Total revenues $ 1,295,947 $ 1,132,018 $ 892,208

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Long-term deferred revenues

37,385 20,194

Total contract liabilities $ 156,332 $ 132,390

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In periods of net loss, all potential common shares are anti-dilutive, so diluted net loss per share equals the basic net loss per share.

In periods of net income, diluted net income per share is computed by dividing net income for the period by the basic weighted-average number of shares plus any dilutive potential common stock outstanding during the period, using the treasury stock method.

Potential common stock includes the effect of outstanding dilutive stock options, restricted stock awards, and restricted stock units, as well as shares the Company could be obligated to issue from its convertible senior notes and warrants, as described in Note 11, Convertible Senior Notes .

For periods prior to the adoption of ASU 2020-06 on January 1, 2022, the Company applied the treasury stock method to calculate the dilutive impact of the convertible senior notes.

Upon adoption of ASU 2020-06, effective January 1, 2022, the Company applies the if-converted method for calculating the dilutive impact of the convertible senior notes.

Refer to Note 1, Organization and Summary of Significant Accounting Policies , for further information.

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

Any anti-dilutive weighted-average dilutive shares related to stock award plans, convertible senior notes, and warrants are excluded from the computation of the diluted net income per share.

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Fair Value of Financial Instruments

Fair Value Hierarchy

The Company measures its financial instruments at fair value.

The Company’s cash, cash equivalents, and restricted cash are classified within Level 1 of the fair value hierarchy as they are valued primarily using quoted market prices utilizing market observable inputs.

The Company’s interest rate swap contracts and credit facility are classified within Level 2 as the valuation inputs are based on quoted prices or market observable data of similar instruments.

The Company’s credit facility is classified within Level 2 as the valuation inputs are based on quoted prices or market observable data of similar instruments.

The Company’s convertible senior notes are classified within Level 2 as the valuation inputs are based on quoted prices in an inactive market on the last day in the reporting period.

As of December 31, 2021 and 2020, the fair value of the convertible senior notes was $ 1.085 billion and $ 782.3 million, respectively, compared to their carrying value of $ 488.2 million and $ 467.2 million, respectively, which are net of unamortized discount and debt issuance costs and excludes amounts classified within additional paid-in capital.

Refer to Note 9, Debt and Credit Agreements , for further information regarding the Company’s credit facility and Note 10, Convertible Senior Notes , for further information regarding the Company’s convertible senior notes.

Interest Rate Swap Contracts

During 2016, the Company entered into an interest rate swap agreement with a combined notional amount of $ 100.0 million with one counterparty that became effective on June 30, 2016 and matured on April 30, 2019.

The swap agreement required the Company to pay a fixed rate of 0.8 % and provided that the Company receive a variable rate based on the one month LIBOR rate subject to a LIBOR floor of 0.0 %.

Amounts payable by or due to the Company were net settled with the respective counterparty on the last business day of each month, commencing July 31, 2016.

The Company’s interest rate swap agreement matured during the second quarter of 2019, and, as of December 31, 2021 and 2020, the Company did not have any outstanding interest rate swap agreements.

As of December 31, 2022, the fair value of the convertible senior notes was $ 501.4 million, compared to their carrying value of $ 566.6 million, which is net of unamortized debt issuance costs (subsequent to the adoption of ASU 2020-06).

As of December 31, 2021, the fair value of the convertible senior notes was $ 1.085 billion, compared to their carrying value of $ 488.2 million, which is net of unamortized discount and debt issuance costs and excludes amounts classified within additional paid-in capital (prior to the adoption of ASU 2020-06).

Refer to Note 10, Debt and Credit Agreement , for further information regarding the Company’s credit facility and Note 11, Convertible Senior Notes , for further information regarding the Company’s convertible senior notes.

Refer to Note 1, Organization and Summary of Significant Accounting Policies , for further information regarding the adoption of ASU 2020-06.

Balance Sheet Components

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Advance payments from customers 11,556 8,191

Rebates and lease buyouts 44,644 21,815

Rebate liabilities 42,802 44,644

Group purchasing organization fees 7,723 7,115

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(1) Includes restricted cash of $ 22.5 million and $ 6.6 million as of December 31, 2022 and 2021, respectively.

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), which consisted of foreign currency translation adjustments, for the years ended December 31, 2021 and 2020:

The following table summarizes the changes in accumulated balances of other comprehensive loss, which consisted of foreign currency translation adjustments, for the years ended December 31, 2022 and 2021:

(In thousands)

Balance as of December 31, 2020 $ ( 5,522 )

Other comprehensive income 3,924

Other comprehensive loss ( 2,885 )

Balance as of December 31, 2021 ( 8,407 )

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

Software Development Costs for External Use

The carrying amounts of capitalized software as of December 31, 2022 and 2021 were as follows:

(In thousands)

Gross carrying amount $ 225,004 $ 214,362

Accumulated amortization ( 144,244 ) ( 117,367 )

Capitalized software, net (1)

$ 80,760 $ 96,995

_________________________________________________

(1) Included in other long-term assets in the Consolidated Balance Sheets.

The Company recorded $ 29.0 million, $ 26.4 million, and $ 23.1 million to cost of revenues for amortization of capitalized software development costs for the years ended December 31, 2022, 2021, and 2020, respectively.

The estimated future amortization expenses for capitalized software were as follows:

December 31, 2022

(In thousands)

2023 $ 28,600

Thereafter 189

Total $ 80,760

Goodwill and Intangible Assets

3 unchanged sentences

Additions (1)

Measurement period adjustments (1)

Foreign currency exchange rate fluctuations ( 1,052 )

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_________________________________________________

(1) The differences in gross carrying amounts between periods are primarily due to additions of intangible assets in connection with acquisitions, partially offset by the write-off of certain fully amortized intangible assets.

(1) The differences in gross carrying amounts between periods are primarily due to the write-off of certain fully amortized intangible assets, partially offset by additions of intangible assets in connection with the Hub and Spoke Innovations acquisition.

Amortization expense of intangible assets was $ 35.2 million, $ 26.5 million, and $ 19.7 million for the years ended December 31, 2022, 2021, and 2020, respectively.

4 unchanged sentences

Total $ 242,906

Debt and Credit Agreements

2016 Senior Credit Facility

On January 5, 2016, the Company 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) a five-year revolving credit facility of $ 200.0 million, which was subsequently increased pursuant to the amendment discussed below (the “Prior Revolving Credit Facility”) and (b) a five-year $ 200.0 million term loan facility (the “Prior Term Loan Facility” and, together with the Prior Revolving Credit 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.

The Prior Credit Agreement had an expiration date of January 5, 2021, upon which date all remaining outstanding borrowings were due and payable.

Loans under the Prior Facilities bore interest, at the Company’s option, at a rate equal to either (a) the LIBOR Rate, plus an applicable margin ranging from 1.50 % to 2.25 % per annum based on the Company’s consolidated total net leverage ratio (as defined in the Prior Credit Agreement), or (b) an alternate base rate equal to the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50 %, and (iii) LIBOR for an interest period of one month, plus an applicable margin ranging from 0.50 % to 1.25 % per annum based on the Company’s consolidated total net leverage ratio (as defined in the Prior Credit Agreement).

Undrawn commitments under the Prior Revolving Credit Facility were subject to a commitment fee ranging from 0.20 % to 0.35 % per annum based on the Company’s consolidated total net leverage ratio on the average daily unused portion of the Prior Revolving Credit Facility.

On each of April 11, 2017 and December 26, 2017, the parties 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.

In connection with the December 2017 amendment, the Company incurred and capitalized an additional $ 2.1 million of debt issuance costs.

Debt and Credit Agreement

2019 Revolving Credit Facility

On November 15, 2019, the Company 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 superseded the Prior Credit Agreement 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 (the “Incremental Facility”).

On November 15, 2019, the Company 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 the Company’s 2016 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 (the “Incremental Facility”).

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.

The A&R Credit Agreement has an expiration date of November 15, 2024, upon which date all remaining outstanding borrowings will be due and payable.

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

Loans under the Revolving Credit Facility bear interest, at the Company’s option, at a rate equal to either (a) the LIBOR Rate, plus an applicable margin ranging from 1.25 % to 2.00 % per annum based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the A&R Credit Agreement), or (b) an alternate base rate equal to the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50 %, and (iii) LIBOR for an interest period of one month plus 1.00 %, plus an applicable margin ranging from 0.25 % to 1.00 % per annum based on the Company’s Consolidated Total Net Leverage Ratio.

As of December 31, 2021, LIBOR has started being phased out and LIBOR is expected to be entirely discontinued on June 30, 2023.

The A&R Credit Agreement provides that upon the occurrence of certain triggering events related to the end of LIBOR, the Company and the administrative agent will select an alternative benchmark rate to replace the LIBOR Rate.

Upon the phasing out of LIBOR, the Company will work with its lenders to establish an alternative benchmark rate (such as the Secured Overnight Financing Rate) taking into account any relevant governmental body’s selection or recommendation of a replacement rate and/or the then-prevailing market convention for determining an alternative benchmark rate.

The Company does not anticipate that the discontinuance or phasing out of the LIBOR Rate will materially impact its liquidity or financial position.

Undrawn commitments under the Revolving Credit Facility are subject to a commitment fee ranging from 0.15 % to 0.30 % per annum based on the Company’s Consolidated Total Net Leverage Ratio on the average daily unused portion of the Revolving Credit Facility.

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The Company is permitted to make voluntary prepayments at any time without payment of a premium or penalty.

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, as described in Note 10, Convertible Senior Notes , expand the Company’s flexibility to repurchase its common stock and make other restricted payments, and replace the total net leverage covenant with a new secured net leverage covenant that requires the Company to maintain a consolidated secured net leverage ratio not to exceed 3.50 :1 for the calendar quarters ending September 30, 2020, December 31, 2020, and March 31, 2021 and 3.00 :1 for the calendar quarters ending thereafter.

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, as described in Note 11, Convertible Senior Notes , expand the Company’s flexibility to repurchase its common stock and make other restricted payments, and replace the total net leverage covenant with a new secured net leverage covenant that requires the Company to maintain a consolidated secured net leverage ratio not to exceed 3.50 :1 for the calendar quarters ending September 30, 2020, December 31, 2020, and March 31, 2021 and 3.00 :1 for the calendar quarters ending thereafter.

The A&R Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, dividends, and other distributions.

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In connection with entering into the A&R Credit Agreement, and as a condition precedent to borrowing loans thereunder, the Company and certain of the Company’s other direct and indirect subsidiaries have entered into certain ancillary agreements, including, but not limited to, a reaffirmation agreement, which amends certain terms of the existing collateral agreement and reaffirms their obligations under the existing guaranty agreement.

The Company was in full compliance with all covenants as of December 31, 2021.

The refinancing of the Prior Credit Agreement by means of the A&R Credit Agreement was evaluated in accordance with ASC 470-50, Debt - Modifications and Extinguishments.

In determining whether the refinancing was to be accounted for as a debt extinguishment or a debt modification, the Company considered whether lenders within the syndicate remained the same or changed and whether the changes in debt terms were substantial.

This assessment was performed on an individual lender basis within the syndicate.

As a result, the refinancing was accounted for as a modification with the exception of certain lenders that exited the syndicate.

The exit of certain lenders resulted in an immaterial write-off of existing unamortized debt issuance costs.

The remaining unamortized debt issuance costs related to debt modification, along with the new deferred costs, will be amortized over the remaining term of the A&R Credit Agreement.

In connection with the A&R Credit Agreement, the Company incurred and capitalized an additional $ 2.3 million of debt issuance costs.

In connection with the Amendment on September 22, 2020, the Company incurred and capitalized an additional $ 0.6 million of debt issuance costs.

The debt issuance costs are being amortized to interest expense using the straight-line method through 2024.

Amortization expense related to debt issuance costs for credit agreements was approximately $ 1.1 million, $ 1.0 million, and $ 2.2 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Interest expense (exclusive of fees and debt issuance cost amortization) was approximately $ 0.5 million and $ 3.6 million for the years ended December 31, 2020 and 2019, respectively.

No interest expense was incurred during the year ended December 31, 2021 as there was no outstanding balance under the Revolving Credit Facility.

The following table represents changes in the balance of the Company’s deferred debt issuance costs:

(In thousands)

Balance as of December 31, 2020 $ 4,253

Amortization ( 1,097 )

Balance as of December 31, 2021 $ 3,156

As of each of December 31, 2021 and 2020, there was no outstanding balance for the Revolving Credit Facility.

The Company was in compliance with all covenants as of December 31, 2022.

As of December 31, 2022 and 2021, there was no outstanding balance for the Revolving Credit Facility.

Convertible Senior Notes

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The Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding May 15, 2025, only under the following circumstances:

(i) during any fiscal quarter commencing after the fiscal quarter ended on December 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the

Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price for the Notes on each applicable trading day;

(i) during any fiscal quarter commencing after the fiscal quarter ended on December 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price for the Notes on each applicable trading day;

(ii) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Notes on each such trading day;

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On or after May 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time, regardless of the foregoing conditions.

During the three months ended December 31, 2021, the conditional conversion feature of the Notes was triggered, based on the price of the Company’s common stock, as the last reported sale price of the Company’s common stock was greater than or equal to 130 % of the then applicable conversion price for the Notes for at least 20 trading days during the period of 30 consecutive trading days ending on December 31, 2021, the last trading day of the fiscal quarter.

Accordingly, the Notes are convertible, in whole or in part, at the option of the holders during the first quarter of 2022.

Whether the Notes will be convertible following the first fiscal quarter of 2022 will depend on the continued satisfaction of this condition or another conversion condition in the future.

The Company classified the Notes as a current liability in its Consolidated Financial Statements as of December 31, 2021 based on its irrevocable election to settle the principal amount in cash as discussed below.

Under the original terms of the Indenture, upon conversion, the Company could satisfy its conversion obligation by paying or delivering a combination of cash and shares of its common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture.

Accordingly, the Notes were convertible during the first quarter of 2022 and were classified as a current liability in the Consolidated Financial Statements as of December 31, 2021.

During the three months ended December 31, 2022, none of the conditional conversion features of the Notes were triggered, and therefore, the Notes are not convertible during the first quarter of 2023, commencing on January 1, 2023.

Accordingly, the Company classified the Notes as a long-term liability in its Consolidated Financial Statements as of December 31, 2022.

Whether the Notes will be convertible following the first fiscal quarter of 2023 will depend on the satisfaction of the conversion conditions in the future.

Under the original terms of the Indenture, upon conversion, the Company could satisfy its conversion obligation by paying or delivering cash, shares of its common stock, or a combination thereof, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture.

On December 13, 2021, the Company irrevocably elected to fix its settlement method to a combination of cash and shares of the Company’s common stock with the specified cash amount per $1,000 principal amount of Notes of at least $ 1,000 .

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The initial conversion rate for the Notes is 10.2751 shares of the Company’s common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $ 97.32 per share of the Company’s common stock, subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

In addition, following certain corporate events that occur prior to the maturity date of the Notes or if the Company delivers a notice of redemption in respect of the Notes, the Company will, under certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes (or any portion thereof) in connection with such a corporate event or convert its Notes called (or deemed called) for redemption during the related redemption period (as defined in the Indenture), as the case may be.

In addition, following certain corporate events that could occur prior to the maturity date of the Notes or if the Company delivers a notice of redemption in respect of the Notes, the Company will, under certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes (or any portion thereof) in connection with such a corporate event or convert its Notes called (or deemed called) for redemption during the related redemption period (as defined in the Indenture), as the case may be.

If the Company undergoes a fundamental change, holders may require, subject to certain exceptions, the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

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No sinking fund is provided for in the Notes.

Convertible debt instruments that may be settled in cash are required to be separated into liability and equity components.

The allocation to the liability component is based on the fair value of a similar instrument that does not contain an equity conversion option.

Based on this debt-to-equity ratio, debt issuance costs are then allocated to the liability and equity components in a similar manner.

Prior to the adoption of ASU 2020-06, convertible debt instruments that could be settled in cash were required to be separated into liability and equity components.

The allocation to the liability component was based on the fair value of a similar instrument that did not contain an equity conversion option.

Based on this debt-to-equity ratio, debt issuance costs were then allocated to the liability and equity components in a similar manner.

Accordingly, at issuance, the Company allocated $ 461.8 million to the debt liability and $ 72.7 million to additional paid-in capital, net of applicable issuance costs and deferred taxes.

The difference between the principal amount of the Notes and the liability component, inclusive of issuance costs, represents the debt discount, which the Company will amortize to interest expense over the term of the Notes using an effective interest rate of 4.18 %.

determination of the discount rate required certain estimates and assumptions.

As of December 31, 2021, the remaining life of the Notes and the related debt discount and issuance cost accretion is approximately 3.7 years.

The difference between the principal amount of the Notes and the liability component, inclusive of issuance costs, represented the debt discount, which the Company amortized to interest expense over the term of the Notes using an effective interest rate of 4.18 %.

The determination of the discount rate required certain estimates and assumptions.

Upon adoption of ASU 2020-06, effective January 1, 2022, the Notes are no longer separated into liability and equity components, and are accounted for as a single liability measured at its amortized cost.

Refer to Note 1, Organization and Summary of Significant Accounting Policies , for further information.

As of December 31, 2022, the remaining life of the Notes and the related issuance cost accretion is approximately 2.7 years.

The maximum number of shares issuable upon conversion, including the effect of a fundamental change and subject to other conversion rate adjustments, would be 5.9 million shares.

As of December 31, 2021, the if-converted value of the Notes exceeded the principal amount by $ 491.1 million.

As of December 31, 2022, the if-converted value of the Notes did not exceed the principal amount.

The Notes consisted of the following balances reported in the Consolidated Balance Sheets as of December 31, 2022 and 2021:

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_________________________________________________

(1) Classified as a current liability as of December 31, 2021 and a long-term liability as of December 30, 2020 in the Consolidated Balance Sheets.

(2) Included in additional paid-in capital in the Consolidated Balance Sheets.

(1) Classified as a long-term liability as of December 31, 2022, and a current liability as of December 31, 2021, in the Consolidated Balance Sheets.

(2) Refer to Note 1, Organization and Summary of Significant Accounting Policies , for further information regarding the impact of the adoption of ASU 2020-06, effective January 1, 2022.

The following table summarizes the components of interest expense resulting from the Notes recognized in interest and other income (expense), net in the Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020:

4 unchanged sentences

Amortization of debt issuance costs $ 3,066 $ 2,343 $ 600

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(1) Refer to Note 1, Organization and Summary of Significant Accounting Policies , for further information regarding the impact of the adoption of ASU 2020-06, effective January 1, 2022.

Convertible Note Hedge and Warrant Transactions

In connection with the issuance of the Notes, the Company entered into convertible note hedge and warrant transactions with an affiliate of one of the initial purchasers of the Notes and certain other financial institutions (the “option counterparties”) with respect to the Company’s common stock.

In connection with the issuance of the Notes in September 2020, the Company entered into convertible note hedge and warrant transactions with an affiliate of one of the initial purchasers of the Notes and certain other financial institutions (the “option counterparties”) with respect to the Company’s common stock.

The convertible note hedge consists of an option for the Company to purchase up to approximately 5.9 million shares of the Company’s common stock, which is equal to the number of shares of the Company’s common stock underlying the Notes, at an initial strike price of approximately $ 97.32 per share.

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The Company received aggregate proceeds of approximately $ 51.3 million for the issuance of the warrants, which was recorded in additional paid-in capital at issuance in the Consolidated Balance Sheets.

warrants could separately have a dilutive effect to the Company’s common stock to the extent that the market price per share of its common stock exceeds the strike price of the warrants.

The warrants could separately have a dilutive effect to the Company’s common stock to the extent that the market price per share of its common stock exceeds the strike price of the warrants.

Lessor Leases

Sales-Type Leases

On a recurring basis, the Company enters into multi-year, sales-type lease agreements with the majority varying in length from one to five years .

On a recurring basis, the Company enters into multi-year, sales-type lease agreements with the majority of such leases varying in length from one to five years .

The following table presents the Company’s income recognized from sales-type leases for the years ended December 31, 2022, 2021, and 2020:

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(In thousands)

Thereafter 179

Total future minimum operating lease payments $ 6,302

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Operating lease costs were $ 18.9 million, $ 15.0 million, and $ 14.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Short-term lease costs and variable lease costs were not material for the years ended December 31, 2021, 2020, and 2019, respectively.

Short-term lease costs and variable lease costs were not material for the years ended December 31, 2022, 2021, and 2020.

During the year ended December 31, 2022, the Company recorded impairment and abandonment charges to operating lease right-of-use assets of $ 9.4 million, in connection with restructuring activities for optimization of certain leased facilities.

The impairment and abandonment charges were recorded to selling, general, and administrative expenses on the Company’s Consolidated Statements of Operations.

The following table summarizes supplemental cash flow information related to the Company’s operating leases for the years ended December 31, 2022, 2021, and 2020:

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As of December 31, 2022, the Company had non-cancelable purchase commitments of $ 159.7 million, of which $ 146.3 million are expected to be paid within the next twelve months.

Ransomware Incident

On May 4, 2022, the Company determined that certain of its information technology systems were affected by ransomware impacting certain internal systems.

Upon detecting the security event, the Company took immediate steps designed to contain the incident and implement its business continuity plans to restore and support continued operations.

The Company has contained the incident and restored substantially all of its critical information technology systems.

During the year ended December 31, 2022, the Company incurred $ 13.6 million of expenses related to the ransomware incident, partially offset by $ 11.1 million of expected insurance recoveries.

Expenses include costs to investigate and remediate the ransomware incident, as well as legal and other professional services, all of which were expensed as incurred.

For the year ended December 31, 2022, the Company included net expenses related to the ransomware incident in cost of revenues of $ 0.3 million, in research and development of $ 0.2 million, and in selling general and administrative expenses of $ 2.0 million, in the Company’s Consolidated Statements of Operations.

Legal Proceedings

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Plaintiff filed an amended complaint on September 30, 2020 and the Company subsequently filed a motion to dismiss the amended complaint on October 28, 2020, which was fully briefed, but the Court had not heard oral argument on the motion.

The parties entered into a settlement agreement on January 25, 2022.

The parties entered into a settlement agreement on January 25, 2022, (the “Settlement Agreement”).

On February 1, 2022, the Court granted preliminary approval of the settlement.

The Court has scheduled a status conference for June 1, 2022.

Following preliminary approval, plaintiff conducted discovery to identify class members and to determine the class size.

Pursuant to the terms of the Settlement Agreement, and following class size discovery, the parties participated in non-binding mediation on November 21, 2022.

A settlement was reached at the mediation and the parties executed an addendum to the Settlement Agreement (the “Addendum”) reflecting the changes to the original settlement terms.

On November 30, 2022, the Court granted preliminary approval of the settlement including the Addendum.

The hearing on final approval of the settlement is currently set for April 6, 2023.

Subject to final approval of the settlement, the Company intends to defend the lawsuit vigorously.

On December 21, 2020, Becton, Dickinson and Company (“BD”) filed a complaint against the Company in the United States District Court for the Middle District of North Carolina, asserting claims of misappropriation under the Defend Trade Secrets Act, misappropriation under the North Carolina Trade Secrets Protection Act, unfair competition, and unfair/deceptive trade practices in violation of North Carolina law (the “BD Complaint”).

This action (the “BD Action”) was commenced in relation to another action brought by BD, in the same Court (the “Related Matter”) against a former BD employee who is also a former Company employee (the “Former Employee”) alleging that the Former Employee had violated the Former Employee’s legal obligations to BD regarding BD’s confidential and trade secret information when the Former Employee allegedly downloaded certain documents from BD’s information technology system following the end of the Former Employee’s employment with BD.

In connection with the Related Matter, BD, the Former Employee, and the Company entered into a protocol with the purpose of facilitating the return to BD of any BD documents that may have been resident, as a result of the Former Employee’s actions, on any devices belonging to the Former Employee or the Company.

The BD Complaint seeks injunctive relief and monetary damages in the form of compensatory, punitive, and exemplary damages, attorneys’ fees and costs, and pre-judgment and post-judgment interest.

On March 17, 2021, the parties filed a joint motion to stay the BD Action,

which motion was granted by the Court on June 8, 2021.

The stay has since been lifted and the Company’s answer to the BD Complaint is due March 9, 2022, unless an extension to such stay is mutually agreed to by the parties and approved by the Court.

The Company intends to defend the lawsuit vigorously.

As required under ASC 450, Contingencies , the Company accrues for contingencies when it believes that a loss is probable and that it can reasonably estimate the amount of any such loss.

The Company has not recorded any material accrual for contingent liabilities associated with the legal proceedings described above based on its belief that any potential material loss, while reasonably possible, is not probable.

Further, any possible range of loss in these matters cannot be reasonably estimated at this time or is not deemed material.

The Company believes that it has valid defenses with respect to these legal proceedings pending against it.

However, litigation is inherently unpredictable, and it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of any of these legal proceedings or because of the diversion of management’s attention and the creation of significant expenses.

The Company has not recorded any material accrual for contingent liabilities associated with the legal proceeding described above based on its belief that any potential material loss, while reasonably possible, is not probable.

Further, the estimated range of loss in this matter is not deemed material.

Company believes that it has valid defenses with respect to the legal proceeding pending against it.

However, litigation is inherently unpredictable, and it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of the legal proceeding or because of the diversion of management’s attention and the creation of significant expenses.

Under the Company’s certificate of incorporation and bylaws, the Company has agreed to indemnify its directors and executive officers to the fullest extent not prohibited by Delaware and other applicable law, subject to certain exceptions.

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In addition, the Company has in the past and may in the future warrant to its customers that its products will conform to functional specifications for a limited period of time following the date of installation (generally not exceeding 30 days) or that its software media is free from material defects.

Sales contracts for certain of the Company’s medication packaging systems often include limited warranties for up to six months , but the periodic activity and ending warranty balances the Company records have historically not been material.

Sales contracts for certain of the Company’s medication packaging systems may have in the past and may in the future include limited warranties for up to six months , but the periodic activity and ending warranty balances the Company records have historically not been material.

From time to time, the Company may also warrant that its professional services will be performed in a good and workmanlike manner or in a professional manner consistent with industry standards.

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The fair value of the awards on the date of issuance is amortized to expense from the date of grant to the date of vesting and are expensed ratably on a straight-line basis over the vesting period.

PSUs granted to the Company’s executives might include performance and market conditions.

PSUs granted to the Company’s executives may include performance and market conditions.

PSUs become eligible for vesting when certain market or performance conditions are met.

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Income tax benefits realized from share-based compensation were $ 5.2 million, $ 26.6 million, and $ 10.3 million, for the years ended December 31, 2022, 2021, and 2020, respectively.

Employee Stock Purchase Plan (“ESPP”)

The following assumptions were used to value shares granted under the ESPP for the years ended December 31, 2022, 2021, and 2020:

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The following assumptions were used to value stock options granted pursuant to the 2009 Plan for the years ended December 31, 2021 and 2020.

There were no stock options granted during the year ended December 31, 2022:

Year Ended December 31,

2021 2020 2019

Expected life, years 4.9 4.7

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Outstanding at December 31, 2021 2,954 $ 67.35 6.9 $ 334,119

Granted 160 129.21

Exercised ( 367 ) 51.20

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As of December 31, 2022, total unrecognized compensation cost related to unvested stock options was $ 16.4 million, which is expected to be recognized over a weighted-average vesting period of 1.4 years.

Restricted Stock Units (“RSU”)

Restricted Stock Units (“RSUs”)

The following table summarizes the RSU activity under the 2009 Plan during the year ended December 31, 2022:

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During the year ended December 31, 2022, the Company granted 56,237 PSUs to its executive officers, of which 0 % to 200 % may become eligible for vesting depending on the level of shareholder return for the period from March 1, 2022 through March 1, 2023.

The number of shares that vest at the end of the performance period depends on the percentile ranking of the total shareholder return for Omnicell stock over the performance period relative to the total shareholder return of each of the other companies in the NASDAQ Healthcare Index (the “Index”).

Stock price appreciation is calculated based on the trailing 20 -day average stock price just prior to the first trading day of March in the grant year, compared to the trailing 20 -day average stock price just prior to the first trading day of March in the year subsequent to the grant year.

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In addition to executive officers’ PSU awards, from time to time, the Company may grant PSUs with specific performance and service conditions to certain employees on an ad hoc basis.

Historically such grants have not been material.

The following table summarizes the PSU activity under the 2009 Plan during the year ended December 31, 2022:

4 unchanged sentences

Granted 78 155.27

Additional granted based on performance achievement 51 156.79

Vested ( 123 ) 122.50

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The 401(k) Plan allows eligible employees in the United States to voluntarily contribute a portion of their pre-tax salary, subject to a maximum limit specified in the Internal Revenue Code.

The Company matches 50 % of employee contributions up to $ 3,000 , annually.

The Company generally matches 50 % of employee contributions up to $ 3,000 , annually.

The Company’s contributions under this plan were $ 8.1 million, $ 6.8 million, and $ 5.7 million in the years ended December 31, 2022, 2021, and 2020, respectively.

Stock Repurchase Program

Stock Repurchase Programs

On August 2, 2016, the Company’s Board of Directors (the “Board”) authorized a stock repurchase program providing for the repurchase of up to $ 50.0 million of the Company’s common stock (the “2016 Repurchase Program”).

The 2016 Repurchase Program is in addition to the stock repurchase program approved by the Board on November 4, 2014 providing for the repurchase of up to $ 50.0 million of the Company’s common stock (the “2014 Repurchase Program”).

As of December 31, 2021, the maximum dollar value of shares that may yet be purchased under the two repurchase programs was $ 54.9 million.

During the year ended December 31, 2022, the 2014 Repurchase Program was completed, and as of December 31, 2022, the maximum dollar value of shares that may yet be purchased under the 2016 Repurchase Program was $ 2.7 million.

The timing, price, and volume of repurchases are to be based on market conditions, relevant securities laws, and other factors.

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The stock repurchase programs do not obligate the Company to repurchase any specific number of shares, and the Company may terminate or suspend the repurchase programs at any time.

On September 17, 2020, the Board authorized a one-time stock repurchase transaction providing for the repurchase of up to $ 75.0 million of the Company’s common stock in privately negotiated transactions concurrently with the issuance of the

Notes, described in Note 10, Convertible Senior Notes .

In September 2020, the Company repurchased 749,300 shares of its 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.

There will be no further repurchases under this one-time authorization.

During the years ended December 31, 2021, 2020, and 2019, the Company did no t repurchase any of its outstanding common stock, including under the 2014 Repurchase Program or the 2016 Repurchase Program, other than the separately-authorized one-time stock repurchase concurrent with the offering of the Notes in September 2020.

Equity Offerings

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

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

Sales of the common stock pursuant to the Distribution Agreement were to 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, as amended, including sales made directly on the Nasdaq Stock Market, or sales made to or through a market maker other than on an exchange.

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

For the years ended December 31, 2021 and 2020, the Company did not sell any of its common stock under the Distribution Agreement.

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.

During the year ended December 31, 2022, the Company repurchased approximately 389,300 shares of its common stock under the repurchase programs at an average price of $ 134.11 per share for an aggregate purchase price of approximately $ 52.2 million.

During the years ended December 31, 2021 and 2020, the Company did not repurchase any of its outstanding common stock under the repurchase programs other than the separately-authorized one-time stock repurchase concurrent with the offering of the Notes in September 2020.

The following is a geographical breakdown of income (loss) before the provision for income taxes:

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Income (loss) before provision for income taxes $ ( 2,453 ) $ 66,007 $ 29,349

The provision for (benefit from) income taxes consisted of the following:

The benefit from income taxes consisted of the following:

Year Ended December 31,

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Total deferred income taxes ( 34,290 ) ( 3,954 ) ( 7,099 )

Total provision for (benefit from) income taxes $ ( 11,842 ) $ ( 2,845 ) $ 12,595

The provision for (benefit from) income taxes differs from the amount computed by applying the statutory federal tax rate as follows:

Total benefit from income taxes $ ( 8,101 ) $ ( 11,842 ) $ ( 2,845 )

The benefit from income taxes differs from the amount computed by applying the statutory federal tax rate as follows:

Year Ended December 31,

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Foreign derived intangible income deduction ( 753 ) ( 68 ) ( 204 )

Global intangible low-taxed income inclusion 960 195 157

Foreign rate differential 186 17 ( 102 )

Foreign branch taxes ( 51 ) ( 9 ) 288

Transaction cost 68 1,097 422

Other ( 219 ) ( 28 ) ( 482 )

Total provision for (benefit from) income taxes $ ( 11,842 ) $ ( 2,845 ) $ 12,595

Total benefit from income taxes $ ( 8,101 ) $ ( 11,842 ) $ ( 2,845 )

The Company has executed various global operational centralization activities and legal entity rationalization in recent years.

During the year ended December 31, 2022, the Company underwent legal entity rationalization through tax free reorganizations.

During the year ended December 31, 2021, the Company recognized a benefit on the release of previously recorded uncertain tax positions related to the sale of certain intellectual property rights by Aesynt B.V.

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and a gain on the transfer of certain assets to Omnicell Pty Ltd, which resulted in a tax benefit, net of tax expense, of $ 6.1 million.

During the year ended December 31, 2020, Aesynt B.V.

merged with and into Aesynt Holding B.V., with Aesynt Holding B.V.

surviving and changing its name to Omnicell B.V., Aesynt Holding Coöperatief U.A.

liquidated into Omnicell, Inc., and Omnicell GmbH merged with and into Mach4 Automatisierungstechnik GmbH (“Mach4”), with Mach4 surviving and changing its name to Omnicell GmbH.

During the year ended December 31, 2020, the Company also recognized a gain on Omnicell Limited’s transferring shares of Omnicell GmbH to Omnicell International, LLC, which resulted in an immaterial tax expense.

During the year ended December 31, 2019, the Company recognized gain on the sale of certain intellectual property rights by Aesynt B.V.

to Omnicell, Inc.

and by Mach4 to Omnicell, Inc., which resulted in a tax expense, net of tax benefit, of $ 7.4 million.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law in response to the COVID-19 pandemic.

The CARES Act, among other provisions, includes provisions related to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating losses carryback periods, alternative minimum tax credit refunds, modification to the net interest expense deduction limitation, and technical amendments to tax depreciation methods for qualified improvement property placed in service after December 31, 2017.

The provisions of the CARES Act did not have a material impact on the Company’s income taxes.

On March 11, 2021, the President of the United States signed into law the “American Rescue Plan Act of 2021” (the “ARP Act”), which provides additional economic stimulus and tax credits, including the expansion and modification of the employee retention tax credit enacted by the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and the refundable tax credits for COVID-related paid sick and family leave enacted by the Family First Act.

The Company does not expect these provisions of the ARP Act to have a material impact for income taxes.

On August 16, 2022, the Inflation Reduction Act of 2022, (the “IRA”), was signed into law.

Among other things, the IRA imposes a 15% corporate alternative minimum tax for tax years beginning after December 31, 2022, levies a 1% excise tax on net stock repurchases after December 31, 2022, and provides tax incentives to promote clean energy.

The Company is in the process of analyzing the potential impacts of the IRA’s provisions on its business.

However, these provisions are not currently expected to have a material impact on the Company’s results of operations or financial position.

On March 11, 2021, the President of the United States signed into law the “American Rescue Plan Act of 2021” (the “ARP Act”), which provides additional economic stimulus and tax credits, including the expansion and modification of the employee retention tax credit enacted by the Coronavirus Aid, Relief and Economic Security Act and the refundable tax credits for COVID-related paid sick and family leave enacted by the Family First Act.

The ARP Act further expands the “covered employees” definition for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, used in determining the limitation on the deduction for excessive employee remuneration rules to be applicable for taxable years beginning after December 31, 2026.

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Lease liability 12,884 13,179

Convertible debt 15,037 543

Capitalized research and development 30,881 —

Other, net 1,557 1,281

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Total deferred tax liabilities ( 98,942 ) ( 110,277 )

Net deferred tax liabilities $ ( 35,822 ) $ ( 24,614 )

Net deferred tax assets (liabilities) $ 20,234 $ ( 35,822 )

Deferred income tax assets (liabilities) are provided for temporary differences that will result in future tax deductions or future taxable income, as well as the future benefit of tax credit carryforwards.

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In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax planning strategies, and results of recent operations.

On the basis of this evaluation, as of December 31, 2021, previously recorded valuation allowance of $ 1.2 million for certain foreign net operating loss carryforwards was released, and the Company no longer has a valuation allowance against any of its deferred tax assets.

As of December 31, 2022 and 2021, the Company does no t have a valuation allowance against any of its deferred tax assets.

As of December 31, 2022, the Company had $ 10.9 million of federal net operating losses and $ 15.0 million of state net operating loss carryforwards expiring at various dates beginning in 2024, and $ 22.2 million of foreign net operating losses carried forward indefinitely.

For income tax purposes, the Company has federal and California research tax credits carryforwards of $ 5.3 million and $ 19.0 million, respectively.

Federal research tax credit carryforwards will begin to expire in 2040.

California credits are available indefinitely to reduce cash taxes payable.

For income tax purposes, the Company has no federal research tax credit carryforward and a California research tax credit carryforward of $ 20.0 million.

California credits are carried forward indefinitely to reduce cash taxes payable.

It is the Company’s practice and intention to reinvest the earnings of its non-U.S.

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The Company files income tax returns in the United States and various state and foreign jurisdictions.

In the normal course of business, the Company is subject to examinations by taxing authorities, including major jurisdictions such as the United States, Germany, Italy, Netherlands, and the United Kingdom.

With few exceptions, as of December 31, 2021, the Company was no longer subject to U.S., state, and foreign examination for years before 2018, 2017, and 2017, respectively.

The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for the years ended December 31, 2021, 2020, and 2019:

In the normal course of business, the Company is subject to examinations by taxing authorities, including major jurisdictions such as the United States, Germany, Italy, France, and the United Kingdom.

With few exceptions, as of December 31, 2022, the Company was no longer subject to U.S., state, and foreign tax examinations for years before 2019, 2018, and 2018, respectively.

The aggregate change in the balance of gross unrecognized tax benefit, which excludes interest and penalties, for the years ended December 31, 2022, 2021, and 2020:

(In thousands)

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Balance as of December 31, 2022 $ 9,296

The total amounts of gross unrecognized tax benefit that, if realized, would favorably affect the Company’s effective income tax rate in future periods, was $ 9.0 million and $ 18.2 million as of December 31, 2021 and 2020, respectively.

The decrease in the gross uncertain tax benefits during the year ended December 31, 2021 was primarily due to a release of certain unrecognized tax benefits as a result of an effective settlement with the tax authorities.

The total amount of gross unrecognized tax benefit that, if realized, would favorably affect the Company’s effective income tax rate in future periods, was $ 9.3 million and $ 9.0 million as of December 31, 2022 and 2021, respectively.

The Company recognizes interest and penalties related to uncertain tax positions in interest and other income (expense), net in the Consolidated Statements of Operations, accruing $ 0.2 million, $ 0.3 million, and $ 0.4 million for the years ended December 31, 2022, 2021, and 2020, respectively.

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During 2020, the Company announced a company-wide organizational realignment initiative in order to more effectively align its organizational infrastructure and operations with the industry vision of the Autonomous Pharmacy.

During the second quarter of 2020, the Company also initiated a restructuring plan to help mitigate the adverse impact of the COVID-19 pandemic on its business and financial results.

The Company also initiated a restructuring plan to help mitigate the adverse impact of the COVID-19 pandemic on its business and financial results.

During the year ended December 31, 2020, the Company incurred $ 10.0 million of employee severance costs and related expenses.

During the first quarter of 2021, the Company continued its organizational realignment initiative, incurring $ 2.0 million of employee severance costs and related expenses.

As of December 31, 2021, there was no unpaid balance related to this realignment initiative.

During the first quarter of 2022, the Company initiated certain domestic and international restructuring initiatives in order to enhance and streamline certain engineering functions for its domestic operations and to realign its international sales organization to better serve its customers in various international markets.

During the third quarter of 2022, the Company initiated restructuring initiatives associated with the integration and functionalization of certain acquisitions, primarily the 340B Link business acquisition, to further accelerate the expansion of the Company’s pharmacy inventory management capabilities.

On November 23, 2022, the Company committed to a plan to reduce the Company’s headcount as part of the Company’s expense containment efforts being implemented due to ongoing macroeconomic headwinds, primarily consisting of employee severance and benefits costs.

During the year ended December 31, 2022, the restructuring plans incurred $ 22.8 million of employee severance costs and related expenses.

As of December 31, 2022, the unpaid balance related to these restructuring plans was $ 18.2 million.

Refer to Note 13, Lessee Leases for information regarding the Company’s restructuring activities for optimization of certain leased facilities.

The following table summarizes the total restructuring expenses recognized in the Company’s Consolidated Statements of Operations for the years ended December 31, 2022, 2021, and 2020:

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Selling, general, and administrative 11,170 1,526 3,681

Total restructuring expenses $ 2,020 $ 9,961 $ —

Total restructuring expense $ 22,803 $ 2,020 $ 9,961

Subsequent Events

As previously disclosed, on November 23, 2022, the Company committed to a plan to reduce the Company’s headcount (the “Plan”), as part of the Company’s expense containment efforts being implemented due to ongoing macroeconomic headwinds.

As a result of continued exploration of expense containment measures, on February 28, 2023, the Company committed to further reduce its headcount as part of the Plan.

The Company expects to further reduce its workforce across many of its functions affecting approximately 60 additional employees.

As part of the Plan, on February 28, 2023, the Company also committed to reduce its real estate footprint to align with its broader hybrid work strategy and in an effort to further reduce costs.

The Company estimates that the additional headcount reductions and office closures will result in additional incremental nonrecurring restructuring and related charges of approximately $ 13.0 million in 2023.

VALUATION AND QUALIFYING ACCOUNTS

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3.1 Amended and Restated Certificate of Incorporation of Omnicell, Inc.

10-Q 3.1 9/20/2001

8-K 3.1 9/20/2001

3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Omnicell, Inc.

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10-K 3.2 3/28/2003

3.4 Second Amended and Restated Bylaws of Omnicell, Inc.

3.4 Third Amended and Restated Bylaws of Omnicell, Inc.

8-K 3.1 10/21/2022

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S-8 99.1 6/22/2022

10.3* Amendment to Omnicell, Inc.

2009 Equity Incentive Plan

10-Q 10.1 11/5/2021

10.3* Form of Restricted Stock Unit Award Agreement for the 2009 Equity Incentive Plan, as amended

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8-K 10.1 3/17/2010

Incorporated By Reference

Exhibit Number Exhibit Description Form Exhibit Filing Date

10.11* Omnicell, Inc.

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10-Q 10.1 5/5/2017

Incorporated By Reference

Exhibit Number Exhibit Description Form Exhibit Filing Date

10.12* Form of Director and Officer Indemnity Agreement

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10-K 10.41 2/27/2019

10.19 Lease Agreement, dated October 20, 2011, between Middlefield Station Associates, LLC and Omnicell, Inc.

10-K 10.9 3/8/2012

10.20 First Amendment to Lease, dated September 28, 2012, by and between Middlefield Station Associates, LLC and Omnicell, Inc.

10.18 Offer letter between Omnicell, Inc.

and Christine Mellon dated February 12, 2021

10-K 10.32 2/25/2022

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8-K 10.2 9/25/2020

Offer letter between Omnicell, Inc.

and Christine Mellon dated February 12, 2021

Omnicell, Inc.

Board of Directors Compensation Plan

10.30* Letter Agreement between Omnicell, Inc.

Johnston, dated July 29, 2022

10-Q 10.2 8/9/2022

Promotion letter between Omnicell, Inc.

Manley dated May 18, 2022

Subsidiaries of the Registrant

Incorporated By Reference

Exhibit Number Exhibit Description Form Exhibit Filing Date

Consent of Independent Registered Public Accounting Firm

Power of Attorney (included on the signature pages hereto)

Incorporated By Reference

Exhibit Number Exhibit Description Form Exhibit Filing Date

Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)

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OMNICELL, INC.

February 25, 2022 By:

March 1, 2023 By:

Executive Vice President & Chief Financial Officer

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/s/ RANDALL A.

LIPPS Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer) February 25, 2022

LIPPS Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer) March 1, 2023

KUIPERS Executive Vice President & Chief Financial Officer

(Principal Financial Officer) February 25, 2022

(Principal Financial Officer) March 1, 2023

/s/ JOSEPH B.

SPEARS Senior Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer) February 25, 2022

SPEARS Senior Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer) March 1, 2023

/s/ JOANNE B.

BAUER February 25, 2022

BAUER March 1, 2023

Bauer Director

/s/ EDWARD P.

BOUSA February 25, 2022

BOUSA March 1, 2023

Bousa Director

JUDSON February 25, 2022

Judson Director

MOORE February 25, 2022

GARRETT March 1, 2023

Garrett Director

MOORE March 1, 2023

Moore Director

PARRISH February 25, 2022

PARRISH March 1, 2023

Parrish Director

SEIM February 25, 2022

Seim Director

SCOTT February 25, 2022

SCOTT March 1, 2023

Scott Director

SMITH February 25, 2022

Smith Director

WHITE February 25, 2022

SEIM March 1, 2023

Seim Director

WHITE March 1, 2023

White Director

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 9A. Controls and Procedures