What changed in this filing

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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-28 · 173 added, 153 removed, 489 unchanged (40% of the section changed)

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• Strategic Risks.

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

In addition, we may be unable to realize the potential benefits of our expense containment measures or our acquired businesses, including RxInnovation Inc., operating as FDS Amplicare ® (“FDS Amplicare”), ReCept Holdings, Inc., (“ReCept”), which was subsequently renamed Omnicell Specialty Pharmacy Services, Inc.

(“Omnicell Specialty Pharmacy Services”), MarkeTouch Media, LLC (“MarkeTouch Media”), and Hub and Spoke Innovations, and risks related to investments in new business strategies and initiatives could disrupt ongoing business and present risks not originally contemplated.

In addition, we may be unable to realize the potential benefits of our acquired businesses, including RxInnovation Inc., operating as FDS Amplicare ® (“FDS Amplicare”), Omnicell Specialty Pharmacy Services, Inc.

(“Omnicell Specialty Pharmacy Services”), MarkeTouch Media, LLC (subsequently merged into EnlivenHealth, Inc.), and Hub and Spoke Innovations, and risks related to investments in new business strategies and initiatives could disrupt ongoing business and present risks not originally contemplated.

• Market Risks.

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• Technology Risks.

We may be unable to develop new solutions or enhance existing solutions to react to changes in technology and customer requirements in a timely and cost-effective manner or we may experience errors in the provision of our Advanced Services that could expose us to liability.

We may be unable to develop new solutions or enhance existing solutions to react to changes in technology and customer requirements in a timely and cost-effective manner or we may experience errors in the provision of our SaaS and Expert Services that could expose us to liability.

In addition, we may incorporate artificial intelligence technologies into certain of our products, services, and processes or our vendors may incorporate artificial intelligence tools into their offerings that may result in enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical, confidentiality, or security concerns.

• Institutional, Retail, and Specialty Pharmacy Risks.

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Risks Related to Our Notes

• Any conversion of our Notes (as defined below) may dilute the ownership interest of our stockholders, depress the price of our common stock or, if the conditional conversion feature of the Notes is triggered, adversely affect our business, operating results, cash flow, or financial condition.

• Any conversion of our 2029 Notes or 2025 Notes (each as defined below) may dilute the ownership interest of our stockholders, depress the price of our common stock or, if the conditional conversion feature of the 2029 Notes or 2025 Notes is triggered, adversely affect our business, operating results, cash flow, or financial condition.

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

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

In addition, within the current macroeconomic environment, we have seen some customers defer or delay implementation of capital equipment projects, including due to customer labor shortages and increased healthcare worker turnover, along with longer timeframes both for capital equipment purchasing decisions and for entering into agreements for our products or solutions due to customer capital budget constraints or customers seeking to stagger or elongate the timeframes between the adoption of new or updated technologies, which has resulted in moderated demand, and may lead to decreased revenues and could result in our business, operating results, cash flow, or financial condition being materially and adversely affected.

In addition, we have seen some customers defer or delay implementation of capital equipment projects, along with longer timeframes both for capital equipment purchasing decisions and for entering into agreements for our products or solutions due to customer capital budget constraints or customers seeking to stagger or elongate the timeframes between the adoption of new or updated technologies, which has resulted in moderated demand, and may lead to decreased revenues and could result in our business, operating results, cash flow, or financial condition being materially and adversely affected.

Furthermore, the foregoing factors may also impact the willingness or ability of our customers to pay their existing obligations or honor their contractual commitments, which could result in decreased revenue and negatively impact our business, operating results, cash flow, or financial condition.

The broader U.S.

and global economy has experienced elevated inflationary pressures as well as continued supply chain disruptions, labor shortages and geopolitical instability.

and global economy has continued to experience elevated inflationary pressures as well as continued supply chain disruptions, labor shortages and geopolitical instability.

We are unable to predict future changes in the state of the U.S.

or global economy or whether inflationary pressures will continue to intensify or subside.

If the current inflationary trends continue, or fail to improve, it could adversely affect our profits, margins or operating results as a result of increasing costs.

We may not realize the benefits of our expense containment efforts.

In November 2022 and November 2023, we announced restructuring initiatives through which we expect to achieve certain efficiencies.

As part of these initiatives, the Company has reduced its workforce across many of its functions and is in the process of reducing its real estate footprint.

The estimates of the charges and costs that the Company expects to incur and the potential benefits that the Company expects to achieve in connection with the foregoing, and the timing thereof, are subject to a number of assumptions and actual results may differ materially.

In addition, the Company may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur as a result of or in connection with the implementation of these initiatives.

There can be no assurance that these initiatives will achieve the expected benefits to our business as intended.

The execution and implementation of these initiatives involve risk, including that significant amounts of management’s time and resources could be diverted from our core operations in order to complete such initiatives.

In addition, these initiatives could fail to realize expected benefits or present unforeseen obstacles, lead to operating inefficiencies and negatively disrupt our corporate culture, which could lead to further employee attrition, any of which would have a material adverse effect on our business, operating results, cash flows and financial condition.

If the current inflationary trends remain elevated, or fail to improve, it could adversely affect our profits, margins or operating results as a result of increasing costs.

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

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New product and service developments or enhancements may be delayed, have technical problems (including software defects or errors), fail to meet customer or market specifications, regulatory requirements, or industry standards, which could result in increased or unexpected expenses related to further developments or modifications.

In addition, they also may not be competitive with other products using new or alternative technologies that offer comparable performance and functionality, may not be accepted in new or existing markets, or may not achieve expected return on investment.

Any of the foregoing could

make our existing and future solutions obsolete and unmarketable, or result in loss of market share or a determination to exit a particular business or product line, damage our reputation or otherwise harm our business, operating results, cash flow, or financial condition.

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

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

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

In addition, they also may not be competitive with, or rendered obsolete by, other products using new or alternative technologies that offer comparable performance and functionality, such as AI, machine-learning, and generative AI capabilities, may not be accepted in new or existing markets, or may not achieve expected return on investment.

Any of the foregoing could make our existing and future solutions obsolete and unmarketable, or result in loss of market share or a determination to exit a particular business or product line, damage our reputation or otherwise harm our business, operating results, cash flow, or financial condition.

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

If we fail to do so, we may be unable to achieve the industry-defined vision of the Autonomous Pharmacy or we may not realize the anticipated benefits of our investments in support of this vision, either of which could have a material adverse effect on our business, operating results, cash flow, or financial condition.

Failure to generate new sales and any reduction in the demand for or adoption of our medication management solutions, medication packaging systems, or related services would reduce our revenues.

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

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

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

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

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

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The purchase of our medication management solutions, including our central pharmacy automation solutions, is often part of a customer’s larger initiative to re-engineer its pharmacy and distribution and materials management systems.

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

and require the input and approval of many decision-makers.

In addition, new product announcements can cause a delay in our customers’ decisions to purchase our products or convert pending orders for our older products to those of our newer products.

For these and other reasons, the sales cycle associated with sales of our systems is often lengthy and subject to a number of delays over which we have little or no control.

A delay in, or loss of, sales of these systems (including as a result of the impacts of public health crises such as the COVID-19 pandemic or due to customer labor shortages , increased healthcare worker turnover, or customer budgetary constraints) could have an adverse effect upon our business, operating results and could harm our business, cash flow, or financial condition.

For these and other reasons, the sales cycle associated with sales of our systems is often lengthy, unpredictable, and subject to a number of delays over which we have little or no control.

A delay in, or loss of, sales of these systems (including as a result of the impacts of public health crises or due to customer labor shortages , increased healthcare worker turnover, or customer budgetary constraints) could have an adverse effect upon our business, operating results and could harm our business, cash flow, or financial condition.

In addition, and in part as a result of the complexities inherent in larger transactions, the time between the purchase and installation of our systems can generally range up to 24 months.

Delays in installation can occur for reasons that are often outside of our control, such as customer labor shortages or increased healthcare worker turnover, as well as customers seeking to stagger or elongate the timeframes between the adoption of new or updated technologies.

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

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

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

We currently offer Advanced Services, which often contain a combination of robotics, smart devices, intelligent software, and expert services.

These offerings include, but are not limited to, Central Pharmacy Dispensing Service, IV Compounding Service, and Point of Care Service.

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

Because we recognize revenues for our medication management solutions and our more complex medication packaging systems only upon installation at a customer’s site, any delay in installation (including as a result of the impacts of public health crises or due to customer labor shortages or healthcare worker turnover) will also cause a delay in the recognition of the revenues for those systems.

We may incorporate artificial intelligence technologies into certain of our products, services and processes or our vendors may incorporate artificial intelligence tools into their offerings.

These technologies are new and developing and may present operational, financial, compliance, and reputational risks, as well as other adverse consequences to our business.

Our competitive position and financial condition may suffer if we fail to keep pace with rapidly evolving technological developments related to advances in artificial intelligence (“AI”), machine-learning, and generative AI technologies.

The potential introduction of these technologies into new and existing offerings may result in new or expanded risks and liabilities, including enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality, or security risks, as well as other factors that could adversely affect our business, reputation, and financial results.

In addition, our vendors may incorporate AI tools into their offerings, and these tools may not meet existing or rapidly evolving regulatory or industry standards and may inhibit our or our vendors’ ability to maintain an adequate level of service and experience.

The use of AI can lead to unintended consequences, including generating factually inaccurate content, misleading or otherwise flawed information, or unintended biases and skewed outcomes, which could expose us to risks related to inaccuracies or errors in the output of such technologies.

We also face risks of competitive disadvantage if our competitors more effectively use AI to create new or enhanced products or services that we are unable to compete against.

Malicious actors may also use generative AI to strengthen social engineering capabilities or create more targeted phishing narratives or otherwise, which may increase the threat of a cybersecurity incident.

If we, or our vendors, experience an actual or perceived breach or privacy or security incident because of the use of generative AI, we may lose valuable intellectual property and confidential information and our reputation and the public perception of the effectiveness of our security measures could be harmed.

In addition, many U.S.

and international governmental bodies and regulators have proposed, or are in the process of developing, new regulations related to the use of AI and machine-learning technologies.

The final form of these may impose obligations related to our development, offering, and use of AI technologies and expose us to increased risk of regulatory enforcement and litigation.

The transition to selling more SaaS and Expert Services, which include a software as a service or solution as a service subscription, presents a number of risks.

We currently offer SaaS and Expert Services, which often contain a combination of robotics and smart devices, intelligent software workflows, and data and analytics, all optimized by expert services.

These offerings include, but are not limited to, Central Pharmacy Dispensing Service, IV Compounding Service, and Points of Care Service.

We also offer our Inventory Optimization Service, certain patient engagement, clinical and financial products and services under EnlivenHealth, Specialty Pharmacy Services, and 340B solutions, as a subscription.

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

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

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

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

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

In addition, since revenues are generally recognized over the term of the subscription, any decrease in customer purchases of our

subscription-based products and services will not be fully reflected in our operating results until future periods, which may result in inflated revenue growth rates that do not reflect such decreases initially.

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

If errors occur during the provision of certain of our Advanced Services, or if we fail to maintain expected service levels, we may be liable to our customers or third parties which may result in a decline in our Advanced Services offerings revenue.

Certain of our Advanced Services offerings are highly complex and may be susceptible to errors, including human or technological error.

If errors occur during the provision of certain of our SaaS and Expert Services, or if we fail to maintain expected service levels, we may be liable to our customers or third parties which may result in a decline in our SaaS and Expert Services offerings revenue.

Certain of our SaaS and Expert Services offerings are highly complex and may be susceptible to errors, including human or technological error.

We may be required to bear the cost of correcting any errors and the cost of such corrections may be significant, which could adversely affect our business, operating results, cash flow, or financial condition.

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We could also be subject to adverse publicity as a result of such claims, regardless of the merits or eventual outcome, which may negatively impact our ability to attract and retain customers.

Furthermore, if we cannot maintain the expected level of service or if our customers fail to achieve agreed upon milestone improvements in financial or operating metrics, payments to us from such customers may be lower than anticipated.

We may not be able to retain our Advanced Services customers.

An increasing percentage of our revenue is derived from our subscription-based Advanced Services offerings.

We may not be able to retain our SaaS and Expert Services customers.

An increasing percentage of our revenue is derived from our subscription-based SaaS and Expert Services offerings.

In connection with those offerings, our customers, generally, have no obligation to renew their subscriptions.

If our Advanced Services customers decline to renew their subscriptions or decide to terminate their agreements early, we would not derive the expected financial benefits from that customer, which could have a material adverse effect on our business, operating results, cash flow, or financial condition.

In addition, some of our Advanced Services agreements require us to adhere to additional data, security, network access, and other institutional procedures and requirements of our customers, and in certain cases may obligate us to agreed upon services levels.

If we do not meet our obligations under any such Advanced Services agreement, we could be liable for damages.

In addition, should a customer undergo a change in control or ownership, it may cause us or the customer to seek to modify or terminate an Advanced Services agreement.

If our SaaS and Expert Services customers decline to renew their subscriptions or decide to terminate their agreements early, if permitted, we would not derive the expected financial benefits from that customer, which could have a material adverse effect on our business, operating results, cash flow, or financial condition.

In addition, some of our SaaS and Expert Services agreements require us to adhere to additional data, security, network access, and other institutional procedures and requirements of our customers, and in certain cases may obligate us to agreed upon services levels.

If we do not meet our obligations under any such SaaS and Expert Services agreement, we could be liable for damages.

In addition, should a customer undergo a change in control or ownership, it may cause us or the customer to seek to modify or terminate an SaaS and Expert Services agreement.

If we are unable to maintain our relationships with group purchasing organizations (“GPOs”) or other similar organizations, we may have difficulty selling our products and services to customers represented by these organizations.

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Some of our contracts with these organizations are terminable at the convenience of the applicable customer.

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

rate targets or our ability to increase our revenues.

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

The GPOs may increase the fees we pay or these organizations may not renew our contracts on similar terms, if at all, and they may choose to terminate our contracts before they expire, any of which could cause our revenues to decline.

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

Approximately 8% of our revenues during the year ended December 31, 2024 were generated from the sale of consumable medication packages, most of which are produced in our St.

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Any disruption in the production capabilities of our St.

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

Petersburg facilities, including as a result of extreme weather conditions or natural disasters, which may become more frequent

as a result of climate change, will adversely affect our ability to ship our consumable medication packages globally and would reduce our revenues.

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

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

Similarly, our EnlivenHealth brand offers a portfolio of web-based, mobile, and telephonic patient engagement, medication management, financial management, clinical, analytics, and population health solutions to pharmacies, which is designed to support improvement in health outcomes related to medication use.

Similarly, our EnlivenHealth brand extends beyond the inpatient setting and into ambulatory care.

This brand offers a portfolio of products designed to digitally enable retail and community pharmacies with connected patient engagement and clinical and financial workflows.

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

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The competitive challenges we face in the markets in which we operate include, but are not limited to, the following:

• current or future competitors may offer or have the ability to offer a broader range of solutions than us, develop alternative solutions that provide a better customer outcome or lower cost of operation, develop new features or capabilities for their products, including artificial intelligence (“AI”), machine learning, and generative AI capabilities, which are part of an intensely competitive and rapidly evolving market, that could compete with our solutions, respond more quickly and efficiently to new or changing technologies, standards, or regulations, or devote greater resources to the development, promotion, and sale of their products than we do;

• current or future competitors may offer or have the ability to offer a broader range of solutions than us, develop alternative solutions that provide a better customer outcome or lower cost of operation, develop new features or capabilities for their products, including AI, machine-learning, and generative AI capabilities, which are part of an intensely competitive and rapidly evolving market, that could compete with our solutions, respond more quickly and efficiently to new or changing technologies, standards, or regulations, or devote greater resources to the development, promotion, and sale of their products than we do;

• competitive pressures could result in increased price competition for our products and services, fewer customer orders, and reduced gross margins;

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and increase our vulnerability to the impact of adverse economic and industry conditions.

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

Our ability to make payments of the principal, to pay interest, or to refinance our indebtedness, including the 2025 Notes and the 2029 Notes, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.

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

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

In addition, as more fully described below in the risk factor captioned “ Covenants in our Second A&R Credit Agreement restrict our business and operations in many ways, and if we do not effectively manage our compliance with these covenants, our business, operating results, cash flow, or financial condition could be adversely affected, ” our second amended and restated agreement with certain lenders, and Wells Fargo Bank, National Association, as administrative agent (the “Second A&R Credit Agreement”) includes customary restrictive covenants that impose operating and financial restrictions on us.

In addition, as more fully described below in the risk factor captioned “ Covenants in our Second A&R Credit Agreement restrict our business and operations in many ways, and if we do not effectively manage our compliance with these covenants, our financial conditions and operating results could be adversely affected, ” our second amended and restated agreement, as amended, with certain lenders, and Wells Fargo Bank, National Association, as administrative agent (the “Second A&R Credit Agreement”) includes customary restrictive covenants that impose operating and financial restrictions on us.

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

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

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

While HIPAA does not create a private right of action, its standards have been used as the basis for civil suits and HIPAA is enforced by the U.S.

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

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

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

Additionally, pursuant to legislation passed in 2021, OCR recently issued guidance on recognized security practices for covered entities and business associates.

OCR indicated that recognized security practices will not be an aggravating factor in OCR investigations, but that implementation of recognized security practices strengthen an organization’s cybersecurity and regulatory posture, as well as possibly lessening enforcement penalties in a potential regulatory enforcement action.

Additionally, on January 6, 2025, HHS OCR issued a Notice of Proposed Rulemaking (“NPRM”) aiming to strengthen cybersecurity protections and better defend against cyber threats targeting the U.S.

system by bolstering the security safeguards required under the HIPAA Security Rule.

While a final rule has not yet been issued (as the NPRM is open for public comment until March 7, 2025), if adopted, these proposed changes would potentially require significant operational adjustments and potential cost increases to comply, and are expected to become final in approximately 180 days from publication of any final rule.

Moreover, compliance with state laws related to health privacy may result in additional compliance costs.

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Specifically, the information blocking rules were implemented as part of the 21st Century Cures Act, and are primarily designed to facilitate technology interoperability and enable the free flow of healthcare information for healthcare treatment, payment or operation purposes.

HHS-OIG may impose penalties for information blocking that has occurred after September 1, 2023, and ONC and HHS proposed a rule on November 1, 2023 listing certain disincentives for actors that conduct information blocking.

The impact on the information blocking rules to our business is currently unclear.

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

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

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

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

Furthermore, new health information standards, whether implemented pursuant to HIPAA, Health Information Technology for Economic and Clinical Health (“HITECH”) Act, congressional action or otherwise could have a significant effect on the manner in which we handle health-related information, and the cost of complying with these standards could be significant.

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

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

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

In addition to California, at least twenty (20) other states in the U.S.

have passed comprehensive consumer privacy laws similar to the CPRA including, but not limited to, Virginia, Colorado, Connecticut, Oregon, Texas, and Utah (among many others).

These laws are either in effect or will go into effect sometime before the end of 2026, and we expect other states to consider adopting similar laws in the future.

Some of these new or existing laws may apply to our business activities, so additional compliance investment and potential business process changes may be required.

Similar consumer privacy and data protection legislation has been introduced at the federal level that may ultimately have conflicting requirements and, if enacted, would further complicate compliance.

Additionally, the Federal Trade Commission (“FTC”) and many state attorneys general are interpreting existing federal and state consumer protection laws to impose evolving standards for the collection, use, dissemination and security of health-related and other personal information.

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Furthermore, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in, or affecting, commerce in violation of Section 5 of the FTC Act.

Additionally, the FTC recently published an advance notice of proposed rulemaking on commercial surveillance and data security, and is seeking comment on whether it should implement new trade regulation rules or other regulatory alternatives concerning the ways in which companies (1) collect, aggregate, protect, use, analyze, and retain consumer data, as well as (2) transfer, share, sell, or otherwise monetize that data in ways that are unfair or deceptive.

Additionally, data and digital services regulation continues to expand, particularly with respect to the artificial intelligence (“AI”) and automated decision making, which may further impact our business and regulatory compliance strategies.

For example, AI regulation or regulatory guidance continues to emerge in response to President Biden’s Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence issued on October 30, 2023.

Additionally, data and digital services regulation continues to expand, particularly with respect to AI and automated decision making, which may further impact our business and regulatory compliance strategies.

Internationally, various jurisdictions outside of the United States in which we operate have established, or are currently developing, their own data privacy and security legal frameworks with which we or our customers must comply.

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The UK has implemented the EU GDPR as the UK GDPR which sits alongside the UK Data Protection Act 2018 (the UK GDPR, together with the EU GDPR, the “GDPR”).

The GDPR has direct effect where an entity is established in the European Economic Area (“EEA”) or the UK (as applicable) and has extraterritorial effect, including where an organization outside of the EEA or the UK processes personal information in relation to the offering of goods or services to those individuals or the monitoring of their behavior.

The GDPR imposes stringent obligations on companies that fall within its scope, including inter alia:

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(iii) obligations to consider data protection as any new products or services are developed and designed (including e.g., to limit the amount of personal information processed);

(iv) requirements to process personal information lawfully including specific requirements for obtaining valid consent where consent is the lawful basis for processing;

(iv) requirements to process personal

information lawfully including specific requirements for obtaining valid consent where consent is the lawful basis for processing;

(v) an obligation to report personal data breaches to:

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

In July 2020, the Court of Justice of the EU (“CJEU”) in its Schrems II judgement limited how organizations could lawfully transfer personal data from the EEA to the US by invalidating the EU-US Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“EU SCCs”), including a requirement for companies to carry out a transfer privacy impact assessment (“TIAs”).

In July 2020, the Court of Justice of the EU (“CJEU”) in its Schrems II judgement limited how organizations could lawfully transfer personal data from the EEA to the US by invalidating the EU-US Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“EU SCCs”), which Omnicell utilizes such standard contractual clauses for cross-border transfers of personal data from the EEA and UK to the U.S.

The Schrems II judgement also includes a requirement for companies to carry out a transfer privacy impact assessment (“TIAs”).

A TIA, among other things, assesses laws governing access to personal data in the recipient country and considers whether supplementary measures that provide privacy protections additional to those provided under EU SCCs will need to be implemented to ensure an “essentially equivalent” level of data protection to that afforded in the EEA.

On October 7, 2022, US President Biden introduced an Executive Order to facilitate a new Trans-Atlantic Data Privacy Framework (“DPF”) and on 10 July 2023, the European Commission adopted its Final Implementing Decision granting the U.S.

adequacy (“Adequacy Decision”) for EU-US transfers of personal data for entities self-certified to the DPF.

Following the CJEU’s decision, in October 2022, former U.S.

President Biden signed an executive order to implement the EU-U.S.

Data Privacy Framework (“DPF,” together with the EU-U.S., “EU-U.S.

DPF”), which would serve as a replacement to the EU-US Privacy Shield.

The EU initiated the process to adopt an adequacy decision for the EU-U.S.

DPF in December 2022, and the European Commission adopted the adequacy decision in July 2023.

The adequacy decision permits U.S.

companies who self-certify to the EU-U.S.

DPF to rely on it as a valid data transfer mechanism for data transfers from the EEA to the U.S.

Entities relying on EU SCCs for transfers to the U.S.

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This may have implications for our cross-border data flows and has and may in the future result in increased compliance costs.

In addition, some privacy advocacy groups have already suggested that they will be challenging the EU-U.S.

The UK GDPR also imposes similar restrictions on transfers of personal data from the UK to jurisdictions that the UK Government does not consider adequate, including the United States.

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The UK Information Commissioner’s Office has also published its version of the TIA and guidance on international transfers, although entities may choose to adopt either the EU or UK style TIA.

Further, on September 21, 2023, the UK Secretary of State for Science, Innovation and Technology established a UK-U.S.

data bridge (i.e., a UK adequacy decision) and adopted UK regulations to implement the UK-U.S.

data bridge (“UK Adequacy Regulations”).

The UK Adequacy Regulations have now been passed in the UK Parliament, and personal data may be transferred from the UK under the UK-U.S.

data bridge through the UK extension to the DPF, from October 12, 2023, to organizations self-certified under the DPF.

The GDPR imposes fines for serious breaches of up to the higher of 4% of the organization’s annual worldwide turnover or €20m (under the EU GDPR) or £17.5m (under the UK GDPR).

The GDPR identifies a list of points to consider when determining the level of fines for data supervisory authorities to impose (including the nature, gravity and duration of the

infringement).

The GDPR identifies a list of points to consider when determining the level of fines for data supervisory authorities to impose (including the nature, gravity and duration of the infringement).

Data subjects also have a right to compensation, as a result of an organization’s breach of the GDPR which has affected them, for financial or non-financial losses (e.g., distress).

In the EU a number of new laws related to digital data and AI have recently entered into force, or are expected to enter into force in the foreseeable future.

We are still assessing the scope of application, impact, and risk of these recent EU laws on our business, and will continue to assess this moving forward, including for example:

(i) the EU’s Data Act, which was adopted on November 27, 2023 and seeks to, among other things regulate the use of, and access to, data generated through connected (or Internet-of-Things) devices and introduces a new means for public sector bodies to access, use and re-use private sector data;

and (ii) the proposed European Health Data Space Regulation which is expected to be agreed in Q3 2024 and seeks to, among other things, provide individuals with more control over their electronic health data (“EHD”), enable cross-border sharing of EHD between national EU healthcare systems and facilitate the sharing of EHD for secondary research purposes.

We are still assessing the scope of application, impact, and risk of these recent EU laws on our business, and will continue to assess this moving forward, including for example the European Health Data Space Regulation which was adopted by the European Parliament in the second quarter of 2024 and seeks to, among other things, provide individuals with more control over their electronic health data (“EHD”), enable cross-border sharing of EHD between national EU healthcare systems and facilitate the sharing of EHD for secondary research purposes.

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

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It is possible that these laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the functionality of our solutions.

In addition to European data protection law, we or our customers may be subject to, or may become subject to, various other data privacy and security laws and regulations of other jurisdictions, including those in Canada, China, India, and Saudi Arabia.

Due to increasing data collection and data flows, as well as the use of emerging technologies (such as AI), regulations

in this area are constantly evolving with regulatory and legislative authorities in numerous parts of the world adopting proposals to regulate data and protect information.

In addition, the interpretation and application of these privacy and data protection laws are often uncertain and in a state of flux, thus requiring constant monitoring for compliance.

Compliance with privacy, data protection, and information security laws, regulations, and other obligations is costly, and we may encounter difficulties, delays, or significant expenses in connection with our compliance, or because of our customers’ need to comply or our customers’ interpretation of their own legal requirements.

For example, as previously disclosed in connection with the cybersecurity event we experienced on May 4, 2022, we provided breach notification to fewer than 350 individuals as required by applicable law.

Additionally, we have in the past been subject to certain class action lawsuits asserting, among other allegations, claims of violation of the Illinois Biometric Information Privacy Act.

In addition, any future event that results in the failure or perceived failure by us to comply with laws, regulations, policies, legal or contractual obligations, industry standards, or regulatory guidance relating to privacy or data security could result in governmental investigations and enforcement actions, litigation, fines and penalties, exposure to indemnification obligations or other liabilities, and adverse publicity, all of which could have an adverse effect on our reputation, as well as our business, financial condition, and operating results.

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

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

Our IT systems and third-party cloud services are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses, public health crises, other catastrophic events or environmental impact, as well as due to system upgrades and/or new system implementations.

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

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As previously disclosed, on May 4, 2022, we determined that certain of our information technology systems were affected by ransomware impacting certain internal systems.

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

We contained the incident and restored substantially all of its critical information technology systems.

We do not believe the security event will have a material adverse effect on its business, operating results, cash flow or financial condition.

We do not believe the security event has had, or will have, a material adverse effect on its business, operating results, cash flow, or financial condition.

We may also be subject to various cybersecurity laws in the EU and the UK, including the UK Network and Information Systems Regulation 2018 (“NIS Regulations”), and the EU Network and Information Systems Security 1 Directive (“NISD1”) as implemented into EU Member State law (and as updated by the EU Network and Information Systems Security 2 Directive (“NISD2”)) which apply to certain operators of “essential services” and digital service providers, such as cloud providers, and medical device manufacturers.

In addition, the EU Critical Entities Resilience Directive entered into force on January 17, 2023 which applies to, among other things, “essential services” including manufacturers of medical devices, imposes stringent cybersecurity and resilience requirements in particular in relation to incidents significantly impacting the continuation of the critical infrastructure service offering in the EU .

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

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

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

appointments.

These solutions require that we maintain an information technology infrastructure that is robust and reliable within competitive and regulatory constraints that continue to evolve.

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

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

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

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

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

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

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

Any failure to prevent such security breaches or privacy violations, or implement satisfactory remedial measures, could require us to expend significant resources to investigate security breaches and notify affected individuals, remediate any damage, disrupt our operations or the operations of our customers, damage our reputation or cause us incur costs to manage public relations issues, damage our relationships with our customers, or expose us to a risk of financial loss, litigation, regulatory penalties, contractual indemnification obligations, or other liability.

Any failure to prevent such security breaches or privacy violations, or implement satisfactory remedial measures, could require us to expend significant resources to investigate security breaches and notify affected individuals, remediate any damage, disrupt our operations or the operations of our customers, damage our reputation or cause us to incur costs to manage public relations issues, damage our relationships with our customers, or expose us to a risk of financial loss, litigation, regulatory penalties, contractual indemnification obligations, or other liability.

We may fail to realize the potential benefits of acquired businesses, which could negatively affect our business, operating results, cash flow, or financial condition.

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

For example, we acquired FDS Amplicare in September 2021, Omnicell Specialty Pharmacy Services (formerly, ReCept) and MarkeTouch Media, each in December 2021, respectively, and Hub and Spoke Innovations in January 2022.

We cannot provide assurance that any acquisition or future transaction we complete will result in long-term benefits to us or our stockholders, or that we will be able to effectively integrate or manage the acquired businesses, including FDS Amplicare, Omnicell Specialty Pharmacy Services, MarkeTouch Media, or Hub and Spoke Innovations.

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

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

For example, the Budget Control Act of 2011, among other things, resulted in reductions in payments to Medicare providers of 2% per fiscal year, which went into effect on April 1, 2013 and, following a temporary suspension during the COVID-19 pandemic that expired on July 1, 2022, will remain in effect through the first six months of the fiscal year 2023 sequestration order unless additional Congressional action is taken.

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

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

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

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

On June 17, 2021, the U.S.

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

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

It is unclear how future efforts to challenge, repeal, replace, or otherwise modify, or alter the implementation or interpretation of the ACA will affect our business, operating results, cash flow, or financial condition.

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

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

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

This consolidation could also result in new entrants in the markets in which we

operate, which presents additional risk and could result in adverse impacts on our business.

See “ We operate in highly competitive markets, and we may be unable to compete successfully ” above for additional information.

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

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Additional products and services may require us to observe HHS regulations for credentialing of providers (pharmacists) or be subject to DEA regulations concerning the management, storing, dispensing, and disposal of, and accounting for, controlled substances, and may be regulated in the future by the FDA, DEA, or other federal agencies due to future legislative and regulatory initiatives or reforms.

In addition, certain provisions of the Federal Food, Drug and Cosmetic Act (“FDCA”) related to the handling, distribution and compounding of pharmaceuticals, govern all parts of the drug

distribution chain, which our customers may be required to comply with and which may influence customer demand for our products.

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

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

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

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

Any failure of our customers to comply with the applicable rules, regulations, and standards could reduce demand for our products or services and harm our business, competitive position, operating results, cash flow, or financial condition.

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The costs to respond to or defend any such reviews, audits and investigations can be significant and are likely to increase in the current enforcement environment.

These audits and investigations may result in other adverse consequences, particularly if the underlying conduct is found to be pervasive or systemic.

These cases may, from time to time, originate from whistleblowers, which have separate indemnity and reimbursement rights under state and federal laws.

These cases, audits and investigations may result in other adverse consequences, particularly if the underlying conduct is found to be pervasive or systemic.

These consequences may include, but are not limited to:

(1) refunding or retroactively adjusting amounts that have been paid under the relevant government program or from other payers;

(1) refunding or retroactively adjusting amounts that have been paid under the relevant government program or from other payors;

(2) state or federal agencies imposing significant fines, penalties and other sanctions on us;

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In addition, we cannot predict the potential impact of future privacy standards and other federal, state, and international privacy and security laws that may be enacted at any time on our customers or on Omnicell.

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

These laws could

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

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

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

For example, as further detailed in “Legal Proceedings” in Note 14, Commitments and Contingencies , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, we are currently engaging in discussions with the U.S.

Attorney’s Office for the Eastern District of Washington regarding our compliance with the pricing terms and conditions of our Federal Supply Schedule contract with the federal government.

If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to significant financial penalties and possible exclusion from participation in federal and state funded healthcare programs, and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws.

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• political unrest, terrorism, and other potential hostilities (such as the ongoing conflicts between Russia and Ukraine or Israel and Hamas), including in areas in which we have facilities or operations;

• epidemics, pandemics, or other major public health crises, such as the COVID-19 pandemic.

• epidemics, pandemics, or other major public health crises.

If we are unable to anticipate and address these risks properly our business, operating results, cash flow, or financial condition could be harmed.

Furthermore, changes in export or import regulation and other trade barriers and uncertainties may have an adverse effect on our business.

For example, in recent years, the U.S.

government advocated greater restrictions on trade generally and tariff increases on certain goods imported into the United States, particularly from China.

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

For example, the current U.S.

administration has recently imposed tariffs on products manufactured in several jurisdictions, including some of the U.S.’s larger trading partners, and has made announcements regarding the potential imposition of tariffs on other jurisdictions, such as the European Union.

The current U.S.

administration has also announced it may implement other tariffs or increase existing tariffs.

Furthermore, in recent years, the U.S.

government advocated greater restrictions on trade generally.

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

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

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

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

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

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

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

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

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

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

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

A failure to adequately meet stakeholder ESG expectations or if our ESG initiatives are viewed as being overemphasized, combined with inconsistent and shifting standards by which to measure ESG performance, may result in the loss of business, being subject to legal proceedings, including investigations or litigation, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent.

Catastrophic events may disrupt our business and harm our operating results.

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

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

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

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In the future, tropical storms may be intensified or occur with increasing frequency as a result of climate change.

Disruptions to, or the failure of any of these systems, and the resulting loss of critical data, which is not quickly

recoverable by the effective execution of disaster recovery plans designed to reduce such disruption, could cause delays in our product development, prevent us from fulfilling our customers’ orders, and could severely affect our ability to conduct normal business operations, the result of which would adversely affect our operating results.

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

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

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

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

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

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

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

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

We also strive to maintain employee well-being, recognizing the continued burdens and pressures employees may be experiencing due to macroeconomic uncertainties, including geopolitical unrest and continued inflation, which may impact employee performance, engagement, and retention.

Furthermore, external and internal (such as our continued growth or internal restructuring initiatives) factors may result in greater workloads for our employees compared to those at companies with which we compete for personnel, which may lead to higher levels of employee burnout and turnover.

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

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however, the laws of certain foreign countries do not protect our proprietary rights as effectively as they do in the U.S.

Despite our efforts to protect our proprietary rights, there can be no assurance that our efforts to protect our proprietary rights are or will be adequate.

that competitors will not independently develop similar technology, and that unauthorized parties will not attempt to copy aspects of our products or obtain and use information that we regard as proprietary, which could harm our competitive position.

Despite our efforts to protect our proprietary rights, there can be no assurance that our efforts to protect our proprietary rights are or will be adequate, that competitors will not independently develop similar technology, and that unauthorized parties will not attempt to copy aspects of our products or obtain and use information that we regard as proprietary, which could harm our competitive position.

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

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

We carry some inventory of critical components and are otherwise working to secure supplies necessary

to ensure fulfillment of customer demand, but global shortages could result in our need to secure supplies at higher costs as well as manufacturing delays.

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

Supply interruptions may result in increased component delivery lead times and increased costs to obtain components and as a result the production of our products may be impacted.

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

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

In certain circumstances, the failure of any of our suppliers or us to perform adequately could

result in quality control issues affecting end users’ acceptance of our products, which could damage customer relationships and harm our business.

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

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

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

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

government customers.

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As a result, our volume of U.S.

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

government customer leases has declined and will continue to decline over time and cease in the future.

In addition, under the terms of the Federal Supply Schedule contract, certain of our U.S.

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government customer.

If any of our government-owned or government-run hospital customers decide to terminate their agreements early for any reason, we would not derive the expected financial benefits from any such customer which could result in lower than expected revenue and adversely affect our business, operating results, cash flow, or financial condition.

Furthermore, on January 20, 2025, President Donald J.

Trump announced an executive order establishing the “Department of Government Efficiency” that seeks to reform federal government processes, maximize government efficiency and productivity and reduce government expenditures.

Uncertainty surrounding the U.S.

federal government’s budget and budgetary priorities, as well as pressures on government expenditures, could adversely affect the funding for, and delay purchasing decisions by, our U.S.

government customers.

If any of our g overnment-owned or government-run hospital customers decide to terminate their agreements early for any reason, we would not derive the expected financial benefits from any such customer, which could result in lower than expected revenue and adversely affect our business, operating results, cash flow, or financial condition.

In addition, the failure of any of our U.S.

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government customers.

The balance of our unsold leases to U.S.

The unsold receivables balance from leases to our U.S.

government customers was $4.6 million as of December 31, 2024.

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We attempt to mitigate these risks through contractual terms negotiated with our customers.

However, these policies and protective contractual terms may not be adequate against product liability claims and in the past we have been subject to certain lawsuits asserting, among other allegations, claims of product liability.

However, these policies and protective contractual terms may not be adequate against product liability claims and in the past we have been subject to certain lawsuits asserting,

among other allegations, claims of product liability.

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

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

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

investment and we may make a determination to exit a particular business strategy, initiative, product line or solution.

Even if successful, they may not have the projected or actual impact that we initially expected or that recoups our initial investment and we may make a determination to exit a particular business strategy, initiative, product line or solution.

As a result, such initiatives may materially adversely affect our business, operating results, cash flow, or financial condition.

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• our involvement in any litigation or investigations by government authorities, including litigation judgments, settlements, or other litigation-related costs;

• cyber events, such as the ransomware incident we experienced in May 2022;

• epidemics, pandemics, or other major public health crises, such as the COVID-19 pandemic;

• cyber events, such as breaches of data security or cyber-attacks on our systems or solutions;

• epidemics, pandemics, or other major public health crises;

• general economic, regulatory, political and market conditions.

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As a result, analysts’ ability to accurately forecast our results may be negatively impacted and it may be more likely that we fail to meet their estimates.

As a result, if our financial results fail to meet (or significantly exceed) our publicly announced financial guidance or the expectations of analysts or investors, analysts could downgrade our common stock or publish unfavorable research that could cause our stock price or trading volume to decline, potentially significantly.

As a result, if our financial results fail to meet (or significantly exceed) our publicly announced financial guidance or

the expectations of analysts or investors, analysts could downgrade our common stock or publish unfavorable research that could cause our stock price or trading volume to decline, potentially significantly.

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

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

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

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

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

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Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless, among other possibilities, our Board of Directors approves the transaction.

of Directors may use these provisions to prevent changes in the management and control of our Company.

Our Board of Directors may use these provisions to prevent changes in the management and control of our Company.

Also, under applicable Delaware law, our Board of Directors may adopt additional anti-takeover measures in the future including, without limitation, a stockholder rights plan.

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Risk Factors Related to Our Notes

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

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

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

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

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

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

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

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

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

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

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

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

Conversion of the 2029 Notes and the 2025 Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock.

The conversion of some or all of the 1.00% Convertible Senior Notes due 2029 (the “2029 Notes”) or the 0.25% Convertible Senior Notes due 2025 (the “2025 Notes”) may dilute the ownership interests of our stockholders.

Upon conversion of the 2029 Notes or the 2025 Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the 2029 Notes or the 2025 Notes, as applicable, being converted.

If we elect to settle the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the 2029 Notes or the 2025 Notes being converted in shares of our common stock or a combination of cash and shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

In addition, the existence of the 2029 Notes or the 2025 Notes may encourage short selling by market participants because the conversion of the 2029 Notes or the 2025 Notes could be used to satisfy short positions, or anticipated conversion of the 2029 Notes or the 2025 Notes into shares of our common stock could depress the price of our common stock .

The conditional conversion feature of the 2029 Notes or the 2025 Notes, if triggered, may adversely affect our financial condition and operating results.

The 2029 Notes are convertible on or after August 1, 2029 and, in the event the conditional conversion features are triggered, prior to August 1, 2029.

The 2025 Notes are convertible on or after May 15, 2025 and, in the event the conditional conversion features are triggered, prior to May 15, 2025.

If one or more holders elect to convert the 2029 Notes or 2025 Notes,

we would be required to settle any converted principal amount of such 2029 Notes or 2025 Notes through the payment of cash, which could adversely affect our liquidity.

In addition, even if holders do not elect to convert the 2029 Notes or 2025 Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2029 Notes or 2025 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

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

In connection with the offering of the Notes, we entered into convertible note hedge transactions with an affiliate of one of the initial purchasers of the Notes and certain other financial institutions (the “option counterparties”).

In connection with the offering of the 2029 Notes and 2025 Notes, respectively, we entered into convertible note hedge transactions with an affiliate of one of the initial purchasers of the 2029 Notes and 2025 Notes and certain other financial institutions (the “option counterparties”).

We also entered into warrant transactions with the option counterparties.

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

The convertible note hedge transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of 2029 Notes or 2025 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2029 Notes or 2025 Notes, as the case may be.

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

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

In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2029 Notes or 2025 Notes (and are likely to do so in connection with any conversion of the 2029 Notes or 2025 Notes or redemption or repurchase of the 2029 Notes or 2025 Notes), which could cause or avoid an increase or a decrease in the market price of our common stock.

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

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If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the convertible note hedge transactions with such option counterparty.

Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility

of our common stock.

Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock.

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

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Any increase in our effective tax rate would reduce our profitability.

On December 15, 2022, the EU Member States formally adopted the EU's Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework that was supported by over 130 countries worldwide.

The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive.

A significant number of countries are also implementing similar local legislation.

We are continuing to evaluate the potential impact of the Pillar Two Framework on future periods, pending legislative adoption by additional individual countries.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could cause our stock price to decline.

Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the United States Securities and Exchange Commission (“SEC”) require annual management assessments of the effectiveness of our internal control over financial reporting, and a report by our independent registered public accounting firm attesting to the effectiveness of internal control.

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

If we fail to maintain effective internal control over financial reporting, as such standards are modified, supplemented,

or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting.

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

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

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

What changed 10-K

Item 1A. Risk Factors