OMNICELL, INC. 10-K

ITEM 1. BUSINESS Overview Omnicell, a leader in transforming the pharmacy and nursing care delivery model, is committed to solving the critical challenges inherent in medication management and elevating the role of clinicians within healthcare as an essential component of care delivery. Omnicell is focused on helping its customers define and deliver a cost-effective medication management strategy designed to equip and empower pharmacists and nurses to focus on patient care rather than administrative tasks, and to drive improved clinical, operational, and financial outcomes across all care settings. We are doing this with an industry-leading medication management infrastructure which includes robotics and smart devices, software workflows, expert services, and operational and optimization analytics. This comprehensive set of solutions provides the critical foundation for customers to realize the Autonomous Pharmacy, an industry-wide vision defined by pharmacy leaders for improving operational efficiencies and ultimately targeting zero-error medication management. Business Strategy In 2023, the United States spent $723 billion on prescription drugs, a 13.6% increase from 2022. This was the largest annual spending increase in 20 years and impacted patients in virtually all settings of care. We believe there are significant challenges facing the practice of pharmacy today including, but not limited to, budget constraints, increased healthcare worker turnover rates, labor shortages, drug shortages, drug diversion, manual and error-prone processes, complex compliance requirements, and limited inventory visibility. Each of these challenges may lead to poor medication management outcomes including, but not limited to, medication errors, adverse drug events, lack of patient adherence, and medication waste. We also recognize that these challenges may impact the timing of contracting for, or implementation of, our products, solutions, or services. However, we believe that over time these significant challenges to the practice of pharmacy will drive demand for increased automation, visibility, insights, and improved medication management outcomes that our solutions are designed to enable. Because of this, we believe that our solutions are well-positioned to address the evolving needs of healthcare institutions and therefore present opportunities for long-term growth. In an effort to address these challenges and deliver solutions to help drive positive medication management outcomes, we continue to make significant investments in our research and development efforts to further advance the industry-defined vision of the Autonomous Pharmacy. Furthermore, we believe a combination of robotics and smart devices, software workflows, expert services, and operational and optimization analytics is needed in every care setting where medications are managed. We are focused on delivering solutions to help our customers realize the industry-defined vision of the Autonomous Pharmacy and drive positive medication management outcomes with outstanding customer experience through a mature channel in four market categories: • Points of Care. As a market leader, we expect to continue expansion into this product market as customers increase the use of our dispensing systems in more areas within their hospitals and increasingly in ambulatory care settings. Macroeconomic trends in our target market continue to improve as health system margins and volumes increase and stabilize in the post-pandemic environment. This positive trajectory is expected to drive increased demand for system modernization through automation, software, and analytics. We are seeing customers seek to maximize the value of existing automated dispensing system investments and continue to invest in next-generation enhancements and solutions for points of care. We believe that customers will upgrade their current installed base over time as we deliver these new solutions to market. We also believe there is an opportunity for us to expand this offering and define a new standard for dispensing systems in ambulatory settings. We believe our current solutions for Points of Care and new innovations and services will continue to help customers drive improved clinical and financial outcomes. • Central Pharmacy and IV Compounding. This market represents the beginning of the medication management process in acute care settings, and we believe it is a significant automation opportunity for high volumes of manual, repetitive, and error-prone processes that are often common in pharmacies today. Manual medication dispensing processes are usually labor intensive, error-prone, and may lead to excess medication waste and expirations for our healthcare partners. Automating the central pharmacy dispensing process should enable customers to reallocate pharmacy labor, enhance dispensing accuracy and patient safety, and reduce medication waste and expirations. Likewise, the manual compounding of sterile IV preparations can be error-prone and create significant patient safety risks, and outsourcing sterile IV compounding could lead to increased medication costs and lack of access to needed medications due to an inability to source medications when they are required. As a result, we believe IV automation provides a significant opportunity to enhance patient safety and reduce costs. We anticipate that these technology-enabled services will become more critical as health systems continue to face labor shortages, increased financial pressure, and supply chain disruptions. 6 Table of Contents • Specialty Pharmacy and 340B Program. We believe that health systems will continue to invest in programs that are intended to improve patient outcomes and drive cost savings by utilizing specialty pharmacies and the federal 340B Drug Pricing Program (the “340B Program”). The 340B Program allows qualifying hospitals and health systems to stretch federal resources and expand patient access to healthcare by requiring manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to eligible healthcare organizations and covered entities. Specialty drugs are used for treatment of complex conditions and often require intensive patient management and specialized workflows for dispensing and care coordination. Specialty medications are projected to account for nearly 60% of U.S. total spending on medications, with total spending projected to be approximately $420 billion in 2025. Specialty pharmacies serve as the connection between patients, prescribing physicians, and payers and work to streamline access and adherence to these specialty drugs. We believe a solution that is designed to help health systems start or optimize their specialty pharmacy programs and the related pharmaceutical aspects of patient care will help ensure continuity of care and should contribute to the revenue and profitability of those organizations. We believe that a fully optimized specialty pharmacy operation represents one of the largest economic opportunities for hospitals and health systems. • Ambulatory Care. We believe ambulatory care, especially the retail and institutional market, represents a significant opportunity as healthcare evolves. Retail pharmacies are expected to fill 4.98 billion prescriptions in 2025 and grow at a compound annual growth rate of around 7.1%, which would result in an approximate $1.2 trillion market valuation by 2032. Additionally, the shift of outpatient care from hospitals and physician offices to other, more convenient settings, such as retail pharmacies and the home continues to be a growing trend. New technologies and increased scope of practice for pharmacists appear to be spurring innovation and expansion of the provision of clinical services by retail pharmacies. We believe this development, combined with the move to value-based care, will drive the adoption of our patient engagement offerings. These solutions are intended to help providers (including pharmacists) engage patients in new ways that are expected to improve outcomes, reduce the total cost of care, and lead to more profitable operations. Products and Services Our products and services span the evolving continuum of care, including inpatient, outpatient, and retail settings. We provide a range of points of care medication and supply dispensing systems, including automated systems. We also offer advanced automation solutions including robotics designed to automate work, streamline workflows, and reduce human error. Across these settings, we provide central pharmacy automation solutions for both medication dispensing and IV compounding. We also provide patient engagement solutions to help improve adherence to prescriptions. With certain automation and technology-enabled service offerings, we provide expert services designed to help optimize utilization through subscription agreements, inclusive of expert personnel to operate the equipment. Our offerings include: Points of Care Our automation solutions for points of care are designed to improve clinician workflows in patient care areas of the healthcare system, such as nursing units, patient wards, operating rooms, and emergency departments. Automated dispensing systems are an essential part of medication management because they are designed to safeguard medications, including controlled substances, and provide automation to track inventory. We strive to continually innovate our automated dispensing systems by designing features that are intended to help our customers close gaps in safety and enable clinicians to spend less time managing medications and more time caring for patients. Our XT Series automated dispensing systems for medications and supplies, which are used in nursing units and other clinical areas of the hospital, are designed to support workflows specific to each area of the hospital, with various software and hardware options. Our Points of Care Service combines market-leading automation, software workflows, expert services, and operational and optimization analytics in an effort to improve solution adoption and optimization, enhance data-driven performance, and drive nursing and pharmacy efficiency. For the operating room, we also offer specialized automated dispensing systems. Our interoperability solutions enable integration of our automated dispensing systems with key electronic health record systems to streamline workflow and increase accuracy. Our XT Amplify program is intended as a way for health systems to continue to introduce innovation even when challenged economically or operationally. This multi-year innovation program is designed to maximize value for hospitals, health systems, and post-acute care facilities that have already invested in Omnicell’s XT Series automated dispensing system and are seeking to enhance the capabilities of these devices in an effort to improve clinical and operational outcomes even further. The solutions in the XT Amplify program aim to enhance the performance and security of existing XT Series systems, extend item-level storage and tracking to refrigerated medications, and improve the management of medical supplies in both XT supply cabinets and open shelf locations. One of the core components of XT Amplify program is XTExtend, a comprehensive console swap that is intended to provide a high level of security while enhancing the user experience. 7 Table of Contents Central Pharmacy and IV Compounding Our Central Pharmacy Dispensing Service combines advanced robotic technology, optimization software, and onsite and remote experts, which is intended to automate and optimize the most cumbersome aspects of the medication dispensing process. This comprehensive service is designed to help health systems enhance patient safety and improve dispensing accuracy, reduce medication dispensing errors and waste, and streamline workflows to enable pharmacy labor resources to focus on higher value tasks. The expansion of many health systems across broad geographic regions due to mergers and acquisitions activity and organic growth has created increased interest for many customers in the Centralized Services model for enterprise-wide medication distribution. This model seeks to help create a more scalable and standardized environment but can be costly and time consuming for a health system to implement on its own. Our Central Med Automation Service integrates advanced robotics and smart devices with innovative software and expert services in an effort to help health systems quickly establish and optimize a flexible and scalable Centralized Services Center that streamlines medication dispensing, reduces manual tasks, optimizes resource allocation, and standardizes processes throughout the health system. Our IV Compounding Service seeks to help health systems reduce outsourcing costs, minimize operating room drug waste, improve patient safety, and gain supply chain control by bringing IV compounding in-house. This solution combines advanced IV robotics, analytics tools, and onsite and remote experts in order to help optimize IV accuracy, sterility, and outcomes, while improving supply chain control. Specialty Pharmacy and 340B Our Specialty Pharmacy Services offering provides a turnkey solution designed to help health systems establish, manage, and optimize an entity-owned specialty pharmacy. This solution is delivered through a risk-share commercial model and is intended for health systems, federally qualified health centers, and provider groups to support onsite management of specialty pharmacy services, including payer contracting, staffing, licensing, and 340B program administration. This offering is designed to drive specialty growth and cost savings, improve access to limited distribution drugs, and increase physician utilization for targeted disease states. Inventory Optimization Our Inventory Optimization Service provides predictive and prescriptive analytics, robust benchmarking, workflow tools, and expert clinical resources to help pharmacy staff quickly pinpoint and address potential inventory issues and optimization opportunities. Our Inventory Optimization Service is designed to provide greater medication inventory visibility as well as reduce medication waste and expirations, stockouts, and shortages. Patient Engagement, Clinical and Financial Solutions 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 intended to elevate the patient-pharmacy experience and enhance financial performance. Our patient engagement solutions are designed to better educate, inform, and enrich patients’ lives through personalized interactive voice response, outbound communications, and mobile app offerings. We also enable digital delivery of medication information (medication guides, vaccine information sheets, and drug monographs) in an effort to unlock patient preferences, staff efficiency, and environmental value. Additionally, our clinical workflows help enable pharmacies to accelerate health and wellness in their community through targeted patient interventions, appointment scheduling, immunization, medication therapy management, medication synchronization, and Medicare plan comparisons. Furthermore, our financial workflows are designed to streamline payments, cashflow, and claims for durable medical equipment, vaccination, clinical care, and specialty drugs through medical billing and reconciliation solutions. These digitally enabled services provide data-driven intelligence to help optimize pharmacy operations, as well as patient adherence and outcomes. Medication Adherence Our medication adherence solutions, which include consumables and medication packaging systems, are designed to improve pharmacy operations and patient adherence to prescriptions. These solutions are used by institutional pharmacies serving long-term care and other non-acute healthcare facilities, as well as retail, community, and outpatient pharmacies. Our single-dose automation solutions allow customers to fill and label a variety of patient-specific, single-dose medication blister packages based on incoming prescriptions. Our fully automated and semi-automated filling equipment is designed specifically for institutional pharmacies with enough order volume to warrant automated packaging of medications. Our automated solutions interface with pharmacy information systems to obtain prescription information. 8 Table of Contents For multi-medication prescriptions, we offer software that guides users through the manual filling process to help streamline workflow with a goal of increased packaging accuracy. In addition, we also offer a wide range of medication blister card packaging and packaging supplies designed to enhance medication adherence in a variety of non-acute care settings. Professional, Technical, and Customer Success Services Our Professional Services offerings for health system pharmacies include technology installation, program management, customer education and training, change management services, and related offerings. We view our customers as partners in the pursuit of better health outcomes for patients and improved satisfaction for the clinicians who serve them. After Omnicell solutions are implemented, our Customer Success team provides support through remote and onsite experts who help customers fully adopt and optimize utilization of our solutions. Our technical services include post-installation support and maintenance via phone and/or web, on-site service, parts, and access to software upgrades. Product support is available through fixed-period service contracts and on a time-and-materials basis. Onsite service is provided by our field service team. Retail Pharmacy and Hospital Automation Outside the United States Additional products sold outside the United States include automated dispensing systems used in hospitals and retail pharmacies for handling the stocking and retrieval of boxed medications. For management of medical supplies, a specialized cabinet that uses radio frequency identification is also available, which is designed to improve picking and restocking workflows for nurses and surgeons. Advancing Our Solutions With more than 30 years of experience delivering medication management solutions, Omnicell believes combining robotics and smart devices, software workflows, expert services, and operational and optimization analytics will help deliver improved medication management outcomes. Software as a Service (“SaaS”) and Expert Services (formerly Advanced Services) include services such as Central Pharmacy Dispensing Service, IV Compounding Service, Points of Care Service, EnlivenHealth solutions, Specialty Pharmacy Services, 340B solutions, Inventory Optimization Service, and other software solutions and licensing support. Because thousands of facilities utilize our services and solutions, we believe we can provide actionable insights to help customers better understand their medication usage and improve pharmacy supply chain management. We offer specialized services and analytics software designed to help healthcare facilities improve their bottom line and patient care by harnessing data from automation and other systems. Operating Segments We manage our operations as a single segment for the purposes of assessing performance and making operating decisions. Our Chief Operating Decision Maker (“CODM”) is our Chief Executive Officer. The CODM allocates resources and evaluates the performance of Omnicell at the consolidated level using our consolidated net income. In addition, the CODM is provided with certain segment assets, primarily those that impact liquidity, as well as certain significant expenses. All significant operating decisions are based upon an analysis of Omnicell as one operating segment, which is the same as our reporting segment. Industry Background and Market We believe our solutions support the industry-defined vision of the Autonomous Pharmacy, are strongly aligned with trends in the healthcare market, and are well-positioned to address the evolving needs of healthcare institutions. The healthcare industry continues to experience a significant degree of consolidation, with healthcare providers combining to create larger healthcare delivery organizations. We believe this trend has increased the market’s need for integrated medication management solutions on a unified platform to help improve clinical and financial outcomes for both inpatient and outpatient settings. Our portfolio of robotics and smart devices; software workflows; expert services; and operational and optimization analytics, combined with innovation, is designed with this objective in mind. In addition, healthcare providers and facilities continue to be affected by significant economic and other pressures. Annual prescription drug expenditures in the United States were approximately $723 billion in 2023, according to the IQVIA National Sales Perspective database. Based on a 2022 report by the Health Care Cost Institute, the rise in prescription drug spending accounted for 39% of the total increase in annual spending per person from 2018 to 2022. In addition, the second largest growth in spending for professional services—defined as payments to physicians and other clinical care team members for services provided in physician offices and hospitals—occurred among administered drugs, which accounted for 21% of the total net cumulative increase in professional services spending from 2018 to 2022. While the cumulative growth in the average 9 Table of Contents price of professional services was 7% between 2018 and 2022, the average prices of physician-administered drugs grew the most at 47%. Rising costs of labor, prescription drugs, and new medical technology all contribute to increased spending. Governmental pressures surrounding healthcare reform and compliance have led to increased scrutiny of the cost and efficiency with which healthcare providers deliver their services. These factors, combined with continuing consolidation in the healthcare industry, have increased the need for the efficient delivery of healthcare in order to control costs and elevated the strategic importance of medication management and pharmacy automation across the continuum of care. Furthermore, while complexities in medication management have increased over time along with the volume of patients and medications, many manual processes are still used, resulting in inefficient tracking and delivery of medications and supplies and increased administrative burden on many clinical staff. According to a survey conducted by the American Society of Health-System Pharmacists in 2023, approximately 73% of pharmacist activities are non-clinical in nature. In addition, many existing healthcare information systems are unable to support the modernization of healthcare delivery processes or address mandated patient safety initiatives. These factors contribute to medical errors and unnecessary process costs across the healthcare sector including in medication management. Regulation and industry guidelines, such as those issued by the U.S. Food and Drug Administration (“FDA”), the U.S. Drug Enforcement Administration (“DEA”), The Joint Commission (an organization that accredits U.S. health care organizations and programs), the U.S. Pharmacopeial Convention, the Institute for Safe Medication Practices, and state boards of pharmacy in the areas of medication management—including storage, security, and labeling—have created an environment of increased patient safety, awareness, and regulatory control. Against this backdrop, healthcare organizations, desiring to improve quality and avoid liability, are driven to prioritize investments in capital equipment, including pharmacy automation, which is a standard of care, to improve patient safety. While the overall storage and security of medications in hospitals have improved, there has been an increased focus on controlled substance management in recent years, particularly in light of the opioid crisis in the United States. HealthcareDiversion.org estimates that roughly 10% of all healthcare workers are anticipated to steal opioids and other substances from patients and hospitals at some point in their career. Joint Commission surveyors are seeking more documentation from hospitals demonstrating that their medication policies and procedures are adequate to prevent illicit use of controlled substances. Medication non-adherence is widely recognized as a common and costly problem. Poor adherence results in increased hospital readmissions, deteriorated treatment outcomes, and avoidable healthcare costs. The estimated annual cost of prescription-drug related morbidity and mortality resulting from non-optimized medication therapy, including medication non-adherence, was $528 billion in 2016, according to a study published in the Annals of Pharmacotherapy in 2018. In addition, a 2017 study published in the Journal of the American Pharmacists Association found that medication issues are responsible for 26% of hospital readmissions. With approximately 74 million Americans taking five or more medications routinely (based on statistics published by the Center for Health Care Strategies and the U.S. Census Bureau in 2019), we believe pharmacists need ways to support the arduous task of maintaining patient compliance. Medication adherence can be improved through attitudinal and behavioral changes, which pharmacists can encourage and help facilitate by providing interventional support, including adherence tools such as blister cards, reminders, prescription synchronization, and patient engagement tools. We believe our EnlivenHealth portfolio has the potential to reduce admissions and emergency department visits and improve patient health by increasing medication adherence. The 2023 American College of Healthcare Executives survey of hospital CEOs found that workforce challenges were their top concern, with 86% of survey respondents mentioning shortages of nurses and 87% citing shortages of technicians. While the nurse workforce rebounded after the pandemic, concerns of a nursing shortage remain as the workforce ages and a significant segment nears retirement age. According to Health Resources & Services Administration (HRSA) health workforce projections, demand for registered nurses in 2036 is expected to exceed supply by 9%, indicating a potentially significant shortage of nurses in the coming years. In addition, the shortage of pharmacy technicians, who are critical to clinical care in inpatient, outpatient and retail settings, is also acute. A nationwide survey conducted in February 2024 by the National Community Pharmacists Association found that 67% of the survey’s 385 independent pharmacy owner/manager respondents said they were having a difficult time filling open staff positions. Pharmacy technicians continue to be in the highest demand, with over 75% of respondents indicating that technician positions were difficult to fill. In addition, a 2022 survey by the American Society of Health-System Pharmacists found that over 90% of hospitals faced shortages of experienced pharmacy technicians, with 64% using pharmacists to perform technician activities. A 2023 survey by the American Society of Health-System Pharmacists found continued challenges with the pharmacy technician workforce, with a turnover rate of 25%. Omnicell’s medication management infrastructure—incorporating technologies such as robotics and smart devices, software workflows, expert services and operational and optimization analytics—is designed to automate many labor-intensive medication management tasks. We believe this will help healthcare providers optimize the use of existing pharmacy staff, which is expected to free up clinicians’ time for higher-value, patient-engaging activities, such as medication therapy management, immunizations, point-of-care testing, and disease state management. 10 Table of Contents Government Regulation Our global operations may be affected by a variety of complex state, federal, and international laws and regulations. These laws and regulations relate to healthcare (including medical devices and pharmaceuticals), privacy, data protection and information security, compliance, import and export, trade, healthcare fraud, waste and abuse (including anti-kickback and false claims laws), environmental standards, anti-corruption, anti-bribery, labor and employment, as well as other areas of focus. Privacy and Security We receive, store, and process personal information and other data from our customers, employees, and service providers. Our customers also use our products or services to obtain and store their personal information, including protected health information (as defined by the Health Information Portability and Accountability Act of 1996 and its implementing regulations, collectively “HIPAA”), from their patients and customers and sometimes personal information of their employees. As a result, we and our customers are subject to various laws and regulations related to privacy, data protection, and information security. In the United States, these include federal health information privacy and security laws (such as HIPAA), various state and federal privacy and security breach notification laws, consumer protection laws, and individual state laws addressing privacy and security of personal and health information. Internationally, various foreign jurisdictions in which we operate, including the European Union (the “EU”), have established, or are developing, their own data privacy and security legal frameworks with which we or our customers are subject to including, for example, the United Kingdom’s Data Protection Act 2018 (being the UK’s implementation of the General Data Protection Regulation), and the EU’s General Data Protection Regulation (the “GDPR”). The GDPR imposes accountability and transparency requirements, data protection requirements, reporting obligations, and transfer restrictions. Artificial Intelligence 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 and our customer’s business and regulatory compliance strategies. For example, AI regulation and 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. In the U.S., in the 2024 legislative session, at least 45 states, Puerto Rico, and the Virgin Islands, introduced AI bills, and 31 states, Puerto Rico and the Virgin Islands adopted resolutions or enacted legislation impacting AI. In the EU, a number of new laws related to digital data and AI have recently entered into force or have been proposed. For example, on December 8, 2023, EU legislators reached agreement on the AI Act, which imposes regulatory requirements onto AI system providers, importers, distributors, and users of AI systems, in accordance with the level of risk involved with the AI system. The UK has not adopted formal legislation to regulate AI but has adopted guidelines in the form of a White Paper. Product Development, Manufacture and Sales In the United States, the U.S. Food and Drug Administration (“FDA”) regulates medical devices, pharmaceutical and biological products under the Federal Food, Drug, and Cosmetic Act (“FD&C Act”), the Public Health Service Act (“PHSA”), and their respective implementing regulations. Medical devices, pharmaceuticals and certain products are subject to rigorous regulation by the FDA, federal, state and local statutes and regulations, including regulation by the U.S. Drug Enforcement Administration (“DEA”) and other governmental agency regulations in the United States and in foreign countries. Noncompliance with applicable requirements can result in import detentions, fines, civil monetary penalties, injunctions, suspensions or losses of regulatory approvals or licenses, recall or seizure of products, operating restrictions, denial of export applications, governmental prohibitions on entering into supply contracts, and criminal prosecution. Certain of our products and solutions are regulated by the FDA and require 510(k) clearance prior to commercialization and marketing. The manufacture and sale of most of our current medication management solutions are not regulated by the FDA or the DEA. However, the pharmacy, dispensing, and compounding activities of other persons (our customers) that use our current medication management solutions may be subject to regulation by those agencies and by individual state boards of pharmacy. With respect to our products and solutions, we manufacture and develop specifications for products classified as Class I and Class II medical devices, which are subject to FDA regulation and require compliance with certain FDA regulations and requirements, including the FDA Quality System Regulation as well as FDA regulations for medical device reporting. We also offer a sterile consumable product that required FDA 510(k) review and clearance prior to marketing and distribution. Products designated as medical devices are also subject to various other regulatory requirements, including as applicable, FDA premarket clearance or approval; establishment registration and device listing; complaint handling; notification and repair, replace, refund; mandatory recalls; unique device identifier requirements; reports of removals and corrections; cybersecurity requirements; and post-marketing surveillance. Similarly, certain provisions of the FD&C Act govern the approval, manufacture, handling, distribution, and tracking and tracing of pharmaceuticals. The FD&C Act also regulates which medications may be compounded, and how certain 11 Table of Contents compounded medications may be manufactured, distributed, and dispensed. Companies engaged in distributing or dispensing compounded pharmaceuticals may be subject to a number of requirements enforced by the FDA or other U.S. regulatory agencies. These requirements may include compliance with United States Pharmacopoeia (“USP”) and National Formulary standards, certificates of analysis, facility registration, and compliance with current good manufacturing practice (“cGMP”). Furthermore, our customers may also be subject to other laws, rules, or regulations that apply to dispensers and licensing and other requirements under laws governing, and regulations promulgated by, state boards of pharmacy, including those, as applicable, that apply to compounding facilities. Additionally, our services and solutions may also be subject to DEA regulations, and applicable state regulations (including states boards of pharmacy), concerning the management, storing, dispensing, and disposal of, and accounting for, controlled substances. Credentialing and Reimbursement We also provide services and solutions to independent and health system specialty pharmacies that may require us to observe U.S. Department of Health and Human Services (“DHHS”) regulations for credentialing of providers (pharmacists). In the United States we are neither enrolled in nor participate under Medicare or any state Medicaid program, and do not submit claims on our behalf to Medicare, Medicaid, or other government or commercial third-party payers for reimbursement. Healthcare Regulations Our current and future arrangements with healthcare professionals, consultants, customers and third-party payors expose us to broadly applicable healthcare regulation and enforcement by the U.S. federal government and the states and foreign governments in which we conduct our business, such as fraud and abuse, and transparency and health information privacy rules and regulations. The most common healthcare laws and regulations that may impact our or our customers’ operations include but are not limited to: • The federal Anti-Kickback Statute, a criminal law which prohibits, among other things, knowingly and willfully soliciting, receiving, offering, or paying any “remuneration” (including any kickback or bribe), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order, arranging for, or recommending the purchase, lease, or order of any item or service for which payment may be made, in whole or in part, under federal healthcare programs (like Medicare or Medicaid). A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. A conviction for violation of the federal Anti-Kickback Statute can result in criminal fines and/or imprisonment and requires mandatory exclusion from participation in federal healthcare programs. Exclusion from the federal healthcare programs may also be imposed if the government determines that an entity has committed acts that are prohibited by the federal Anti-Kickback Statute. Although there are a number of statutory exceptions and regulatory safe harbors to the federal Anti-Kickback Statute protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration to those who prescribe, purchase, or recommend pharmaceutical and biological products, may be subject to scrutiny if they do not fit squarely within an exception or safe harbor. Our or our customers’ practices may not in all cases meet all of the criteria for safe harbor protection from Anti-Kickback Statute liability. • Federal civil and criminal false claims laws, including the civil False Claims Act (“FCA”), which prohibits, among other things: (i) knowingly presenting, or causing to be presented, claims for payment of government funds that are false or fraudulent; (ii) knowingly making, or using or causing to be made or used, a false record or statement material to a false or fraudulent claim; (iii) knowingly making, using or causing to made or used a false record or statement material to an obligation to pay money to the government; or (iv) knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. Under the FCA it is illegal to submit claims for payment to Medicare or Medicaid that an individual knows or should know are false or fraudulent; no specific intent to defraud is required. The civil FCA defines "knowing" to include not only actual knowledge but also instances in which the person acted in deliberate ignorance or reckless disregard of the truth or falsity of the information. Filing false claims may result in fines of up to three times the programs' loss plus $11,000 per claim filed. Under the civil FCA, each instance of an item or a service billed to Medicare or Medicaid counts as a claim. The fact that a claim results from a kickback or is made in violation of the Stark Law (as defined herein) also may render it false or fraudulent, creating liability under the civil FCA as well as the Anti-Kickback Statute or Stark Law. Private individuals, commonly known as “whistleblowers,” can bring FCA qui tam actions, on behalf of the government and may share in amounts paid by the entity to the government in recovery or settlement. In addition, as noted above, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute 12 Table of Contents constitutes a false or fraudulent claim for purposes of the FCA. Moreover, entities can be held liable under the FCA even when they do not submit claims directly to government payers if they are deemed to “cause” the submission of false or fraudulent claims. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and significant mandatory penalties per false or fraudulent claim or statement for violations. Such per-claim penalties are currently set at $13,508 to $27,018 per false claim or statement for penalties assessed after January 30, 2023, with respect to violations occurring after November 2, 2015. Under the criminal FCA penalties for submitting false claims include imprisonment and criminal fines; the OIG also may impose administrative civil monetary penalties for false or fraudulent claims. • HIPAA imposes criminal liability and civil monetary penalties for executing a scheme to defraud any health care benefit program or making false statements relating to health care matters. HIPAA, which, among other things, prohibits knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payers, and prohibits (i) knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false, fictitious, or fraudulent statement or representation and (ii) making or using any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items, or services. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating the HIPAA fraud provisions without actual knowledge of the statute or specific intent to violate it. In addition to the fraud and abuse considerations, in relation to the HIPAA Security Rule, the DHHS, in January 2025, issued a Notice of Proposed Rulemaking (“Proposed Rule”) aiming to strengthen cybersecurity protections and better defend against cyber threats targeting the U.S. health care system. The Proposed Rule attempts to strengthen the requirements of the HIPAA Security Rule by clarifying and revising definitions and removing the distinction between “required” and “addressable” implementation specifications. The Proposed Rule adds new implementation requirements to better help ensure that HIPAA-regulated entities implement compliance activities consistent with industry standard best practices, such as the NIST Cybersecurity Framework. Regulated entities would be required to document, in writing, all HIPAA Security Rule policies and procedures. At this point, the future of the Proposed Rule is unclear, as the newly elected U.S. administration will likely determine whether to move forward with the rulemaking process. • The Federal Civil Monetary Penalties Law, which authorizes the imposition of substantial civil monetary penalties against an entity that engages in activities including, among others (i) knowingly presenting, or causing to be presented, a claim for services not provided as claimed or that is otherwise false or fraudulent in any way; (ii) arranging for or contracting with an individual or entity that is excluded from participation in federal healthcare programs to provide items or services reimbursable by a federal healthcare program; (iii) violations of the federal Anti-Kickback Statute; or (iv) failing to report and return a known overpayment. The Office of Inspector General (“OIG”) of the DHHS may seek civil monetary penalties and sometimes exclusion for a wide variety of conduct and is authorized to seek different amounts of penalties and assessments based on the type of violation at issue. Penalties range from $10,000 to $50,000 per violation. • Many U.S. states have laws and regulations analogous to Federal fraud and abuse laws, such as individual state anti-kickback, fee-splitting and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers. • Various Federal laws, regulations, and agency issued guidance documents govern communications and marketing, including to Medicare enrollees, and establish limits on (or prohibit) compensation paid for lead generation activities, including the Centers for Medicare and Medicaid Services (“CMS”) Medicare Communications and Marketing Guidelines (“MCMG”). The OIG has issued fraud alerts addressing commission based sales agent arrangements, highlighting fraud and abuse concerns in relation to same. • The Health Resources & Services Administration’s 340B Program requires pharmaceutical manufacturers participating in Medicaid to sell covered outpatient drugs at discounted prices to specified health care organizations (called 340B covered entities), including, but not limited to: sole community hospitals, critical access hospitals, rural referral centers, and certain disproportionate share hospitals serving low-income and indigent patients. These 340B covered entities are responsible for certain statutory obligations, such as a prohibition on duplicate discounts and on diversion, and are required to have certain policies and records regarding their compliance with the 340B Program. 340B covered entities may be audited with respect to their 340B Program compliance. • The Physician Self-Referral Law, commonly referred to as the “Stark Law,” prohibits the submission, or causing the submission, of claims in violation of the law's restrictions on referrals. The Stark Law prohibits a physician from referring Medicare patients to an entity (including pharmacies) for the furnishing of “designated health services,” if the 13 Table of Contents physician or a member of the physician’s immediate family has a direct or indirect “financial relationship” with the entity, unless a specific exception applies. Financial relationships include both ownership/investment interests and compensation arrangements. The law further prohibits the entity from billing for any services that arise out of such prohibited referrals. Certain of these provisions are applicable to the referral of Medicaid patients as well. Designated health services include outpatient prescription drug services; clinical laboratory services; physical therapy, occupational therapy, and outpatient speech-language pathology services; radiology and certain other imaging services; radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment, and supplies; prosthetics, orthotics, and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services . The Stark Law is a strict liability statute thus the prohibition applies regardless of the rationale for the financial relationship and the reason for ordering the service. Therefore, intent to commit an illegal act is not required in order for the government to prove a violation of the Stark Law. Additionally, some states have enacted statutes and regulations similar to the Stark Law, but which may be applicable to the referral of patients regardless of their payer source and which may apply to different types of services. These state laws may contain statutory and regulatory exceptions that are different from those of the federal law and that may vary from state to state. • Per the Exclusion Statute the OIG is legally required to exclude from participation in all Federal health care programs individuals and entities convicted of certain types of criminal offenses, including felony convictions for other health-care-related fraud, theft, or other financial misconduct. If a person or entity is excluded by OIG from participation in the Federal health care programs, then Medicare, Medicaid, and other Federal health care programs, such as TRICARE and the Veterans Health Administration, will not pay for items or services that are furnished, ordered, or prescribed. • The Physician Payments Sunshine Act, as known as “Open Payments”, is a national disclosure program created by the Affordable Care Act that increases transparency into financial relationships between the health care industry and physicians or teaching hospitals. Certain manufacturers of drugs, devices, biologics and medical supplies, among others, are required to report annually to CMS information related to payments and other transfers of value made by that entity to U.S.-licensed physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, certified nurse midwives, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. The CMS collects data annually, and makes it publicly available and searchable online at openpaymentsdata.cms.gov. Individual states have their own “sunshine act reporting laws” which vary from state to state. • The U.S. Foreign Corrupt Practices Act or FCPA, and other anti-corruption laws and regulations (including the United Kingdom Bribery Act) pertaining to financial relationships and interactions with foreign government officials, which prohibit U.S. companies and their employees, officers, and representatives from paying, offering to pay, promising, or authorizing the payment of anything of value to any foreign government official (including, potentially, healthcare professionals in countries in which we may sell products), government staff member, political party, or political candidate to obtain or retain business or to otherwise seek favorable treatment. Some state laws require medical device and pharmaceutical companies to comply with industry voluntary compliance guidelines (such as the AdvaMed Code of Ethics and PhRMA Code), or the relevant compliance guidance promulgated by the federal government, in addition to requiring manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures to the extent that those laws impose requirements that are more stringent than the Physician Payments Sunshine Act. In addition, state and local laws may require the registration of sales representatives. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Violations of any of such laws, or any other governmental regulations that apply to us, may subject us to significant penalties, including, without limitation, civil, criminal and administrative penalties, judicial sanctions, which could include, among other actions, refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, damages, fines, restitution, disgorgement, or other civil or criminal penalties, as well as additional reporting requirements and oversight if the company becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, the curtailment or restructuring of our operations, refusals of government contracts, exclusion from participation in federal and state healthcare programs (if we were so participating) and imprisonment, any of which could adversely affect our ability to operate our business. 14 Table of Contents Ex-U.S. Considerations Since we manufacture and sell our products outside of the United States, certain products of a local nature and variations of product lines must also meet the applicable national, provincial, state and local regulatory requirements of the applicable country (“ex-U.S. regulatory requirements”). Additional risks are inherent to conducting business outside the United States, including more robust information governance and environmental regulations in the European Union, expropriation, nationalization, and other governmental actions. Demand for many of our existing and new products is, and will continue to be, affected by the extent to which ex-U.S. regulatory requirements increase our risk and/or expense to do business in those countries. Compliance with the laws and regulations applicable to our global operations is costly and requires sufficient resources to actively maintain various governance, risk, and compliance systems in several areas to enable us to keep abreast of the constantly evolving legal and regulatory landscape both in the United States and abroad. These areas include, without limitation, FDCA and FDA, Controlled Substances Act and DEA regulations, individual state boards of pharmacy regulations, and laws and regulations regarding quality, privacy, information governance and security, and environmental, health and safety. We expect that there will continue to be U.S. federal and state laws and regulations and international laws and regulations that are adopted that could impact our operations and business. Any failure to comply with these laws and regulations could result in a range of fines, penalties, damages, individual imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, 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, and/or other sanctions. Recent Acquisition s In addition to our own organic development, we have, from time to time, acquired businesses and technologies that expand our product lines and are strategic fits for our business, and although no acquisitions were completed in 2023 or 2024, we expect to continue to seek to acquire businesses, technologies, or products in the future. Sales and Distribution We sell our products and services primarily in the United States. Approximately 91% of our revenue was generated in this market for the year ended December 31, 2024. Our sales force is organized by customer segment in the United States and Canada, with strategic and key account managers assigned to our top health systems; account executives, assigned to smaller health systems and healthcare facilities; and health system executives and solution experts focused on generating new business. Our sales in the United States and Canada are primarily made direct to end-user customers with the exception of some distribution of medication adherence consumables and automation in parts of Canada. Outside of the United States and Canada, we have direct sales employees in the United Kingdom, France, Germany, and Australia. For other geographies such as the Middle East, Asia, and Latin America, we sell through distributors. In addition, our international team handles direct sales, installation, and service for hospital healthcare facilities in the United Kingdom, Germany, and France, and for community pharmacies in the United Kingdom, Germany, and Australia. Sales, installation, and service to healthcare facilities are handled through distribution partners in other parts of Europe, Asia, Australia, the Middle East, and Latin America. Our products are available in a variety of languages including Traditional Chinese, Simplified Chinese, Croatian, Dutch, French, German, Japanese, Korean, Swedish, and Spanish. Our foreign operations are discussed in Note 3, Revenues, and Note 7, Property and Equipment , of the Notes to Consolidated Financial Statements and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of this Annual Report on Form 10-K. Our combined direct, corporate sales support, and international distribution sales teams consisted of approximately 460 staff members as of December 31, 2024. Nearly all of our direct sales team members have hospital capital equipment, services, or clinical systems experience. The sales cycle for our automation systems, from the initial sales meeting to completion of installation, can take in excess of 12 to 24 months. This is due in part to the cost of our systems and the number of people within each healthcare facility involved in the purchasing decision and installation process. To initiate the selling process, the sales representative generally contacts the chief financial officer, chief pharmacy officer, chief information officer, chief nursing officer, director of pharmacy, director of nursing, director of information technology, director of materials management, or other decision makers, and actively engages with each group within the healthcare facility about the economic, safety, efficiency, and compliance benefits of our solutions relative to competing methods of managing medications or medical and surgical supplies. In addition, particularly with respect to certain of our European customers, we also may discuss the environmental, social, governance, or sustainability aspects of our products or services. We contract with Group Purchasing Organizations (“GPOs”), each of which functions as a purchasing agent on behalf of member hospitals and other healthcare providers. Pursuant to the terms of GPO agreements, each member contracts directly with us and can purchase our products under pre-negotiated contract terms and pricing. These GPO contracts are typically for 15 Table of Contents multiple years with options to renew or extend for up to two years and some of which can be terminated by either party at any time. Our current most significant GPO contracts include Vizient, Inc., Premier Inc., HealthTrust Purchasing Group, and Advocate Health Supply Chain Alliance. We also have a Federal Supply Schedule contract with the Department of Veterans Affairs (the “GSA Contract”), allowing the Department of Veterans Affairs, the Department of Defense, and other federal government customers to purchase our products. The accounts receivable balances are with individual members of the GPOs and federal agencies that purchase under the GSA Contract, and therefore no significant concentration of credit risk exists. During our fiscal year ended December 31, 2024, sales to members of the ten largest GPOs and federal agencies that purchase under the GSA Contract accounted for approximately 65% of our total consolidated revenues. We offer multi-year, non-cancelable lease payment terms to assist healthcare organizations in purchasing our systems by reducing their cash flow requirements in a lease structure. We sell a portion of our multi-year lease receivables to third-party leasing finance companies. Our clinical and technical consulting team supports our sales force by working with our customers to identify potential solutions intended to help them achieve their desired outcomes. Our Professional Services team assists customers with the implementation of our solutions, including configuring our systems to address the specific needs of each individual customer. After the solutions are implemented, our Customer Success team provides remote and onsite experts who help our customers fully adopt and optimize utilization of our solutions in an effort to achieve their desired clinical and business outcomes. We offer telephone and web-based technical support and issue resolution through our U.S.-based technical support centers. Our support centers are staffed 24 hours a day, 365 days a year. We have found that a majority of our customers’ service issues can be addressed by our support engineers either by phone or with remote diagnostic tools. In addition, our customers can enable access to allow us to remotely monitor system performance of certain products. Where applicable, this suite of support tools is designed to proactively monitor certain system statuses and can alert service personnel to potential problems to preempt system failure and reduce unplanned downtime. Our field engineers deliver on-site services for hardware-related issues and are deployed to customer sites based on solution expertise and geographic proximity to customers. Additional support to our field services is provided by certified external partners as needed. Manufacturing and Inventory The manufacturing process for our automation products allows us to uniquely configure hardware and software to meet a wide variety of individual customer needs. The automation product manufacturing process consists primarily of the final assembly of components and testing of the completed product. Many of the sub-assemblies and components we use are provided by third-party contract manufacturers or other suppliers. The majority of these contract manufacturers and other suppliers are based in Asia and the U.S. We and our partners test these sub-assemblies and perform inspections to assure the quality and reliability of our products. While many components of our systems are standardized and available through multiple sources, certain components or subsystems are fabricated by a single supplier according to our specifications, schedules, and customer requirements, or are only available from limited sources. Our medication adherence product manufacturing process consists of fabrication and assembly of equipment and mechanized process manufacturing of consumables. We rely on a limited number of suppliers for the raw materials that are necessary in the production of our consumable medication packages. Our arrangements with contract manufacturers generally set forth quality, cost, and delivery requirements, as well as manufacturing process terms, such as continuity of supply, inventory management, capacity flexibility, quality and cost management, oversight of manufacturing, and conditions for the use of our intellectual property. Our operations organization procures components and schedules production based on the backlog of customer orders. Installation of equipment and software typically occurs anywhere between three weeks to 12 months after the initial order is received. Larger or more complex implementations such as software-enabled connected devices for Central Pharmacy, including, but not limited to, our Central Pharmacy Dispensing Service and IV Compounding Service, are often installed between 12 and 24 months after the initial order is received. We utilize our backlog to manage our installation, procurement, and production activities to help improve inventory turns, reduce inventory scrap, and manage shipping costs. Shipment of consumables typically occurs between one and four weeks after an order is received. Competition The markets in which we operate are intensely competitive. We compete directly with a number of companies in the medication management automation solutions market, as well as the medication adherence solutions market, on the basis of many factors, including price, quality, customer outcome, return on investment, cost of operation, innovation, product features and capabilities, installation and service, reputation and brand recognition, size of installed base, range of services and solutions, distribution, and promotion. We expect continued and increased competition from current and future competitors in the markets in which we operate, and are affected by evolving and new technologies, changes in industry standards (including standards of care), and dynamic customer requirements. 16 Table of Contents Furthermore, the healthcare industry has experienced a significant degree of consolidation. This consolidation may require us to adapt how we market, sell, or distribute our products. Similarly, healthcare providers have consolidated to create larger healthcare delivery organizations. As market demands, government regulations, and societal pressures continue to cause the healthcare industry to evolve, it could result in further business consolidations and alliances among the industry participants with whom we engage and compete. We believe our industry-leading medication management infrastructure products and services compare favorably with the offerings of our competitors, particularly with respect to the medication management outcomes that we have helped enable our customers to achieve across the continuum of care, from inpatient to outpatient, in each setting of care where medications are managed. We believe we have a strongly differentiated outcome-centric approach to medication management that combines robotics and smart devices, software workflows, expert services, and operational and optimization analytics. Intellectual Property and Proprietary Technology We rely on a combination of patents, trademarks, copyright and trade secret laws, confidentiality procedures, contractual restrictions, and licensing arrangements to protect our intellectual property rights. We pursue patent protection in the United States and foreign jurisdictions for technology that we believe to be proprietary and that may offer a potential competitive advantage for our products. Our issued patents expire on various dates between 2025 and 2043. We intend to seek and obtain additional United States and foreign patents on our technology. Our product software is generally subject to copyright protection under applicable United States and foreign copyright laws. We have also obtained United States and certain foreign registrations of various trademarks, and we intend to seek and obtain additional registrations of our trademarks in the United States and foreign jurisdictions. Trade secrets and other confidential information are also important to our business. We protect our trade secrets through a combination of contractual restrictions and confidentiality and licensing agreements. Research and Development Our research and development efforts start with collaborating with our customers. The insights we gain from this collaboration help us develop solutions that are designed to address the customer’s unmet needs and challenges. We continue to invest significantly in enhancing the value of our XT Series automated dispensing systems through both hardware and software upgrades. Additionally, we are making substantial investments to help our customers realize the industry-defined vision of the Autonomous Pharmacy. This includes focusing on our cloud-based platform and assisting customers in migrating from on-premise infrastructure to our cloud-based platform. We are also investing in further development of technology-enabled software and services, including enhancements to our SaaS and Expert Services offerings and building software designed to scale our current service offerings. Our robotic automation capabilities are also evolving as we work to enhance and develop new solutions. We have started the migration of our solutions to OmniSphere, our next generation, cloud native, software workflow engine and data platform. OmniSphere is designed to seamlessly integrate enterprise robotics and smart devices across the medication management continuum of care. The results of our research and development efforts are expected to drive the advancement of our cloud-based offerings and accelerate the realization of the industry-defined vision of the Autonomous Pharmacy. Business under Government Contracts A number of our U.S. government-owned or government-run hospital customers have signed five-year leases, with payment terms that are subject to one-year government budget funding cycles. Failure of any of our U.S. government customers to receive their annual funding could impair our ability to sell to these customers, or to collect payments on our existing unsold leases. Effective September 2021, the U.S. government mandated changes in its Federal Supply Schedule contract that resulted in our determination not to enter into future leases with U.S. government customers. Our existing leases with U.S. government customers are unaffected by this change. As such, our volume of U.S. government customer leases has declined over time and will likely cease in the future. In addition, under the terms of the Federal Supply Schedule contract, certain of our U.S. government customer contracts are terminable at the convenience of the applicable U.S. government customer. Furthermore, on January 20, 2025, President Donald J. Trump announced an executive order establishing the “Department of Government Efficiency” to reform federal government processes, maximize government efficiency and productivity and reduce government expenditures. As a result, there are uncertainties and pressures surrounding the U.S. federal government’s budget and budgetary priorities, as well as pressures on government expenditures. 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. For additional information regarding these leases, see the risk factor captioned “ Our U.S. government lease 17 Table of Contents 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 , ” under Item 1A “Risk Factors ”. In addition, certain of our state or other municipal-run hospital customers may also be subject to annual funding cycles or have contracts that are terminable at the convenience of the applicable state or other municipal-run hospital customer. Should any of these customers not receive their annual funding or decide to terminate their agreements early for any reason, we would not derive the expected financial benefits from any such customer. Financing Practices Relating to Working Capital We assist healthcare facilities in financing their purchases of our systems by offering multi-year, non-cancelable lease payment terms. We typically sell the majority of the multi-year lease receivables (other than those associated with our SaaS and Expert Services , as described further below) to third-party leasing finance companies, although our ability to sell these receivables may be influenced by the perception of our customers’ ability to pay, or other restrictions, which may be influenced by factors outside of our control. As part of our SaaS and Expert Services offering, we provide equipment and software at the inception of the contract period, which is accounted for as a multi-year sales-type lease. These agreements are generally multi-year and non-cancellable. We typically retain these lease receivables for such SaaS and Expert Services in-house and service them for the duration of the associated service term. For additional information regarding these financing activities, refer to Note 1, Organization and Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Backlog Backlog is the dollar amount of bookings that have not yet been recognized as revenue. Bookings for those SaaS and Expert Services contracts without a minimum commitment are not included in backlog. In addition, dependent upon counterparty or credit risk, which is evaluated at the time of contract signing, for a given multi-year subscription contract we may reduce the portion of the contractual commitment booked at a given time, and these excluded amounts are not included in backlog. A majority of our connected devices and software license products are installable and recognized as revenues within twelve months of booking, while service revenues from SaaS and Expert Services are recorded over the contractual term. Larger or more complex implementations such as software-enabled connected devices for Central Pharmacy, including, but not limited to, our Central Pharmacy Dispensing Service and IV Compounding Service, are often installed and recognized as revenue between 12 and 24 months after booking. We consider backlog that is expected to be converted to revenues in more than twelve months to be long-term backlog. We believe a majority of long-term product backlog will be convertible into revenues in 12 to 24 months. Long-term SaaS and Expert Services backlog typically represents multi-year subscription agreements (usually with contractual terms of two to seven years, some of which have not yet been implemented) that will be converted to revenue over the contractual term. Due to industry practice that allows customers to change order configurations with limited advance notice prior to shipment and as customer installation schedules may change, backlog as of any particular date may not necessarily indicate the timing of future revenue. However, we do believe that backlog is an indication of a customer’s willingness to install our solutions and revenue we expect to generate over time. Going forward, we will no longer be reporting SaaS and Expert Services backlog information, as these revenue streams will be captured by the new Annual Recurring Revenue (“ARR”) metric, which we will begin utilizing as a key performance metric for our business, and is described in further detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations under the heading “Our Business – 2025 Product Bookings and Annual 18 Table of Contents Recurring Revenue – Annual Recurring Revenue.” The chart below summarizes our total backlog under the definition of bookings in use through 2024: December 31, 2024 2023 (In thousands) Total backlog $ 1,201,296 $ 1,142,686 By type: Product backlog $ 646,508 $ 610,832 SaaS and Expert Services backlog (1) 554,788 531,854 By duration and type: Short-term product backlog $ 447,412 $ 377,936 Long-term product backlog 199,096 232,896 Short-term SaaS and Expert Services backlog (1) $ 93,113 $ 72,455 Long-term SaaS and Expert Services backlog (1) 461,675 459,399 _________________________________________________ (1) Includes only the value of SaaS and Expert Services non-cancelable contracts with minimum commitments. Starting in 2025, we will utilize product bookings as a key performance metric for our business. The new product bookings metric is described in greater detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations under the heading “Our Business – 2025 Product Bookings and Annual Recurring Revenue – Product Bookings.” For comparative purposes, the table below summarizes our backlog as of December 31, 2024 under the new definition of product bookings that we will utilize to determine product backlog going forward beginning in 2025: December 31, 2024 (In thousands) Total product backlog (1) $ 646,440 By duration: Short-term product backlog $ 447,344 Long-term product backlog 199,096 _________________________________________________ (1) Product backlog is the dollar amount of product bookings that have not yet been recognized as revenue. A majority of our connected devices and software license products are installable and recognized as revenues within twelve months of booking. Larger or more complex implementations such as software-enabled connected devices for Central Pharmacy, including, but not limited to, our Central Pharmacy Dispensing Service and IV Compounding Service, are often installed and recognized as revenue between 12 and 24 months after booking. Due to industry practice that allows customers to change order configurations with limited advance notice prior to shipment and as customer installation schedules may change, backlog as of any particular date may not necessarily indicate the timing of future revenue. However, we do believe that backlog is an indication of a customer’s willingness to install our solutions and revenue we expect to generate over time. We consider backlog that is expected to be converted to revenues in more than twelve months to be long-term backlog. We believe a majority of long-term product backlog will be convertible into revenues in 12-24 months. Environmental, Social, and Governance (“ESG”) Initiatives We view Omnicell as a purpose-driven company with a social mission: Our goal of transforming pharmacy care through outcomes-centric innovation is designed to optimize clinical and business outcomes across all settings of care. Our teams are motivated by knowing that our work to improve medication management across the continuum of care has a tangible, real-world impact on healthcare workers, patients, and communities. We recognize that we are accountable not only to our customers and stockholders, but also to the global community. In April 2024, we published our 2023 ESG Report, which highlights our approach to being responsible corporate citizens and describes and updates our contributions and work towards achieving a more sustainable future. We adhere to internationally-recognized Organisation for Economic Co-operation and Development guidance for the responsible sourcing of raw materials and continually work to enhance the sustainability attributes of our products and improve the sustainability of our designs. In 19 Table of Contents addition, we seek to ensure access to high-quality, equitable, and integrated care for all patients worldwide. Furthermore, we are focused on creating a culture of care, engagement, and well-being for all of our employees. There continues to be evolving and increasing expectations from regulators, customers, investors, and employees with respect to reducing and limiting greenhouse gas emissions and a focus on matters relating to ESG activities, which requires deliberate, conscientious efforts to effect change. We are carefully studying ways we can contribute to realize a 1.5° Celsius future by 2030, reduce waste in our product design and manufacturing processes and develop product end-of-life solutions, as well as enhance our social and governance initiatives, taking cues from our internal and external stakeholders, internal assessments, and direction from the Corporate Governance Committee of Omnicell’s Board of Directors. As an organization, we have adopted a risk-management approach using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework to assess and reduce the impact of climate change on our business strategy and operations. We continually seek to innovate and improve our business practices as we strive to build “A Better Way.” More information on our ESG initiatives and a copy of our 2023 ESG Report are available on our corporate website, www.omnicell.com, under the “Company ESG” tab. We are not including the information contained on, or that can be accessed through, this website as part of, or incorporating it by reference into, this Annual Report on Form 10-K. Human Capital Management As of December 31, 2024, we had approximately 3,670 employees worldwide (with approximately 3,100 located in either the United States or Canada), excluding individuals who are classified as temporary or contractors. We administer an annual employee engagement survey (“OmniVoices Engagement Survey”) using an external third-party platform. The overall purpose of the survey is to gain employee feedback and take action on the feedback in order to continue Omnicell’s journey of building a Culture of Care. For 2024, we achieved an overall employee satisfaction score of 73. We believe that our ongoing investment in strengthening Omnicell’s Culture of Care, Communication, Cross-collaboration, and Recognition programs, along with our commitment to acting on employee feedback, contributed to an increase of 5 points in our employee satisfaction score since the September 2023 survey (previously 68). To further embed our Culture of Care aspirations, the People Organization established a Culture Catalyst team, comprised of employees and leaders across the business. The purpose of this highly engaged group of employees was to lead the creation and execution of a series of culture sprints with employees, with the ultimate goal of defining Omnicell’s Culture of Care aspirations with a ground up approach. This led to the creation of a Culture Statement that resonates with more than 80% of Omnicell’s global employee base, across all levels, and serves as the north star of what makes us, uniquely us. In addition, this team, under the guidance of the People Organization leadership team, has tackled several barriers with solutions to ensure that all Omnicell employees are able to Walk the Talk to bring our Guiding Principles to life, established Ask Me Anything sessions to create two-way dialogue between leaders and employees, and to provide practical tools that will foster better collaboration and a One Team mindset. Compensation and Benefits • We embrace a strong pay-for-performance total rewards philosophy that we believe is competitive, performance-based, and cost-effective. We offer market-competitive pay and a comprehensive benefits package. • Our bonus program is designed to incentivize our employees to focus on work that will further the delivery of our annual priorities. • We offer reward and recognition programs that embed our guiding principles into our Culture of Care and everything we do, allowing for peer-to-peer recognition and motivating our employees to continually work to advance our promise, our purpose, and our guiding principles. • Our quarterly performance review process (Aspire) is designed to enable our talent to reach their optimum levels of contribution to Omnicell’s business strategies, facilitates regular employee feedback, and supports our pay-for-performance philosophy. Health and Wellness • We offer a comprehensive wellness program designed to promote a healthy lifestyle, including on-site gym facilities, lifestyle spending rewards, on-site bio-metric screening, and employee assistance/health coaching. In addition to making physical health a priority, we offer mental health counseling and resources, financial coaching, and Virtual Health services (i.e., video/telephone health services). 20 Table of Contents Employee Development • Our Organizational Development function plays a strategic role in helping us develop and retain talent through an array of developmental experiences for employees to enable them to reach their highest level of performance and potential at Omnicell. We strive to deliver consistent learning and career growth development opportunities and experiences across all roles, functions, and locations. Our engagement scores in employee growth opportunities and career path, both landing above industry benchmarks, as measured by the OmniVoices Engagement Survey platform, reflect our commitment to employee development. • Our approach to employee development is designed to enable our Enterprise Strategy by unleashing the potential of our people. In 2024, we continued core programs including 360 Development Cohorts for People Leaders, Career Development Workshops and Elevate Learning Library in Omnicell University for all employees and scaled the Lead Program to develop all People Leaders in strategic capabilities (Leadership Imperatives) intended to create an exceptional employee experience and workplace culture. To further embed a focus on continuous learning, we set up a working group comprised of training professionals across the organization to develop a common set of modern learning principles to create a more cohesive learning experience across all employee touchpoints. • In 2024, we built on the foundations of our THRIVE Senior Leadership Talent Review and Succession Process, which facilitates cross-functional identification of top talent, succession planning, and individual development planning. We utilized this process to enhance our leadership profile by assessing talent against the Leadership Imperatives and created Success Profiles for Senior Leadership roles. This is expected to lead to more accurate top talent identification and targeted successor development plans in an effort to accelerate readiness for critical roles. As a result of the process, the Senior Leadership team was able to have a holistic view of the talent landscape and create a Talent Action plan. • We continued to align our Leadership Development offerings to support our Talent Philosophy – Performance – Accountability – Transparency – Differentiation – Development. To this end, we implemented people leader enablement programs including Performance Mindset Training, Leader as Coach Workshop, and Executive level courses in Visual Storytelling and High Stakes Communication. To increase effectiveness, each program included practical tools that are accessible at the point of need, such as in OPTIC as part of the Aspire Performance Review process. Recruiting and Retention • We continue to expand the role of our talent acquisition team into the role of talent partner. Our goal is to deliver strategic counsel and insights that support business leaders in making informed decisions about workforce planning and development, ultimately driving organizational growth and innovation through the power of talent. This transformation goes beyond traditional recruitment, as we integrate ourselves deeply within the business framework. By partnering closely with different departments, we gain an in-depth understanding of their unique challenges and goals. This collaboration enhances our ability to not only align our talent acquisition strategies with Omnicell’s overarching business objectives, but also to proactively address future talent needs. Through these efforts, we have deployed a workforce strategy designed to identify and hire strategic talent for critical roles in key locations. Leveraging digital recruiting platforms, social media engagement, and university partnerships, we are not just expanding our employer brand, but also working to create a talent pipeline that is both diverse and attuned to the evolving dynamics of our industry. • Our commitment to a robust and thoughtful hiring process is unwavering. We understand that candidates are our customers, and we strive to provide them with a positive and engaging experience. By treating candidates with the same respect and attention as we do our customers, we build strong relationships and attract the right talent. • We have enhanced our recruiting efforts to enable faster and better decisions, save time for value-added work, improve ease of job posting, and more efficiently manage the talent acquisition experience. Diversity, Equity, Inclusion, and Belonging At Omnicell, our ongoing commitment is to foster a positive, supportive, inclusive, and diverse work environment across the entire Omnicell enterprise. We are building and cultivating a work environment that is welcoming and engaging for every employee regardless of age, religion, race, ethnic origin, gender identification, sexual orientation, veteran status, or disability. This commitment also extends to (i) our suppliers as we continue to pursue opportunities to partner with an array of different suppliers and small businesses; and (ii) our products and services as we seek to ensure they are inclusive and acceptable. In addition, we are dedicated to advocating for health access for all and striving to ensure fair and equal access to medication and comprehensive medication management support. 21 Table of Contents Available Information We file reports and other information with, and furnish reports and other information to, the United States Securities and Exchange Commission (“SEC”) including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and Proxy or Information Statements. Those reports and statements as well as all amendments to those documents filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available: (1) at the SEC’s Internet site (www.sec.gov) and (2) free of charge through our investor relations website, under the heading “Financials,” as soon as reasonably practicable after electronic filing with, or furnishing to, the SEC. Our website address is www.omnicell.com and our investor relations website is located at ir.omnicell.com. Information About Our Executive Officers The following table sets forth certain information about our executive officers as of the date of this Annual Report on Form 10-K: Name Age Position Randall A. Lipps 67 President, Chief Executive Officer, and Chairman of the Board of Directors Nchacha E. Etta 54 Executive Vice President and Chief Financial Officer Nnamdi Njoku 48 Executive Vice President and Chief Operating Officer Corey J. Manley 47 Executive Vice President and Chief Legal and Administrative Officer Randall A. Lipps was named Chief Executive Officer and President of Omnicell in October 2002. Mr. Lipps has served as Chairman of the Board and a Director of Omnicell since founding Omnicell in September 1992. Mr. Lipps received both a B.S. in economics and a B.B.A. from Southern Methodist University. Nchacha E. Etta joined Omnicell in June 2023 as Executive Vice President and Chief Financial Officer. Prior to joining Omnicell, Mr. Etta served as Senior Vice President and Chief Financial Officer of Essilor of America, Inc., a subsidiary of EssilorLuxottica SA, a global leader in ophthalmic medical devices and products, from May 2019 to March 2022. From June 2015 to May 2019, Mr. Etta served as Worldwide Vice President and Chief Financial Officer of Johnson & Johnson Vision, an operating company of Johnson & Johnson, a global healthcare company. From February 2006 to June 2015, Mr. Etta held senior finance roles at The Coca-Cola Company, a total beverage company. Prior to The Coca-Cola Company, Mr. Etta served in financial roles of increasing responsibility at Microsoft Corporation, Eli Lilly & Company, and the Carlyle Group. He started his career with Orano Cycle (previously Cogema) in Bethesda, MD. Mr. Etta received a B.S. in accounting from George Mason University and an MBA in finance from Howard University. Nnamdi Njoku joined Omnicell in October 2024 as Executive Vice President and Chief Operating Officer. Prior to joining Omnicell, Mr. Njoku served as President – Sports Medicine, Surgical, Upper Extremities and Restorative Therapies of Zimmer Biomet Holdings, Inc., a global medical technology leader, from March 2023 to September 2024. From April 2022 to March 2023, Mr. Njoku served as Senior Vice President & President – Neuromodulation at Medtronic, Inc., a subsidiary of Medtronic plc, a leading global healthcare technology company (“Medtronic”). Prior to that, he served as President – Mechanical Circulatory Support from August 2019 to March 2022, as Vice President & General Manager – Transformative Solutions from February 2018 to August 2019 and as Vice President, Surgical Synergy from September 2017 to October 2018 at Medtronic. From August 2005 to August 2017, Mr. Njoku held executive operational roles of increasing responsibility at Medtronic. Prior to Medtronic, Mr. Njoku served in operational roles of increasing responsibility at UnitedHealth Group and Deloitte Consulting. Mr. Njoku received a Bachelor of Arts degree in business administration from the University of St. Thomas and an MBA from Cornell University. Corey J. Manley joined Omnicell in April 2021 as Vice President and General Counsel. In May 2022, Mr. Manley was named Senior Vice President and Chief Legal Officer. Subsequently, in June 2023, Mr. Manley was named Executive Vice President and Chief Legal and Administrative Officer. Prior to joining Omnicell, he was Chief Legal Officer, Corporate Secretary, and Chief Compliance Officer with BFS Capital, Inc., a global fintech company, from April 2018 to April 2021. From August 2014 until April 2018, Mr. Manley was a partner in the law firm of Duane Morris LLP and prior to that he was a partner in the law firm of Kirkland & Ellis LLP from November 2009 until August 2014. Mr. Manley holds a J.D. from the University of Notre Dame Law School and a B.S. in mechanical engineering from Purdue University. 22 Table of Contents