OMNICELL INC
For the period ended Jun 30, 2024. Filed Aug 6, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 6, 2024
OMCL$37.34-1.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0000926326-24-000015
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000926326-24-000027
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 112 previous paragraphs and 119 current paragraphs.
81 unchanged; 25 reworded; 6 added; 4 removed; 2 previous and 7 current paragraphs rearranged.
Tables are not compared: 8 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
•our information technology systems or solutions susceptibility to disruptions, breaches, or cyber-attacks; and
Current report
Cost of revenues for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 decreased by $14.2 million, primarily driven by a $25.7 million decrease in cost of product revenues, partially offset by a $11.5 million increase in cost of service revenues.
Current report
The decrease in cost of product revenues was primarily driven by the decrease in product revenues of $84.3 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues for the six months ended June 30, 2024, primarily due to the decrease in revenues of higher margin products as well as the impact of certain fixed costs, such as labor and overhead. In addition, the decrease in cost of product revenues was partially offset by $5.4 million of inventory write-down charges related to the planned RDS product line wind down and an increase of $2.0 million of restructuring costs incurred during the six months ended June 30, 2024. The increase in cost of service revenues was primarily driven by the increase in service revenues of $17.6 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Current report
Provision for Income Taxes
Current report
For the six months ended June 30, 2024 and 2023, we recorded a provision for income taxes of $2.3 million and $2.6 million, respectively, by applying our estimated annual effective tax rate to our year-to-date measure of ordinary income and adjusted for $3.3 million and $2.7 million, respectively, of discrete income tax expense primarily from equity compensation. The change in the provision for income taxes for the six months ended June 30, 2024 compared to the provision for income taxes for the same period in 2023 was insignificant, comprising of various offsetting components of annual effective tax rate and discrete income tax expense.
Current report
Net cash provided by operating activities was $108.7 million for the six months ended June 30, 2024, primarily consisting of operating inflows of $52.4 million and favorable working capital movements of $56.3 million. Operating inflows consisted of a net loss of $11.9 million, adjusted for non-cash items of $64.3 million, which consisted primarily of depreciation and amortization expense of $42.1 million, share-based compensation expense of $18.7 million, and inventory write-down charges of $5.4 million. The favorable working capital was primarily due to an increase in deferred revenues of $22.1 million driven by an increase in billings, a decrease in inventories of $11.2 million resulting from inventory management initiatives, and a decrease in accounts receivable and unbilled receivables of $10.9 million driven by overall business activity and the timing of billings and collections.
Removed paragraphs (4)
Previous report
•our containment of the impacts of the ransomware incident we experienced in May 2022, and any further impacts on the Company, including its business, operating results, cash flow, or financial condition;
Previous report
Benefit from Income Taxes
Previous report
For the three months ended March 31, 2024 and 2023, we recorded a benefit from income taxes of $2.2 million and $6.2 million, respectively. The change in the benefit from income taxes for the three months ended March 31, 2024 compared to the benefit from income taxes for the same period in 2023 was primarily due to a decrease in research and development credits, foreign-derived intangible income deduction and benefit from state taxes.
Previous report
Net cash provided by operating activities was $50.0 million for the three months ended March 31, 2024, primarily consisting of a net loss of $15.7 million adjusted for non-cash items of $28.2 million and changes in assets and liabilities of $37.4 million. The non-cash items primarily consisted of depreciation and amortization expense of $21.3 million, share-based compensation expense of $8.6 million, amortization of operating lease right-of-use assets of $1.9 million, amortization of debt issuance costs of $1.0 million, and a change in deferred income taxes of $4.6 million. Changes in assets and liabilities include cash inflows primarily from (i) an increase in deferred revenues of $34.1 million primarily due to an increase in billings for certain technical service and Advanced Service offerings, (ii) a decrease in inventories of $6.3 million, primarily due to management of inventory levels to align with the current forecasted demand as well as inventory management efforts, (iii) an increase in accrued liabilities of $5.1 million, (iv) a decrease in accounts receivable and unbilled receivables of $3.4 million driven by overall business activity and the timing of billings, shipments, and collections, as well as the impacts of lower revenues, (v) a decrease in prepaid commissions of $2.2 million, (vi) a decrease in other current assets of $0.9 million, (vii) a decrease in other long-term assets of $0.8 million, and (viii) an increase in other long-term liabilities $0.8 million. These cash inflows were partially offset by (i) a decrease in accrued compensation of $10.3 million, primarily due to a decrease in the accrual for restructuring initiatives, as well as timing of payroll and ESPP purchases, (ii) a decrease in operating lease liabilities of $2.8 million, (iii) a decrease in accounts payables of $1.4 million, (iv) an increase in investment in sales-type leases of $1.1 million, and (v) an increase in prepaid expenses of $0.6 million.
Reworded paragraphs (25)
Previous wording
•our ability to generate cash from operations and our estimates regarding the sufficiency of our cash resources;
Current wording
•our ability to generate cash from operations, expected future uses of cash, and estimates regarding, and the sufficiency of, our sources of funding and cash resources.
Previous wording
Omnicell solutions are helping healthcare facilities worldwide to reduce costs, improve labor efficiency, establish new revenue streams, enhance supply chain control, support compliance, and move closer to the industry vision of the Autonomous Pharmacy. We sell our product and consumable solutions together with related service offerings. Revenues generated in the United States represented 89% and 88% of our total revenues for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Omnicell solutions are helping healthcare facilities worldwide to reduce costs, improve labor efficiency, establish new revenue streams, enhance supply chain control, support compliance, and move closer to the industry vision of the Autonomous Pharmacy. We sell our product and consumable solutions together with related service offerings. Revenues generated in the United States represented 92% and 86% of our total revenues for the three months ended June 30, 2024 and 2023, respectively, and 91% and 87% of our total revenues for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
We generally provide installation planning and consulting as part of most connected device product sales, which is typically included in the initial price of the solution. To help ensure the maximum availability of our systems, our customers typically purchase technical services contracts (maintenance and support) in increments of one to five years. In addition to connected device product sales, we provide a range of services to our customers. We also provide Advanced Services such as Central Pharmacy Dispensing Service (service portion), IV Compounding Service (service portion), EnlivenHealth, Specialty Pharmacy Services, 340B solutions, Inventory Optimization Service, and other software solutions, which typically are provided over 2-7 years.
Current wording
We generally provide installation planning and consulting as part of most connected device product sales, which is typically included in the initial price of the solution. To help ensure the maximum availability of our systems, our customers typically purchase technical services contracts (maintenance and support) in increments of one to five years. In addition to connected device product sales, we provide a range of services to our customers. We also provide Advanced Services such as Central Pharmacy Dispensing Service (service portion), IV Compounding Service (service portion), EnlivenHealth, Specialty Pharmacy Services, 340B solutions, Inventory Optimization Service, and other software solutions, which typically are provided over two to seven years.
Previous wording
Our full-time employee headcount was approximately 3,590 and 3,650 on March 31, 2024 and December 31, 2023, respectively.
Current wording
Our full-time employee headcount was approximately 3,630 and 3,650 on June 30, 2024 and December 31, 2023, respectively.
Previous wording
•Point 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. However, we recognize that the current macroeconomic environment, with significant labor constraints, may impact our customers’ considerations in the near term when they are determining whether to implement new workflows that may affect those same stressed labor pools. As we are largely through the replacement cycle of our previous generation of automated dispensing systems, we are seeing demand moderate. With the launch of next-generation enhancements and solutions for points of care, we believe we are providing a path for customers to maximize the value of their existing technology investments through upgrades and acquisitions of new program offerings for their current installed base. 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 within the Point of Care market and new innovation and services will continue to help customers drive improved clinical and financial outcomes.
Current wording
•Point 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. While the macroeconomic environment is showing some signs of improvement, we recognize that some health system customers may still be facing budgetary or labor constraints, which may impact our customers’ considerations in the near term when they are determining whether to implement new solutions and workflows. As we are largely through the replacement cycle of our previous generation of automated dispensing systems, we are seeing demand moderate. With the launch of next-generation enhancements and solutions for points of care, we believe we are providing a path for customers to maximize the value of their existing technology investments through upgrades and acquisitions of new program offerings for their current installed base. 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 within the Point of Care market and new innovation and services will continue to help customers drive improved clinical and financial outcomes.
Previous wording
There were no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the three months ended March 31, 2024 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
There were no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the six months ended June 30, 2024 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
Product revenues represented 54% and 64% of total revenues for the three months ended March 31, 2024 and 2023, respectively. Product revenues decreased by $52.4 million, primarily due to lower volumes from our automated dispensing systems business primarily as a result of the impact of a continued challenging environment for some of our health system customers and the timing of our XT Series systems lifecycle, as we are largely through the replacement cycle and seeing demand moderate.
Current wording
Product revenues represented 57% and 63% of total revenues for the three months ended June 30, 2024 and 2023, respectively. Product revenues decreased by $31.9 million, primarily due to lower volumes from our automated dispensing systems business primarily as a result of the impact of a continued challenging environment for some of our health system customers and the timing of our XT Series systems lifecycle, as we are largely through the replacement cycle.
Previous wording
Services and other revenues represented 46% and 36% of total revenues for the three months ended March 31, 2024 and 2023, respectively. Services and other revenues include revenues from technical services and Advanced Services offerings. Services and other revenues increased by $7.9 million, primarily due to an increase of $5.2 million in technical services revenues as a result of growth in our installed customer base as well as the impact of pricing actions and an increase of $2.8 million in Advanced Services revenues due to continued customer demand.
Current wording
Service revenues represented 43% and 37% of total revenues for the three months ended June 30, 2024 and 2023, respectively. Service revenues include revenues from technical services and Advanced Services offerings. Service revenues increased by $9.7 million, primarily due to an increase of $2.1 million in technical services revenues as a result of growth in our installed customer base and the impact of pricing actions, as well as an increase of $7.5 million in Advanced Services revenues due to continued customer demand.
Previous wording
Our international sales represented 11% and 12% of total revenues for the three months ended March 31, 2024 and 2023, respectively, and are expected to be affected by foreign currency exchange rate fluctuations. We are unable to predict the extent to which revenues in future periods will be impacted by changes in foreign currency exchange rates.
Current wording
Our international sales represented 8% and 14% of total revenues for the three months ended June 30, 2024 and 2023, respectively, and are expected to be affected by foreign currency exchange rate fluctuations. We are unable to predict the extent to which revenues in future periods will be impacted by changes in foreign currency exchange rates.
Previous wording
Cost of revenues for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 decreased by $12.1 million, primarily driven by a $17.1 million decrease in cost of product revenues, partially offset by a $5.0 million increase in cost of services and other revenues.
Current wording
Cost of revenues for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 decreased by $2.1 million, primarily driven by a $8.6 million decrease in cost of product revenues, partially offset by a $6.5 million increase in cost of service revenues.
Previous wording
The decrease in cost of product revenues was primarily driven by the decrease in product revenues of $52.4 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues for the three months ended March 31, 2024, primarily due to the decrease in revenues of higher margin products as well as the impact of certain fixed costs, such as labor and overhead. In addition, the decrease in cost of product revenues was partially offset by an increase of $2.6 million of restructuring costs incurred during the three months ended March 31, 2024. The increase in cost of services and other revenues was primarily driven by the increase in services and other revenues of $7.9 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Current wording
The decrease in cost of product revenues was primarily driven by the decrease in product revenues of $31.9 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues for the three months ended June 30, 2024, primarily due to the decrease in revenues of higher margin products as well as the impact of certain fixed costs, such as labor and overhead. In addition, the decrease in cost of product revenues was partially offset by $5.4 million of inventory write-down charges related to the planned RDS product line wind down incurred during the three months ended June 30, 2024. The increase in cost of service revenues was primarily driven by the increase in service revenues of $9.7 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.
Previous wording
The overall decrease in gross margin primarily relates to lower product revenues for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 whereas the decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues, primarily due to the decrease in revenues of higher margin products as well as the impact of certain fixed costs, such as labor and overhead. The decrease is partially offset by restructuring costs incurred during the three months ended March 31, 2024. Our gross profit for the three months ended March 31, 2024 was $92.6 million, as compared to $125.0 million for the three months ended March 31, 2023.
Current wording
The overall decrease in gross margin primarily relates to lower product revenues for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, whereas the decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues, primarily due to the decrease in revenues of higher margin products as well as the impact of certain fixed costs, such as labor and overhead. The decrease is partially offset by inventory write-down charges related to the planned RDS product line wind down incurred during the three months ended June 30, 2024. Our gross profit for the three months ended June 30, 2024 was $114.4 million, as compared to $134.4 million for the three months ended June 30, 2023.
Previous wording
Research and Development. Research and development expenses decreased by $0.8 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was primarily attributed to a decrease in employee-related expenses as a result of lower headcount.
Current wording
Research and Development. Research and development expenses decreased by $2.0 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily attributed to a decrease in employee-related expenses as a result of lower headcount.
Previous wording
Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by $2.2 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by a $2.9 million increase in other income and a $0.7 million increase in other expense. The increase in other income during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 is primarily attributable to higher interest income received due to higher interest rates and higher cash and cash equivalents balances.
Current wording
Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by $0.5 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily driven by a $0.8 million increase in other income and a $0.3 million increase in other expense. The increase in other income during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 is primarily attributable to higher interest income received due to higher interest rates and higher cash and cash equivalents balances.
Previous wording
Selling, General, and Administrative. Selling, general, and administrative expenses decreased by $32.7 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was primarily due to a decrease of $12.9 million in employee-related expenses as a result of lower headcount, a decrease of $8.4 million in impairment and abandonment charges of operating lease right-of-use and other assets in connection with restructuring activities of certain leased facilities, a decrease of $4.5 million in restructuring costs, a decrease of $3.8 million in consulting expenses, a decrease of $1.4 million in freight out, and a decrease of $1.1 million in commissions expenses.
Current wording
Selling, General, and Administrative. Selling, general, and administrative expenses decreased by $46.2 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was primarily due to a decrease of $22.6 million in employee-related expenses as a result of lower headcount, a decrease of $8.4 million in impairment and abandonment charges of operating lease right-of-use and other assets in connection with restructuring activities of certain leased facilities, a decrease of $5.0 million in restructuring costs, a decrease of $3.2 million in commissions expenses, and a decrease of $1.5 million in freight out.
Previous wording
We had cash and cash equivalents of $512.4 million at March 31, 2024 compared to $468.0 million at December 31, 2023. All of our cash and cash equivalents are invested in bank accounts and money market funds held in sweep and asset management accounts with financial institutions of high credit quality.
Current wording
We had cash and cash equivalents of $556.8 million at June 30, 2024 compared to $468.0 million at December 31, 2023. All of our cash and cash equivalents are invested in bank accounts and money market funds held in sweep and asset management accounts with financial institutions of high credit quality.
Previous wording
On November 15, 2019, we entered into an Amended and Restated Credit Agreement (as amended, the “Prior A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo Securities, LLC, Citizens Bank, N.A., and JPMorgan Chase Bank, N.A., as joint lead arrangers, and Wells Fargo Bank, National Association, as administrative agent. The Prior A&R Credit Agreement provided for (a) a five-year revolving credit facility of $500.0 million (the “Prior Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million (the “Prior Incremental Facility”). In addition, the Prior A&R Credit Agreement included a letter of credit sub-limit of up to $15.0 million and a swing line loan sub-limit of up to $25.0 million.
Current wording
On November 15, 2019, Omnicell, Inc. entered into an Amended and Restated Credit Agreement (as amended, the “Prior A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo Securities, LLC, Citizens Bank, N.A., and JPMorgan Chase Bank, N.A., as joint lead arrangers, and Wells Fargo Bank, National Association, as administrative agent. The Prior A&R Credit Agreement provided for (a) a five-year revolving credit facility of $500.0 million (the “Prior Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million (the “Prior Incremental Facility”). In addition, the Prior A&R Credit Agreement included a letter of credit sub-limit of up to $15.0 million and a swing line loan sub-limit of up to $25.0 million. The Prior A&R Credit Agreement was subsequently amended on September 22, 2020 and March 29, 2023 to permit the issuance of the convertible senior notes and the purchase of the convertible note hedge transactions (as described in Note 10, Convertible Senior Notes, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q), expand our flexibility to make restricted payments (including common stock repurchases), and replace the total net leverage covenant, as well as to remove and replace the interest rate benchmark based on the London interbank offered rate (“LIBOR”) and related LIBOR-based mechanics with an interest rate benchmark based on the secured overnight financing rate (“SOFR”) as administered by the Federal Reserve Bank of New York and related SOFR-based mechanics.
Previous wording
On October 10, 2023, we entered into a Second Amended and Restated Credit Agreement (the “Second A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A., PNC Capital Markets LLC and TD Securities (USA) LLC as joint lead arrangers and Wells Fargo Bank, National Association, as administrative agent. The Second A&R Credit Agreement supersedes the Prior A&R Credit Agreement and provides for (a) a five-year revolving credit facility of $350.0 million (the “Current Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to an amount equal to the sum of (i) the greater of $250.0 million and 100% of the adjusted consolidated EBITDA for the last four quarters and (ii) additional amounts subject to pro forma compliance with certain consolidated secured net leverage ratio (the “Current Incremental Facility”). In addition, the Second A&R Credit Agreement includes a letter of credit sub-limit of up to $15 million and a swing line loan sub-limit of up to $25 million. The Second A&R Credit Agreement has an expiration date of October 10, 2028, subject to acceleration under certain conditions, upon which date all remaining outstanding borrowings will be due and payable.
Current wording
On October 10, 2023, Omnicell, Inc. entered into a Second Amended and Restated Credit Agreement (the “Second A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A., PNC Capital Markets LLC and TD Securities (USA) LLC as joint lead arrangers and Wells Fargo Bank, National Association, as administrative agent. The Second A&R Credit Agreement supersedes the Prior A&R Credit Agreement and provides for (a) a five-year revolving credit facility of $350.0 million (the “Current Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to an amount equal to the sum of (i) the greater of $250.0 million and 100% of the adjusted consolidated EBITDA for the last four quarters and (ii) additional amounts subject to pro forma compliance with certain consolidated secured net leverage ratio (the “Current Incremental Facility”). In addition, the Second A&R Credit Agreement includes a letter of credit sub-limit of up to $15.0 million and a swing line loan sub-limit of up to $25.0 million. The Second A&R Credit Agreement has an expiration date of October 10, 2028, subject to acceleration under certain conditions, upon which date all remaining outstanding borrowings will be due and payable.
Previous wording
The 2016 Repurchase Program has a total of $2.7 million remaining for future repurchases as of March 31, 2024, which may result in additional use of cash. There were no stock repurchases during the three months ended March 31, 2024. Refer to “Stock Repurchase Programs” under Note 15, Employee Benefits and Share-Based Compensation, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.
Current wording
The 2016 Repurchase Program has a total of $2.7 million remaining for future repurchases as of June 30, 2024, which may result in additional use of cash. There were no stock repurchases during the six months ended June 30, 2024. Refer to “Stock Repurchase Programs” under Note 15, Employee Benefits and Share-Based Compensation, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.
Previous wording
Net cash provided by operating activities was $12.8 million for the three months ended March 31, 2023, primarily consisting of a net loss of $15.0 million and changes in assets and liabilities of $12.4 million, offset by non-cash items of $40.2 million. The non-cash items primarily consisted of depreciation and amortization expense of $22.0 million, share-based compensation expense of $14.0 million, amortization of operating lease right-of-use assets of $2.2 million, impairment and abandonment of operating lease right-of-use assets related to facilities of $7.8 million, amortization of debt issuance costs of $1.0 million, and a change in deferred income taxes of $7.8 million. Changes in assets and liabilities include cash outflows primarily from (i) a decrease in accrued compensation of $25.2 million, primarily due to a decrease in the accrual for restructuring initiatives, lower commissions, as well as timing of payroll and ESPP purchases, (ii) an increase in accounts receivable and unbilled receivables of $22.2 million, primarily due to the timing of billings, shipments and collections, and (iii) a decrease in operating lease liabilities of $2.7 million. These cash outflows were partially offset by (i) an increase in deferred revenues of $29.1 million, primarily due to an increase in billings for certain service and subscription offerings, (ii) a decrease in inventories of $6.8 million, primarily due to management of inventory levels to align with the current forecasted demand, and (iii) a decrease in prepaid commissions of $2.6 million.
Current wording
Net cash provided by operating activities was $85.7 million for the six months ended June 30, 2023, primarily consisting of operating inflows of $64.8 million and favorable working capital movements of $20.9 million. Operating inflows consisted of a net loss of $11.5 million, adjusted for non-cash items of $76.3 million, which consisted primarily of depreciation and amortization expense of $44.1 million, share-based compensation expense of $28.1 million, and impairment and abandonment charges on operating lease right-of-use assets of $7.8 million. The favorable working capital was primarily due to a decrease in accounts receivable and unbilled receivables of $26.5 million due to the timing of billings and collections, a decrease in inventories of $17.8 million resulting from inventory management initiatives, and an increase in deferred revenues of $16.5 million driven by increased billings. These cash inflows were partially offset by a decrease in accrued compensation of $21.0 million and a decrease in accounts payable of $15.8 million, due to an overall decrease in spending and the timing of payments.
Previous wording
Net cash used in investing activities was $12.3 million for the three months ended March 31, 2024, which consisted of capital expenditures of $9.0 million for property and equipment and $3.4 million for external-use software development costs.
Current wording
Net cash used in investing activities was $25.9 million for the six months ended June 30, 2024, which consisted of capital expenditures of $18.5 million for property and equipment and $7.4 million for external-use software development costs.
Previous wording
Net cash used in investing activities was $13.6 million for the three months ended March 31, 2023, which consisted of capital expenditures of $10.1 million for property and equipment, and $3.5 million for external-use software development costs.
Current wording
Net cash used in investing activities was $28.5 million for the six months ended June 30, 2023, which consisted of capital expenditures of $21.8 million for property and equipment, and $6.7 million for external-use software development costs.
Previous wording
Net cash provided by financing activities was $3.9 million for the three months ended March 31, 2023, primarily due to $12.1 million in proceeds from employee stock option exercises and ESPP purchases, partially offset by $1.4 million in employees’ taxes paid related to restricted stock unit vesting and a net change in the customer funds balances of $6.9 million.
Current wording
Net cash used in financing activities was $4.7 million for the six months ended June 30, 2024, primarily due to a net change in the customer funds balances of $11.6 million, partially offset by $8.1 million in proceeds from employee stock option exercises and ESPP purchases.
Previous wording
Net cash provided by financing activities was $11.9 million for the three months ended March 31, 2024, primarily due to $8.0 million in proceeds from employee stock option exercises and ESPP purchases and a net change in the customer funds balances of $4.6 million, partially offset by $0.7 million in employees’ taxes paid related to restricted stock unit vesting.
Current wording
Net cash provided by financing activities was $7.5 million for the six months ended June 30, 2023, primarily due to $15.2 million in proceeds from employee stock option exercises and ESPP purchases, partially offset by $3.5 million in employees’ taxes paid related to restricted stock unit vesting and a net change in the customer funds balances of $4.3 million.
Previous wording
There have been no significant changes during the three months ended March 31, 2024 to the contractual obligations disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” set forth in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
There have been no significant changes during the six months ended June 30, 2024 to the contractual obligations disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” set forth in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2023.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
Product revenues represented 55% and 63% of total revenues for the six months ended June 30, 2024 and 2023, respectively. Product revenues decreased by $84.3 million, due to lower volumes from our automated dispensing systems business primarily as a result of the impact of a continued challenging environment for some of our health system customers and the timing of our XT Series systems lifecycle, as we are largely through the replacement cycle.
Current report — wording carried from elsewhere
Service revenues represented 45% and 37% of total revenues for the six months ended June 30, 2024 and 2023, respectively. Service revenues include revenues from technical services and Advanced Services offerings. Service revenues increased by $17.6 million, primarily due to an increase of $7.3 million in technical services revenues as a result of growth in our installed customer base and the impact of pricing actions, as well as an increase of $10.3 million in Advanced Services revenues due to continued customer demand.
Current report — wording carried from elsewhere
Our international sales represented 9% and 13% of total revenues for the six months ended June 30, 2024 and 2023, respectively, and are expected to be affected by foreign currency exchange rate fluctuations. We are unable to predict the extent to which revenues in future periods will be impacted by changes in foreign currency exchange rates.
Current report — wording carried from elsewhere
The overall decrease in gross margin primarily relates to lower product revenues for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, whereas the decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues, primarily due to the decrease in revenues of higher margin products as well as the impact of certain fixed costs, such as labor and overhead. The decrease is partially offset by inventory write-down charges related to the planned RDS product line wind down and restructuring costs incurred during the six months ended June 30, 2024. Our gross profit for the six months ended June 30, 2024 was $207.0 million, as compared to $259.5 million for the six months ended June 30, 2023.
Current report — wording carried from elsewhere
Selling, General, and Administrative. Selling, general, and administrative expenses decreased by $13.5 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily due to a decrease of $9.8 million in employee-related expenses as a result of lower headcount and a decrease of $2.0 million in commissions expenses.
Current report — wording carried from elsewhere
Research and Development. Research and development expenses decreased by $2.9 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was primarily attributed to a decrease in employee-related expenses as a result of lower headcount.
Current report — wording carried from elsewhere
Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by $2.7 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily driven by a $3.6 million increase in other income and a $0.9 million increase in other expense. The increase in other income during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 is primarily attributable to higher interest income received due to higher interest rates and higher cash and cash equivalents balances.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
•our expected future uses of cash and the sufficiency of our sources of funding; and
Previous report — wording carried elsewhere
On September 22, 2020 and March 29, 2023, we entered into amendments to the Prior A&R Credit Agreement to, among other changes, permit the issuance of the convertible senior notes and the purchase of the convertible note hedge transactions, as described in Note 10, Convertible Senior Notes, expand our flexibility to repurchase our common stock and make other restricted payments, and replace the total net leverage covenant, as well as to remove and replace the interest rate benchmark based on the London interbank offered rate (“LIBOR”) and related LIBOR-based mechanics applicable to borrowings under the Prior A&R Credit Agreement with an interest rate benchmark based on the secured overnight financing rate (“SOFR”) as administered by the Federal Reserve Bank of New York and related SOFR-based mechanics.