OMNICELL INC

Previous wording

Omnicell, a leader in transforming the pharmacy 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 to define and deliver a cost effective medication management strategy that is 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, smart devices, intelligent software, and expert services. This comprehensive set of solutions provides the critical foundation for customers to realize the industry vision of the Autonomous Pharmacy, a vision defined by pharmacy leaders for improving operational efficiencies and ultimately targeting zero-error medication management.

Current wording

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.

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 88% of our total revenues for the year ended December 31, 2023.

Current wording

Omnicell solutions are helping healthcare facilities worldwide to uncover cost savings, improve labor efficiency, establish new revenue streams, enhance supply chain control, support compliance, and move closer to the industry-defined vision of the Autonomous Pharmacy. We sell our product and consumable solutions together with related service offerings. Revenues generated in the United States represented 91% of our total revenues for the year ended December 31, 2024.

Previous wording

Over the past several years, our business has expanded from a single-point solution to a platform of products and services that will help to further advance the industry vision of the Autonomous Pharmacy. This expansion has resulted in larger deal sizes across multiple products, services, and implementations for customers and, we believe, more comprehensive, valuable, and enduring relationships. As our business evolves, we continue to evaluate the metrics and methods we use to measure the success of our business.

Current wording

Over the past several years, our business has expanded from a single-point solution to a platform of products and services that will help further advance the industry-defined vision of the Autonomous Pharmacy. This expansion has resulted in larger deal sizes across multiple products, services, and implementations for customers and, we believe, more comprehensive, valuable, and enduring relationships. As our business evolves, we continue to evaluate the metrics and methods we use to measure the success of our business.

Previous wording

We utilize bookings as an indicator of the success of our business. We define bookings generally as: (i) the value of non-cancelable contractsfor our connected devices, software products, and Advanced Services (although, for those Advanced Services contracts without a minimum commitment, bookings only include the amount of revenue that has been recognized once the services have been provided); and (ii) for our consumables, the value of orders placed through our Omnicell Storefront online platform or through written or telephonic orders. We typically exclude technical services and other less significant items ancillary to our products and services, such as freight revenue from bookings. 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. As noted, the portfolio of products, solutions and services we offer has evolved. As a result, the ordering process for certain of our solutions has also evolved. For example, orders for certain solutions may not include a purchase order. Connected devices and software license bookings are recorded as revenue upon customer acceptance of the installation or receipt of goods. Revenues from Advanced Services bookings are recorded over the contractual term. Bookings decreased by 19%, from $1.054 billion in 2022 to $854 million in 2023, primarily driven by lower-than-expected orders for our Advanced Services, particularly our technology-enabled services, which include Central Pharmacy Dispensing Service and IV Compounding Service.

Current wording

We utilize bookings as an indicator of the success of our business. During 2024, we defined bookings generally as: (i) the value of non-cancelable contracts for our connected devices, software products, and SaaS and Expert Services(although, for those SaaS and Expert Services contracts without a minimum commitment, bookings only include the amount of revenue that has been recognized once the services have been provided); and (ii) for our consumables, the value of orders placed through our Omnicell Storefront online platform or through written or telephonic orders. We typically exclude technical services and other less significant items ancillary to our products and services, such as freight revenue, from bookings. 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. As noted, the portfolio of products, solutions, and services we offer has evolved. As a result, the ordering process for certain of our solutions has also evolved. For example, orders for certain solutions may not include a purchase order. Connected devices and software license bookings are recorded as revenue upon customer acceptance of the installation or receipt of goods. Revenues from SaaS and Expert Services bookings are recorded over the contractual term. Bookings increased by 8%, from $854 million in 2023 to $923 million in 2024, primarily driven by XT Series upgrades as we complete the XT Series upgrade cycle, as well as better than expected bookings of XTExtend, a core component of the multi-year XT Amplify innovation program.

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 (support and maintenance) 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 comprehensive service offerings 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

(3) For those Advanced Services contracts without a minimum commitment, bookings only include the amount of revenue that has been recognized once the services have been provided.

Current wording

(3) For those SaaS and Expert Services contracts without a minimum commitment, bookings only include the amount of revenue that has been recognized once the services have been provided.

Previous wording

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 information about our revenues, gross profit, income from operations, and other key financial data. All significant operating decisions are based upon an analysis of Omnicell as one operating segment, which is the same as our reporting segment.

Current wording

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.

Previous wording

Our full-time employee headcount was approximately 3,650 on December 31, 2023, a decrease of approximately 580 employees since December 31, 2022. The decrease in employee headcount reflects the impact of restructuring initiatives announced in November 2022 and November 2023.

Current wording

Our full-time employee headcount was approximately 3,670 on December 31, 2024.

Previous wording

The U.S. spent a total of $634 billion on prescription drugs in 2022, an increase of 9% compared to 2021, and prescription drugs impact the vast majority of 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 implementing, 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.

Current wording

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.

Previous wording

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 vision of the Autonomous Pharmacy. Furthermore, we believe a combination of robotics, smart devices, intelligent software, and expert services is needed in every care setting where medications are managed. We are focused on delivering solutions to help our customers realize the industry vision of the Autonomous Pharmacy and drive positive medication management outcomes with outstanding customer experience through a mature channel in four market categories:

Current wording

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:

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. We continue to invest in next-generation point of care enhancements and solutions and 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 within the Point of Care market and new innovation and services will continue to help customers drive improved clinical and financial outcomes.

Current wording

•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.

Previous wording

•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 as a result of being unable 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.

Current wording

•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.

Previous wording

•Retail, Institutional, and Payer. We believe the Retail, Institutional, and Payer market represents a significant opportunity as healthcare evolves. Retail drug prescriptions represent 85% of all prescription drugs dispensed in the U.S., growing at a rate of 1.7% annually through 2022. Additionally, the COVID-19 pandemic accelerated the shift of outpatient care from hospitals and physician offices to other, more convenient settings, such as retail pharmacies and the home (including through telehealth technologies). 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, which, combined with the move to value-based care, we believe will drive the adoption of our patient engagement solutions, that are intended to help providers (including pharmacists) and payers engage patients in new ways that are expected to improve outcomes, reduce the total cost of care, and lead to more profitable operations. Because of the complexity of relationships between payers and providers, as well as the large number of retail pharmacies, including a significant number of independent pharmacies, we believe a network of established relationships between payers, providers and pharmacies will continue to be important.

Current wording

•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.

Previous wording

Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. We regularly review our estimates and assumptions, which are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions. We believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our Consolidated Financial Statements:

Current wording

Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. We regularly review our estimates and assumptions, which are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions. We believe the following critical accounting estimates are affected by significant judgments used in the preparation of our Consolidated Financial Statements:

Previous wording

We earn revenues from sales of our products and related services, which are sold in the healthcare industry, our principal market.

Current wording

We earn revenues from sales of our products and related services, which are sold in the healthcare industry, our principal market. Many of our sales contain multiple performance obligations, with a combination of hardware systems, software products, support and maintenance, and professional services.

Previous wording

The transaction price is allocated to separate performance obligations proportionally based on the standalone selling price of each performance obligation. Standalone selling price is best evidenced by the price we charge for the good or service when selling it separately in similar circumstances to similar customers. Other than for the renewal of annual technical services contracts, our products and services are not generally sold separately. We use an amount discounted from the list price as a best estimated selling price.

Current wording

A significant level of judgment is involved in contractual arrangements with multiple performance obligations to determine appropriate allocation of the transaction price. We allocate the transaction price to separate performance obligations based on the estimated standalone selling price of each performance obligation. Standalone selling price is best evidenced by the price we would charge for the good or service when selling it separately in similar circumstances to similar customers. Other than for the renewal of annual technical services contracts, our products and services are not generally sold separately. We use an amount discounted from the list price as a best estimated standalone selling price.

Previous wording

We recognize revenue when the performance obligation has been satisfied by transferring a promised good or service to a customer. The good or service is transferred when or as the customer obtains control of the good or service. Determining when control transfers requires management to make judgments that affect the timing of revenues recognized. Generally, for products requiring a complex implementation, control passes when the product is installed and ready for use. For all other products, control generally passes when product has been shipped and title has passed. For maintenance contracts and certain other services, including Advanced Services provided on a subscription basis, control passes to the customer over time, generally ratably over the service term as we provide a stand-ready service for the customer’s equipment. Time and material services transfer control to the customer at the time the services are provided. The portion of the transaction price allocated to our unsatisfied performance obligations for which invoicing has occurred is recorded as deferred revenues, net of deferred cost of goods sold.

Current wording

Additionally, judgment is required to determine the timing of revenue recognition for each performance obligation based upon when control transfers to a customer. We review our performance obligations in a contract and evaluate when transfer of control occurs. Generally, for products requiring a complex implementation, control passes when the product is installed and functionally ready for use. For all other products, control generally passes when product has been shipped and title has passed. For support and maintenance contracts and certain other services, including SaaS and Expert Services provided on a subscription basis, control passes to the customer over time, generally ratably over the service term. Time and material services transfer control to the customer at the time the services are provided.

Previous wording

Inventories are stated at the lower of cost, computed using the first-in, first-out method, and net realizable value. Inbound shipping costs are included in cost of inventory. We regularly monitor inventory quantities on hand and record write-downs for excess and obsolete inventories based on our estimate of demand for our products, potential obsolescence of technology, product life cycles, and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds its estimated selling price. These factors are impacted by market and economic conditions, technology changes, and new product introductions and require estimates that may include elements that are uncertain. Actual demand may differ from forecasted demand and may have a material effect on gross margins. If inventory is written down, a new cost basis is established that cannot be increased in future periods. Shipments from suppliers or contract manufacturers before we receive them are recorded as in-transit inventory when title and the significant risks and rewards of ownership have passed to us.

Current wording

Inventories are stated at the lower of cost, computed using the first-in, first-out method, and net realizable value. We regularly monitor inventory quantities on hand and record write-downs for excess and obsolete inventories based on our estimate of demand for our products, potential obsolescence of technology, product life cycles, and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds its estimated selling price. These factors are impacted by market and economic conditions, technology changes, and new product introductions and require estimates that may include elements that are uncertain. Actual demand may differ from forecasted demand and may have a material effect on gross margins. If inventory is written down, a new cost basis is established that cannot be increased in future periods. Changes in our assumptions, judgments, or estimates could impact future financial results if additional write-downs for excess and obsolete inventories are needed.

Previous wording

In accordance with ASC 740, we recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of ASC 740 and complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.

Current wording

We account for uncertain tax positions in accordance with ASC 740. We estimate and recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of ASC 740 and complex tax laws.

Previous wording

Services and other revenues represented 38% and 30% of total revenues for the years ended December 31, 2023 and 2022, respectively. Services and other revenues include revenues from technical services and Advanced Services offerings. Services and other revenues increased by $45.8 million, primarily due to an increase of $26.7 million in Advanced Services revenues due to continued customer demand and an increase of $19.1 million in technical services revenues as a result of growth in our installed customer base as well as the impact of pricing actions.

Current wording

Service revenues represented 43% and 38% of total revenues for the years ended December 31, 2024 and 2023, respectively. Services and other revenues include revenues from technical services and SaaS and Expert Services offerings. Service revenues increased by $43.2 million, primarily due to an increase of $12.4 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 $30.8 million in SaaS and Expert Services revenues due to continued customer demand.

Previous wording

Our international sales represented 12% and 10% of total revenues for both of the years ended December 31, 2023 and 2022, 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 9% and 12% of total revenues for the years ended December 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.

Previous wording

Cost of revenues for the year ended December 31, 2023 compared to the year ended December 31, 2022 decreased by $56.7 million, primarily driven by a $79.5 million decrease in cost of product revenues, partially offset by a $22.8 million increase in cost of services and other revenues.

Current wording

Cost of revenues for the year ended December 31, 2024 compared to the year ended December 31, 2023 decreased by $9.0 million, primarily driven by a $31.1 million decrease in cost of product revenues, partially offset by a $22.0 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 $194.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues for the year ended December 31, 2023, primarily due to certain fixed costs, such as labor and overhead. In addition, the decrease in cost of product revenues was also driven by lower inventory-related costs as pricing for semiconductors, steel, freight, and other costs has decreased from the prior period, as well as the impact from restructuring activities. The increase in cost of services and other revenues was primarily driven by the increase in services and other revenues of $45.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Current wording

The decrease in cost of product revenues was primarily driven by the decrease in product revenues of $78.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues for the year ended December 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 $5.4 million of inventory write-down charges related to the Company’s Medimat Robotic Dispensing System (“RDS”) product line wind down incurred during the year ended December 31, 2024 and an increase of $2.9 million of restructuring costs for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase in cost of service revenues was primarily driven by the increase in service revenues of $43.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Previous wording

The overall decrease in gross margin primarily relates to lower product revenues for the year ended December 31, 2023 compared to the year ended December 31, 2022 whereas the decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues, primarily due to certain fixed costs, such as labor and overhead. The decrease is partially offset by lower inventory-related costs and the impact from restructuring activities. Our gross profit for the year ended December 31, 2023 was $496.8 million, as compared to $589.0 million for the year ended December 31, 2022.

Current wording

The overall decrease in gross margin primarily relates to lower product revenues for the year ended December 31, 2024 compared to the year ended December 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 in cost of product revenues is partially offset by inventory write-down charges related to the RDS product line wind down and an increase in restructuring costs incurred during the year ended December 31, 2024. Our gross profit for the year ended December 31, 2024 was $471.0 million, as compared to $496.8 million for the year ended December 31, 2023.

Previous wording

Research and Development. Research and development expenses decreased by $7.9 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease was primarily attributed to a decrease of $5.4 million in consulting expenses, a decrease in employee-related expenses of $4.8 million, and other decreases from cost saving initiatives, partially offset by an increase of $4.3 million due to the timing of capitalized software projects.

Current wording

Research and Development. Research and development expenses decreased by $6.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily attributed to a decrease of $10.8 million in employee-related expenses primarily as a result of lower headcount and a decrease of $3.4 million in restructuring costs, partially offset by an increase of $3.8 million in cloud hosting services expenses, and an increase of $3.1 million in consulting expenses.

Previous wording

Selling, General, and Administrative. Selling, general, and administrative expenses decreased by $51.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease was primarily due to a decrease of $21.9 million in employee-related expenses, including the impact of restructuring activities, a decrease of $9.8 million in consulting expenses, a decrease of $7.3 million in commissions expenses, a decrease of $6.0 million in freight out, and a decrease of $4.8 million in travel expenses. The decrease is also driven by a decrease of $2.8 million of ransomware-related expenses, net of insurance recoveries, related to the ransomware incident we experienced in May 2022. The decrease is partially offset by an increase of $2.2 million in executive transition costs incurred during the year ended December 31, 2023, and an impairment of certain long-lived assets of $1.0 million during the year ended December 31, 2023.

Current wording

Selling, General, and Administrative. Selling, general, and administrative expenses decreased by $54.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily due to a decrease of $23.3 million in employee-related expenses primarily as a result of lower headcount, a decrease of $11.0 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 $8.4 million in restructuring costs, a decrease of $4.1 million in commissions expenses, a decrease of $2.9 million in freight out, and a decrease of $2.2 million in executives transition costs.

Previous wording

Interest and Other Income (Expense), Net. Interest and other income (expense), net, changed by $14.9 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by a $14.6 million increase in other income. The increase in other income during the year ended December 31, 2023 compared to the year ended December 31, 2022 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 $10.5 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by a $12.2 million increase in other income and a $1.7 million increase in other expense. The increase in other income during the year ended December 31, 2024 compared to the year ended December 31, 2023 is primarily attributable to a $7.5 million gain on extinguishment of convertible senior notes and related unwind of note hedges and warrants, as well as higher interest income received due to higher interest rates and higher cash and cash equivalents balances throughout the majority of the year.

Previous wording

We recorded a provision for income taxes of $0.3 million on a loss before taxes of $20.1 million, which resulted in a negative effective tax rate of 1% for the year ended December 31, 2023, compared to an income tax benefit of $8.1 million on a loss before taxes of $2.5 million, which resulted in an effective tax rate of 330% for the year ended December 31, 2022. The 2023 annual effective tax rate differed from the statutory tax rate of 21%, primarily due to an unfavorable impact of non-deductible equity compensation charges partially offset by a favorable impact of research and development credits, and foreign-derived intangible income (“FDII”) deduction.

Current wording

We recorded an income tax expense of $13.1 million on an income before income taxes of $25.6 million, which resulted in a positive effective tax rate of 51% for the year ended December 31, 2024, compared to an income tax expense of $0.3 million on a loss before income taxes of $20.1 million, which resulted in a negative effective tax rate of 1% for the year ended December 31, 2023. The 2024 annual effective tax rate differed from the statutory tax rate of 21%, primarily due to an unfavorable impact of non-deductible equity compensation charges partially offset by a favorable impact of research and development credits.

Previous wording

We had cash and cash equivalents of $468.0 million at December 31, 2023, compared to $330.4 million at December 31, 2022. 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 $369.2 million at December 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.

Previous wording

Our ratio of current assets to current liabilities was 2.5:1 and 2.1:1 at December 31, 2023 and 2022, respectively.

Current wording

Our ratio of current assets to current liabilities was 1.4:1 and 2.5:1 at December 31, 2024 and 2023, respectively.

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 11, Convertible Senior Notes, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K), 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 $15.0 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.

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

As of December 31, 2023, we had $350.0 million of funds available under the Current Revolving Credit Facility and as of December 31, 2022, we had $500.0 million of funds available under the Prior Revolving Credit Facility. As of December 31, 2023 and 2022, there was no outstanding balance under the Prior or Current Revolving Credit Facility and we were in full compliance with all covenants.

Current wording

As of December 31, 2024, we had $350.0 million of funds available under the Current Revolving Credit Facility. As of December 31, 2024, there was no outstanding balance under the Current Revolving Credit Facility and we were in full compliance with all covenants.

Previous wording

Our future uses of cash are expected to be primarily for working capital, capital expenditures, and other contractual obligations. We also expect a continued use of cash for potential acquisitions and acquisition-related activities, as well as repurchases of our common stock. In addition, we may also use a portion of our cash, as we consider various options related to our outstanding debt.

Current wording

Our future uses of cash are expected to be primarily for working capital, capital expenditures, and other contractual obligations. We may also use cash for potential acquisitions and acquisition-related activities, as well as repurchases of our common stock. In addition, we may also use a portion of our cash as we consider various options related to our outstanding debt.

Previous wording

The 2016 Repurchase Program has a total of $2.7 million remaining for future repurchases as of December 31, 2023, which may result in additional use of cash. During the year ended December 31, 2022, we repurchased approximately 389,300 shares of our common stock under the repurchase programs at an average price of $134.11 per share for an aggregate purchase price of approximately $52.2 million. There were no stock repurchases during the year ended December 31, 2023. Refer to Note 16, Stock Repurchase Programs, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Current wording

The 2016 Repurchase Program has a total of $2.7 million remaining for future repurchases as of December 31, 2024, which may result in additional use of cash. There were no stock repurchases during the year ended December 31, 2024. Refer to Note 16, Stock Repurchase Programs, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Previous wording

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

Current wording

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

Previous wording

Net cash provided by operating activities was $77.8 million for the year ended December 31, 2022, primarily consisting of net income of $5.6 million adjusted for non-cash items of $145.6 million, offset by changes in assets and liabilities of $73.5 million. The non-cash items primarily consisted of depreciation and amortization expense of $86.9 million, share-based compensation expense of $68.2 million, amortization of operating lease right-of-use assets of $12.2 million, impairment and abandonment of operating lease right-of-use assets related to facilities of $9.4 million, amortization of debt issuance costs of $4.2 million, and a change in deferred income taxes of $37.3 million. Changes in assets and liabilities include cash outflows from (i) an increase in accounts receivable and unbilled receivables of $60.4 million primarily due to an increase in billings driven by overall business growth and the timing of shipments as well as collections, (ii) an increase in inventories of $30.1 million primarily to support forecasted sales, including advanced purchases of certain components, such as semiconductors, as well as higher costs of inventory and timing of shipments, (iii) an increase in investment in sales-type leases of $15.4 million primarily due to the increase in sales-type lease revenues associated with certain Advanced Services products, (iv) a decrease in operating lease liabilities of $13.8 million, (v) a decrease in accounts payables of $7.8 million primarily due to an overall decrease in spending during the fourth quarter of 2022, including inventory spending, as well as timing of payments, and (vi) an increase in prepaid expenses of $4.7 million. These cash outflows were partially offset by (i) an increase in deferred revenues of $24.5 million primarily due to an increase in billings for certain service and subscription offerings, (ii) an increase in accrued liabilities of $16.7 million primarily due to an increase in taxes payable and an increase in general liabilities, (iii) a decrease in other current assets of $6.4 million, (iv) a decrease in other long-term assets of $5.0 million, (v) a decrease in prepaid commissions of $4.3 million, and (vi) an increase in accrued compensation of $2.4 million.

Current wording

Net cash provided by operating activities was $187.7 million for the year ended December 31, 2024, primarily consisting of operating inflows of $129.4 million and favorable working capital movements of $58.3 million. Operating inflows consisted of net income of $12.5 million, adjusted for non-cash items of $116.9 million, which consisted primarily of depreciation and amortization expense of $82.2 million, share-based compensation expense of $39.3 million, amortization of operating lease right-of-use assets of $7.5 million, a net gain on extinguishment of convertible senior notes of $7.5 million, inventory write-down charges of $5.4 million, and a change in deferred income taxes of $14.9 million. The favorable working capital was primarily due to an increase in deferred revenues of $29.0 million driven by an increase in billings for certain technical service and SaaS and Expert Services offerings, a decrease in inventories of $15.6 million resulting from inventory management initiatives, an increase in accrued liabilities of $13.9 million due to an increase in taxes payable, a decrease in other current assets of $9.3 million due to a decrease in income taxes receivable, an increase in accrued compensation of $8.6 million, and an increase in accounts payables of $7.2 million. These cash inflows were partially offset by a decrease in operating lease liabilities of $10.7 million, an increase in investment in sales-type leases of $10.4 million primarily due to the acceptance of certain SaaS and Expert Services products under sales-type lease arrangements, and an increase in accounts receivable and unbilled receivables of $5.0 million primarily due to the timing of billings, shipments, and collections.

Previous wording

Net cash provided by operating activities was $181.1 million for the year ended December 31, 2023, primarily consisting of net loss of $20.4 million adjusted for non-cash items of $157.8 million and changes in assets and liabilities of $43.7 million. The non-cash items primarily consisted of depreciation and amortization expense of $87.3 million, share-based compensation expense of $55.3 million, impairment and abandonment of operating lease right-of-use assets related to facilities of $10.0 million, amortization of operating lease right-of-use assets of $8.2 million, amortization of debt issuance costs of $4.4 million, and a change in deferred income taxes of $11.0 million. Changes in assets and liabilities include cash inflows from (i) a decrease in accounts receivable and unbilled receivables of $49.2 million primarily due to the timing of billings, shipments, and collections, as well as the impacts of lower revenues, (ii) a decrease in inventories of $38.0 million primarily due to management of inventory levels to align with the current forecasted demand, (iii) an increase in deferred revenues of $24.1 million primarily due to an increase in billings for certain technical service and Advanced Service offerings, (iv) a decrease in prepaid commissions of $7.1 million, (v) a decrease in other long-term assets of $2.1 million, and (vi) a decrease in prepaid expenses of $1.1 million. These cash inflows were partially offset by (i) a decrease in accrued compensation of $21.5 million primarily due to a decrease in the accrual for restructuring initiatives, lower commissions, as well as timing of ESPP purchases, (ii) a decrease in accounts payables of $17.5 million primarily due to an overall decrease in spending, as well as timing of payments, (iii) a decrease in operating lease liabilities of $10.9 million, (iv) an increase in investment in sales-type leases of $10.4 million primarily due to the acceptance of certain Advanced Services products under sales-type lease arrangements, (v) a decrease in accrued liabilities of $10.3 million, and (vi) an increase in other current assets of $6.8 million.

Current wording

Net cash provided by operating activities was $181.1 million for the year ended December 31, 2023, primarily consisting of operating inflows of $137.4 million and favorable working capital movements of $43.7 million. Operating inflows consisted of net loss of $20.4 million, adjusted for non-cash items of $157.8 million, which consisted primarily of depreciation and amortization expense of $87.3 million, share-based compensation expense of $55.3 million, impairment and abandonment of operating lease right-of-use assets related to facilities of $10.0 million, amortization of operating lease right-of-use assets of $8.2 million, and a change in deferred income taxes of $11.0 million. The favorable working capital was primarily due to a decrease in accounts receivable and unbilled receivables of $49.2 million primarily due to the timing of billings, shipments, and collections, as well as the impacts of lower revenues, a decrease in inventories of $38.0 million primarily due to management of inventory levels to align with the current forecasted demand, an increase in deferred revenues of $24.1 million primarily due to an increase in billings for certain technical service and SaaS and Expert Services offerings, and a decrease in prepaid commissions of $7.1 million. These cash inflows were partially offset by a decrease in accrued compensation of $21.5 million primarily due to a decrease in the accrual for restructuring initiatives, lower commissions, as well as timing of ESPP purchases, a decrease in accounts payables of $17.5 million primarily due to an overall decrease in spending, as well as timing of payments, a decrease in operating lease liabilities of $10.9 million, an increase in investment in sales-type leases of $10.4 million primarily due to the acceptance of certain SaaS and Expert Services products under sales-type lease arrangements, a decrease in accrued liabilities of $10.3 million, and an increase in other current assets of $6.8 million.

Previous wording

Net cash used in investing activities was $58.7 million for the year ended December 31, 2022, which consisted of capital expenditures of $47.5 million for property and equipment, $13.2 million for external-use software development costs, and $3.4 million consideration paid for the acquisition of Hub and Spoke Innovations, net of cash acquired, partially offset by purchase price adjustments from business acquisitions of $5.5 million.

Current wording

Net cash used in investing activities was $52.8 million for the year ended December 31, 2024, which consisted of capital expenditures of $36.5 million for property and equipment and $16.3 million for external-use software development costs.

Previous wording

Net cash provided by financing activities was $23.4 million for the year ended December 31, 2023, primarily due to $23.2 million in proceeds from employee stock option exercises and ESPP purchases and a net change in the customer funds balances of $10.5 million, partially offset by $7.4 million in employees’ taxes paid related to restricted stock unit vesting and $3.0 million in payments for debt issuance costs.

Current wording

Net cash provided by financing activities was $23.4 million for the year ended December 31, 2023, primarily due to $23.2 million in proceeds from employee stock option exercises and ESPP purchases and a net change in the customer funds balances of $10.5 million, partially offset by $7.4 million in employees’ taxes paid related to restricted stock unit vesting.