OMNICELL INC

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements are contained throughout this Quarterly Report on Form 10-Q including in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include, but are not limited to, statements about:

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements are contained throughout this Quarterly Report on Form 10-Q including in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goals,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “target,” “will,” “would,” “vision,” and variations of these terms and similar expressions.

Previous wording

Forward-looking statements are based on our current expectations and assumptions, and are subject to known and unknown risks and uncertainties, many of which are beyond our control, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied in the forward-looking statements. Such risks and uncertainties include those described throughout this Quarterly Report on Form 10-Q, including Part I - Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II - Item 1A. “Risk Factors,”as well as in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2024. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements should be considered in light of these risks and uncertainties. You should carefully read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits, as well as other documents we file with, or furnish to, the SEC from time to time, with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements in this Quarterly Report on Form 10-Q represent our current estimates and assumptions and speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those expressed or implied in any forward-looking statements, whether as a result of changed circumstances, future events, even if new information becomes available in the future, or otherwise.

Current wording

Forward-looking statements are based on our current expectations and assumptions, and are subject to known and unknown risks and uncertainties, many of which are beyond our control, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied in the forward-looking statements. Such risks and uncertainties include those described throughout this Quarterly Report on Form 10-Q, including in Part I - Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II - Item 1A. “Risk Factors,”as well as in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 27, 2025. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements should be considered in light of these risks and uncertainties. You should carefully read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits, as well as other documents we file with, or furnish to, the U.S. Securities and Exchange Commission (“SEC”) from time to time, with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements in this Quarterly Report on Form 10-Q represent our current estimates and assumptions and speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those expressed or implied in any forward-looking statements, whether as a result of changed circumstances, future events, even if new information becomes available in the future, or otherwise.

Previous wording

•our information technology systems or solutions susceptibility to disruptions, breaches, or cyber-attacks; and

Current wording

•disruptions to our information technology systems and breaches of data security or cyber-attacks on our systems or solutions;

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 91% of our total revenues for both the three months ended September 30, 2024 and 2023, and 91% and 88% of our total revenues for the nine months ended September 30, 2024 and 2023, respectively.

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 92% and 89% of our total revenues for the three months ended March 31, 2025 and 2024, respectively.

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.

Current wording

We utilize product bookings as an indicator of the success of certain portions of our business that generate non-recurring revenue. We define product bookings generally as the value of non-cancelable contracts for our connected devices and software licenses. We typically exclude freight revenue and other less significant items ancillary to our products from product 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 value of the contractual commitment booked at a given time. Connected devices and software license bookings are recorded as revenue upon customer acceptance of the installation or receipt of goods.

Previous wording

We generally provide installation planning and consulting as part of most connected device product sales, which are 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.

Current wording

As part of most connected device product sales, we generally provide installation planning and consulting, which is typically included in the initial price of the solution.

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 (loss). In addition, the CODM is provided with certain segment assets and liabilities, 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 3,660 and 3,650 on September 30, 2024 and December 31, 2023, respectively.

Current wording

Our full-time employee headcount was approximately 3,620 and 3,670 on March 31, 2025 and December 31, 2024, respectively.

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. 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.

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. As health systems expand and grow, we find that traditional methods of medication management may lead to multi-vendor environments that may complicate workflows, often creating unnecessary redundancy and increasing chances for potential errors. We believe health systems need a single source for technology and resources that is designed to execute and optimize centralized medication management strategies to better meet current and future health system needs.

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 2.7% annually through 2024. 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

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 nine months ended September 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.

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 three months ended March 31, 2025 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, 2024.

Previous wording

Service revenues represented 44% and 37% of total revenues for the three months ended September 30, 2024 and 2023, respectively. Service revenues include revenues from technical services and Advanced Services offerings. Service revenues increased by $14.2 million, primarily due to an increase of $2.3 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 $11.9 million in Advanced Services revenues due to continued customer demand.

Current wording

Service revenues represented 46% of total revenues for both the three months ended March 31, 2025 and 2024. Service revenues include revenues from technical services and SaaS and Expert Services offerings. Service revenues increased by $11.6 million, primarily due to an increase of $2.9 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 $8.8 million in SaaS and Expert Services revenues due to continued customer demand, including an increase in revenues from our Specialty Pharmacy Services offering.

Previous wording

Our international sales represented 9% and 12% of total revenues for the nine months ended September 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 wording

Our international sales represented 8% and 11% of total revenues for the three months ended March 31, 2025 and 2024, 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

Our ability to continue to grow revenues is dependent on our ability to continue to obtain orders from customers, which may be dependent upon customers’ capital equipment budgets and/or capital equipment approval cycles, our ability to produce quality products and consumables to fulfill customer demand, the volume of installations we are able to complete, our ability to meet customer needs by providing a quality installation experience, our ability to develop new or enhance existing solutions, and our flexibility in workforce allocations among customers to complete installations on a timely basis. The timing of our product revenues for equipment is primarily dependent on when our customers’ schedules and/or staffing levels allow for installations.

Current wording

Our ability to grow revenues is dependent on our ability to continue to obtain orders from customers, which may be dependent upon customers’ capital equipment budgets and/or capital equipment approval cycles, our ability to produce quality products and consumables to fulfill customer demand, the volume of installations we are able to complete, our ability to meet customer needs by providing a quality installation experience, our ability to develop new or enhance existing solutions, and our flexibility in workforce allocations among customers to complete installations on a timely basis. The timing of our product revenues for equipment is primarily dependent on when our customers’ schedules and/or staffing levels allow for installations.

Previous wording

Cost of revenues for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 decreased by $6.5 million, primarily driven by a $11.9 million decrease in cost of product revenues, partially offset by a $5.3 million increase in cost of service revenues.

Current wording

Cost of revenues for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 increased by $5.2 million, primarily driven by a $12.1 million increase in cost of service revenues, partially offset by a $6.9 million decrease in cost of product revenues.

Previous wording

The overall decrease in gross margin primarily relates to lower product revenues for the three months ended September 30, 2024 compared to the three months ended September 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 in cost of product revenues is partially offset by restructuring costs incurred during the three months ended September 30, 2024. Our gross profit for the three months ended September 30, 2024 was $122.3 million, as compared to $132.0 million for the three months ended September 30, 2023.

Current wording

The overall increase in gross margin primarily relates to higher revenues for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, as well as a decrease in cost of product revenues primarily due to the impact of more favorable materials costs during the three months ended March 31, 2025 and a decrease in restructuring costs, partially offset by an increase in certain non-recurring costs, including software upgrade expenses. Our gross profit for the three months ended March 31, 2025 was $110.9 million, as compared to $92.6 million for the three months ended March 31, 2024.

Previous wording

Research and Development. Research and development expenses decreased by $3.1 million for the three months ended September 30, 2024 compared to the three months ended September 30, 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 $1.5 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to the timing of capitalized software projects.

Previous wording

Selling, General, and Administrative. Selling, general, and administrative expenses decreased by $9.5 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily due to a decrease of $6.6 million in employee-related expenses as a result of lower headcount and a decrease of $1.1 million in freight out for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, as well as $1.3 million of executives transition costs incurred during the three months ended September 30, 2023.

Current wording

Selling, General, and Administrative. Selling, general, and administrative expenses increased by $9.6 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase was primarily due to an increase of $6.2 million in employee-related expenses primarily as a result of higher headcount, an increase of $2.7 million for legal and regulatory expenses, and an increase of $1.5 million in certain restructuring and severance charges for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Previous wording

Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by $1.4 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily driven by a $1.5 million increase in other income and a $0.1 million increase in other expense. The increase in other income during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 is primarily attributable to higher interest income received due to higher cash and cash equivalents balances.

Current wording

Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by $1.9 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily driven by a $2.1 million decrease in other income and a $0.2 million increase in other expense. The decrease in other income during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 is primarily attributable to lower interest income received due to lower interest rates and lower cash and cash equivalents balances following the partial repurchase of our convertible senior notes in November 2024.

Previous wording

For the nine months ended September 30, 2024 and 2023, we recorded a provision for income taxes of $5.3 million and $4.4 million, respectively, by applying our estimated annual effective tax rate to our year-to-date measure of ordinary income and adjusted for $4.9 million and $5.6 million, respectively, of discrete income tax expense primarily from equity compensation. The change in the provision for income taxes for the nine months ended September 30, 2024 compared to the provision for income taxes for the same period in 2023 was insignificant, consisting of various offsetting components of annual effective tax rate and discrete income tax expense.

Current wording

For the three months ended March 31, 2025 and March 31, 2024, we recorded a benefit from income taxes of $2.5 million and $2.2 million, respectively. The change in the benefit from income taxes for the three months ended March 31, 2025 compared to the benefit from income taxes for the same period in 2024 was insignificant, consisting of various offsetting components of annual effective tax rate and discrete income tax expense.

Previous wording

We had cash and cash equivalents of $570.6 million at September 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.

Current wording

We had cash and cash equivalents of $386.8 million at March 31, 2025 compared to $369.2 million at December 31, 2024. 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 1.1:1 and 2.5:1 at September 30, 2024 and December 31, 2023, respectively.

Current wording

Our ratio of current assets to current liabilities was 1.4:1 at both March 31, 2025 and December 31, 2024.

Previous wording

As of September 30, 2024, we had $350.0 million of funds available under the Current Revolving Credit Facility. As of September 30, 2024, there was no outstanding balance under the Current Revolving Credit Facility and we were in full compliance with all covenants. Refer to Note 9, Debt and Credit Agreement, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information. We expect to use future loans under the Current Revolving Credit Facility, if any, for working capital, potential acquisitions, and other general corporate purposes.

Current wording

Refer to Note 10, Debt and Credit Agreement, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information. We expect to use future loans under the Current Revolving Credit Facility, if any, for working capital, potential acquisitions, and other general corporate purposes.

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 September 30, 2024, which may result in additional use of cash. There were no stock repurchases during the nine months ended September 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.

Current wording

The 2016 Repurchase Program has a total of $2.7 million remaining for future repurchases as of March 31, 2025, which may result in additional use of cash. There were no stock repurchases during the three months ended March 31, 2025. Refer to “Stock Repurchase Programs” under Note 16, 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 $142.7 million for the nine months ended September 30, 2023, primarily consisting of operating inflows of $107.8 million and favorable working capital movements of $34.9 million. Operating inflows consisted of a net loss of $6.0 million, adjusted for non-cash items of $113.8 million, which consisted primarily of depreciation and amortization expense of $65.6 million, share-based compensation expense of $43.1 million, impairment and abandonment of operating lease right-of-use assets related to facilities of $7.8 million, amortization of operating lease right-of-use assets of $6.2 million, and a change in deferred income taxes of $14.2 million. The favorable working capital was primarily due to a decrease in inventories of $31.7 million primarily due to management of inventory levels to align with the current forecasted demand, a decrease in accounts receivable and unbilled receivables of $27.1 million primarily due to the timing of billings, shipments, and collections, as well as the impacts of lower revenues, an increase in deferred revenues of $23.6 million primarily due to an increase in billings for certain service and subscription offerings, and a decrease in prepaid commissions of $5.5 million. These cash inflows were partially offset by a decrease in accrued compensation of $29.4 million primarily due to a decrease in the accrual for restructuring initiatives, lower commissions, as well as timing of payroll and ESPP purchases, a decrease in accounts payable of $13.4 million primarily due to an overall decrease in spending, as well as the timing of payments, an increase in investment in sales-type leases of $8.8 million primarily due to the acceptance of certain Advanced Services products under sales-type lease arrangements, and a decrease in operating lease liabilities of $8.1 million.

Current wording

Net cash provided by operating activities was $25.9 million for the three months ended March 31, 2025, primarily consisting of operating inflows of $22.6 million and favorable working capital movements of $3.3 million. Operating inflows consisted of a net loss of $7.0 million, adjusted for non-cash items of $29.6 million, which consisted primarily of depreciation and amortization expense of $20.0 million and share-based compensation expense of $10.8 million. The favorable working capital was primarily due to an increase in deferred revenues of $20.2 million, driven primarily by an increase in billings for certain technical service and SaaS and Expert Services offerings, and a decrease in accounts receivable and unbilled receivables of $5.5 million, primarily due to the timing of billings, shipments, and collections. The cash inflows were partially offset by a decrease in accrued compensation of $14.2 million, primarily due to the timing of bonus payments, as well as ESPP purchases.

Previous wording

Net cash provided by operating activities was $131.4 million for the nine months ended September 30, 2024, primarily consisting of operating inflows of $93.8 million and favorable working capital movements of $37.6 million. Operating inflows consisted of a net loss of $3.3 million, adjusted for non-cash items of $97.1 million, which consisted primarily of depreciation and amortization expense of $62.3 million, share-based compensation expense of $30.3 million, inventory write-down charges of $5.4 million, amortization of operating lease right-of-use assets of $5.3 million, and a change in deferred income taxes of $9.4 million. The favorable working capital was primarily due to an increase in deferred revenues of $27.7 million driven by an increase in billings, a decrease in inventories of $10.0 million resulting from inventory management initiatives, a decrease of $8.4 million in other current assets due to a decrease in income tax receivables, and an increase of $7.0 million in accrued liabilities due to an increase in rebate liabilities. These cash inflows were partially offset by a decrease of $8.0 million in operating lease liabilities, an increase of $7.5 million in investment in sales-type leases resulting from growth in our Advanced Services offerings, and a decrease in accrued compensation of $6.7 million.

Current wording

Net cash provided by operating activities was $50.0 million for the three months ended March 31, 2024, primarily consisting of operating inflows of $12.6 million and favorable working capital movements of $37.4 million. Operating inflows consisted of net loss of $15.7 million, adjusted for non-cash items of $28.2 million, which consisted primarily of depreciation and amortization expense of $21.3 million, and share-based compensation expense of $8.6 million. The favorable working capital was primarily due to an increase in deferred revenues of $34.1 million driven by an increase in billings for certain technical service and SaaS and Expert Services offerings, a decrease in inventories of $6.3 million resulting from the management of inventory levels to align with the current forecasted demand as well as inventory management efforts, and an increase in accrued liabilities of $5.1 million. These cash inflows were partially offset by 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.

Previous wording

Net cash used in investing activities was $39.2 million for the nine months ended September 30, 2024, which consisted of capital expenditures of $27.4 million for property and equipment and $11.8 million for external-use software development costs.

Current wording

Net cash used in investing activities was $15.7 million for the three months ended March 31, 2025, which consisted of capital expenditures of $11.2 million for property and equipment and $4.6 million for external-use software development costs.

Previous wording

Net cash used in investing activities was $42.6 million for the nine months ended September 30, 2023, which consisted of capital expenditures of $32.4 million for property and equipment, and $10.2 million for external-use software development costs.

Current 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.

Previous wording

Net cash provided by financing activities was $10.3 million for the nine months ended September 30, 2023, primarily due to $23.0 million in proceeds from employee stock option exercises and ESPP purchases, partially offset by $6.1 million in employees’ taxes paid related to restricted stock unit vesting and a net change in the customer funds balances of $6.6 million.

Current wording

Net cash provided by financing activities was $4.0 million for the three months ended March 31, 2025, primarily due to $8.3 million in proceeds from employee stock option exercises and ESPP purchases.

Previous wording

Net cash used in financing activities was $1.1 million for the nine months ended September 30, 2024, primarily due to a net change in the customer funds balances of $10.7 million, partially offset by $13.1 million in proceeds from employee stock option exercises and ESPP purchases.

Current 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.

Previous wording

There have been no significant changes during the nine months ended September 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.

Current wording

There have been no significant changes during the three months ended March 31, 2025 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, 2024.

Previous wording

(3)We issued convertible senior notes in September 2020 that are due in September 2025. The obligations presented above include both principal and interest for these notes. Although these notes mature in 2025, they may be converted into cash and shares of our common stock prior to maturity if certain conditions are met. Any conversion prior to maturity can result in repayment of the principal amounts sooner than the scheduled repayment as indicated in the table above. Refer to Note 10, Convertible Senior Notes, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.

Current wording

(3)We issued the 2025 Notes in September 2020 that are due in September 2025 and issued the 2029 Notes in November 2024 that are due in December 2029. The obligations presented above include both principal and interest on these notes. Although these notes mature in 2025 and 2029, respectively, they may be converted into cash and shares of our common stock prior to maturity if certain conditions are met. Any conversion prior to maturity can result in repayment of the principal amounts sooner than the scheduled repayment as indicated in the table above. Refer to Note 11, Convertible Senior Notes, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.