UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 000-33043

OMNICELL, INC.

(Exact name of registrant as specified in its charter)


Delaware			94-3166458
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

590 East Middlefield Road

Mountain View, CA 94043

(Address of registrant’s principal executive offices, including zip code)

(650) 251-6100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

OMCL

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transitions period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of ~~April 27,~~July 28, 2021, there were ~~43,189,924~~43,474,327 shares of the registrant’s common stock, $0.001 par value, outstanding.

Table of Contents

OMNICELL, INC.

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets (Unaudited) as of ~~March 31,~~June 30, 2021 and December 31, 2020	3

	Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended ~~March 31,~~June 30, 2021 and 2020	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and six months ended ~~March 31,~~June 30, 2021 and 2020	5

	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and six months ended ~~March 31,~~June 30, 2021 and 2020	6

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020	78

	Notes to Condensed Consolidated Financial Statements (Unaudited)	89

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2829

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3842

Item 4.	Controls and Procedures	3943

PART II	OTHER INFORMATION	4044

Item 1.	Legal Proceedings	4044

Item 1A.	Risk Factors	4044

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4145

Item 3.	Defaults Upon Senior Securities	4145

Item 4.	Mine Safety Disclosures	4145

Item 5.	Other Information	4145

Item 6.	Exhibits	4246

Signature		4347

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

OMNICELL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020

		(In thousands, except par value)					(In thousands, except par value)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	548,055	$	485,928	Cash and cash equivalents	$	614,236	$	485,928
Accounts receivable and unbilled receivables, net of allowances of $5,518 and $4,286, respectively		205,658		190,117
Accounts receivable and unbilled receivables, net of allowances of $5,077 and $4,286, respectively						Accounts receivable and unbilled receivables, net of allowances of $5,077 and $4,286, respectively	209,953		190,117
Inventories	Inventories	96,208		96,298		Inventories	101,185		96,298
Prepaid expenses	Prepaid expenses	17,122		16,027		Prepaid expenses	17,442		16,027
Other current assets	Other current assets	36,956		41,044		Other current assets	41,472		41,044
Total current assets	Total current assets	903,999		829,414		Total current assets	984,288		829,414
Property and equipment, net	Property and equipment, net	60,538		59,073		Property and equipment, net	62,323		59,073
Long-term investment in sales-type leases, net	Long-term investment in sales-type leases, net	21,255		22,156		Long-term investment in sales-type leases, net	19,615		22,156
Operating lease right-of-use assets	Operating lease right-of-use assets	51,922		55,114		Operating lease right-of-use assets	49,359		55,114
Goodwill	Goodwill	499,065		499,309		Goodwill	499,266		499,309
Intangible assets, net	Intangible assets, net	161,816		168,211		Intangible assets, net	155,775		168,211
Long-term deferred tax assets	Long-term deferred tax assets	15,376		15,019		Long-term deferred tax assets	15,559		15,019
Prepaid commissions	Prepaid commissions	54,209		56,919		Prepaid commissions	55,067		56,919
Other long-term assets	Other long-term assets	118,443		119,289		Other long-term assets	119,742		119,289
Total assets	Total assets	$	1,886,623	$	1,824,504	Total assets	$	1,960,994	$	1,824,504

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	50,759	$	40,309	Accounts payable	$	56,195	$	40,309
Accrued compensation	Accrued compensation	37,851		55,750		Accrued compensation	48,487		55,750
Accrued liabilities	Accrued liabilities	84,075		80,311		Accrued liabilities	91,125		80,311

Deferred revenues, net	Deferred revenues, net	119,588		100,053		Deferred revenues, net	121,305		100,053
Total current liabilities	Total current liabilities	292,273		276,423		Total current liabilities	317,112		276,423
Long-term deferred revenues	Long-term deferred revenues	7,887		5,673		Long-term deferred revenues	11,875		5,673
Long-term deferred tax liabilities	Long-term deferred tax liabilities	39,128		39,633		Long-term deferred tax liabilities	40,626		39,633
Long-term operating lease liabilities	Long-term operating lease liabilities	45,435		48,897		Long-term operating lease liabilities	42,512		48,897
Other long-term liabilities	Other long-term liabilities	18,542		19,174		Other long-term liabilities	18,743		19,174

Convertible senior notes, net	Convertible senior notes, net	472,347		467,201		Convertible senior notes, net	477,554		467,201
Total liabilities	Total liabilities	875,612		857,001		Total liabilities	908,422		857,001
Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)	0		0		Commitments and contingencies (Note 13)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; 0 shares issued	Preferred stock, $0.001 par value, 5,000 shares authorized; 0 shares issued	0		0		Preferred stock, $0.001 par value, 5,000 shares authorized; 0 shares issued	0		0
Common stock, $0.001 par value, 100,000 shares authorized; 53,065 and 52,677 shares issued; 43,171 and 42,783 shares outstanding, respectively		53		53
Common stock, $0.001 par value, 100,000 shares authorized; 53,330 and 52,677 shares issued; 43,436 and 42,783 shares outstanding, respectively						Common stock, $0.001 par value, 100,000 shares authorized; 53,330 and 52,677 shares issued; 43,436 and 42,783 shares outstanding, respectively	53		53
Treasury stock at cost, 9,894 outstanding, respectively	Treasury stock at cost, 9,894 outstanding, respectively	(238,109)		(238,109)		Treasury stock at cost, 9,894 outstanding, respectively	(238,109)		(238,109)
Additional paid-in capital	Additional paid-in capital	950,361		920,359		Additional paid-in capital	970,846		920,359
Retained earnings	Retained earnings	304,849		290,722		Retained earnings	325,273		290,722
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(6,143)		(5,522)		Accumulated other comprehensive loss	(5,491)		(5,522)
Total stockholders’ equity	Total stockholders’ equity	1,011,011		967,503		Total stockholders’ equity	1,052,572		967,503
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,886,623	$	1,824,504	Total liabilities and stockholders’ equity	$	1,960,994	$	1,824,504

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020					2021		2020		2021		2020

		(In thousands, except per share data)				(In thousands, except per share data)
Revenues:	Revenues:							Revenues:
Product revenues	Product revenues	$	178,125	$	170,073			Product revenues	$	196,911	$	138,942	$	375,036	$	309,015
Services and other revenues	Services and other revenues	73,718		59,613				Services and other revenues	75,828		60,679		149,546		120,292
Total revenues	Total revenues	251,843		229,686				Total revenues	272,739		199,621		524,582		429,307
Cost of revenues:	Cost of revenues:							Cost of revenues:
Cost of product revenues	Cost of product revenues	92,627		90,272				Cost of product revenues	100,227		85,779		192,854		176,051
Cost of services and other revenues	Cost of services and other revenues	36,933		29,792				Cost of services and other revenues	36,214		30,617		73,147		60,409
Total cost of revenues	Total cost of revenues	129,560		120,064				Total cost of revenues	136,441		116,396		266,001		236,460
Gross profit	Gross profit	122,283		109,622				Gross profit	136,298		83,225		258,581		192,847
Operating expenses:	Operating expenses:							Operating expenses:
Research and development	Research and development	16,080		18,652				Research and development	18,213		20,830		34,293		39,482
Selling, general, and administrative	Selling, general, and administrative	86,593		78,819				Selling, general, and administrative	89,169		69,386		175,762		148,205

Total operating expenses	Total operating expenses	102,673		97,471				Total operating expenses	107,382		90,216		210,055		187,687
Income from operations		19,610		12,151
Income (loss) from operations								Income (loss) from operations	28,916		(6,991)		48,526		5,160
Interest and other income (expense), net	Interest and other income (expense), net	(6,691)		(822)				Interest and other income (expense), net	(5,959)		174		(12,650)		(648)
Income before provision for income taxes		12,919		11,329
Income (loss) before provision for income taxes								Income (loss) before provision for income taxes	22,957		(6,817)		35,876		4,512
Provision for (benefit from) income taxes	Provision for (benefit from) income taxes	(1,208)		18				Provision for (benefit from) income taxes	2,533		(2,518)		1,325		(2,500)
Net income		$	14,127	$	11,311
Net income per share:
Net income (loss)								Net income (loss)	$	20,424	$	(4,299)	$	34,551	$	7,012
Net income (loss) per share:								Net income (loss) per share:
Basic	Basic	$	0.33	$	0.27			Basic	$	0.47	$	(0.10)	$	0.80	$	0.16

Diluted	Diluted	$	0.30	$	0.26			Diluted	$	0.43	$	(0.10)	$	0.74	$	0.16
Weighted-average shares outstanding:	Weighted-average shares outstanding:							Weighted-average shares outstanding:
Basic	Basic	42,962		42,357				Basic	43,262		42,659		43,113		42,509
Diluted	Diluted	46,367		43,621				Diluted	47,106		42,659		46,765		43,616

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

Three Months Ended March 31,
2021 2020
(In thousands)
Net income $ 14,127 $ 11,311
Other comprehensive loss:
Foreign currency translation adjustments (621) (4,694)
Other comprehensive loss (621) (4,694)
Comprehensive income $ 13,506 $ 6,617


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

	(In thousands)
Net income (loss)	$	20,424	$	(4,299)	$	34,551	$	7,012
Other comprehensive income (loss):

Foreign currency translation adjustments	652		451		31		(4,243)
Other comprehensive income (loss)	652		451		31		(4,243)
Comprehensive income (loss)	$	21,076	$	(3,848)	$	34,582	$	2,769

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

Common Stock Treasury Stock Additional
Paid-In Capital Accumulated
Earnings Accumulated Other
Comprehensive Income (Loss) Stockholders’
Equity
Shares Amount Shares Amount
(In thousands)
Balances as of December 31, 2020 52,677 $ 53 (9,894) $ (238,109) $ 920,359 $ 290,722 $ (5,522) $ 967,503
Net income — — — — — 14,127 — 14,127
Other comprehensive loss — — — — — — (621) (621)
Share-based compensation — — — — 11,772 — — 11,772
Issuance of common stock under employee stock plans 388 0 — — 20,826 — — 20,826
Tax payments related to restricted stock units — — — — (2,596) — — (2,596)
Balances as of March 31, 2021 53,065 $ 53 (9,894) $ (238,109) $ 950,361 $ 304,849 $ (6,143) $ 1,011,011


		Common Stock			Treasury Stock			Additional Paid-In Capital				Accumulated Earnings			Accumulated Other Comprehensive Income (Loss)				Stockholders’ Equity				Common Stock						Treasury Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders’ Equity
		Shares	Amount		Shares	Amount								Shares								Amount			Shares			Amount

		(In thousands)																					(In thousands)
Balances as of December 31, 2019		51,277	$	51	(9,145)	$	(185,074)			$	780,931						$	258,792			$	(9,446)		$	845,254
Balances as of December 31, 2020																						Balances as of December 31, 2020	52,677			$	53		(9,894)	$	(238,109)	$	920,359	$	290,722	$	(5,522)	$	967,503
Net income	Net income	—	—		—	—		—				11,311			—				11,311			Net income	—			—			—	—		—		14,127		—		14,127
Other comprehensive loss	Other comprehensive loss	—	—		—	—		—				—			(4,694)				(4,694)			Other comprehensive loss	—			—			—	—		—		—		(621)		(621)

Share-based compensation	Share-based compensation	—	—		—	—		10,659				—			—				10,659			Share-based compensation	—			—			—	—		11,772		—		—		11,772
Issuance of common stock under employee stock plans	Issuance of common stock under employee stock plans	474	1		—	—		17,658				—			—				17,659			Issuance of common stock under employee stock plans	388			0			—	—		20,826		—		—		20,826
Tax payments related to restricted stock units	Tax payments related to restricted stock units	—	—		—	—		(1,425)				—			—				(1,425)			Tax payments related to restricted stock units	—			—			—	—		(2,596)		—		—		(2,596)
Cumulative effect of a change in accounting principle related to credit losses		—	—		—	—		—				(264)			—				(264)
Balances as of March 31, 2020		51,751	$	52	(9,145)	$	(185,074)	$	807,823			$	269,839		$	(14,140)			$	878,500

Balances as of March 31, 2021																						Balances as of March 31, 2021	53,065			53			(9,894)	(238,109)		950,361		304,849		(6,143)		1,011,011
Net income																						Net income	—			—			—	—		—		20,424		—		20,424
Other comprehensive income																						Other comprehensive income	—			—			—	—		—		—		652		652

Share-based compensation																						Share-based compensation	—			—			—	—		13,039		—		—		13,039
Issuance of common stock under employee stock plans																						Issuance of common stock under employee stock plans	265			0			—	—		11,517		—		—		11,517
Tax payments related to restricted stock units																						Tax payments related to restricted stock units	—			—			—	—		(4,071)		—		—		(4,071)
Balances as of June 30, 2021																						Balances as of June 30, 2021	53,330			$	53		(9,894)	$	(238,109)	$	970,846	$	325,273	$	(5,491)	$	1,052,572

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY (UNAUDITED) - CONTINUED

Three Months Ended March 31,
2021 2020
(In thousands)
Operating Activities
Net income $ 14,127 $ 11,311
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 17,575 14,043
Share-based compensation expense 11,772 10,659
Deferred income taxes (862) (1,149)
Amortization of operating lease right-of-use assets 2,895 2,682
Amortization of debt issuance costs 849 241
Amortization of discount on convertible senior notes 4,571 0
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables (15,427) (16,052)
Inventories (1,035) (5,734)
Prepaid expenses (1,095) 323
Other current assets 3,128 968
Investment in sales-type leases 925 (268)
Prepaid commissions 2,710 2,881
Other long-term assets 2,177 (2,844)
Accounts payable 10,368 208
Accrued compensation (17,899) (9,165)
Accrued liabilities 4,661 2,734
Deferred revenues 21,749 16,868
Operating lease liabilities (3,142) (2,784)
Other long-term liabilities (632) 309
Net cash provided by operating activities 57,415 25,231
Investing Activities
Software development for external use (8,043) (10,602)
Purchases of property and equipment (5,089) (3,173)
Net cash used in investing activities (13,132) (13,775)
Financing Activities
Repayment of revolving credit facility — (50,000)
Proceeds from issuances under stock-based compensation plans 20,826 17,659
Employees’ taxes paid related to restricted stock units (2,596) (1,425)
Change in customer funds, net (2,631) 0
Net cash provided by (used in) financing activities 15,599 (33,766)
Effect of exchange rate changes on cash and cash equivalents (386) (820)
Net increase (decrease) in cash, cash equivalents, and restricted cash 59,496 (23,130)
Cash, cash equivalents, and restricted cash at beginning of period 489,920 127,210
Cash, cash equivalents, and restricted cash at end of period $ 549,416 $ 104,080
Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents $ 548,055 $ 104,080
Restricted cash included in Other current assets 1,361 0
Cash, cash equivalents, and restricted cash at end of period $ 549,416 $ 104,080
Supplemental disclosure of non-cash activities
Unpaid purchases of property and equipment $ 487 $ 944
Transfers between inventory and property and equipment, net $ 1,269 $ 0


	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders’ Equity
	Shares	Amount		Shares	Amount

	(In thousands)
Balances as of December 31, 2019	51,277	$	51	(9,145)	$	(185,074)	$	780,931	$	258,792	$	(9,446)	$	845,254
Net income	—	—		—	—		—		11,311		—		11,311
Other comprehensive loss	—	—		—	—		—		—		(4,694)		(4,694)

Share-based compensation	—	—		—	—		10,659		—		—		10,659
Issuance of common stock under employee stock plans	474	1		—	—		17,658		—		—		17,659
Tax payments related to restricted stock units	—	—		—	—		(1,425)		—		—		(1,425)
Cumulative effect of a change in accounting principle related to credit losses	—	—		—	—		—		(264)		—		(264)
Balances as of March 31, 2020	51,751	52		(9,145)	(185,074)		807,823		269,839		(14,140)		878,500
Net loss	—	—		—	—		—		(4,299)		—		(4,299)
Other comprehensive income	—	—		—	—		—		—		451		451

Share-based compensation	—	—		—	—		11,351		—		—		11,351
Issuance of common stock under employee stock plans	151	0		—	—		3,503		—		—		3,503
Tax payments related to restricted stock units	—	—		—	—		(2,045)		—		—		(2,045)
Balances as of June 30, 2020	51,902	$	52	(9,145)	$	(185,074)	$	820,632	$	265,540	$	(13,689)	$	887,461

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
	2021		2020

	(In thousands)
Operating Activities
Net income	$	34,551	$	7,012
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	34,965		28,779




Share-based compensation expense	24,811		22,010



Deferred income taxes	453		(9,409)
Amortization of operating lease right-of-use assets	5,791		5,157
Amortization of debt issuance costs	1,707		482
Amortization of discount on convertible senior notes	9,195		0
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables	(19,662)		28,236
Inventories	(6,569)		(7,271)
Prepaid expenses	(1,415)		1,181
Other current assets	188		219
Investment in sales-type leases	2,423		(1,375)
Prepaid commissions	1,852		4,040
Other long-term assets	1,559		(4,580)
Accounts payable	15,684		(11,254)
Accrued compensation	(7,263)		(3,098)
Accrued liabilities	10,142		(2,824)
Deferred revenues	27,454		16,264
Operating lease liabilities	(6,247)		(5,186)
Other long-term liabilities	(431)		4,352
Net cash provided by operating activities	129,188		72,735
Investing Activities

Software development for external use	(15,415)		(20,002)
Purchases of property and equipment	(11,067)		(13,211)

Net cash used in investing activities	(26,482)		(33,213)
Financing Activities

Repayment of revolving credit facility	0		(50,000)





Proceeds from issuances under stock-based compensation plans	32,343		21,162
Employees’ taxes paid related to restricted stock units	(6,667)		(3,470)
Change in customer funds, net	(3,263)		0

Net cash provided by (used in) financing activities	22,413		(32,308)
Effect of exchange rate changes on cash and cash equivalents	(74)		(841)
Net increase in cash, cash equivalents, and restricted cash	125,045		6,373
Cash, cash equivalents, and restricted cash at beginning of period	489,920		127,210
Cash, cash equivalents, and restricted cash at end of period	$	614,965	$	133,583
Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents	$	614,236	$	133,583
Restricted cash included in Other current assets	729		0
Cash, cash equivalents, and restricted cash at end of period	$	614,965	$	133,583
Supplemental disclosure of non-cash activities
Unpaid purchases of property and equipment	$	607	$	366
Transfers between inventory and property and equipment, net	$	1,876	$	0

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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OMNICELL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Organization and Summary of Significant Accounting Policies

Business

Omnicell, Inc. was incorporated in California in 1992 under the name Omnicell Technologies, Inc. and reincorporated in Delaware in 2001 as Omnicell, Inc. The Company’s major products and related services are medication management automation solutions and adherence tools for healthcare systems and pharmacies, which are sold in its principal market, the healthcare industry. The Company’s market is primarily located in the United States and Europe. “Omnicell” or the “Company” collectively refer to Omnicell, Inc. and its subsidiaries.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the financial position of the Company as of ~~March 31,~~June 30, 2021 and December 31, 2020, ~~and~~ the results of operations and comprehensive income (loss) for the three and six months ended June 30, 2021 and 2020, and cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) have been condensed or omitted in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 24, 2021, except as discussed in the section entitled “Recently Adopted Authoritative Guidance” below. The Company’s results of operations and comprehensive income for the three and six months ended June 30, 2021, and cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2021, or for any future period.

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications and Adjustments

Certain prior-year amounts have been reclassified to conform with current-period presentation. This reclassification was a change in the presentation of certain items in the disaggregation of revenues for the three and six months ended ~~March 31,~~June 30, 2020 in Note 3, Revenues. This change was not deemed material and was included to conform with current-period classification and presentation.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s Condensed Consolidated Financial Statements and accompanying Notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results may be different from the estimates.

The Company’s critical accounting policies are those that affect its financial statements materially and involve difficult, subjective, or complex judgments by management. As of ~~March 31,~~June 30, 2021, the Company is not aware of any events or circumstances that would require an update to its estimates, judgments, or revisions to the carrying value of its assets or liabilities.

Segment Reporting

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company's Chief Operating Decision Maker ("CODM") is its Chief Executive Officer. The CODM allocates resources and evaluates the performance of the Company at the consolidated level using information about its revenues, gross profit, income from operations, and other key financial data. All significant operating decisions are based upon an analysis of the Company as 1 operating segment, which is the same as its reporting segment.

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Recently Adopted Authoritative Guidance

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740, Income Taxes, as well as improves consistent application of and simplifies the guidance for other areas of ASC 740 by clarifying and amending existing guidance. The Company adopted ASU 2019-12 on January 1, 2021 on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

Recently Issued Authoritative Guidance

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The update simplifies the accounting for convertible debt instruments by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. This update permits the use of either the modified retrospective or fully retrospective method of transition. ASU 2020-06 will be effective for the Company beginning January 1, 2022. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on its ~~Condensed~~ Consolidated Financial Statements.

There was no other recently issued and effective authoritative guidance that is expected to have a material impact on the Company’s Condensed Consolidated Financial Statements through the reporting date.

Note 2. Business Combinations

340B Link Business Acquisition

On October 1, 2020, the Company completed the acquisition of all of the outstanding equity of the 340B Link business (the “340B Link Business”) of Pharmaceutical Strategies Group, LLC pursuant to the terms and conditions of the Equity Purchase Agreement, dated August 11, 2020, as amended, by and among the Company, PSGH, LLC, BW Apothecary Holdings, LLC, the sellers identified therein and the sellers’ representative for total cash consideration of $225.0 million. The 340B Link Business acquisition adds a comprehensive and differentiated suite of software-enabled services and solutions used by certain eligible hospitals, health systems, clinics, and entities to manage compliance and capture 340B drug cost savings on outpatient prescriptions filled through the eligible entity’s pharmacy or a contracted pharmacy partner. The results of the 340B Link Business's operations have been included in the Company's consolidated results of operations, commencing as of the acquisition date.

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The Company accounted for the acquisition of the 340B Link Business in accordance with ASC 805, Business Combinations. The tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date. The preliminary fair values assume management's best estimates based on information available at the acquisition date and may change over the measurement period, which will end no later than one year from the acquisition date, as additional information is received. The following table represents the preliminary allocation of the purchase price to the assets acquired and the liabilities assumed by the Company as part of the acquisition included in the Company's Condensed Consolidated Balance Sheets, and is reconciled to the purchase price transferred:


	340B Link Business (Preliminary)

	(In thousands)

Accounts receivable and unbilled receivables	$	8,197
Prepaid expenses	232
Other current assets	22,747
Total current assets	31,176
Property and equipment	531
Operating lease right-of-use assets	3,138
Goodwill	161,117
Intangible assets	62,800
Total assets	258,762
Accounts payable	568
Accrued liabilities	23,787
Long-term deferred tax liabilities	6,818
Long-term operating lease liabilities	2,589
Total liabilities	33,762
Total purchase price	$	225,000

The $161.1 million of goodwill arising from the 340B Link Business acquisition is primarily attributed to sales of future software-enabled services and solutions and the 340B Link Business’s assembled workforce. Goodwill that is expected to be deductible for tax purposes is approximately $93.9 million.

Intangible assets eligible for recognition separate from goodwill were those that satisfied either the contractual/legal criterion or the separability criterion in the accounting guidance. The identifiable intangible assets acquired and their estimated useful lives for amortization are as follows:


	304B Link Business
	Fair value		Useful life (years)

	(In thousands, except for years)
Customer relationships	$	53,000	21
Acquired technology	9,000		5

Trade names	200		1
Non-compete agreements	600		3

Total purchased intangible assets	$	62,800

The customer relationships intangible asset represents the fair value of the underlying relationships and agreements with the 340B Link Business’s customers. The acquired technology intangible asset represents the fair value of the 340B Link Business's portfolio of software and solutions that have reached technological feasibility and were part of the 340B Link Business’s offerings at the date of acquisition. The trade names intangible asset represents the fair value of brand and name recognition associated with the marketing of the 340B Link Business's software-enabled services and solutions. The non-compete agreements intangible asset represents the fair value of non-compete agreements with former key members of the 340B Link Business's management.

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The fair value of the customer relationships intangible asset was determined based on the excess earnings method; the fair values of the acquired technology and trade names intangible assets were determined based on the relief-from-royalty

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method; and the fair value of the non-compete agreements intangible asset was determined based on the lost profits method. The key assumptions used in estimating the fair values of intangible assets included forecasted financial information; customer attrition rates; royalty rates of 10.0% and 0.5% for the acquired technology and trade names intangible assets, respectively; a discount rate of 14.0% for all intangible assets; and certain other assumptions.

The customer relationships and acquired technology intangible assets are being amortized using a double-declining method of amortization as such method better represents the economic benefits to be obtained. The trade names and non-compete agreements are being amortized over their estimated useful lives using the straight-line method of amortization.

The Company believes that the fair value assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that market participants would use. Actual results may differ from these estimates and assumptions.

Pro Forma Financial Information

The following table presents certain unaudited pro forma information for illustrative purposes only, for the three and six months ended ~~March 31,~~June 30, 2020 as if ~~this~~the 340B Link Business acquisition had been completed on January 1, 2019. The pro forma information is not indicative of what would have occurred had the acquisition taken place on January 1, 2019. The unaudited pro forma information combines the historical results of the acquisition with the Company’s consolidated historical results and includes certain adjustments including, but not limited to, amortization and depreciation of intangible assets and property and equipment acquired; imputed interest, interest expense, and amortization of debt issuance costs for the indebtedness incurred to complete the acquisition; and acquisition-related costs incurred.


	~~Three Months Ended~~
	~~March 31, 2020~~

	~~(In thousands, except per share data)~~
~~Pro forma revenues~~	$	~~238,647~~
~~Pro forma net income~~	$	~~10,694~~


	Three Months Ended June 30,		Six Months Ended June 30,
	2020		2020

	(In thousands)
Pro forma revenues	$	208,868	$	447,515
Pro forma net income (loss)	$	(3,803)	$	6,891

Note 3. Revenues

Revenue Recognition

The Company earns revenues from sales of its products and related services, which are sold in the healthcare industry, its principal market. The Company’s customer arrangements typically include one or more of the following revenue categories:

Connected devices, software licenses, and other. Software-enabled connected devices and software licenses that manage and regulate the storage and dispensing of pharmaceuticals, consumables blister cards, and packaging equipment and other supplies. This revenue category is often sold through long-term, sole-source agreements with multi-year co-development plans. Solutions in this category include, but are not limited to, XT Series automated dispensing systems, the XR2 Automated Central Pharmacy ~~system,~~System, and IV compounding automation solutions.

Technical services. Post-installation technical support and other related services, including phone support, on-site service, parts, and access to unspecified software updates and enhancements, if and when available. This revenue category is often supported by multi-year or annual contractual agreements.

Consumables. Medication adherence packaging, labeling, and other one-time use packaging including multimed adherence packaging and single dose blister cards which are used by retail, community, and outpatient pharmacies, as well as by institutional pharmacies serving long-term care and other sites outside the acute care hospital, and are designed to improve patient engagement and adherence to prescriptions.

Software-as-a-service (“SaaS”), subscription software, and technology-enabled services. Emerging software and service solutions which are offered on a subscription basis with fees typically based either on transaction volume or a fee over a specified period of time. Solutions in this category include, but are not limited to, EnlivenHealth™ (formerly Population Health Solutions), 340B solutions, and services associated with Omnicell One™ (formerly Performance Center), Central Pharmacy Dispensing Services, including the XR2 Automated Central Pharmacy ~~system,~~System, and Central Pharmacy Compounding Services, including IV compounding automation solutions.

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The following table summarizes revenue recognition for each revenue category:

Revenue Category

Timing of Revenue Recognition

Income Statement Classification

Connected devices, software licenses, and other

Point in time, as transfer of control occurs, generally upon installation and acceptance by the customer

Product

Technical services

Over time, as services are provided, typically ratably over the service term

Service

Consumables

Point in time, as transfer of control occurs, generally upon shipment to or receipt by customer

Product

SaaS, subscription software, and technology-enabled services

Over time, as services are provided

Service

A portion of the Company’s sales are made to customers who are members of Group Purchasing Organizations (“GPOs”) and Federal agencies that purchase under a Federal Supply Schedule contract with the Department of Veterans Affairs (the "GSA Contract"). GPOs are often owned fully or in part by the Company’s customers, and the Company pays fees to the GPO on completed contracts. The Company also pays the Industrial Funding Fee ("IFF") to the Department of Veterans Affairs under the GSA Contract. The Company considers these fees consideration paid to customers and records them as reductions to revenue. Fees to GPOs and the IFF were ~~$3.4~~$4.2 million and ~~$2.9~~$1.7 million for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $7.6 million and $4.6 million for the six months ended June 30, 2021 and 2020, respectively.

Disaggregation of Revenues

The following table summarizes the Company’s revenues disaggregated by revenue type for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020					2021		2020		2021		2020

		(In thousands)				(In thousands)
Connected devices, software licenses, and other	Connected devices, software licenses, and other	$	159,718	$	147,347			Connected devices, software licenses, and other	$	179,044	$	121,377	$	338,762	$	268,724
Technical services	Technical services	50,860		49,519				Technical services	51,932		50,178		102,792		99,697
Consumables	Consumables	18,407		22,726				Consumables	17,867		17,565		36,274		40,291
SaaS, subscription software, and technology-enabled services	SaaS, subscription software, and technology-enabled services	22,858		10,094				SaaS, subscription software, and technology-enabled services	23,896		10,501		46,754		20,595
Total revenues	Total revenues	$	251,843	$	229,686			Total revenues	$	272,739	$	199,621	$	524,582	$	429,307

The following table summarizes the Company’s revenues disaggregated by geographic region, which is determined based on customer location, for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020					2021		2020		2021		2020

		(In thousands)				(In thousands)
United States	United States	$	224,276	$	207,734			United States	$	242,859	$	178,052	$	467,135	$	385,786
Rest of world (1)	Rest of world (1)	27,567		21,952				Rest of world (1)	29,880		21,569		57,447		43,521
Total revenues	Total revenues	$	251,843	$	229,686			Total revenues	$	272,739	$	199,621	$	524,582	$	429,307

(1) No individual country represented more than 10% of total revenues.

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Contract Assets and Contract Liabilities

The following table reflects the Company’s contract assets and contract liabilities:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020

		(In thousands)					(In thousands)
Short-term unbilled receivables, net (1)	Short-term unbilled receivables, net (1)	$	12,184	$	13,895	Short-term unbilled receivables, net (1)	$	12,465	$	13,895
Long-term unbilled receivables, net (2)	Long-term unbilled receivables, net (2)	14,856		17,205		Long-term unbilled receivables, net (2)	15,074		17,205
Total contract assets	Total contract assets	$	27,040	$	31,100	Total contract assets	$	27,539	$	31,100

Short-term deferred revenues, net	Short-term deferred revenues, net	$	119,588	$	100,053	Short-term deferred revenues, net	$	121,305	$	100,053
Long-term deferred revenues	Long-term deferred revenues	7,887		5,673		Long-term deferred revenues	11,875		5,673
Total contract liabilities	Total contract liabilities	$	127,475	$	105,726	Total contract liabilities	$	133,180	$	105,726

(1) Included in accounts receivable and unbilled receivables in the Condensed Consolidated Balance Sheets.

(2) Included in other long-term assets in the Condensed Consolidated Balance Sheets.

The portion of the transaction price allocated to the Company’s unsatisfied performance obligations for which invoicing has occurred is recorded as deferred revenues.

Short-term deferred revenues of ~~$119.6~~$121.3 million and $100.1 million include deferred revenues from product sales and service contracts, net of deferred cost of sales of ~~$20.8~~$21.4 million and $21.0 million, as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. The short-term deferred revenues from product sales relate to delivered and invoiced products, pending installation and acceptance, expected to occur within the next twelve months. During the three and six months ended ~~March 31,~~June 30, 2021, the Company recognized revenues of ~~$47.3~~$23.8 million and $71.1 million, respectively, that were included in the corresponding gross short-term deferred revenues balance of $121.1 million as of December 31, 2020.

Long-term deferred revenues include deferred revenues from product and service contracts of ~~$7.9~~$11.9 million and $5.7 million as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. Remaining performance obligations are primarily recognized ratably over the remaining term of the contract, generally not more than ten years.

Significant Customers

There were no customers that accounted for more than 10% of the Company’s total revenues for the three and six months ended ~~March 31,~~June 30, 2021 and 2020. Also, there were no customers that accounted for more than 10% of the Company’s accounts receivable balance as of ~~March 31,~~June 30, 2021 and December 31, 2020.

Note 4. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of shares outstanding during the period. In periods of net loss, all potential common shares are anti-dilutive, so diluted net loss per share equals the basic net loss per share. In periods of net income, diluted net income per share is computed by dividing net income for the period by the basic weighted-average number of shares plus any dilutive potential common stock outstanding during the period, using the treasury stock method. Potential common stock includes the effect of outstanding dilutive stock options, restricted stock awards, and restricted stock units, as well as shares the Company could be obligated to issue from its convertible senior notes and warrants, as described in Note 10, Convertible Senior Notes. Any anti-dilutive weighted-average dilutive shares related to stock award plans, convertible senior notes, and warrants are excluded from the computation of the diluted net income per share.

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The basic and diluted net income (loss) per share calculations for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 were as follows:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020					2021		2020		2021		2020

		(In thousands, except per share data)				(In thousands, except per share data)
Net income		$	14,127	$	11,311
Net income (loss)								Net income (loss)	$	20,424	$	(4,299)	$	34,551	$	7,012
Weighted-average shares outstanding – basic	Weighted-average shares outstanding – basic	42,962		42,357				Weighted-average shares outstanding – basic	43,262		42,659		43,113		42,509
Effect of dilutive securities from stock award plans	Effect of dilutive securities from stock award plans	1,980		1,264				Effect of dilutive securities from stock award plans	2,066		0		2,040		1,107
Effect of convertible senior notes	Effect of convertible senior notes	1,425		0				Effect of convertible senior notes	1,778		0		1,612		0
Weighted-average shares outstanding – diluted	Weighted-average shares outstanding – diluted	46,367		43,621				Weighted-average shares outstanding – diluted	47,106		42,659		46,765		43,616

Net income per share – basic		$	0.33	$	0.27
Net income per share – diluted		$	0.30	$	0.26
Net income (loss) per share – basic								Net income (loss) per share – basic	$	0.47	$	(0.10)	$	0.80	$	0.16
Net income (loss) per share – diluted								Net income (loss) per share – diluted	$	0.43	$	(0.10)	$	0.74	$	0.16

Anti-dilutive weighted-average shares related to stock award plans	Anti-dilutive weighted-average shares related to stock award plans	287		1,744				Anti-dilutive weighted-average shares related to stock award plans	199		4,931		290		1,929
Anti-dilutive weighted-average shares related to warrants	Anti-dilutive weighted-average shares related to warrants	5,908		0				Anti-dilutive weighted-average shares related to warrants	5,908		0		5,908		0

Note 5. Cash and Cash Equivalents and Fair Value of Financial Instruments

Cash and cash equivalents of ~~$548.1~~$614.2 million and $485.9 million as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively, consisted of bank accounts and highly-liquid U.S. Government money market funds held in sweep and asset management accounts with major financial institutions. As of ~~March 31,~~June 30, 2021 and December 31, 2020, cash equivalents were ~~$502.3~~$566.9 million and $447.2 million, respectively, which consisted of money market funds held in sweep and asset management accounts.

Fair Value Hierarchy

The Company measures its financial instruments at fair value. The Company’s cash, cash equivalents, and restricted cash are classified within Level 1 of the fair value hierarchy as they are valued primarily using quoted market prices utilizing market observable inputs. The Company's credit facility is classified within Level 2 as the valuation inputs are based on quoted prices or market observable data of similar instruments. The Company's convertible senior notes are classified within Level 2 as the valuation inputs are based on quoted prices in an inactive market on the last day in the reporting period. As of ~~March 31,~~June 30, 2021, the fair value of the convertible senior notes was ~~$816.8~~$931.2 million, compared to their carrying value of ~~$472.3~~$477.6 million, which is net of unamortized discount and debt issuance costs and excludes amounts classified within additional paid-in capital. Refer to Note 9, Debt and Credit Agreement, for further information regarding the Company’s credit facility and Note 10, Convertible Senior Notes, for further information regarding the Company’s convertible senior notes.

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Note 6. Balance Sheet Components

Balance sheet details as of ~~March 31,~~June 30, 2021 and December 31, 2020 are presented in the tables below:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020

		(In thousands)					(In thousands)
Inventories:	Inventories:					Inventories:
Raw materials	Raw materials	$	30,331	$	28,205	Raw materials	$	31,620	$	28,205
Work in process	Work in process	6,961		7,973		Work in process	8,590		7,973
Finished goods	Finished goods	58,916		60,120		Finished goods	60,975		60,120
Total inventories	Total inventories	$	96,208	$	96,298	Total inventories	$	101,185	$	96,298

Other current assets:	Other current assets:					Other current assets:
Funds held for customers, including restricted cash (1)	Funds held for customers, including restricted cash (1)	$	17,228	$	18,164	Funds held for customers, including restricted cash (1)	$	18,661	$	18,164
Net investment in sales-type leases, current portion	Net investment in sales-type leases, current portion	10,222		10,246		Net investment in sales-type leases, current portion	10,364		10,246
Prepaid income taxes	Prepaid income taxes	7,071		10,095		Prepaid income taxes	6,569		10,095
Other current assets	Other current assets	2,435		2,539		Other current assets	5,878		2,539
Total other current assets	Total other current assets	$	36,956	$	41,044	Total other current assets	$	41,472	$	41,044

Other long-term assets:	Other long-term assets:					Other long-term assets:
Capitalized software, net	Capitalized software, net	$	95,632	$	94,027	Capitalized software, net	$	96,588	$	94,027
Unbilled receivables, net	Unbilled receivables, net	14,856		17,205		Unbilled receivables, net	15,074		17,205
Deferred debt issuance costs	Deferred debt issuance costs	3,979		4,253		Deferred debt issuance costs	3,704		4,253
Other long-term assets	Other long-term assets	3,976		3,804		Other long-term assets	4,376		3,804
Total other long-term assets	Total other long-term assets	$	118,443	$	119,289	Total other long-term assets	$	119,742	$	119,289

Accrued liabilities:	Accrued liabilities:					Accrued liabilities:
Operating lease liabilities, current portion	Operating lease liabilities, current portion	$	12,236	$	12,197	Operating lease liabilities, current portion	$	12,370	$	12,197
Customer fund liabilities	Customer fund liabilities	17,228		18,164		Customer fund liabilities	18,661		18,164
Advance payments from customers	Advance payments from customers	7,426		6,981		Advance payments from customers	7,069		6,981
Rebates and lease buyouts	Rebates and lease buyouts	24,838		21,815		Rebates and lease buyouts	28,836		21,815
Group purchasing organization fees	Group purchasing organization fees	4,802		4,412		Group purchasing organization fees	5,772		4,412
Taxes payable	Taxes payable	3,544		3,520		Taxes payable	3,303		3,520
Other accrued liabilities	Other accrued liabilities	14,001		13,222		Other accrued liabilities	15,114		13,222
Total accrued liabilities	Total accrued liabilities	$	84,075	$	80,311	Total accrued liabilities	$	91,125	$	80,311

(1) Includes restricted cash of ~~$1.4~~$0.7 million and $4.0 million as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), which consisted of foreign currency translation adjustments, for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:


		Three Months Ended March 31,			Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020	2021	2020			2021	2020
		Foreign currency translation adjustments					Foreign currency translation adjustments

		(In thousands)			(In thousands)
Beginning balance	Beginning balance	$	(5,522)				$	(9,446)			Beginning balance	$	(6,143)	$	(14,140)	$	(5,522)	$	(9,446)
Other comprehensive loss		(621)					(4,694)
Other comprehensive income (loss)											Other comprehensive income (loss)	652		451		31		(4,243)

Ending balance	Ending balance	$	(6,143)				$	(14,140)			Ending balance	$	(5,491)	$	(13,689)	$	(5,491)	$	(13,689)

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Note 7. Property and Equipment

The following table represents the property and equipment balances as of ~~March 31,~~June 30, 2021 and December 31, 2020:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020

		(In thousands)					(In thousands)
Equipment	Equipment	$	85,724	$	81,034	Equipment	$	88,052	$	81,034
Furniture and fixtures	Furniture and fixtures	7,422		7,498		Furniture and fixtures	7,333		7,498
Leasehold improvements	Leasehold improvements	20,025		19,517		Leasehold improvements	20,192		19,517
Software	Software	51,992		50,230		Software	56,765		50,230
Construction in progress	Construction in progress	6,366		7,095		Construction in progress	5,773		7,095
Property and equipment, gross	Property and equipment, gross	171,529		165,374		Property and equipment, gross	178,115		165,374
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(110,991)		(106,301)		Accumulated depreciation and amortization	(115,792)		(106,301)
Total property and equipment, net	Total property and equipment, net	$	60,538	$	59,073	Total property and equipment, net	$	62,323	$	59,073

Depreciation and amortization expense of property and equipment was ~~$4.8~~$4.9 million and ~~$4.3~~$4.7 million for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $9.7 million and $9.0 million for the six months ended June 30, 2021 and 2020, respectively.

The geographic location of the Company's property and equipment, net, is based on the physical location in which it is located. The following table summarizes the geographic information for property and equipment, net, as of ~~March 31,~~June 30, 2021 and December 31, 2020:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020

		(In thousands)					(In thousands)
United States	United States	$	55,227	$	53,203	United States	$	57,269	$	53,203
Rest of world (1)	Rest of world (1)	5,311		5,870		Rest of world (1)	5,054		5,870
Total property and equipment, net	Total property and equipment, net	$	60,538	$	59,073	Total property and equipment, net	$	62,323	$	59,073

(1) No individual country represented more than 10% of total property and equipment, net.

Note 8. Goodwill and Intangible Assets

Goodwill

The following table represents changes in the carrying amount of goodwill:

December 31,
2020 Additions Foreign currency exchange rate fluctuations March 31,
2021
(In thousands)
Goodwill $ 499,309 0 (244) $ 499,065


	December 31, 2020		Additions	Foreign currency exchange rate fluctuations	June 30, 2021

	(In thousands)
Goodwill	$	499,309	0	(43)	$	499,266

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Intangible Assets, Net

The carrying amounts and useful lives of intangible assets as of ~~March 31,~~June 30, 2021 and December 31, 2020 were as follows:


		March 31, 2021										June 30, 2021
		Gross carrying amount		Accumulated amortization		Foreign currency exchange rate fluctuations		Net carrying amount		Useful life (years)		Gross carrying amount (1)		Accumulated amortization		Foreign currency exchange rate fluctuations		Net carrying amount		Useful life (years)

		(In thousands, except for years)										(In thousands, except for years)
Customer relationships	Customer relationships	$	187,889	$	(67,464)	$	(816)	$	119,609	10 - 30	Customer relationships	$	187,889	$	(70,588)	$	(780)	$	116,521	10 - 30
Acquired technology	Acquired technology	86,029		(47,600)		6		38,435		5 - 20	Acquired technology	85,666		(49,904)		6		35,768		5 - 20
Backlog		1,150		(1,150)		—		0		4

Trade names	Trade names	7,850		(5,985)		14		1,879		1 - 12	Trade names	7,000		(5,327)		14		1,687		1 - 12
Patents	Patents	2,899		(1,507)		1		1,393		2 - 20	Patents	2,890		(1,542)		1		1,349		2 - 20
Non-compete agreements	Non-compete agreements	600		(100)		—		500		3	Non-compete agreements	600		(150)		—		450		3

Total intangibles assets, net	Total intangibles assets, net	$	286,417	$	(123,806)	$	(795)	$	161,816		Total intangibles assets, net	$	284,045	$	(127,511)	$	(759)	$	155,775


	December 31, 2020
	Gross carrying amount (1)		Accumulated amortization		Foreign currency exchange rate fluctuations		Net carrying amount		Useful life (years)

	(In thousands, except for years)
Customer relationships	$	187,889	$	(64,254)	$	(777)	$	122,858	10 - 30
Acquired technology	86,029		(44,851)		6		41,184		5 - 20
Backlog	1,150		(1,078)		—		72		4
Trade names	7,850		(5,794)		14		2,070		1 - 12
Patents	2,930		(1,455)		2		1,477		2 - 20
Non-compete agreements	600		(50)		—		550		3

Total intangibles assets, net	$	286,448	$	(117,482)	$	(755)	$	168,211

December 31, 2020
Gross carrying
amount Accumulated
amortization Foreign currency exchange rate fluctuations Net carrying
amount Useful life
(years)
(In thousands, except for years)
Customer relationships $ 187,889 $ (64,254) $ (777) $ 122,858 10 - 30
Acquired technology 86,029 (44,851) 6 41,184 5 - 20
Backlog 1,150 (1,078) — 72 4
Trade names 7,850 (5,794) 14 2,070 1 - 12
Patents 2,930 (1,455) 2 1,477 2 - 20
Non-compete agreements 600 (50) — 550 3
Total intangibles assets, net $ 286,448 $ (117,482) $ (755) $ 168,211
(1) The differences in gross carrying amounts between periods are primarily due to the write-off of certain fully amortized intangible assets.

Amortization expense of intangible assets was ~~$6.3~~$6.1 million and ~~$4.5~~$4.4 million for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $12.4 million and $8.9 million for the six months ended June 30, 2021 and 2020, respectively.

The estimated future amortization expenses for amortizable intangible assets were as follows:


		March 31, 2021			June 30, 2021

		(In thousands)			(In thousands)
Remaining nine months of 2021		$	17,675
Remaining six months of 2021				Remaining six months of 2021	$	11,612
2022	2022	21,167		2022	21,176
2023	2023	19,145		2023	19,153
2024	2024	12,856		2024	12,865
2025	2025	11,586		2025	11,608
Thereafter	Thereafter	79,387		Thereafter	79,361
Total	Total	$	161,816	Total	$	155,775

Note 9. Debt and Credit Agreement

2019 Revolving Credit Facility

On November 15, 2019, the Company entered into an Amended and Restated Credit Agreement (as subsequently amended as discussed below, the “A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo

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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 A&R Credit Agreement superseded the Company’s 2016 secured credit facility (the “Prior Credit Agreement”) and provides for (a) a five-year revolving credit facility of $500.0 million (the “Revolving Credit

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Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million (the “Incremental Facility”). In addition, the 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 A&R Credit Agreement has an expiration date of November 15, 2024, upon which date all remaining outstanding borrowings will be due and payable.

Loans under the Revolving Credit Facility bear interest, at the Company’s option, at a rate equal to either (a) the LIBOR Rate, plus an applicable margin ranging from 1.25% to 2.00% per annum based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the A&R Credit Agreement), or (b) an alternate base rate equal to the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50%, and (iii) LIBOR for an interest period of one month plus 1.00%, plus an applicable margin ranging from 0.25% to 1.00% per annum based on the Company’s Consolidated Total Net Leverage Ratio. Undrawn commitments under the Revolving Credit Facility are subject to a commitment fee ranging from 0.15% to 0.30% per annum based on the Company’s Consolidated Total Net Leverage Ratio on the average daily unused portion of the Revolving Credit Facility. The applicable margin for, and certain other terms of, any term loans under the Incremental Facility will be determined prior to the incurrence of such loans. The Company is permitted to make voluntary prepayments at any time without payment of a premium or penalty.

On September 22, 2020, the parties entered into an amendment (the “Amendment”) to the A&R Credit Agreement to, among other changes, permit the issuance of the convertible senior notes and the purchase of the convertible note hedge transactions, as described in Note 10, Convertible Senior Notes, expand the Company’s flexibility to repurchase its common stock and make other restricted payments, and replace the total net leverage covenant with a new secured net leverage covenant that requires the Company to maintain a consolidated secured net leverage ratio not to exceed 3.50:1 for the calendar quarters ending September 30, 2020, December 31, 2020, and March 31, 2021 and 3.00:1 for the calendar quarters ending thereafter.

The A&R Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, dividends, and other distributions. The A&R Credit Agreement contains financial covenants that require the Company and its subsidiaries to not exceed a maximum total secured net leverage ratio (as described above) and maintain a minimum interest coverage ratio. In addition, the A&R Credit Agreement contains certain customary events of default including, but not limited to, failure to pay interest, principal and fees, or other amounts when due, material misrepresentations or misstatements in any representation or warranty, covenant defaults, certain cross defaults to other material indebtedness, certain judgment defaults, and events of bankruptcy. The Company’s obligations under the A&R Credit Agreement and any swap obligations and banking services obligations owing to a lender (or an affiliate of a lender) are guaranteed by certain of its domestic subsidiaries and secured by substantially all of its and such subsidiary guarantors’ assets. In connection with entering into the A&R Credit Agreement, and as a condition precedent to borrowing loans thereunder, the Company and certain of the Company’s other direct and indirect subsidiaries have entered into certain ancillary agreements, including, but not limited to, a reaffirmation agreement, which amends certain terms of the existing collateral agreement and reaffirms their obligations under the existing guaranty agreement. The Company was in full compliance with all covenants as of ~~March 31,~~June 30, 2021.

The refinancing of the Prior Credit Agreement by means of the A&R Credit Agreement was evaluated in accordance with ASC 470-50, Debt - Modifications and Extinguishments. In determining whether the refinancing was to be accounted for as a debt extinguishment or a debt modification, the Company considered whether lenders within the syndicate remained the same or changed and whether the changes in debt terms were substantial. This assessment was performed on an individual lender basis within the syndicate. As a result, the refinancing was accounted for as a modification with the exception of certain lenders that exited the syndicate. The exit of certain lenders resulted in an immaterial write-off of existing unamortized debt issuance costs. The remaining unamortized debt issuance costs related to debt modification, along with the new deferred costs, will be amortized over the remaining term of the A&R Credit Agreement.

In connection with the A&R Credit Agreement, the Company incurred and capitalized an additional $2.3 million of debt issuance costs. In connection with the Amendment on September 22, 2020, the Company incurred and capitalized an additional $0.6 million of debt issuance costs. The debt issuance costs are being amortized to interest expense using the straight-line method through 2024. Amortization expense related to debt issuance costs for credit agreements was approximately $0.3 million and $0.2 million for the three months ended ~~March 31,~~June 30, 2021 and 2020, ~~respectively.~~respectively, and approximately $0.5 million for both the six months ended June 30, 2021 and 2020.

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The following table represents changes in the balance of the Company's deferred debt issuance costs:


	(In thousands)
Balance as of December 31, 2020	$	4,253
Additions	0
Amortization	~~(274)~~(549)
Balance as of ~~March 31,~~June 30, 2021	$	~~3,979~~3,704

As of each of ~~March 31,~~June 30, 2021 and December 31, 2020, there was 0 outstanding balance for the Revolving Credit Facility.

Note 10. Convertible Senior Notes

0.25% Convertible Senior Notes due 2025

On September 25, 2020, the Company completed a private offering of $575.0 million aggregate principal amount of 0.25% convertible senior notes (the “Notes”), including the exercise in full of the initial purchasers’ option to purchase up to an additional $75.0 million principal amount of the Notes. The Company received proceeds from the issuance of the Notes of $559.7 million, net of $15.3 million of transaction fees and other debt issuance costs. The Notes bear interest at a rate of 0.25% per year, payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2021. The Notes were issued pursuant to an indenture, dated September 25, 2020 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The Notes are general senior, unsecured obligations of the Company and will mature on September 15, 2025, unless earlier redeemed, repurchased or converted.

The Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding May 15, 2025, only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ended on December 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Notes on each applicable trading day; (ii) during the 5 business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Notes on each such trading day; (iii) if the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; and (iv) upon the occurrence of specified corporate events, as specified in the Indenture. On or after May 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time, regardless of the foregoing conditions.

During the three months ended ~~March 31,~~June 30, 2021, the conditional conversion feature of the Notes was triggered, based on the price of the Company’s common stock, as the last reported sale price of the Company’s common stock was greater than or equal to 130% of the then applicable conversion price for the Notes for at least 20 trading days during the period of 30 consecutive trading days ending on ~~March 31,~~June 30, 2021, the last trading day of the fiscal quarter. Accordingly, the Notes are convertible, in whole or in part, at the option of the holders during the ~~second~~third quarter of 2021. Whether the Notes will be convertible following the ~~second~~third fiscal quarter of 2021 will depend on the continued satisfaction of this condition or another conversion condition in the future. The Company continues to classify the Notes as a long-term liability in its Condensed Consolidated Financial Statements as of ~~March 31,~~June 30, 2021 based on contractual settlement provisions.

Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. The initial conversion rate for the Notes is 10.2751 shares of the Company’s common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $97.32 per share of the Company’s common stock, subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following certain corporate events that occur prior to the maturity date of the Notes or if the Company delivers a notice of redemption in respect of the Notes, the Company will, under certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes (or any portion thereof) in connection with such a corporate event or convert its Notes called (or deemed called) for redemption during the related redemption period (as defined in the Indenture), as the case may be.

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If the Company undergoes a fundamental change, holders may require, subject to certain exceptions, the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal

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amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. As of ~~March 31,~~June 30, 2021, none of the criteria for a fundamental change or a conversion rate adjustment had been met.

The Company may not redeem the Notes prior to September 20, 2023. The Company may redeem for cash all or any portion of the Notes, at its option, on or after September 20, 2023, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company redeems less than all of the outstanding Notes, at least $150.0 million aggregate principal amount of Notes must be outstanding and not subject to redemption as of the date of the relevant notice of redemption. No sinking fund is provided for in the Notes.

Convertible debt instruments that may be settled in cash are required to be separated into liability and equity components. The allocation to the liability component is based on the fair value of a similar instrument that does not contain an equity conversion option. Based on this debt-to-equity ratio, debt issuance costs are then allocated to the liability and equity components in a similar manner. Accordingly, at issuance, the Company allocated $461.8 million to the debt liability and $72.7 million to additional paid-in capital, net of applicable issuance costs and deferred taxes. The difference between the principal amount of the Notes and the liability component, inclusive of issuance costs, represents the debt discount, which the Company will amortize to interest expense over the term of the Notes using an effective interest rate of 4.18%. The determination of the discount rate required certain estimates and assumptions. As of ~~March 31,~~June 30, 2021, the remaining life of the Notes and the related debt discount and issuance cost accretion is approximately ~~4.5~~4.2 years.

The maximum number of shares issuable upon conversion, including the effect of a fundamental change and subject to other conversion rate adjustments, would be 8.1 million shares. As of ~~March 31,~~June 30, 2021, the if-converted value of the Notes exceeded the principal amount by ~~$192.3~~$319.8 million.

The Notes consisted of the following balances reported in the Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2021 and December 31, 2020:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020

		(In thousands)					(In thousands)
Liability:	Liability:					Liability:
Principal amount	Principal amount	$	575,000	$	575,000	Principal amount	$	575,000	$	575,000
Unamortized discount	Unamortized discount	(91,173)		(95,744)		Unamortized discount	(86,549)		(95,744)
Unamortized debt issuance costs	Unamortized debt issuance costs	(11,480)		(12,055)		Unamortized debt issuance costs	(10,897)		(12,055)
Convertible senior notes, liability component	Convertible senior notes, liability component	$	472,347	$	467,201	Convertible senior notes, liability component	$	477,554	$	467,201

Convertible senior notes, equity component (1)	Convertible senior notes, equity component (1)	$	72,732	$	72,732	Convertible senior notes, equity component (1)	$	72,732	$	72,732

(1) Included in additional paid-in capital in the Condensed Consolidated Balance Sheets.

The following table summarizes the components of interest expense resulting from the Notes recognized in interest and other income (expense), net in the Condensed Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2021:

~~Three Months Ended~~

~~March 31, 2021~~

~~(In thousands)~~

~~Contractual coupon interest~~

~~359~~

~~Amortization of discount~~

~~4,571~~

~~Amortization of debt issuance costs~~

~~575~~


	Three Months Ended June 30,		Six Months Ended June 30,
	2021		2021

	(In thousands)
Contractual coupon interest	$	359	$	719
Amortization of discount	$	4,624	$	9,195
Amortization of debt issuance costs	$	583	$	1,158

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Convertible Note Hedge and Warrant Transactions

In connection with the issuance of the Notes, the Company entered into convertible note hedge and warrant transactions with an affiliate of one of the initial purchasers of the Notes and certain other financial institutions (the “option counterparties”) with respect to the Company’s common stock.

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The convertible note hedge consists of an option for the Company to purchase up to approximately 5.9 million shares of the Company’s common stock, which is equal to the number of shares of the Company’s common stock underlying the Notes, at an initial strike price of approximately $97.32 per share. The convertible note hedge will expire upon the maturity of the Notes, if not earlier exercised or terminated. The cost of the convertible note hedge was approximately $100.6 million and was accounted for as an equity instrument, which was recorded in additional paid-in capital in the Condensed Consolidated Balance Sheets. The Company recorded a deferred tax asset of $25.8 million at issuance related to the convertible note hedge transaction. The convertible note hedge is expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes.

Separately from the convertible note hedge, the Company entered into warrant transactions to sell to the option counterparties warrants to acquire, subject to customary anti-dilution adjustments, up to approximately 5.9 million shares of its common stock in the aggregate at an initial strike price of $141.56 per share. The warrants require net share or net cash settlement upon the Company’s election. The Company received aggregate proceeds of approximately $51.3 million for the issuance of the warrants, which was recorded in additional paid-in capital at issuance in the Condensed Consolidated Balance Sheets. The warrants could separately have a dilutive effect to the Company’s common stock to the extent that the market price per share of its common stock exceeds the strike price of the warrants.

Note 11. Lessor Leases

Sales-Type Leases

On a recurring basis, the Company enters into multi-year, sales-type lease agreements, with the majority varying in length from one to five years. The Company optimizes cash flows by selling a majority of its non-U.S. government sales-type leases to third-party leasing finance companies on a non-recourse basis. The Company has no obligation to the leasing company once the lease has been sold. Some of the Company's sales-type leases, mostly those relating to U.S. government hospitals which comprise approximately ~~66%~~68% of the lease receivable balance, are retained in-house.

The following table presents the Company’s income recognized from sales-type leases for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020					2021		2020		2021		2020

		(In thousands)				(In thousands)
Sales-type lease revenues	Sales-type lease revenues	$	5,963	$	6,392			Sales-type lease revenues	$	4,648	$	6,612	$	10,611	$	13,004
Cost of sales-type lease revenues	Cost of sales-type lease revenues	(2,366)		(2,569)				Cost of sales-type lease revenues	(1,613)		(2,655)		(3,979)		(5,224)
Selling profit on sales-type lease revenues	Selling profit on sales-type lease revenues	$	3,597	$	3,823			Selling profit on sales-type lease revenues	$	3,035	$	3,957	$	6,632	$	7,780

Interest income on sales-type lease receivables	Interest income on sales-type lease receivables	$	497	$	461			Interest income on sales-type lease receivables	$	439	$	526	$	936	$	987

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The receivables as a result of these types of transactions are collateralized by the underlying equipment leased and consist of the following components at ~~March 31,~~June 30, 2021 and December 31, 2020:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020

		(In thousands)					(In thousands)
Net minimum lease payments to be received	Net minimum lease payments to be received	$	34,256	$	35,331	Net minimum lease payments to be received	$	32,458	$	35,331
Less: Unearned interest income portion	Less: Unearned interest income portion	(2,779)		(2,929)		Less: Unearned interest income portion	(2,479)		(2,929)
Net investment in sales-type leases	Net investment in sales-type leases	31,477		32,402		Net investment in sales-type leases	29,979		32,402
Less: Current portion (1)	Less: Current portion (1)	(10,222)		(10,246)		Less: Current portion (1)	(10,364)		(10,246)
Long-term investment in sales-type leases, net	Long-term investment in sales-type leases, net	$	21,255	$	22,156	Long-term investment in sales-type leases, net	$	19,615	$	22,156

(1) The current portion of the net investment in sales-type leases is included in other current assets in the Condensed Consolidated Balance Sheets.

The carrying amount of the Company’s sales-type lease receivables is a reasonable estimate of fair value.

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The maturity schedule of future minimum lease payments under sales-type leases retained in-house and the reconciliation to the net investment in sales-type leases reported on the Condensed Consolidated Balance Sheets was as follows:


		March 31, 2021			June 30, 2021

		(In thousands)			(In thousands)
Remaining nine months of 2021		$	8,485
Remaining six months of 2021				Remaining six months of 2021	$	5,755
2022	2022	10,002		2022	10,339
2023	2023	7,629		2023	7,693
2024	2024	4,826		2024	4,914
2025	2025	2,907		2025	2,979
Thereafter	Thereafter	407		Thereafter	778
Total future minimum sales-type lease payments	Total future minimum sales-type lease payments	34,256		Total future minimum sales-type lease payments	32,458
Present value adjustment	Present value adjustment	(2,779)		Present value adjustment	(2,479)
Total net investment in sales-type leases	Total net investment in sales-type leases	$	31,477	Total net investment in sales-type leases	$	29,979

Operating Leases

The Company entered into certain leasing agreements that were classified as operating leases prior to the adoption of ASC 842, Leases. These agreements in place prior to January 1, 2019 continue to be treated as operating leases, however any leasing agreements entered into on or after January 1, 2019 under these programs are classified and accounted for as sales-type leases in accordance with ASC 842. The operating lease arrangements generally have initial terms of one to seven years.

The following table represents the Company’s income recognized from operating leases for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:

Three Months Ended March 31,
2021 2020
(In thousands)
Rental income $ 2,611 $ 2,977


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

	(In thousands)
Rental income	$	3,193	$	3,024	$	5,804	$	6,001

Note 12. Lessee Leases

The Company has operating leases for office buildings, data centers, office equipment, and vehicles. The Company’s leases have initial terms of one to 12 years. As of ~~March 31,~~June 30, 2021, the Company did not have any additional material operating leases that were entered into, but not yet commenced.

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The maturity schedule of future minimum lease payments under operating leases and the reconciliation to the operating lease liabilities reported on the Condensed Consolidated Balance Sheets was as follows:


		March 31, 2021			June 30, 2021

		(In thousands)			(In thousands)
Remaining nine months of 2021		$	11,305
Remaining six months of 2021				Remaining six months of 2021	$	7,482
2022	2022	14,088		2022	14,174
2023	2023	10,199		2023	10,304
2024	2024	8,847		2024	8,921
2025	2025	6,413		2025	6,434
Thereafter	Thereafter	17,293		Thereafter	17,277
Total operating lease payments	Total operating lease payments	68,145		Total operating lease payments	64,592
Present value adjustment	Present value adjustment	(10,474)		Present value adjustment	(9,710)
Total operating lease liabilities (1)	Total operating lease liabilities (1)	$	57,671	Total operating lease liabilities (1)	$	54,882

(1) Amount consists of a current and long-term portion of operating lease liabilities of ~~$12.2~~$12.4 million and ~~$45.4~~$42.5 million, respectively. The current portion of the operating lease liabilities is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

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Operating lease costs were ~~$3.7~~$3.6 million and ~~$3.6~~$3.4 million for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $7.3 million and $7.0 million for the six months ended June 30, 2021 and 2020, respectively. Short-term lease costs and variable lease costs were immaterial for the three and six months ended ~~March 31,~~June 30, 2021 and 2020.

The following table summarizes supplemental cash flow information related to the Company’s operating leases for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020:


		Three Months Ended March 31,					Six Months Ended June 30,
		2021		2020			2021		2020

		(In thousands)					(In thousands)
Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities	$	3,972	$	3,735	Cash paid for amounts included in the measurement of lease liabilities	$	7,863	$	7,067
Right-of-use assets obtained in exchange for new lease liabilities	Right-of-use assets obtained in exchange for new lease liabilities	$	541	$	792	Right-of-use assets obtained in exchange for new lease liabilities	$	906	$	1,335

The following table summarizes the weighted-average remaining lease term and weighted-average discount rate related to the Company’s operating leases as of ~~March 31,~~June 30, 2021 and December 31, 2020:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Weighted-average remaining lease term, years	Weighted-average remaining lease term, years	5.8		5.9		Weighted-average remaining lease term, years	5.6		5.9
Weighted-average discount rate, %	Weighted-average discount rate, %	5.8	%	5.8	%	Weighted-average discount rate, %	5.8	%	5.8	%

Note 13. Commitments and Contingencies

Purchase Obligations

In the ordinary course of business, the Company issues purchase orders based on its current manufacturing needs. As of ~~March 31,~~June 30, 2021, the Company had non-cancelable purchase commitments of ~~$82.8~~$114.4 million, of which ~~$78.8~~$89.5 million are expected to be paid within the year ending December 31, 2021.

Legal Proceedings

The Company is currently involved in various legal proceedings.

A class action lawsuit was filed against the Company, on June 5, 2019, in the Circuit Court of Cook County, Illinois, Chancery Division, captioned Corey Heard, individually and on behalf of all others similarly situated v. Omnicell, Inc., Case No. 2019-CH-06817 (the “Heard Action”). The complaint seeks class certification, monetary damages in the form of statutory damages for willful and/or reckless or, in the alternative, negligent violation of the Illinois Biometric Information Privacy Act (“BIPA”), and certain declaratory, injunctive, and other relief based on causes of action directed to allegations of violation of BIPA by the Company. The complaint was served on the Company on June 13, 2019. On July 31, 2019, the Company filed a

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motion to stay or consolidate the case with the action Yana Mazya, et al. v. Northwestern Lake Forest Hospital, et al., Case No. 2018-CH-07161, pending in the Circuit Court of Cook County, Illinois, Chancery Division (the “Mazya Action”). The Court subsequently, on October 10, 2019, denied the motion, without prejudice, as being moot in view of the dismissal of the claims against the Company in the Mazya Action. The Company filed a motion to dismiss the complaint in the Heard Action on October 31, 2019. The hearing on the Company’s motion to dismiss was held on September 2, 2020. The Court ruled from the bench and dismissed the complaint without prejudice giving plaintiff leave to file an amended complaint by September 30, 2020. Plaintiff filed an amended complaint on September 30, 2020 and the Company subsequently filed a motion to dismiss the amended complaint on October 28, 2020. The Company's motion to dismiss is now fully briefed and the Court has scheduled oral argument on the motion for ~~June 4,~~September 17, 2021. The Company intends to defend the lawsuit vigorously.

On December 21, 2020, Becton, Dickinson and Company (“BD”) filed a complaint against the Company in the United States District Court for the Middle District of North Carolina, asserting claims of misappropriation under the Defend Trade Secrets Act, misappropriation under the North Carolina Trade Secrets Protection Act, unfair competition, and unfair/deceptive trade practices in violation of North Carolina law (the “Omnicell Complaint”). This action (the “Omnicell Action”) was commenced in relation to another action brought by BD, in the same Court (the “Related Matter”) against a former BD employee who is also a former Company employee (the “Former Employee”) alleging that the Former Employee had violated the Former Employee’s legal obligations to BD regarding BD’s confidential and trade secret information when the Former Employee allegedly downloaded certain documents from BD’s information technology system following the end of the Former Employee’s employment with BD. In connection with the Related Matter, BD, the Former Employee, and the Company entered into a protocol with the purpose of facilitating the return to BD of any BD documents that may have been resident, as a result of the Former Employee’s actions, on any devices belonging to the Former Employee or the Company. The Omnicell Complaint seeks injunctive relief and monetary damages in the form of compensatory, punitive, and exemplary damages, attorneys’ fees

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and costs, and pre-judgment and post-judgment interest. On March 17, 2021, the parties filed a joint motion to stay the Omnicell Action, which motion remains pending with the Court. On April 30, 2021, pending the decision from the Court regarding the joint motion to stay the Omnicell Action, the Company filed a consent motion for extension of time supported by BD to file the Company’s answer to the Omnicell Complaint. The consent motion was granted by the Court on ~~April 30, 2021, and~~June 8, 2021. The stay is in place for no more than 180 days, setting the deadline for filing the Company’s answer to the Omnicell Complaint as December 6, 2021, unless an extension to such stay is ~~now due June 3, 2021.~~mutually agreed to by the parties and approved by the Court. The Company intends to defend the lawsuit vigorously.

As required under ASC 450, Contingencies, the Company accrues for contingencies when it believes that a loss is probable and that it can reasonably estimate the amount of any such loss. The Company has not recorded any material accrual for contingent liabilities associated with the legal proceedings described above based on its belief that any potential loss, while reasonably possible, is not probable. Further, any possible range of loss in these matters cannot be reasonably estimated at this time or is not deemed material. The Company believes that it has valid defenses with respect to these legal proceedings pending against it. However, litigation is inherently unpredictable, and it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of any of these legal proceedings or because of the diversion of management’s attention and the creation of significant expenses.

Note 14. Income Taxes

The Company generally provides for income taxes in interim periods based on the estimated annual effective tax rate for the year, adjusting for discrete items in the quarter in which they arise. The annual effective tax rate before discrete items was ~~26.7%~~27.8% and ~~26.6%~~28.0% for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

The Company continued its global operational centralization activities and legal entity rationalization during the ~~first~~second quarter of 2021. The Company ~~did not recognize any gains or losses~~recognized an immaterial gain from such activities during the ~~three~~six months ended ~~March 31, 2020~~June 30, 2021, and ~~2021.~~did not recognize a gain or loss from such activities during the six months ended June 30, 2020. The Company recognized a discrete tax benefit related to equity compensation in the amount of ~~$4.1~~$8.2 million and ~~$2.8~~$3.3 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

The 2021 annual effective tax rate before discrete items differed from the statutory rate of 21% primarily due to the unfavorable impact of state income taxes and non-deductible compensation and equity charges, partially offset by the favorable impact of research and development credits and a foreign derived intangible income (“FDII”) benefit deduction. The 2020 annual effective tax rate before discrete items differed from the statutory rate of 21% primarily due to the unfavorable impact of state income taxes, non-deductible compensation and equity charges, and non-deductible expenses, partially offset by the favorable impact of research and development credits and a FDII benefit deduction.

On March 11, 2021, the President of the United States signed into law the “American Rescue Plan Act of 2021” (the “ARP Act”), which provides additional economic stimulus and tax credits, including the expansion and modification of the employee retention tax credit enacted by the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and the refundable tax credits for COVID-related paid sick and family leave enacted by the Family First Act. The Company does not expect these provisions of the ARP Act to have a material impact for income taxes. The ARP Act further provides revenue

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raising offsets to meet budget reconciliation rules, including the expansion of “covered employees” for purposes of the ~~section~~Internal Revenue Code of 1986, as amended, Section 162(m) limitation on the deduction for excessive employee remuneration rules to be applicable for taxable years beginning after December 31, 2026. The Company will continue to evaluate the impact of these provisions of the ARP Act on income taxes.

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company had gross unrecognized tax benefits of ~~$17.7~~$18.1 million and $18.2 million, respectively. It is the Company’s policy to classify accrued interest and penalties as part of ~~the~~ unrecognized tax benefits, but to record interest and penalties in interest and other income (expense), net in the Condensed Consolidated Statements of Operations. As of ~~March 31,~~June 30, 2021 and December 31, 2020, the amount of accrued interest and penalties was ~~$1.1~~$1.3 million and $1.4 million, respectively.

The Company files income tax returns in the United States and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities, including major jurisdictions such as the United States, Germany, Italy, Netherlands, and the United Kingdom. With few exceptions, as of ~~March 31,~~June 30, 2021, the Company was no longer subject to U.S., state, and foreign examination for years before 2017, 2016, and 2016, respectively.

Although the Company believes it has adequately provided for uncertain tax positions, the provisions on these positions may change as revised estimates are made or the underlying matters are settled or otherwise resolved. It is not possible at this time to reasonably estimate changes in the unrecognized tax benefits within the next twelve months.

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Note 15. Employee Benefits and Share-Based Compensation

Stock-Based Plans

For a detailed explanation of the Company's stock plans, refer to Note 14, Employee Benefits and Share-Based Compensation, of the ~~Company's~~audited Consolidated Financial Statements and accompanying Notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 24, 2021.

Share-Based Compensation Expense

The following table sets forth the total share-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020					2021		2020		2021		2020

		(In thousands)				(In thousands)
Cost of product and service revenues	Cost of product and service revenues	$	1,937	$	1,770			Cost of product and service revenues	$	2,044	$	2,130	$	3,981	$	3,900
Research and development	Research and development	1,700		1,768				Research and development	1,731		1,854		3,431		3,622
Selling, general, and administrative	Selling, general, and administrative	8,135		7,121				Selling, general, and administrative	9,264		7,367		17,399		14,488
Total share-based compensation expense	Total share-based compensation expense	$	11,772	$	10,659			Total share-based compensation expense	$	13,039	$	11,351	$	24,811	$	22,010

Employee Stock ~~Options and ESPP Shares~~Purchase Plan (“ESPP”)

The following assumptions were used to value ~~stock options and Employee Stock Purchase Plan (“ESPP”)~~ shares ~~granted pursuant to~~under the ~~Company’s equity incentive plans~~ESPP for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:

Three Months Ended March 31,
2021 2020
Stock options
Expected life, years 4.9 4.7
Expected volatility, % 30.1 % 33.6 %
Risk-free interest rate, % 0.6 % 1.4 %
Estimated forfeiture rate, % 7.9 % 5.7 %
Dividend yield, % 0 % 0 %

Three Months Ended March 31,
2021 2020
Employee stock purchase plan shares
Expected life, years 0.5 - 2.0 0.5 - 2.0
Expected volatility, % 27.4% - 53.5% 30.4% - 39.9%
Risk-free interest rate, % 0.1% - 2.6% 1.4% - 2.7%
Dividend yield, % 0 % 0 %

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~~Stock Options Activity~~

~~The following table summarizes the share option activity under the Company’s 2009 Equity Incentive Plan (the “2009 Plan”), as amended, during the three months ended March 31, 2021:~~

Number of
Shares Weighted-Average
Exercise Price Weighted-Average
Remaining Years Aggregate
Intrinsic Value
(In thousands, except per share data)
Outstanding at December 31, 2020 3,932 $ 62.50 7.8 $ 226,160
Granted 150 125.80
Exercised (196) 58.49
Expired (6) 78.32
Forfeited (60) 72.27
Outstanding at March 31, 2021 3,820 $ 65.02 7.5 $ 247,796
Exercisable at March 31, 2021 1,608 $ 47.83 5.8 $ 131,946
Vested and expected to vest at March 31, 2021 and thereafter 3,598 $ 64.01 7.4 $ 237,072

The weighted-average fair value per share of options granted during the three months ended March 31, 2021 and 2020 was $33.89 and $26.31, respectively. The intrinsic value of options exercised during the three months ended March 31, 2021 and 2020 was $14.0 million and $9.9 million, respectively.

~~As of March 31, 2021, total unrecognized compensation cost related to unvested stock options was $49.1 million, which is expected to be recognized over a weighted-average vesting period of 2.7 years.~~

~~Employee Stock Purchase Plan Activity~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Expected life, years	0.5 - 2.0		0.5 - 2.0		0.5 - 2.0		0.5 - 2.0
Expected volatility, %	27.4% - 53.5%		30.4% - 39.9%		27.4% - 53.5%		30.4% - 39.9%
Risk-free interest rate, %	0.1% - 2.6%		1.4% - 2.7%		0.1% - 2.6%		1.4% - 2.7%
Dividend yield, %	0	%	0	%	0	%	0	%

For the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, employees purchased approximately 156,000 and 217,000 shares of common stock, respectively, under the ESPP at a weighted-average price of $59.75 and $43.51, respectively. As of ~~March 31,~~June 30, 2021, the unrecognized compensation cost related to the shares to be purchased under the ESPP was approximately ~~$4.4~~$2.9 million and is expected to be recognized over a weighted-average period of ~~1.5~~1.3 years.

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Stock Options

The following assumptions were used to value stock options granted pursuant to the Company’s 2009 Equity Incentive Plan (as amended, the “2009 Plan”) for the three months ended June 30, 2020, and the six months ended June 30, 2021 and 2020. There were 0 stock options granted during the three months ended June 30, 2021.


	Three Months Ended June 30,		Six Months Ended June 30,
	2020		2021		2020
Expected life, years	4.7		4.9		4.7
Expected volatility, %	42.2	%	30.1	%	37.9	%
Risk-free interest rate, %	0.5	%	0.6	%	0.9	%
Estimated forfeiture rate, %	5.7	%	7.9	%	5.7	%
Dividend yield, %	0	%	0	%	0	%

The following table summarizes the stock options activity during the six months ended June 30, 2021:


	Number of Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Years	Aggregate Intrinsic Value

	(In thousands, except per share data)
Outstanding at December 31, 2020	3,932	$	62.50	7.8	$	226,160
Granted	150	125.80
Exercised	(395)	58.20
Expired	(8)	68.18
Forfeited	(120)	73.01
Outstanding at June 30, 2021	3,559	$	65.28	7.3	$	306,648
Exercisable at June 30, 2021	1,634	$	49.45	5.9	$	166,665
Vested and expected to vest at June 30, 2021 and thereafter	3,381	$	64.38	7.3	$	294,384

The weighted-average fair value per share of options granted during the three months ended June 30, 2020 was $26.03, and the weighted-average fair value per share of options granted during the six months ended June 30, 2021 and 2020 was $33.89 and $26.21, respectively. The intrinsic value of options exercised during the three months ended June 30, 2021 and 2020 was $16.8 million and $2.5 million, respectively, and during the six months ended June 30, 2021 and 2020 was $30.8 million and $12.4 million, respectively.

As of June 30, 2021, total unrecognized compensation cost related to unvested stock options was $43.8 million, which is expected to be recognized over a weighted-average vesting period of 2.6 years.

Restricted Stock Units (“RSUs”) ~~and Restricted Stock Awards (“RSAs”)~~

~~Summaries of~~The following table summarizes the restricted stock units activity under the 2009 Plan ~~are presented below for~~during the ~~three~~six months ended ~~March 31,~~June 30, 2021:


		Number of Shares	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Years	Aggregate Intrinsic Value			Number of Shares	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Years	Aggregate Intrinsic Value

		(In thousands, except per share data)							(In thousands, except per share data)
Restricted stock units

Outstanding at December 31, 2020	Outstanding at December 31, 2020	580	$	72.87	1.6	$	69,670	Outstanding at December 31, 2020	580	$	72.87	1.6	$	69,670
Granted (Awarded)	Granted (Awarded)	96	129.97					Granted (Awarded)	165	134.00
Vested (Released)	Vested (Released)	(37)	72.71					Vested (Released)	(86)	75.56
Forfeited	Forfeited	(17)	70.59					Forfeited	(36)	71.92
Outstanding and unvested at March 31, 2021		622	$	81.79	1.6	$	80,723
Outstanding and unvested at June 30, 2021								Outstanding and unvested at June 30, 2021	623	$	88.75	1.5	$	94,403

As of ~~March 31,~~June 30, 2021, total unrecognized compensation cost related to RSUs was ~~$44.8~~$48.2 million, which is expected to be recognized over the remaining weighted-average vesting period of 3.0 years.

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Number of
Shares Weighted-Average
Grant Date Fair Value
(In thousands, except per share data)
Restricted stock awards
Outstanding at December 31, 2020 21 $ 68.11
Granted (Awarded) 0 0
Vested (Released) 0 0
Outstanding and unvested at March 31, 2021 21 $ 68.11
Restricted Stock Awards (“RSAs”)

The following table summarizes the restricted stock awards activity under the 2009 Plan during the six months ended June 30, 2021:


	Number of Shares	Weighted-Average Grant Date Fair Value

	(In thousands, except per share data)

Outstanding at December 31, 2020	21	$	68.11
Granted (Awarded)	10	135.86
Vested (Released)	(21)	68.11

Outstanding and unvested at June 30, 2021	10	$	135.86

As of ~~March 31,~~June 30, 2021, total unrecognized compensation cost related to RSAs was ~~$0.2~~$1.2 million, which is expected to be recognized over the remaining weighted-average vesting period of ~~0.2~~0.9 years.

Performance-Based Restricted Stock Units (“PSUs”)

~~A summary of~~The following table summarizes the performance-based restricted stock units activity under the 2009 Plan ~~is presented below for~~during the ~~three~~six months ended ~~March 31,~~June 30, 2021:


		Number of Shares	Weighted-Average Grant Date Fair Value Per Unit			Number of Shares	Weighted-Average Grant Date Fair Value Per Unit

		(In thousands, except per share data)				(In thousands, except per share data)
Outstanding at December 31, 2020	Outstanding at December 31, 2020	155	$	74.26	Outstanding at December 31, 2020	155	$	74.26
Granted	Granted	51	156.79		Granted	51	156.79
Vested	Vested	(17)	82.35		Vested	(41)	70.60
Forfeited	Forfeited	(6)	63.20		Forfeited	(6)	63.20
Outstanding and unvested at March 31, 2021		183	$	96.94
Outstanding and unvested at June 30, 2021					Outstanding and unvested at June 30, 2021	159	$	102.21

As of ~~March 31,~~June 30, 2021, total unrecognized compensation cost related to PSUs was approximately ~~$10.4~~$8.6 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.5 years.

Summary of Shares Reserved for Future Issuance under Equity Incentive Plans

The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of ~~March 31,~~June 30, 2021:


			Number of Shares

			(In thousands)
Share options outstanding			~~3,820~~3,559
Non-vested restricted stock awards			~~826~~792
Shares authorized for future issuance			~~872~~1,902
ESPP shares available for future issuance			1,050
Total shares reserved for future issuance			~~6,568~~7,303

Stock Repurchase Program

On August 2, 2016, the Company's Board of Directors (the “Board”) authorized a stock repurchase program providing for the repurchase of up to $50.0 million of the Company’s common stock (the “2016 Repurchase Program”). The 2016 Repurchase Program is in addition to the stock repurchase program approved by the Board on November 4, 2014 providing for the repurchase of up to $50.0 million of the Company’s common stock (the “2014 Repurchase Program”). As of ~~March 31,~~June 30, 2021, the maximum dollar value of shares that may yet be purchased under the two repurchase programs was $54.9 million. The stock repurchase programs do not obligate the Company to repurchase any specific number of shares, and the Company may terminate or suspend the repurchase programs at any time.

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During the three and six months ended ~~March 31,~~June 30, 2021 and 2020, the Company did 0t repurchase any of its outstanding common stock.

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Note 16. Equity Offerings

On November 3, 2017, the Company entered into a Distribution Agreement (the “Distribution Agreement”) with J.P. Morgan Securities LLC, Wells Fargo Securities, LLC, and HSBC Securities (USA) Inc., as its sales agents, pursuant to which the Company was able to offer and sell from time to time through the sales agents up to $125.0 million maximum aggregate offering price of the Company’s common stock. Sales of the common stock pursuant to the Distribution Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on the Nasdaq Stock Market, or sales made to or through a market maker other than on an exchange.

For the ~~three~~six months ended ~~March 31,~~June 30, 2020, the Company did not sell any of its common stock under the Distribution Agreement.

The registration statement under which the shares that could have been sold pursuant to the Distribution Agreement expired on November 3, 2020, and, accordingly, no additional sales will be made pursuant to the Distribution Agreement.

Note 17. Restructuring Expenses

During 2020, the Company announced a company-wide organizational realignment initiative in order to more effectively align its organizational infrastructure and operations with the strategic vision of the autonomous pharmacy. During the second quarter of 2020, the Company also initiated a restructuring plan to help mitigate the adverse impact of the COVID-19 pandemic on its business and financial results. During the three and six months ended June 30, 2020, the Company incurred $6.4 million and $10.0 million of employee severance costs and related expenses under both initiatives, respectively.

In the first quarter of 2021, the Company continued its organizational realignment ~~initiative. During the three months ended March 31, 2021 and 2020, the Company incurred~~initiative, incurring $2.0 ~~million and $3.6~~ million of employee severance costs and related expenses. The Company did 0t incur any additional restructuring expenses ~~respectively. As of March 31, 2021,~~during the ~~unpaid balance related to this restructuring plan was $1.2 million.~~three months ended June 30, 2021.

The following table summarizes the total restructuring expense recognized in the Company’s Condensed Consolidated Statements of Operations for the three months ended ~~March 31,~~June 30, 2020, and six months ended June 30, 2021 and 2020:


			Three Months Ended March 31,						Three Months Ended June 30,		Six Months Ended June 30,
		2021	2020					2020	2021		2020

			(In thousands)						(In thousands)
Cost of product and service revenues	Cost of product and service revenues		$	389	$	75	Cost of product and service revenues		$	2,489	$	389	$	2,564
Research and development	Research and development		105		798		Research and development		2,918		105		3,716
Selling, general, and administrative	Selling, general, and administrative		1,526		2,732		Selling, general, and administrative		949		1,526		3,681
Total restructuring expense	Total restructuring expense		$	2,020	$	3,605	Total restructuring expense		$	6,356	$	2,020	$	9,961

Note 18. Subsequent Events

On July 26, 2021, the Company announced its acquisition of RxInnovation Inc., a Delaware corporation, operating as FDS Amplicare (“FDS Amplicare”), for total aggregate cash consideration of $177.0 million, subject to customary adjustments. FDS Amplicare is a pharmacy software solutions provider. The transaction, which is expected to close in the second half of 2021, is subject to clearance under the Hart-Scott-Rodino Act and the satisfaction of other customary closing conditions.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS

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 report, 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:

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•our expectations about the continuing impact of the ongoing COVID-19 pandemic (including new variants of the virus) and associated efforts to contain the spread of the ~~pandemic)~~pandemic on our workforce and operations, as well as the continuing impacts on our customers and suppliers, and the anticipated continuing effects of the COVID-19 pandemic and associated containment measures on our business, financial condition, liquidity, and results of operations;

•our expectations regarding our future sales pipeline and product bookings;

•the extent and timing of future revenues, including the amounts of our current backlog;

•the size or growth of our market or market share;

•our beliefs about drivers of demand for our solutions, market opportunities in certain product categories, and continued expansion in these product categories, as well as our belief that our technology, services, and solutions within these categories position us well to address the needs of retail, acute, and post-acute pharmacy providers;

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•our ability to acquire companies, businesses, products, or technologies on commercially reasonable terms and integrate such acquisitions effectively;

•our goal of advancing our platform with new product introductions annually;

•our ability to deliver on the autonomous pharmacy vision, as well as our plan to integrate our current offerings and technologies on a cloud infrastructure and invest in broadening our solutions across certain key areas as we execute on this vision;

•continued investment in the autonomous pharmacy vision, our beliefs about the anticipated benefits of such investments, and our expectations regarding continued growth in subscription and cloud-based offerings as we execute on this vision;

•our belief that our solutions and vision for fully autonomous medication management are strongly aligned with long-term trends in the healthcare market and well-positioned to address the evolving needs of the healthcare institutions;

•planned new products and services;

•our ability to secure adequate supplies of raw materials and components utilized in the manufacture of our products of a quality that we require and at acceptable prices;

•the bookings, revenue, and margin opportunities presented by new products, emerging markets, and international markets;

•our ability to align our cost structure and headcount with our current business expectations;

•the outcome of any legal proceedings to which we are a party;

•the bookings, revenues, non-GAAP EBITDA, non-GAAP operating margin, or non-GAAP earnings per share goals we may set;

•our projected target long-term revenues and revenue growth rates, long-term non-GAAP operating margin targets, long-term non-GAAP EBITDA margin targets, and free cash flow conversion;

•our ability to protect our intellectual property and operate our business without infringing, misappropriating, or otherwise violating the intellectual property rights of others;

•the expected impacts of new accounting standards or changes to existing accounting standards;

•our expected future uses of cash, including our expected uses for the remaining proceeds of our convertible senior notes, and the sufficiency of our sources of funding; and

•our ability to generate cash from operations and our estimates regarding the sufficiency of our cash resources.

In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "seeks," "may," "plans," "potential," "predicts," "projects," "should," "will," "would," and variations of these terms and similar expressions. Forward-looking statements are based on our current expectations and assumptions and are subject to known and unknown risks and uncertainties, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied in the forward-looking statements.

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Such risks and uncertainties include those described throughout this quarterly report, including in Part II - Item 1A. “Risk Factors” and Part I - Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. You should carefully read this quarterly report and the documents that we reference in this quarterly report and have filed as exhibits, as well as other documents we file from time to time with the U.S. Securities and Exchange Commission (“SEC”), with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements in this quarterly report represent our estimates and assumptions only as of the date of this quarterly report. 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, even if new information becomes available in the future.

All references in this report to “Omnicell,” “our,” “us,” “we,” or “the Company” collectively refer to Omnicell, Inc., a Delaware corporation, and its subsidiaries. The term “Omnicell, Inc.” refers only to Omnicell, Inc., excluding its subsidiaries.

We own various registered and unregistered trademarks and service marks used in our business, some of which appear in this report. The most important of these marks include Omnicell® and the Omnicell logo. This report may also

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include the trademarks and service marks of other companies. Such trademarks and service marks are the marks of their respective owners.

OVERVIEW

Our Business

We are a leader in transforming the pharmacy care delivery model. Our medication management automation solutions and adherence tools empower healthcare systems and pharmacies to focus on clinical care, rather than administrative tasks. Our solutions support the vision of a fully autonomous pharmacy, a roadmap designed to improve operational efficiencies through a fully automated, medication management infrastructure. Our vision is to transform the pharmacy care delivery model through automation designed to replace manual, error-prone processes, combined with a single, cloud-based platform and advanced services offerings. We believe our connected devices, products, and solutions will help our customers harness the power of data and analytics, and deliver improved patient outcomes.

Over 7,000 facilities worldwide use our automation and analytics solutions which are designed to improve pharmacy workflows, increase operational efficiency, reduce medication errors, deliver actionable intelligence, and improve patient safety. More than 50,000 institutional and retail pharmacies across North America and the United Kingdom leverage our innovative medication adherence and population health solutions to improve patient engagement, and adherence to prescriptions and vaccine scheduling, helping to reduce costly hospital readmissions. We sell our product and consumable solutions together with related service offerings. Revenues generated in the United States represented 89% of our total revenues for both the three months ended June 30, 2021 and 2020, and 89% and 90% of our total revenues for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

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 vision of the autonomous pharmacy. This has resulted in larger deal sizes across multiple products, services, and implementations for customers and, we believe, more comprehensive, valuable, and enduring relationships.

We utilize product bookings as an indicator of the success of our business. Product bookings generally consist of all firm orders other than for technical services and other less significant items, as evidenced generally by a non-cancelable contract and purchase order for equipment and software products, and by a purchase order for consumables. A majority of our connected devices and software license product bookings are installable within twelve months of booking, and are recorded as revenue upon customer acceptance of the installation or receipt of goods. Revenues from software-as-a-service (“SaaS”), subscription software, and technology-enabled services product bookings are recorded over the contractual term.

In addition to product solution sales, we provide services to our customers. We provide installation planning and consulting as part of most product sales which is generally included in the initial price of the solution. To help assure the maximum availability of our systems, our customers typically purchase maintenance and support contracts in increments of one to five years. As a result of the growth of our installed base of customers and expanded service offerings, our service revenues have also grown.

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The following table summarizes each revenue category:

Revenue Category

Revenue Type (1)

Income Statement Classification

Included in Product Bookings

Connected devices, software licenses, and other

High visibility/

Nonrecurring

Product

Yes (2)

Technical services

High visibility/

Recurring

Service

Consumables

High visibility/

Recurring

Product

Yes

SaaS, subscription software, and technology-enabled services

High visibility/

Recurring

Service

Yes

(1) All revenue types are highly visible from long-term, sole-source agreements, backlog, or the recurring nature of the revenue stream.

(2) Freight revenue and certain other insignificant revenue streams are not included in product bookings.

Our full-time employee headcount was approximately ~~2,970~~3,080 and 2,860 on ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

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Operating Segments

We manage our operations as a single segment for the purposes of assessing performance and making operating decisions. Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer. The CODM allocates resources and evaluates the performance of Omnicell at the consolidated level using 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.

Strategy

We are committed to being the care provider’s most trusted partner and executing on the vision of the autonomous pharmacy by delivering automation, intelligence, and advanced services, powered by a single, cloud-based platform. We believe there are significant challenges in pharmacy practice including, but not limited to, medication errors, drug shortages, medication loss due to drug diversion, significant medication waste and expiration costs, a high level of manual steps in the medication management automation process, complexity around compliance requirements, high pharmacy employee turnover rates, hospitalizations from adverse drug events in outpatient settings, high variability in outcomes, and limited inventory visibility. We believe that these significant challenges in pharmacy practice drive the demand for increased digitization and virtualization, and that our solutions enable this and represent large opportunities in four market categories:

•Point of Care. As a market leader, we expect to continue expansion of this product category as customers increase use of our dispensing systems in more areas within their hospitals. In addition, we are ~~early in~~nearly midway through the replacement, upgrade, and expansion cycle of our XT Series automated dispensing systems which we believe is a significant market opportunity and we expect to continue to focus on further penetrating markets through competitive conversions. We believe our current portfolio within the Point of Care market and new innovation and services will continue to drive improved outcomes and lower costs for our customers.

•Central Pharmacy. This market represents the beginning of the medication management process in acute care settings, and, we believe, the next big automation opportunity to replace manual and repetitive processes which are common in the pharmacy today. Manual processes are prone to significant errors, and products such as IVX Workflow, our IV sterile compounding solutions, and the XR2 Automated Central Pharmacy ~~system~~System automate these manual processes and are designed to reduce the risk of error for our healthcare partners. We believe new products and innovations, including Omnicell One, in the Central Pharmacy market create opportunities to replace prior generation Central Pharmacy robotics and carousels. The Central Pharmacy also represents an opportunity to provide technology-enabled services designed to reduce the administrative burden on the pharmacy and allow clinicians to operate at the top of their license.

•340B Software-Enabled Services. This market is targeted to covered entities participating in Section 340B of the Public Health Services Act. The act requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to health care organizations that care for many uninsured and low-income patients and results in a complex compliance environment. We believe that there are significant opportunities for health systems to improve participation benefits and maximize program savings through software-enabled services

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and solutions. Our Omnicell 340B platform of technology-enabled services includes split billing software, contract pharmacy administration, specialty contract pharmacy administration, and drug discount access solutions.

•Retail, Institutional, and Payer. We believe the Retail, Institutional, and Payer market represents a large opportunity as the majority of drugs are distributed in the non-acute sector. New technology and updated state board regulations are leading to innovation at traditional retail providers, which, combined with the move to value-based care, we believe will incentivize the market to adopt solutions to help providers and payers engage patients in new ways that lower the total cost of care. We believe adoption of our EnlivenHealth (formerly Population Health Solutions) portfolio of software products and services, along with medication adherence packaging, will increase adherence performance rates, increase prescription volume for our customers, and reduce hospital and emergency room visits due to improved adherence. As retail pharmacies play an increasingly vital role in population health following the onset of the COVID-19 pandemic, EnlivenHealth has extended solutions to assist with vaccination programs, testing protocols, and patient engagement efforts. There are ~~three~~four main areas of focus:

◦CareScheduler is an exclusive digital solution that automates the scheduling, reporting, and patient outreach for administering the COVID-19 vaccine and other vaccines and testing procedures.

◦Medication Synchronization is an appointment-based solution that aligns a patient's medications to a single refill date, designed to improve medication adherence and reduce hospital readmissions.

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Omnichannel Communications Platform is our comprehensive engagement solution that leverages machine learning and proven Interactive Voice Response technology to enable customers to create a personalized and differentiated pharmacy experience for their patients.

◦Medication Therapy Management is a platform that offers intuitive workflow with high-level decision support for efficiently completing CMS-compliant Comprehensive Medication Reviews using pharmacy claims data.

We believe our technology, services, and solutions within these market categories position us well to address the needs of retail, acute, and post-acute pharmacy providers.

COVID-19 Update

We continue to closely monitor the COVID-19 pandemic and ongoing impacts on our Company. During the first half of 2020, as a result of the COVID-19 pandemic, health systems faced financial and operational pressures which we believe led our customers to delay or defer purchasing decisions and/or implementation of our solutions. However, starting in the third quarter of 2020, we began to see our customers returning to pre-pandemic purchasing patterns consistent with long-term strategic investments. We believe that the challenges that our customers have faced during the COVID-19 pandemic, including the need for robust visibility throughout their pharmacy supply chains, have increased the strategic relevance of our products and services.

Although COVID-19 vaccines are now available and being widely distributed, there remains significant uncertainty regarding the duration and severity of the continuing impact of the pandemic on the U.S. and world economies, including the impact of new variants of the COVID-19 virus. The ongoing impact on our business remains uncertain, the duration and scope of which cannot currently be predicted, and may result in increased borrowing costs and other costs of capital or otherwise adversely affect our business, results of operations, financial condition, and liquidity. However, under current circumstances, we believe that our financial position and resources will allow us to manage the anticipated impact of the COVID-19 pandemic on our business for the foreseeable future.

Acquisitions

On July 26, 2021, we announced our acquisition of RxInnovation Inc., a Delaware corporation, operating as FDS Amplicare (“FDS Amplicare”), for total aggregate cash consideration of $177.0 million, subject to customary adjustments. We will use cash available on our balance sheet to fund the transaction. FDS Amplicare is a pharmacy software solutions provider. The transaction, which is expected to close in the second half of 2021, is subject to clearance under the Hart-Scott-Rodino Act and the satisfaction of other customary closing conditions. The acquisition will add a comprehensive and differentiated suite of financial management, analytics, and population health solutions to Omnicell’s EnlivenHealth division.

On October 1, 2020, we completed the acquisition of the 340B Link business (the “340B Link Business”) of Pharmaceutical Strategies Group, LLC pursuant to the terms and conditions of the Equity Purchase Agreement, dated August 11, 2020, as amended, by and among the Company, PSGH, LLC, BW Apothecary Holdings, LLC, the sellers identified therein and the seller’s representative for total cash consideration of $225.0 million. The acquisition adds a comprehensive and differentiated suite of software-enabled services and solutions used by certain eligible hospitals, health systems, clinics, and

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entities to manage compliance and capture 340B drug cost savings on outpatient prescriptions filled through the eligible entity’s pharmacy or a contracted pharmacy partner. The results of the operations of the 340B Link Business have been included in our consolidated results of operations beginning October 1, 2020.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based on our Condensed 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 Condensed Consolidated Financial Statements:

•Revenue recognition;

•Allowance for credit losses for accounts receivable, unbilled receivables, and net investment in sales-type leases;

•Leases;

•Inventory;

•Software development costs;

•Valuation and impairment of goodwill and intangible assets;

•Business combinations;

•Convertible senior notes;

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•Share-based compensation; and

•Accounting for income taxes.

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~~six months ended ~~March 31,~~June 30, 2021 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, 2020, except as discussed in “Recently Adopted Authoritative Guidance” in Note 1, Organization and Summary of Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q.

Recently Issued Authoritative Guidance

Refer to “Recently Issued Authoritative Guidance” in Note 1, Organization and Summary of Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements in this quarterly report on Form 10-Q for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial position, and cash flows.

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RESULTS OF OPERATIONS

Total Revenues


		Three Months Ended March 31,								Three Months Ended June 30,
						Change in								Change in
		2021		2020		$		%		2021		2020		$		%

		(Dollars in thousands)								(Dollars in thousands)
Product revenues	Product revenues	$	178,125	$	170,073	$	8,052	5%	Product revenues	$	196,911	$	138,942	$	57,969	42%
Percentage of total revenues	Percentage of total revenues	71%		74%					Percentage of total revenues	72%		70%
Services and other revenues	Services and other revenues	73,718		59,613		14,105		24%	Services and other revenues	75,828		60,679		15,149		25%
Percentage of total revenues	Percentage of total revenues	29%		26%					Percentage of total revenues	28%		30%
Total revenues	Total revenues	$	251,843	$	229,686	$	22,157	10%	Total revenues	$	272,739	$	199,621	$	73,118	37%

Product revenues represented ~~71%~~72% and ~~74%~~70% of total revenues for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively. Product revenues increased by ~~$8.1~~$58.0 million, due to increased customer demand, primarily within our automated dispensing systems business. In comparison, the second quarter of 2020 was impacted by the COVID-19 pandemic as health systems were focusing resources on COVID-19 essential activities.

Services and other revenues represented ~~29%~~28% and ~~26%~~30% of total revenues for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively. Services and other revenues include revenues from technical services, SaaS, subscription software, and technology-enabled services, and other services. Services and other revenues increased by ~~$14.1~~$15.1 million, primarily due to revenues of ~~$10.9~~$11.5 million from the newly-acquired 340B Link Business, as well as continued growth in our installed customer base.

Our international sales represented 11% of total revenues for both the three months ended June 30, 2021 and 2020, 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.


	Six Months Ended June 30,
					Change in
	2021		2020		$		%

	(Dollars in thousands)
Product revenues	$	375,036	$	309,015	$	66,021	21%
Percentage of total revenues	71%		72%
Services and other revenues	149,546		120,292		29,254		24%
Percentage of total revenues	29%		28%
Total revenues	$	524,582	$	429,307	$	95,275	22%

Product revenues represented 71% and 72% of total revenues for the six months ended June 30, 2021 and 2020, respectively. Product revenues increased by $66.0 million, due to increased customer demand, primarily within our automated dispensing systems business. In comparison, the second quarter of 2020 was impacted by the COVID-19 pandemic as health systems were focusing resources on COVID-19 essential activities.

Services and other revenues represented 29% and 28% of total revenues for the six months ended June 30, 2021 and 2020, respectively. Services and other revenues include revenues from technical services, SaaS, subscription software, and technology-enabled services, and other services. Services and other revenues increased by $29.3 million, primarily due to revenues of $22.4 million from the newly-acquired 340B Link Business, as well as continued growth in our installed customer base.

Our international sales represented 11% and 10% of total revenues for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, 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.

Our ability to continue to grow revenues is dependent on our ability to continue to obtain orders from customers, 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, and our flexibility in manpower

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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 allow for installations.

Cost of Revenues and Gross Profit

Cost of revenues is primarily comprised of three general categories: (i) standard product costs which account for the majority of the product cost of revenues that are provided to customers, and are inclusive of purchased material, labor to build the product, and overhead costs associated with production; (ii) installation costs as we install our equipment at the customer site and include costs of the field installation personnel, including labor, travel expenses, and other expenses; and (iii) other costs, including variances in standard costs and overhead, scrap costs, rework, warranty, provisions for excess and obsolete inventory, and amortization of software development costs and intangibles.

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		Three Months Ended March 31,								Three Months Ended June 30,
						Change in								Change in
		2021		2020		$		%		2021		2020		$		%

		(Dollars in thousands)								(Dollars in thousands)
Cost of revenues:	Cost of revenues:								Cost of revenues:
Cost of product revenues	Cost of product revenues	$	92,627	$	90,272	$	2,355	3%	Cost of product revenues	$	100,227	$	85,779	$	14,448	17%
As a percentage of related revenues	As a percentage of related revenues	52%		53%					As a percentage of related revenues	51%		62%
Cost of services and other revenues	Cost of services and other revenues	36,933		29,792		7,141		24%	Cost of services and other revenues	36,214		30,617		5,597		18%
As a percentage of related revenues	As a percentage of related revenues	50%		50%					As a percentage of related revenues	48%		50%
Total cost of revenues	Total cost of revenues	$	129,560	$	120,064	$	9,496	8%	Total cost of revenues	$	136,441	$	116,396	$	20,045	17%
As a percentage of total revenues	As a percentage of total revenues	51%		52%					As a percentage of total revenues	50%		58%

Gross profit	Gross profit	$	122,283	$	109,622	$	12,661	12%	Gross profit	$	136,298	$	83,225	$	53,073	64%
Gross margin	Gross margin	49%		48%					Gross margin	50%		42%

Cost of revenues for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 increased by ~~$9.5~~$20.0 million, of which ~~$2.4~~$14.4 million was attributed to the increase in cost of product revenues and ~~$7.1~~$5.6 million was attributed to the increase in cost of services and other revenues.

The increase in cost of product revenues was primarily driven by the increase in product revenues of ~~$8.1~~$58.0 million for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31, 2020.~~June 30, 2020, partially offset by the benefits associated with economies of scale due to higher volumes, as well as the reduction of employee-related expenses for restructuring initiatives.

The increase in cost of services and other revenues was primarily driven by the increase in services and other revenues of ~~$14.1~~$15.1 million, including incremental revenues from the newly-acquired 340B Link Business, for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020, as well as additional investments in our service business to support new product offerings.

The overall increase in gross margin primarily relates to higher revenues for the three months ended June 30, 2021 due to increased customer ~~demand.~~demand, benefits associated with economies of scale due to higher volumes, as well as the reduction of employee-related expenses for restructuring initiatives. Gross margin in the second quarter of 2020 was impacted by the COVID-19 pandemic. Our gross profit for the three months ended ~~March 31,~~June 30, 2021 was ~~$122.3~~$136.3 million, as compared to ~~$109.6~~$83.2 million for the three months ended ~~March 31,~~June 30, 2020.

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	Six Months Ended June 30,
					Change in
	2021		2020		$		%

	(Dollars in thousands)
Cost of revenues:
Cost of product revenues	$	192,854	$	176,051	$	16,803	10%
As a percentage of related revenues	51%		57%
Cost of services and other revenues	73,147		60,409		12,738		21%
As a percentage of related revenues	49%		50%
Total cost of revenues	$	266,001	$	236,460	$	29,541	12%
As a percentage of total revenues	51%		55%

Gross profit	$	258,581	$	192,847	$	65,734	34%
Gross margin	49%		45%

Cost of revenues for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 increased by $29.5 million, of which $16.8 million was attributed to the increase in cost of product revenues and $12.7 million was attributed to the increase in cost of services and other revenues.

The increase in cost of product revenues was primarily driven by the increase in product revenues of $66.0 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, partially offset by the benefits associated with economies of scale due to higher volumes, as well as the reduction of employee-related expenses for restructuring initiatives.

The increase in cost of services and other revenues was primarily driven by the increase in services and other revenues of $29.3 million, including incremental revenues from the newly-acquired 340B Link Business, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, as well as additional investments in our service business to support new product offerings.

The overall increase in gross margin primarily relates to higher revenues for the six months ended June 30, 2021 due to increased customer demand, benefits associated with economies of scale due to higher volumes, as well as the reduction of employee-related expenses for restructuring initiatives. Gross margin in the second quarter of 2020 was impacted by the COVID-19 pandemic. Our gross profit for the six months ended June 30, 2021 was $258.6 million, as compared to $192.8 million for the six months ended June 30, 2020.

Operating Expenses and Interest and Other Income (Expense), Net


		Three Months Ended March 31,								Three Months Ended June 30,
						Change in								Change in
		2021		2020		$		%		2021		2020		$		%

		(Dollars in thousands)								(Dollars in thousands)
Operating expenses:	Operating expenses:								Operating expenses:
Research and development	Research and development	$	16,080	$	18,652	$	(2,572)	(14)%	Research and development	$	18,213	$	20,830	$	(2,617)	(13)%
As a percentage of total revenues	As a percentage of total revenues	6%		8%					As a percentage of total revenues	7%		10%
Selling, general, and administrative	Selling, general, and administrative	86,593		78,819		7,774		10%	Selling, general, and administrative	89,169		69,386		19,783		29%
As a percentage of total revenues	As a percentage of total revenues	34%		34%					As a percentage of total revenues	33%		35%
Total operating expenses	Total operating expenses	$	102,673	$	97,471	$	5,202	5%	Total operating expenses	$	107,382	$	90,216	$	17,166	19%
As a percentage of total revenues	As a percentage of total revenues	41%		42%					As a percentage of total revenues	39%		45%

Interest and other income (expense), net	Interest and other income (expense), net	$	(6,691)	$	(822)	$	(5,869)	714%	Interest and other income (expense), net	$	(5,959)	$	174	$	(6,133)	(3,525)%

Research and Development. Research and development expenses decreased by $2.6 million for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020. The decrease was primarily attributed to a ~~decrease~~reduction of $2.9 million in employee-related expenses for restructuring initiatives.

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Selling, General, and Administrative. Selling, general, and administrative expenses increased by $19.8 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase was primarily due to an increase of approximately $12.2 million in employee-related expenses primarily related to increased headcount, including ~~$0.7~~the incremental headcount from the 340B Link Business acquisition, an increase of $2.0 million in acquisition-related expenses, as well as higher consulting and other expenses.

Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by $6.1 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily driven by a $6.2 million increase in other expenses. The increase in other expenses during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020 is primarily driven by amortization of discount and debt issuance costs as well as interest expense associated with our convertible senior notes issued in September 2020.


	Six Months Ended June 30,
					Change in
	2021		2020		$		%

	(Dollars in thousands)
Operating expenses:
Research and development	$	34,293	$	39,482	$	(5,189)	(13)%
As a percentage of total revenues	7%		9%
Selling, general, and administrative	175,762		148,205		27,557		19%
As a percentage of total revenues	34%		35%
Total operating expenses	$	210,055	$	187,687	$	22,368	12%
As a percentage of total revenues	40%		44%

Interest and other income (expense), net	$	(12,650)	$	(648)	$	(12,002)	1,852%

Research and Development. Research and development expenses decreased by $5.2 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The decrease was primarily attributed to a reduction of $3.6 million in employee-related expenses for restructuring initiatives, as well as lower ~~restructuring~~consulting expenses.

Selling, General, and Administrative. Selling, general, and administrative expenses increased by ~~$7.8~~$27.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the ~~three~~six months ended ~~March 31,~~June 30, 2020. The increase was primarily due to an increase of approximately ~~$6.7~~$20.1 million in employee-related expenses primarily related to increased headcount, including the incremental headcount from the 340B Link Business acquisition, as well as higher consulting expenses and an increase in acquisition-related expenses of $2.0 million, partially offset by ~~certain cost savings, including reduced travel costs, and $1.2 million lower~~a reduction in employee-related expenses for restructuring ~~expenses.~~

~~Table~~initiatives of ~~Contents~~$2.2 million.

Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by ~~$5.9~~$12.0 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the ~~three~~six months ended ~~March 31,~~June 30, 2020, primarily driven by a ~~$5.1~~$11.3 million increase in other expenses and a ~~$0.8~~$0.7 million decrease in other income. The increase in other expenses during the ~~three~~six months ended ~~March 31,~~June 30, 2021 as compared to the ~~three~~six months ended ~~March 31,~~June 30, 2020 is primarily driven by amortization of discount and debt issuance costs as well as interest expense associated with our convertible senior notes issued in September 2020.

Provision for (Benefit from) Income Taxes

Three Months Ended March 31,
Change in
2021 2020 $ %
(Dollars in thousands)
Provision for (benefit from) income taxes $ (1,208) $ 18 $ (1,226) (6,811)%


	Three Months Ended June 30,
					Change in
	2021		2020		$		%

	(Dollars in thousands)
Provision for (benefit from) income taxes	$	2,533	$	(2,518)	$	5,051	(201)%


	Six Months Ended June 30,
					Change in
	2021		2020		$		%

	(Dollars in thousands)
Provision for (benefit from) income taxes	$	1,325	$	(2,500)	$	3,825	(153)%

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Our annual effective tax rate before discrete items was ~~26.7%~~27.8% and ~~26.6%~~28.0% for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. The ~~increase~~decrease in the estimated annual effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the same period in 2020 was primarily due to ~~an increase in non-deductible compensation and equity charges and~~our higher profitability during the period, a decrease in ~~foreign derived intangible income (“FDII”) benefit, partially offset by~~in non-deductible expenses, and an increase in research and development credits.

~~Benefit from~~Provision for income taxes for the ~~three~~six months ended ~~March 31,~~June 30, 2021 included net discrete income tax benefit of ~~$4.7~~$8.6 million, primarily due to a ~~$4.1~~$8.2 million tax benefit from equity compensation.

Provision for income taxes for the ~~three~~six months ended ~~March 31,~~June 30, 2020 included net discrete income tax benefit of ~~$3.0~~$3.8 million, primarily due to a ~~$2.8~~$3.3 million tax benefit from equity compensation.

Refer to Note 14, Income Taxes, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q for more details.

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of ~~$548.1~~$614.2 million at ~~March 31,~~June 30, 2021 compared to $485.9 million at December 31, 2020. All of our cash and cash equivalents are invested in bank accounts and money market funds held in sweep and asset management accounts with major financial institutions.

Our cash position and working capital at ~~March 31,~~June 30, 2021 and December 31, 2020 were as follows:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020

		(In thousands)					(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	548,055	$	485,928	Cash and cash equivalents	$	614,236	$	485,928
Working capital	Working capital	$	611,726	$	552,991	Working capital	$	667,176	$	552,991

Our ratio of current assets to current liabilities was 3.1:1 and 3.0:1 at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

Sources of Cash

Revolving Credit Facility

On November 15, 2019, we entered into an Amended and Restated Credit Agreement (as subsequently amended, as discussed below, the “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 A&R Credit Agreement superseded our 2016 senior secured credit facility and provides for (a) a five-year revolving credit facility of $500.0 million (the “Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million. In addition, the 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.

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secured net leverage ratio not to exceed 3.50:1 for the calendar quarters ending September 30, 2020, December 31, 2020, and March 31, 2021 and 3.00:1 for the calendar quarters ending thereafter.

As of ~~March 31,~~June 30, 2021, there was no outstanding balance for the 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.~~10-Q for more details. We expect to use future loans under the Revolving Credit Facility, if any, for working capital, potential acquisitions, and other general corporate purposes.

Convertible Senior Notes

On September 25, 2020, we completed a private offering of $575.0 million aggregate principal amount of 0.25% convertible senior notes (the “Notes”), including the exercise in full of the initial purchasers’ option to purchase up to an additional $75.0 million principal amount of the Notes. We received proceeds from the issuance of the Notes of $559.7 million, net of $15.3 million of transaction fees and other debt issuance costs. The Notes bear interest at a rate of 0.25% per year, payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2021. The Notes are general senior, unsecured obligations of the Company and will mature on September 15, 2025, unless earlier redeemed,

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repurchased, or converted. Refer to Note 10, Convertible Senior Notes, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report on Form ~~10-Q.~~10-Q for more details.

During the fourth quarter of 2020, we used approximately $49.3 million of the net proceeds from the offering to pay the cost of the convertible note hedge transactions (partially offset by the proceeds we received from the sale of the warrant transactions), approximately $53.0 million of the net proceeds to repurchase shares of our common stock from purchasers of the Notes, $150.0 million of the net proceeds to pay down outstanding borrowings under the Revolving Credit Facility, and $225.0 million for the acquisition of the 340B Link Business. We intend to use the remainder of the net proceeds from this offering for working capital and other general corporate purposes, which may include potential acquisitions, strategic transactions, and potential future repurchases of our common stock.

Uses of Cash

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.

Our stock repurchase programs have a total of $54.9 million remaining for future repurchases as of ~~March 31,~~June 30, 2021, which may result in additional use of cash. Refer to “Stock Repurchase Program” 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.~~10-Q for more details. There were no stock repurchases during the three and six months ended ~~March 31,~~June 30, 2021 and 2020.

Based on our current business plan and product 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 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.

Cash Flows

The following table summarizes, for the periods indicated, selected items in our Condensed Consolidated Statements of Cash Flows:

Three Months Ended March 31,
2021 2020
(In thousands)
Net cash provided by (used in):
Operating activities $ 57,415 $ 25,231
Investing activities (13,132) (13,775)
Financing activities 15,599 (33,766)
Effect of exchange rate changes on cash and cash equivalents (386) (820)
Net increase (decrease) in cash, cash equivalents, and restricted cash $ 59,496 $ (23,130)

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	Six Months Ended June 30,
	2021		2020

	(In thousands)
Net cash provided by (used in):
Operating activities	$	129,188	$	72,735
Investing activities	(26,482)		(33,213)
Financing activities	22,413		(32,308)
Effect of exchange rate changes on cash and cash equivalents	(74)		(841)
Net increase in cash, cash equivalents, and restricted cash	$	125,045	$	6,373

Operating Activities

We expect cash from our operating activities to fluctuate in future periods as a result of a number of factors, including the timing of our billings and collections, our operating results, and the timing of other liability payments.

Net cash provided by operating activities was ~~$57.4~~$129.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021, primarily consisting of net income of ~~$14.1~~$34.6 million adjusted for non-cash items of ~~$36.8~~$76.9 million and changes in assets and liabilities of ~~$6.5~~$17.7 million. The non-cash items primarily consisted of depreciation and amortization expense of ~~$17.6~~$35.0 million, share-based compensation expense of ~~$11.8 million, amortization of operating lease right-of-use assets of $2.9 million, amortization of debt issuance costs of $0.8~~$24.8 million, amortization of discount on convertible senior notes of ~~$4.6~~$9.2 million, amortization of operating lease right-of-use assets of $5.8 million, amortization of debt issuance costs of $1.7 million, and a change in deferred income taxes of ~~$0.9~~$0.5 million. Changes in assets and liabilities include cash inflows from (i) an increase in deferred revenues of ~~$21.7~~$27.5 million primarily due to an increase in billings driven by the timing of shipments in order to meet customers’ implementation schedules and recognition of revenues for products requiring installation, (ii) an increase in accounts payable of ~~$10.4~~$15.7 million primarily due to an overall increase in spending, as well as timing of payments, (iii) an increase in accrued liabilities of ~~$4.7~~$10.1 million primarily due to an increase in rebates and buyout liabilities, (iv) a decrease in ~~other current assets~~investment in sales-

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type leases of $2.4 million, (v) a decrease in prepaid commissions of ~~$2.7~~$1.9 million, and (vi) a decrease in other long-term assets of ~~$2.2~~$1.6 million. These cash inflows were partially offset by (i) ~~a decrease in accrued compensation of $17.9 million primarily due to a decrease in accrued commissions and bonuses, as well as timing of ESPP purchases, (ii)~~ an increase in accounts receivable and unbilled receivables of ~~$15.4~~$19.7 million primarily due to an increase in billings driven by the timing of shipments as well as collections, (ii) a decrease in accrued compensation of $7.3 million primarily due to a decrease in accrued commissions and bonuses, (iii) an increase in inventories of $6.6 million to support forecasted sales, (iv) a decrease in operating lease liabilities of ~~$3.1~~$6.2 million, ~~(iv)~~and (v) an increase in prepaid expenses of ~~$1.1 million, and (v) an increase in inventories of $1.0~~$1.4 million.

Net cash provided by operating activities was ~~$25.2~~$72.7 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020, primarily consisting of net income of ~~$11.3~~$7.0 million adjusted for non-cash items of ~~$26.5~~$47.0 million ~~offset by~~and changes in assets and liabilities of ~~$12.6~~$18.7 million. The non-cash items primarily consisted of depreciation and amortization expense of ~~$14.0~~$28.8 million, share-based compensation expense of ~~$10.7~~$22.0 million, amortization of operating lease right-of-use assets of ~~$2.7~~$5.2 million, amortization of debt issuance costs of ~~$0.2~~$0.5 million, and a change in deferred income taxes of ~~$1.1~~$9.4 million. Changes in assets and liabilities include cash ~~outflows~~inflows from (i) ~~an increase~~a decrease in accounts receivable and unbilled receivables of ~~$16.1~~$28.2 million primarily due to an increase in collections and a decrease in billings ~~late~~due to timing of shipments, (ii) an increase in deferred revenues of $16.3 million primarily due to the ~~quarter~~timing of shipments in order to meet customers’ implementation schedules and recognition of revenues for products requiring installation, (iii) an increase in other long-term liabilities of $4.4 million, (iv) a decrease in prepaid commissions of $4.0 million, and (v) a decrease in prepaid expenses of $1.2 million. These cash inflows were partially offset by (i) a decrease in accounts payable of $11.3 million primarily due to an overall decrease in spending, as well as timing of ~~collections,~~payments, (ii) ~~a decrease in accrued compensation of $9.2 million primarily due to a decrease in accrued commissions and bonuses, as well as timing of payroll and ESPP purchases, (iii)~~ an increase in inventories of ~~$5.7~~$7.3 million to support ~~higher production for~~ forecasted sales, ~~and to fulfill order backlog,~~(iii) a decrease in operating lease liabilities of $5.2 million, (iv) an increase in other long-term assets of ~~$2.8 million; and~~$4.6 million, (v) a decrease in ~~operating lease liabilities~~accrued compensation of ~~$2.8 million. These cash outflows were partially offset by (i) an increase in deferred revenues of $16.9~~$3.1 million, ~~primarily due to the timing of order shipments and recognition of revenues for product requiring installation, (ii)~~(vi) a decrease ~~in prepaid commissions of $2.9 million, (iii) an increase~~ in accrued liabilities of ~~$2.7~~$2.8 million, and ~~(iv) a decrease~~(vii) an increase in ~~other current assets~~investment in sales-type leases of ~~$1.0~~$1.4 million.

Investing Activities

Net cash used in investing activities was ~~$13.1~~$26.5 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021, which consisted of capital expenditures of ~~$5.1~~$11.1 million for property and equipment, and ~~$8.0~~$15.4 million for costs of software development for external use.

Net cash used in investing activities was ~~$13.8~~$33.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020, which consisted of capital expenditures of ~~$3.2~~$13.2 million for property and equipment, and ~~$10.6~~$20.0 million for costs of software development for external use.

Financing Activities

Net cash provided by financing activities was ~~$15.6~~$22.4 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021, primarily due to ~~$20.8~~$32.3 million in proceeds from employee stock option exercises and ESPP purchases, partially offset by ~~$2.6~~$6.7 million in employees’ taxes paid related to restricted stock unit vesting, and a net decrease in the customer funds balances of ~~$2.6~~$3.3 million.

Net cash used in financing activities was ~~$33.8~~$32.3 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020, primarily due to the repayment of $50.0 million ~~under~~of the Revolving Credit Facility and ~~$1.4~~$3.5 million in employees’ taxes paid related to restricted stock unit vesting, partially offset by ~~$17.7~~$21.2 million in proceeds from employee stock option exercises and ~~ESPP~~employee stock plan purchases.

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Contractual Obligations

There have been no significant changes during the ~~three~~six months ended ~~March 31,~~June 30, 2021 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, 2020.

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Contractual obligations as of ~~March 31,~~June 30, 2021 were as follows:


		Payments Due By Period											Payments Due By Period
		Total		Remainder of 2021		2022 - 2023		2024 - 2025		2026 and thereafter			Total		Remainder of 2021		2022 - 2023		2024 - 2025		2026 and thereafter

		(In thousands)											(In thousands)
Operating leases (1)	Operating leases (1)	$	68,145	$	11,305	$	24,287	$	15,260	$	17,293	Operating leases (1)	$	64,592	$	7,482	$	24,478	$	15,355	$	17,277
Purchase obligations (2)	Purchase obligations (2)	82,829		78,848		3,378		560		43		Purchase obligations (2)	114,388		89,479		23,246		1,567		96
Convertible senior notes (3)	Convertible senior notes (3)	581,469		719		2,875		577,875		—		Convertible senior notes (3)	581,469		719		2,875		577,875		—

Total (4)	Total (4)	$	732,443	$	90,872	$	30,540	$	593,695	$	17,336	Total (4)	$	760,449	$	97,680	$	50,599	$	594,797	$	17,373

(1)Commitments under operating leases relate primarily to leased office buildings, data centers, office equipment, and vehicles. Refer to Note 12, Lessee Leases, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report on Form ~~10-Q.~~10-Q for more details.

(2)We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates. These amounts are associated with agreements that are enforceable and legally binding. The amounts under such contracts are included in the table above because we believe that cancellation of these contracts is unlikely and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.

(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.~~10-Q for more details.

(4)Refer to Note 13, Commitments and Contingencies, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report on Form ~~10-Q.~~10-Q for more details.

Off-Balance Sheet Arrangements

As of ~~March 31,~~June 30, 2021, we had no off-balance sheet arrangements as defined under Regulation S-K 303(a)(4) of the Exchange Act and the instructions thereto.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks related to fluctuations in foreign currency exchange rates and interest rates.

Foreign Currency Exchange Risk

We operate in foreign countries which expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies, the most significant of which are the British Pound and the Euro. In order to manage foreign currency risk, at times we enter into foreign exchange forward contracts to mitigate risks associated with changes in spot exchange rates of mainly non-functional currency denominated assets or liabilities of our foreign subsidiaries. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. By working only with major banks and closely monitoring current market conditions, we seek to limit the risk that counterparties to these contracts may be unable to perform. We do not enter into derivative contracts for trading purposes. As of ~~March 31,~~June 30, 2021, we did not have any outstanding foreign exchange forward contracts.

Interest Rate Fluctuation Risk

We are exposed to interest rate risk through our borrowing activities. As of ~~March 31,~~June 30, 2021, there was no outstanding balance under the A&R Credit Agreement, and the net carrying amount under our convertible senior notes was ~~$472.3~~$477.6 million. Although our convertible senior notes are based on a fixed rate, changes in interest rates could impact the fair value of such notes. As of ~~March 31,~~June 30, 2021, the fair market value of our convertible senior notes was ~~$816.8~~$931.2 million. Refer to Note 5, Cash and Cash Equivalents and Fair Value of Financial Instruments, and Note 10, Convertible Senior Notes, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report on Form ~~10-Q.~~10-Q for more details.

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We have used interest rate swap agreements to protect against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows relating to interest payments on a portion of our outstanding debt. Our interest rate swaps, which were designated as cash flow hedges, involved the receipt of variable amounts from counterparties in exchange for us

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making fixed-rate payments over the life of the agreements. We do not hold or issue any derivative financial instruments for speculative trading purposes. As of ~~March 31,~~June 30, 2021, we did not have any outstanding interest rate swap agreements.

There were no significant changes in our market risk exposures during the ~~three~~six months ended ~~March 31,~~June 30, 2021 as compared to the market risk exposures disclosed in Quantitative and Qualitative Disclosures About Market Risk, set forth in Part II, Item 7A of our annual report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 24, 2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ~~or the Exchange Act)~~(the “Exchange Act”)) as of the end of the period covered by this report. These disclosure controls and procedures are designed to ensure that the information required to be disclosed by us in this report was (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Based on such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.

Limitations on Effectiveness of Controls

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements for external purposes in accordance with U.S. ~~GAAP.~~Generally Accepted Accounting Principles. All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that the objectives of the internal control system are met.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the three months ended ~~March 31,~~June 30, 2021.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth under “Legal Proceedings” in Note 13, Commitments and Contingencies, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q is incorporated herein by reference.

ITEM 1A. RISK FACTORS

Other than the ~~updated risk factor~~updates provided below, please refer to Part I, Item 1A, “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 24, 2021, for a description of the risks and uncertainties that may have a material adverse effect on our business, financial condition, or results of operations.

In assessing these risks, you should also refer to other information contained in this quarterly report on Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Condensed Consolidated Financial Statements and accompanying Notes.

~~The following risk factor has been updated:~~

We face risks related to adverse public health epidemics, including the ongoing global COVID-19 pandemic, which had an adverse effect on and, depending on the severity and duration of the pandemic, could continue to adversely affect our business, financial condition, and results of operations.

The continued spread of COVID-19, including new variants of the virus, concerns over the pandemic, and related containment measures have adversely impacted our workforce and operations, as well as those of our customers and suppliers, and had an adverse effect on and, depending on the severity and duration of the ongoing COVID-19 pandemic, could continue to adversely affect our business, financial condition, and results of operations.

In response to the ongoing pandemic, the vast majority of our non-manufacturing and non-customer facing personnel continues to work from home. For our employees who are not able to work from home, we have made modifications to our sites to enhance social distancing, implemented recommended safety practices and processes, enhanced cleaning measures, and provided personal protective equipment. If significant or critical portions of our workforce are unable to work effectively as a result of the COVID-19 pandemic, including because of illness, quarantines, facility closures, ineffective remote work arrangements, or technology failures or limitations, our operations would be materially adversely impacted.

Demand for our solutions, many of which involve a significant initial financial commitment from our customers, is largely dependent on our customers’ financial strength and capital and operating budgets. As a result of the pandemic, health systems have faced financial and operational pressures which we believe led our customers to delay or defer purchasing decisions and/or installations of our solutions during the first half of 2020. However, starting in the third quarter of 2020, we began to see our customers returning to pre-pandemic purchasing patterns consistent with long-term strategic investments. However, any future decisions by our customers to cancel, defer, or delay capital expenditure projects, generally reduced capital expenditures by healthcare facilities, and financial losses sustained by health systems as a result of the COVID-19 pandemic could again decrease demand for our products and related services, resulting in decreased revenue and lower revenue growth rates, which would adversely affect our operating results, perhaps materially.

In addition, ~~although we have not experienced~~ any ~~material disruptions to our supply chain to date, any future prolonged~~ disruption to our suppliers as a result of the COVID-19 pandemic and associated containment measures could significantly disrupt our supply chain, increase our procurement costs, and impact our ability to ~~produce~~manufacture our products, which would negatively impact our sales and operating results.

Furthermore, the COVID-19 pandemic has significantly increased economic and demand uncertainty and has led to disruption and volatility in the global capital markets, which could increase the cost of capital and adversely impact access to capital not only for us, but also for our customers and suppliers. Weak economic conditions and inability to access capital in a timely manner, or at all, could reduce our customers’ demand for our products and services, which would adversely affect our operating results, perhaps materially.

The global COVID-19 pandemic continues to rapidly evolve, and the full extent to which COVID-19 (including the emergence of new variants of the ~~COVID-19~~ virus), will continue to impact our business, results of operations, and financial position will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the severity, resurgences, and duration of the outbreak, travel restrictions, business closures or disruptions, and the effectiveness of actions taken to contain and treat the disease. While certain COVID-19 vaccines have now been approved and are being distributed globally, we are unable to predict ~~how widely utilized~~ the ~~vaccines will be, whether they will be ultimately effective~~

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~~in preventing~~ the ~~spread of COVID-19 (including its variant strains),~~pandemic and when economic activity and business operations will normalize.

To the extent the COVID-19 pandemic continues to adversely affect our business and financial results, it may also have the effect of heightening certain other risks described in the “Risk Factors” section in our annual report on Form 10-K for

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the year ended December 31, 2020, including, but not limited to, those relating to unfavorable economic and market conditions, our ability to develop new products or enhance existing products, the need to compete successfully against new product or service entrants, our need to generate sufficient cash flows to service our indebtedness, our tax rates, and our international operations.

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

Factors that are largely beyond our control, such as the cost, quality, and availability of the raw materials and components utilized in the manufacture of our products, may affect the cost of such products, and we may not be able to pass those costs on to our customers. Our products use raw materials and components that may be subject to price fluctuations, shortages, or other disruptions of supply for many reasons outside of our control, including as a result of the COVID-19 pandemic. The cost, quality, and availability of these raw materials and components are essential to the successful manufacture and sale of our products. If we are unable to maintain supply sources of these raw materials and components, or if such sources fail to satisfy our supply requirements, we may lose sales and experience increased component costs.

While we carry some inventory of critical components and are otherwise working to secure supplies necessary to ensure fulfillment of customer demand, global shortages could result in our need to secure supplies at higher costs as well as manufacturing delays. We have recently experienced increased delays in shipments of various components used in the manufacture of our products, in particular with regard to semiconductor chips. As a result, we have sought alternate sources of certain components, which may be at a higher cost. Because semiconductor chips continue to be subject to an ongoing significant shortage, our ability to source components that use semiconductor chips has been adversely affected. These supply interruptions have resulted in increased component delivery lead times and increased costs to obtain components with available semiconductor chips. To the extent this semiconductor chip shortage or other shortages continue, the production of our products may be impacted. If the Company or our suppliers are unable to obtain components from third parties in the quantities and of the quality that we require, on a timely basis and at acceptable prices, we may not be able to deliver our products on a timely or cost-effective basis to our customers, which could harm our business, results of operations, and financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

During the three and six months ended ~~March 31,~~June 30, 2021, we did not repurchase any shares of our common stock under our stock repurchase programs. Refer to “Stock Repurchase Program” 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 more details.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Incorporated By Reference
Exhibit Number Exhibit Description Form File No. Exhibit Filing Date
3.1
Amended and Restated Certificate of Incorporation of Omnicell, Inc.
10-Q 000-33043 3.1 9/20/2001
3.2
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Omnicell, Inc.
10-Q 000-33043 3.2 8/9/2010
3.3
Certificate of Designation of Series A Junior Participating Preferred Stock
10-K 000-33043 3.2 3/28/2003
3.4
Second Amended and Restated Bylaws of Omnicell, Inc. dated August 6, 2020
8-K 000-33043 3.1 8/12/2020
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4
4.2
Form of Common Stock Certificate
S-1/A 333-57024 4.1 7/24/2001
4.3
Indenture, dated as of September 25, 2020, by and between Omnicell, Inc. and U.S. Bank National Association, as Trustee
8-K 000-33043 4.1 9/25/2020
4.4
Form of Global Note, representing Omnicell, Inc.’s 0.25% Convertible Senior Notes due 2025 (included as Exhibit A to the Indenture referenced as Exhibit 4.3)
8-K 000-33043 4.2 9/25/2020
31.1+
Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)
31.2+
Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)
32.1+
Certification of Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)
101.INS+
Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH+
Inline XBRL Taxonomy Extension Schema Document
101.CAL+
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB+
Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE+
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104+
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

Incorporated By Reference

Exhibit Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of Omnicell, Inc.

10-Q

000-33043

3.1

9/20/2001

3.2

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Omnicell, Inc.

10-Q

000-33043

3.2

8/9/2010

3.3

Certificate of Designation of Series A Junior Participating Preferred Stock

10-K

000-33043

3.2

3/28/2003

3.4

Second Amended and Restated Bylaws of Omnicell, Inc. dated August 6, 2020

8-K

000-33043

3.1

8/12/2020

4.1

Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4

4.2

Form of Common Stock Certificate

S-1/A

333-57024

4.1

7/24/2001

4.3

Indenture, dated as of September 25, 2020, by and between Omnicell, Inc. and U.S. Bank National Association, as Trustee

8-K

000-33043

4.1

9/25/2020

4.4

Form of Global Note, representing Omnicell, Inc.’s 0.25% Convertible Senior Notes due 2025 (included as Exhibit A to the Indenture referenced as Exhibit 4.3)

8-K

000-33043

4.2

9/25/2020

10.1*

Omnicell, Inc. 2009 Equity Incentive Plan, as amended

S-8

333-256979

99.1

6/10/2021

31.1+

Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)

31.2+

Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)

32.1+

Certification of Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)

101.INS+

Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH+

Inline XBRL Taxonomy Extension Schema Document

101.CAL+

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF+

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB+

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE+

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104+

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

* Indicates a management contract, compensation plan, or arrangement.

+ Filed herewith.

4246

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

OMNICELL, INC.

Date:

~~May 4,~~August 6, 2021

By:

/s/ Peter J. Kuipers

Peter J. Kuipers,

Executive Vice President & Chief Financial Officer

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