zhihao/Moment via Getty Images Investment thesis Omnicell (NASDAQ:OMCL) has built a highly differentiated portfolio of products and services in the medication dispensing market that puts it, in my opinion, in a strongly advantageous position as the company is building a strong moat that will allow it to stay highly profitable and enjoy high and stable revenue streams in the long term, which should translate into significant (and hopefully steady) returns for investors once a more mature stage is reached. Th ...

Omnicell, Inc. (OMCL) reported fourth-quarter 2023 adjusted earnings per share (EPS) of 33 cents, in line with the year-over-year figure. However, the metric beat the Zacks Consensus Estimate of 17 cents.Adjustments include one-time expenses like share-based compensations, the amortization of acquired intangibles, acquisition-related expenses, executive transition costs, severance-related expenses and others.GAAP loss was 32 cents per share in the quarter under review compared with 64 cents in the prior-yea ...

Omnicell (OMCL) is well-poised for growth in the coming quarters, backed by the execution of its vision to transform the pharmacy care delivery model and deliver mission-critical medication management solutions for customers globally. The company is closely managing the cost structure with several initiatives, which are set to benefit its key metrics.Macroeconomic headwinds are resisting the full impact of expense containment efforts.In the past three months, this Zacks Rank #3 (Hold) stock has declined 21. ...

Financial Data and Key Metrics Changes - Total revenues for Q3 2023 were $299 million, down 14% compared to Q3 2022, primarily due to lower point of care revenues [33] - Non-GAAP EBITDA for Q3 2023 was $41 million, a decrease of $6 million compared to the previous quarter [36] - Non-GAAP earnings per share for Q3 2023 were $0.62, compared to $1.00 in the same period last year [36] - Cash balance at the end of Q3 2023 was $447 million, up $48 million from $399 million as of June 30, 2023 [37] Business Line Data and Key Metrics Changes - Services revenue for Q3 2023 was $110 million, an increase of 8% versus Q3 2022, driven by growth in Advanced Services [33] - Advanced Services revenue is expected to be between $208 million and $213 million for 2023, reflecting a 13% increase at the midpoint compared to 2022 [44] - Technical Services revenue is expected to range between $222 million and $227 million in 2023, a 9% increase at the midpoint compared to 2022 [44] Market Data and Key Metrics Changes - Health system customers are showing caution in implementing new workflows due to staffing and budget constraints, impacting the timing of new capital and software projects [11] - Customer interest in IV solutions remains robust despite regulatory headwinds affecting IVX systems [12] Company Strategy and Development Direction - The company aims to transform the pharmacy care delivery model and deliver medication management solutions globally [9] - Focus on automation and optimization of pharmacy operations is seen as critical for long-term growth [14] - The company is building on expense containment initiatives and reducing headcount by approximately 7% to align cost structure with revenue expectations [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing challenges in the healthcare industry, including labor shortages and budget constraints, which are expected to continue into 2024 [54] - The company remains confident in its ability to capture market share as hospital financial pressures alleviate and the macroeconomic environment improves [13] - Future revenue guidance for 2023 has been adjusted to between $1.135 billion and $1.155 billion, reflecting a decrease from previous expectations [41] Other Important Information - The company has completed refinancing its revolving credit facility, indicating lender confidence in its business model [37] - Anticipated annualized cost savings from cost actions are expected to be between $45 million and $55 million [49] Q&A Session Summary Question: Can you detail any particular areas you plan to focus on for cost cuts? - The company is looking at enabling functions for cost reductions while limiting cuts in growth areas like Advanced Services [58] Question: What products or services under Advanced Services are contributing to growth? - Specialty services are a key growth engine, along with some growth in retail solutions [59] Question: What percentage of the bookings guidance is product-related? - The company does not disclose specific percentages but indicates that most headwinds in bookings are from inpatient point of care [62] Question: What are the conversations with hospital systems regarding forward demand? - Providers face flat revenues and rising labor costs, impacting their ability to execute orders, particularly in inpatient care [68] Question: Can you provide an update on regulatory requirements for IVX? - The situation is complex due to varying interpretations of FDA rules by local pharmacy boards, affecting the rollout of IV solutions [75] Question: What is the outlook for 340B revenue? - The company expects limited growth in 340B but sees opportunities in internal specialty pharmacy services [80] Question: What are the latest thoughts on capital allocation going forward? - The company will continue to invest in growth areas and monitor markets for opportunities that align with its strategy [106]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section provides Omnicell's unaudited condensed consolidated financial statements and management's discussion and analysis [ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)](index=3&type=section&id=ITEM%201.%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20%28UNAUDITED%29) This section presents Omnicell's unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes for Q3 2023 [Condensed Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%28Unaudited%29) The balance sheet shows a slight increase in total assets and stockholders' equity, while total liabilities decreased from December 31, 2022, to September 30, 2023 | Metric | Sep 30, 2023 (In thousands) | Dec 31, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Total assets | $2,221,575 | $2,210,758 | $10,817 | 0.49% | | Total liabilities | $1,034,139 | $1,080,621 | $(46,482) | -4.30% | | Total stockholders' equity | $1,187,436 | $1,130,137 | $57,299 | 5.07% | | Cash and cash equivalents | $446,840 | $330,362 | $116,478 | 35.25% | | Accounts receivable and unbilled receivables, net | $272,584 | $299,469 | $(26,885) | -8.98% | | Inventories | $116,144 | $147,549 | $(31,405) | -21.28% | | Total current liabilities | $369,361 | $428,446 | $(59,085) | -13.79% | [Condensed Consolidated Statements of Operations (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20%28Unaudited%29) Total revenues decreased by 14% for Q3 2023 and 11% for the nine months, leading to a net loss for the nine-month period | Metric | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------- | | Total revenues | $298,663 | $348,059 | $(49,396) | -14.19% | | Product revenues | $188,755 | $246,565 | $(57,810) | -23.45% | | Services and other revenues | $109,908 | $101,494 | $8,414 | 8.29% | | Gross profit | $131,964 | $159,095 | $(27,131) | -17.05% | | Income (loss) from operations | $3,712 | $18,465 | $(14,753) | -79.90% | | Net income (loss) | $5,553 | $16,774 | $(11,221) | -66.90% | | Diluted EPS | $0.12 | $0.37 | $(0.25) | -67.57% | | Metric | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------- | | Total revenues | $888,265 | $998,273 | $(110,008) | -11.02% | | Product revenues | $562,906 | $706,246 | $(143,340) | -20.29% | | Services and other revenues | $325,359 | $292,027 | $33,332 | 11.41% | | Gross profit | $391,436 | $467,234 | $(75,798) | -16.22% | | Income (loss) from operations | $(11,503) | $36,034 | $(47,537) | -131.92% | | Net income (loss) | $(5,996) | $34,056 | $(40,052) | -117.62% | | Diluted EPS | $(0.13) | $0.73 | $(0.86) | -117.81% | [Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29%20%28Unaudited%29) Comprehensive income decreased significantly for Q3 2023, resulting in a comprehensive loss for the nine-month period | Metric | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------- | | Net income (loss) | $5,553 | $16,774 | $(11,221) | -66.90% | | Foreign currency translation adjustments | $(2,953) | $(6,770) | $3,817 | -56.38% | | Comprehensive income (loss) | $2,600 | $10,004 | $(7,404) | -74.01% | | Metric | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------- | | Net income (loss) | $(5,996) | $34,056 | $(40,052) | -117.62% | | Foreign currency translation adjustments | $(42) | $(15,735) | $15,693 | -99.73% | | Comprehensive income (loss) | $(6,038) | $18,321 | $(24,359) | -132.96% | [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%28Unaudited%29) Total stockholders' equity increased, driven by additional paid-in capital from share-based compensation and employee stock plans | Metric | Dec 31, 2022 (In thousands) | Sep 30, 2023 (In thousands) | Change (In thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Stockholders' Equity | $1,130,137 | $1,187,436 | $57,299 | | Additional Paid-In Capital | $1,046,760 | $1,110,096 | $63,336 | | Retained Earnings | $390,728 | $384,732 | $(5,996) | | Accumulated Other Comprehensive Loss | $(17,087) | $(17,129) | $(42) | - Issuance of common stock under employee stock plans contributed **$12.1 million** and **$3.1 million** in Q1 and Q2 2023, respectively, and **$7.8 million** in Q3 2023[19](index=19&type=chunk) - Share-based compensation added **$15.2 million**, **$15.1 million**, and **$16.1 million** to additional paid-in capital in Q1, Q2, and Q3 2023, respectively[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) Operating cash flow significantly improved for the nine months ended September 30, 2023, with a net increase in cash | Cash Flow Activity | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net cash provided by (used in) operating activities | $142,680 | $(4,372) | $147,052 | | Net cash used in investing activities | $(42,644) | $(41,417) | $(1,227) | | Net cash provided by (used in) financing activities | $10,290 | $(24,515) | $34,805 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $109,862 | $(71,729) | $181,591 | - Operating cash flow improved due to a decrease in inventories (**$31.7 million**), a decrease in accounts receivable (**$27.1 million**), and an increase in deferred revenues (**$23.6 million**)[185](index=185&type=chunk) - Investing activities primarily consisted of capital expenditures for property and equipment (**$32.4 million**) and external-use software development costs (**$10.2 million**)[187](index=187&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section provides detailed disclosures on accounting policies, financial instruments, debt, equity, and other financial components [Note 1. Organization and Summary of Significant Accounting Policies](index=11&type=section&id=Note%201.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) Omnicell provides medication management solutions, operates as a single segment, and adopted ASU 2021-08 prospectively from January 1, 2023 - Omnicell, Inc. was reincorporated in Delaware in 2001 and focuses on medication management solutions and adherence tools for the healthcare industry, primarily in the United States and Europe[28](index=28&type=chunk) - The company manages its operations as a **single segment**, with the CEO acting as the Chief Operating Decision Maker (CODM), evaluating performance at the consolidated level[33](index=33&type=chunk) - ASU 2021-08, requiring recognition and measurement of contract assets and liabilities acquired in business combinations per ASC 606, was adopted on **January 1, 2023**, applied prospectively[34](index=34&type=chunk) [Note 2. Revenues](index=13&type=section&id=Note%202.%20Revenues) Omnicell generates revenue from connected devices, software, consumables, and services, with product revenues recognized at a point in time | Revenue Category | Timing of Revenue Recognition | Income Statement Classification | | :-------------------------------- | :-------------------------------------------------------------------------------- | :------------------------------ | | Connected devices, software licenses, and other | Point in time, generally upon installation and acceptance | Product | | Consumables | Point in time, generally upon shipment to or receipt by customer | Product | | Technical services | Over time, typically ratably over the service term | Service | | Advanced Services | Over time, as services are provided | Service | | Revenue Type | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Connected devices, software licenses, and other | $167,560 | $226,415 | $500,182 | $650,125 | | Consumables | $21,195 | $20,150 | $62,724 | $56,121 | | Technical services | $57,303 | $53,914 | $167,851 | $156,386 | | Advanced Services | $52,605 | $47,580 | $157,508 | $135,641 | | Total revenues | $298,663 | $348,059 | $888,265 | $998,273 | | Geographic Region | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | United States | $272,649 | $315,755 | $785,794 | $898,269 | | Rest of world | $26,014 | $32,304 | $102,471 | $100,004 | | Total revenues | $298,663 | $348,059 | $888,265 | $998,273 | | Contract Asset/Liability | Sep 30, 2023 (In thousands) | Dec 31, 2022 (In thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total contract assets | $33,434 | $40,507 | | Total contract liabilities | $180,044 | $156,332 | [Note 3. Net Income (Loss) Per Share](index=15&type=section&id=Note%203.%20Net%20Income%20%28Loss%29%20Per%20Share) Diluted net income per share decreased for Q3 2023, resulting in a net loss per share for the nine-month period | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) (In thousands) | $5,553 | $16,774 | $(5,996) | $34,056 | | Weighted-average shares outstanding – basic (In thousands) | 45,333 | 44,441 | 45,117 | 44,304 | | Net income (loss) per share – basic | $0.12 | $0.38 | $(0.13) | $0.77 | | Net income (loss) per share – diluted | $0.12 | $0.37 | $(0.13) | $0.73 | [Note 4. Cash and Cash Equivalents and Fair Value of Financial Instruments](index=15&type=section&id=Note%204.%20Cash%20and%20Cash%20Equivalents%20and%20Fair%20Value%20of%20Financial%20Instruments) Cash and cash equivalents increased, with financial instruments measured at fair value within Level 1 and Level 2 hierarchy | Metric | Sep 30, 2023 (In thousands) | Dec 31, 2022 (In thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $446,840 | $330,362 | | Cash equivalents | $429,700 | $301,000 | | Fair value of convertible senior notes | $518,600 | $501,400 | | Carrying value of convertible senior notes | $568,900 | $566,600 | - Cash and cash equivalents primarily consist of bank accounts and highly-liquid U.S. Government money market funds[49](index=49&type=chunk) - The company's cash, cash equivalents, and restricted cash are classified within **Level 1** of the fair value hierarchy, while the credit facility and convertible senior notes are classified within **Level 2**[50](index=50&type=chunk) [Note 5. Balance Sheet Components](index=16&type=section&id=Note%205.%20Balance%20Sheet%20Components) Inventories, other current assets, and accrued liabilities decreased, while funds held for customers also saw a reduction | Balance Sheet Component | Sep 30, 2023 (In thousands) | Dec 31, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Inventories | $116,144 | $147,549 | $(31,405) | -21.28% | | Other current assets | $50,236 | $77,362 | $(27,126) | -35.06% | | Other long-term assets | $90,766 | $105,017 | $(14,251) | -13.57% | | Accrued liabilities | $150,385 | $172,655 | $(22,270) | -12.90% | | Funds held for customers, including restricted cash | $30,967 | $56,703 | $(25,736) | -45.39% | [Note 6. Property and Equipment](index=17&type=section&id=Note%206.%20Property%20and%20Equipment) Net property and equipment increased, driven by equipment and software development costs, with higher depreciation expense | Property and Equipment (Net) | Sep 30, 2023 (In thousands) | Dec 31, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Total property and equipment, net | $106,880 | $93,961 | $12,919 | 13.75% | | Equipment | $95,891 | $91,391 | $4,500 | 4.92% | | Purchased software and internal-use software development costs | $97,860 | $76,327 | $21,533 | 28.21% | | Depreciation and Amortization Expense | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Depreciation and amortization expense | $6,700 | $5,800 | $19,600 | $16,700 | [Note 7. External-Use Software Development Costs](index=18&type=section&id=Note%207.%20External-Use%20Software%20Development%20Costs) Net external-use software development costs decreased, with amortization expense remaining relatively stable year-over-year | Metric | Sep 30, 2023 (In thousands) | Dec 31, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | External-use software development costs, net | $69,872 | $80,760 | $(10,888) | -13.48% | | Amortization Expense | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Amortization of external-use software development costs | $7,100 | $7,300 | $21,900 | $21,500 | | Estimated Future Amortization (In thousands) | Amount | | :-------------------------------- | :----- | | Remaining three months of 2023 | $6,787 | | 2024 | $24,747 | | 2025 | $17,608 | | 2026 | $12,069 | | 2027 | $6,114 | | Thereafter | $2,547 | | Total | $69,872 | [Note 8. Goodwill and Intangible Assets](index=18&type=section&id=Note%208.%20Goodwill%20and%20Intangible%20Assets) Goodwill remained stable, while net intangible assets decreased due to amortization of customer relationships and technology | Metric | Sep 30, 2023 (In thousands) | Dec 31, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Goodwill | $734,328 | $734,274 | $54 | 0.01% | | Total intangibles assets, net | $218,861 | $242,906 | $(24,045) | -9.90% | | Customer relationships, net | $195,763 | $210,398 | $(14,635) | -6.96% | | Acquired technology, net | $20,084 | $27,767 | $(7,683) | -27.67% | | Amortization Expense | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Amortization expense of intangible assets | $7,700 | $8,700 | $24,100 | $26,700 | | Estimated Future Amortization (In thousands) | Amount | | :-------------------------------- | :----- | | Remaining three months of 2023 | $7,483 | | 2024 | $23,093 | | 2025 | $21,056 | | 2026 | $18,061 | | 2027 | $16,754 | | Thereafter | $132,414 | | Total | $218,861 | [Note 9. Debt and Credit Agreement](index=19&type=section&id=Note%209.%20Debt%20and%20Credit%20Agreement) Omnicell entered a new credit agreement for a $350 million revolving facility, with no outstanding balance as of September 30, 2023 - On **October 10, 2023**, Omnicell entered into a Second Amended and Restated Credit Agreement, replacing the Prior A&R Credit Agreement[68](index=68&type=chunk) - The new agreement includes a **$350.0 million** five-year revolving credit facility and an uncommitted incremental loan facility, expiring on **October 10, 2028**[68](index=68&type=chunk) - As of September 30, 2023, the company had **$500.0 million** available under the Prior Revolving Credit Facility with **no outstanding balance** and was in compliance with all covenants[73](index=73&type=chunk) [Note 10. Convertible Senior Notes](index=21&type=section&id=Note%2010.%20Convertible%20Senior%20Notes) The company holds $575 million in convertible senior notes due 2025, with no conversion conditions met in Q3 2023 - The company has **$575.0 million** aggregate principal amount of **0.25% convertible senior notes** due September 15, 2025[74](index=74&type=chunk) - As of September 30, 2023, none of the conditional conversion features were triggered, classifying the notes as a **long-term liability**[76](index=76&type=chunk) | Metric | Sep 30, 2023 (In thousands) | Dec 31, 2022 (In thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Principal amount | $575,000 | $575,000 | | Unamortized debt issuance costs | $(6,113) | $(8,429) | | Convertible senior notes, net | $568,887 | $566,571 | | Interest Expense Component | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Contractual coupon interest | $359 | $359 | $1,078 | $1,078 | | Amortization of debt issuance costs | $773 | $768 | $2,316 | $2,298 | [Note 11. Lessor Leases](index=23&type=section&id=Note%2011.%20Lessor%20Leases) Sales-type lease income increased for Q3 2023 but decreased for the nine months, with net investment in leases growing | Metric | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Sales-type lease revenues | $14,388 | $10,115 | $27,960 | $34,033 | | Selling profit on sales-type lease revenues | $4,758 | $7,247 | $13,777 | $17,070 | | Rental income (Operating leases) | $1,330 | $2,327 | $5,459 | $7,220 | | Metric | Sep 30, 2023 (In thousands) | Dec 31, 2022 (In thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net investment in sales-type leases | $53,249 | $44,410 | | Long-term investment in sales-type leases, net | $41,631 | $32,924 | | Future Minimum Sales-Type Lease Payments (In thousands) | Amount | | :-------------------------------- | :----- | | Remaining three months of 2023 | $3,828 | | 2024 | $13,431 | | 2025 | $11,351 | | 2026 | $9,053 | | 2027 | $7,286 | | Thereafter | $17,521 | | Total net investment in sales-type leases | $53,249 | [Note 12. Lessee Leases](index=24&type=section&id=Note%2012.%20Lessee%20Leases) Operating lease liabilities totaled $43.5 million, with costs decreasing and significant impairment charges due to restructuring | Metric | Sep 30, 2023 (In thousands) | | :-------------------------------- | :-------------------------- | | Total operating lease liabilities | $43,462 | | Current portion of operating lease liabilities | $10,617 | | Long-term operating lease liabilities | $32,845 | | Operating Lease Costs (In thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease costs | $2,600 | $4,000 | $8,200 | $12,800 | | Impairment and abandonment charges | N/A | $300 | $7,800 | $5,400 | | Lease Metrics | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Weighted-average remaining lease term (years) | 4.6 | 5.0 | | Weighted-average discount rate (%) | 5.7% | 5.7% | [Note 13. Commitments and Contingencies](index=25&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) Non-cancelable purchase commitments totaled $118.7 million, with ransomware expenses largely offset by insurance recoveries - Non-cancelable purchase commitments totaled **$118.7 million** as of September 30, 2023, with **$78.1 million** expected to be paid within the year ending December 31, 2023[93](index=93&type=chunk) | Ransomware Incident Expenses (In thousands) | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total expenses | $1,000 | $13,500 | | Expected insurance recoveries | N/A | $11,100 | | Net expenses | N/A | $2,400 | | Cumulative Ransomware Impact (In thousands) | Amount | | :-------------------------------- | :----- | | Cumulative expenses since detection | $13,600 | | Insurance recoveries received | $11,600 | - The company has not recorded any material accrual for contingent liabilities related to legal proceedings, believing any potential material loss is not probable[97](index=97&type=chunk) [Note 14. Income Taxes](index=26&type=section&id=Note%2014.%20Income%20Taxes) Omnicell recorded a $4.4 million provision for income taxes for the nine months ended September 30, 2023, a shift from a prior year benefit | Metric | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Provision for (benefit from) income taxes | $1,829 | $543 | $4,405 | $(995) | | Unrecognized Tax Benefits (In thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Gross unrecognized tax benefits | $10,100 | $9,300 | | Accrued interest and penalties | $400 | $200 | - The 2023 annual effective tax rate before discrete items was influenced by R&D credits and FDII benefit, partially offset by non-deductible compensation and GILTI tax inclusion[100](index=100&type=chunk) - The Inflation Reduction Act of 2022, introducing a **15% corporate alternative minimum tax** and **1% excise tax** on net stock repurchases, did not materially impact the company's income tax provision for the nine months ended September 30, 2023[101](index=101&type=chunk) [Note 15. Employee Benefits and Share-Based Compensation](index=26&type=section&id=Note%2015.%20Employee%20Benefits%20and%20Share-Based%20Compensation) Share-based compensation expense decreased, with 9.1 million shares reserved for future issuance under various equity plans | Share-Based Compensation Expense (In thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total share-based compensation expense | $14,982 | $17,310 | $43,113 | $50,731 | | Equity Incentive Plan Activity (9 Months Ended Sep 30, 2023, in thousands) | Shares Outstanding/Unvested | | :-------------------------------- | :-------------------------- | | Stock options outstanding | 2,120 | | RSUs outstanding and unvested | 1,236 | | RSAs outstanding and unvested | 24 | | PSUs outstanding and unvested | 99 | | Total shares reserved for future issuance | 9,146 | - Employees purchased approximately **353,000 shares** under the ESPP at a weighted-average price of **$46.68** for the nine months ended September 30, 2023[107](index=107&type=chunk) - The 2014 Repurchase Program was completed in Q1 2022, and **$2.7 million** remains available under the 2016 Repurchase Program as of September 30, 2023. No stock repurchases occurred in Q3 2023[117](index=117&type=chunk)[118](index=118&type=chunk) [Note 16. Restructuring Expenses](index=29&type=section&id=Note%2016.%20Restructuring%20Expenses) Omnicell incurred $5.5 million in employee severance costs for the nine months ended September 30, 2023, due to restructuring plans | Employee-Related Restructuring Expense (In thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total restructuring expense, net of reversals | $(581) | $1,794 | $5,454 | $5,321 | | Restructuring Plan Balances (In thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Unpaid balance related to the Plan | $1,000 | $18,200 | - The restructuring plan initiated in November 2022 and expanded in Q1 2023 aims to reduce headcount and real estate footprint due to macroeconomic headwinds and a hybrid work strategy[120](index=120&type=chunk) [Note 17. Subsequent Events](index=30&type=section&id=Note%2017.%20Subsequent%20Events) Omnicell entered a new credit agreement and announced a new restructuring plan in Q4 2023, with estimated charges of $12-18 million - On **October 10, 2023**, Omnicell entered into the Second Amended and Restated Credit Agreement, superseding the Prior A&R Credit Agreement[123](index=123&type=chunk) - On **November 2, 2023**, the company announced the '2023 Plan' to reduce headcount and real estate footprint, estimating **$12 million to $18 million** in nonrecurring restructuring and related charges[124](index=124&type=chunk) - The 2023 Plan charges consist of approximately **$9 million to $12 million cash-based** for severance and **$3 million to $6 million non-cash** for office closures, with substantial completion expected by Q2 2024[124](index=124&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=30&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Omnicell's financial condition and results for Q3 2023, covering revenue, costs, liquidity, and strategy [FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS](index=30&type=section&id=FORWARD-LOOKING%20STATEMENTS%20AND%20FACTORS%20THAT%20MAY%20AFFECT%20FUTURE%20RESULTS) This section highlights forward-looking statements subject to risks and uncertainties that could cause actual results to differ - Forward-looking statements cover expectations for future sales, bookings, revenues, market growth, investment in the Autonomous Pharmacy, and development of new products and services[126](index=126&type=chunk) - Such statements are subject to known and unknown risks and uncertainties, many beyond the company's control, which may cause actual results to differ materially[129](index=129&type=chunk) - The company assumes no obligation to publicly update any forward-looking statements, except as required by law[129](index=129&type=chunk) [OVERVIEW](index=32&type=section&id=OVERVIEW) Omnicell leads in medication management, leveraging intelligent infrastructure and the Autonomous Pharmacy vision to address industry challenges - Omnicell is focused on optimizing medication management across all care settings through an intelligent infrastructure to achieve the **Autonomous Pharmacy vision**, aiming for zero-error medication management[133](index=133&type=chunk) - Bookings are defined as the value of non-cancelable contracts for connected devices, software products, Advanced Services (with minimum commitment), and consumables, excluding technical services and freight revenue[136](index=136&type=chunk) - The company's business strategy addresses significant challenges in pharmacy, such as labor shortages, medication errors, and waste, by investing in R&D and delivering solutions across Point of Care, Central Pharmacy and IV Compounding, Specialty Pharmacy and 340B Program, and Retail, Institutional, and Payer market categories[141](index=141&type=chunk)[142](index=142&type=chunk)[146](index=146&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=34&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Financial statements require significant judgments in areas like revenue recognition, inventory, and goodwill, with no material changes in Q3 2023 - Critical accounting policies involve significant judgments and estimates in areas including revenue recognition, allowance for credit losses, inventory, software development costs, leases, goodwill and intangible asset valuation, business combinations, share-based compensation, and income taxes[146](index=146&type=chunk) - No material changes in critical accounting estimates were made during the nine months ended September 30, 2023, compared to those disclosed in the 2022 Annual Report on Form 10-K, except for the prospective adoption of ASU 2021-08[148](index=148&type=chunk) [RESULTS OF OPERATIONS](index=35&type=section&id=RESULTS%20OF%20OPERATIONS) Omnicell saw declining revenues and gross profit, but operating expenses decreased due to cost-saving initiatives, and interest income rose [Total Revenues](index=35&type=section&id=Total%20Revenues) Total revenues decreased by 14% for Q3 and 11% for the nine months, driven by lower product revenues, while services grew | Revenue Category | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------- | | Product revenues | $188,755 | $246,565 | $(57,810) | -23% | | Services and other revenues | $109,908 | $101,494 | $8,414 | 8% | | Total revenues | $298,663 | $348,059 | $(49,396) | -14% | | Revenue Category | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------- | | Product revenues | $562,906 | $706,246 | $(143,340) | -20% | | Services and other revenues | $325,359 | $292,027 | $33,332 | 11% | | Total revenues | $888,265 | $998,273 | $(110,008) | -11% | - Product revenues decreased primarily due to lower volumes from automated dispensing systems, impacted by health systems' capital budget and labor constraints[151](index=151&type=chunk)[154](index=154&type=chunk) - Services and other revenues increased due to higher customer demand for Advanced Services, growth in the installed customer base, and pricing actions[152](index=152&type=chunk)[155](index=155&type=chunk) [Cost of Revenues and Gross Profit](index=36&type=section&id=Cost%20of%20Revenues%20and%20Gross%20Profit) Cost of revenues decreased, but gross profit declined due to a disproportionate drop in product revenues relative to fixed costs | Cost of Revenues & Gross Profit | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------- | | Cost of product revenues | $106,311 | $134,023 | $(27,712) | -21% | | Cost of services and other revenues | $60,388 | $54,941 | $5,447 | 10% | | Total cost of revenues | $166,699 | $188,964 | $(22,265) | -12% | | Gross profit | $131,964 | $159,095 | $(27,131) | -17% | | Gross margin | 44% | 46% | -2% | N/A | | Cost of Revenues & Gross Profit | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------- | | Cost of product revenues | $323,800 | $374,175 | $(50,375) | -13% | | Cost of services and other revenues | $173,029 | $156,864 | $16,165 | 10% | | Total cost of revenues | $496,829 | $531,039 | $(34,210) | -6% | | Gross profit | $391,436 | $467,234 | $(75,798) | -16% | | Gross margin | 44% | 47% | -3% | N/A | - The decrease in cost of product revenues was primarily due to lower product revenues and reduced inventory-related costs (semiconductors, steel, freight)[161](index=161&type=chunk)[164](index=164&type=chunk) - Gross margin declined because the decrease in cost of product revenues did not proportionally offset the larger decrease in product revenues, mainly due to certain fixed costs like labor and overhead[162](index=162&type=chunk)[165](index=165&type=chunk) [Operating Expenses and Interest and Other Income (Expense), Net](index=38&type=section&id=Operating%20Expenses%20and%20Interest%20and%20Other%20Income%20%28Expense%29%2C%20Net) Operating expenses decreased due to cost-saving initiatives, while interest and other income significantly improved from higher interest rates | Operating Expenses & Other Income | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------- | | Research and development | $24,281 | $25,171 | $(890) | -4% | | Selling, general, and administrative | $103,971 | $115,459 | $(11,488) | -10% | | Total operating expenses | $128,252 | $140,630 | $(12,378) | -9% | | Interest and other income (expense), net | $3,670 | $(1,148) | $4,818 | -420% | | Operating Expenses & Other Income | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | Change (In thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------- | | Research and development | $70,296 | $76,556 | $(6,260) | -8% | | Selling, general, and administrative | $332,643 | $354,644 | $(22,001) | -6% | | Total operating expenses | $402,939 | $431,200 | $(28,261) | -7% | | Interest and other income (expense), net | $9,912 | $(2,973) | $12,885 | -433% | - R&D expenses decreased due to cost-saving initiatives and lower consulting expenses[166](index=166&type=chunk)[169](index=169&type=chunk) - SG&A expenses decreased due to lower consulting, commission, freight out, employee-related restructuring, rent, and ransomware-related expenses, partially offset by executive transition costs[167](index=167&type=chunk)[170](index=170&type=chunk) - Interest and other income (expense), net, improved significantly due to higher interest income from increased interest rates and cash balances[168](index=168&type=chunk)[171](index=171&type=chunk) [Provision for (Benefit from) Income Taxes](index=39&type=section&id=Provision%20for%20%28Benefit%20from%29%20Income%20Taxes) Omnicell recorded a $4.4 million tax provision for the nine months ended September 30, 2023, a shift from a prior year benefit | Income Tax | 3 Months Ended Sep 30, 2023 (In thousands) | 3 Months Ended Sep 30, 2022 (In thousands) | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Provision for (benefit from) income taxes | $1,829 | $543 | $4,405 | $(995) | - The change from a tax benefit in 2022 to a tax provision in 2023 was primarily due to a decrease in excess tax benefit from equity compensation and the change in income (loss) before income taxes[172](index=172&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=39&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Cash and working capital improved, with a refinanced credit facility and significant operating cash generation, supporting future growth | Metric | Sep 30, 2023 (In thousands) | Dec 31, 2022 (In thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $446,840 | $330,362 | | Working capital | $544,390 | $453,366 | | Ratio of current assets to current liabilities | 2.5:1 | 2.1:1 | - The company believes existing cash, anticipated cash flows from operations, and the revolving credit facility will be sufficient to meet cash needs for at least the next twelve months and fund continued business growth beyond that[182](index=182&type=chunk) [Sources of Cash](index=40&type=section&id=Sources%20of%20Cash) Omnicell's cash sources include operating activities and a new $350 million revolving credit facility, with no outstanding balance - On **October 10, 2023**, Omnicell entered into a Second Amended and Restated Credit Agreement, providing a **$350.0 million** five-year revolving credit facility[178](index=178&type=chunk) - As of September 30, 2023, the company had **$500.0 million** available under the Prior Revolving Credit Facility with **no outstanding balance** and was in compliance with all covenants[179](index=179&type=chunk) [Uses of Cash](index=40&type=section&id=Uses%20of%20Cash) Future cash uses include working capital, capital expenditures, potential acquisitions, and remaining stock repurchases - Expected future uses of cash include working capital, capital expenditures, contractual obligations, potential acquisitions, and common stock repurchases[180](index=180&type=chunk) - As of September 30, 2023, **$2.7 million** remains available for repurchases under the 2016 Repurchase Program; no stock repurchases occurred during the nine months ended September 30, 2023[181](index=181&type=chunk) [Cash Flows](index=41&type=section&id=Cash%20Flows) Operating cash flow significantly increased, while investing activities used cash for capital and software, and financing provided cash | Cash Flow Activity | 9 Months Ended Sep 30, 2023 (In thousands) | 9 Months Ended Sep 30, 2022 (In thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by (used in) operating activities | $142,680 | $(4,372) | | Net cash used in investing activities | $(42,644) | $(41,417) | | Net cash provided by (used in) financing activities | $10,290 | $(24,515) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $109,862 | $(71,729) | - Operating cash flow improved due to decreases in inventories and accounts receivable, and an increase in deferred revenues[185](index=185&type=chunk) - Investing activities included **$32.4 million** for property and equipment and **$10.2 million** for external-use software development costs[187](index=187&type=chunk) - Financing activities were positively impacted by **$23.0 million** from stock-based compensation plans, partially offset by **$6.1 million** in employee taxes related to RSUs and a **$6.6 million** change in customer funds[189](index=189&type=chunk) [Contractual Obligations](index=42&type=section&id=Contractual%20Obligations) Total contractual obligations are $746.1 million, primarily convertible senior notes, purchase obligations, and operating leases | Contractual Obligation | Total (In thousands) | Remainder of 2023 (In thousands) | 2024 - 2025 (In thousands) | 2026 - 2027 (In thousands) | 2028 and thereafter (In thousands) | | :-------------------------------- | :------------------- | :------------------------------- | :------------------------- | :------------------------- | :--------------------------------- | | Operating leases | $49,540 | $3,340 | $21,870 | $16,276 | $8,054 | | Purchase obligations | $118,658 | $78,055 | $40,471 | $132 | $0 | | Convertible senior notes | $577,875 | $0 | $577,875 | $0 | $0 | | Total | $746,073 | $81,395 | $640,216 | $16,408 | $8,054 | - The convertible senior notes, due in September 2025, represent the largest portion of contractual obligations[191](index=191&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=43&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Omnicell faces foreign currency and interest rate risks, using forward contracts to mitigate currency risk, with no significant changes in Q3 2023 - Omnicell is exposed to foreign currency exchange rate fluctuations, mainly involving the British Pound and Euro, and uses foreign exchange forward contracts to mitigate this risk[193](index=193&type=chunk) - As of September 30, 2023, the company had no outstanding foreign exchange forward contracts or interest rate swap agreements[193](index=193&type=chunk)[196](index=196&type=chunk) - Interest rate risk primarily stems from borrowing activities and the fair value of convertible senior notes, which had a carrying amount of **$568.9 million** and a fair value of **$518.6 million** as of September 30, 2023[194](index=194&type=chunk)[195](index=195&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=43&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were effective, acknowledging inherent limitations, with no material changes in internal control - Management concluded that disclosure controls and procedures were **effective** at the reasonable assurance level as of September 30, 2023[199](index=199&type=chunk) - All internal control systems have inherent limitations and can only provide reasonable assurance that objectives are met[200](index=200&type=chunk) - There were **no material changes** in internal control over financial reporting during the three months ended September 30, 2023[201](index=201&type=chunk) [PART II. OTHER INFORMATION](index=45&type=section&id=PART%20II%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=45&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Legal proceedings information is referenced from Note 13, with no material accruals for contingent liabilities recorded - Information on legal proceedings is incorporated by reference from Note 13, Commitments and Contingencies[204](index=204&type=chunk) [ITEM 1A. RISK FACTORS](index=45&type=section&id=ITEM%201A.%20RISK%20FACTORS) Substantial debt and restrictive covenants pose significant risks to Omnicell's financial flexibility and business operations - The company's substantial debt, including a **$350.0 million** revolving credit facility and **$575.0 million** in convertible senior notes, could limit borrowing ability, restrict cash flow for operations, and increase vulnerability to adverse economic conditions[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) - The Second A&R Credit Agreement contains restrictive covenants, including a maximum consolidated secured net leverage ratio of **3.00:1** and a minimum consolidated interest coverage ratio of **3.00:1**, which could lead to default if not met[212](index=212&type=chunk)[213](index=213&type=chunk) - Failure to comply with covenants could result in immediate repayment of outstanding borrowings or foreclosure on assets, severely harming the business[213](index=213&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=46&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No shares of common stock were repurchased under the company's repurchase program during Q3 2023 - No shares of common stock were repurchased under the company's repurchase program during the three months ended September 30, 2023[214](index=214&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=46&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported[215](index=215&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=46&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to Omnicell, Inc - Mine Safety Disclosures are not applicable to the registrant[216](index=216&type=chunk) [ITEM 5. OTHER INFORMATION](index=46&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No directors or officers adopted or terminated Rule 10b5-1 trading plans during Q3 2023 - No directors or officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2023[217](index=217&type=chunk) [ITEM 6. EXHIBITS](index=47&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including management contracts, credit agreements, and certifications - Exhibits include management contracts, compensation plans, separation agreements, the Second Amended and Restated Credit Agreement, and various certifications (CEO, CFO)[218](index=218&type=chunk) [Signature](index=48&type=section&id=Signature) The report was signed by Nchacha E. Etta, Executive Vice President & Chief Financial Officer, on November 3, 2023 - The report was signed by Nchacha E. Etta, Executive Vice President & Chief Financial Officer, on **November 3, 2023**[225](index=225&type=chunk)

Investor Relations August 1, 2023 This presentation contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"), including Q2-2023 non-GAAP gross margin, non-GAAP operating expense, nonGAAP EBITDA, and non-GAAP earnings per share, 2017 and Q2-2023 liquidity and 2017 and Q2-2023 net debt/EBITDA, guidance with respect to 2023 non-GAAP EBITDA and non-GAAP earnings per share. Reconciliations of the 2017 and Q2-2023 non-GAAP financial measures to ...

PART I FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Omnicell's unaudited financial statements for the period ended June 30, 2023, including balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, with accompanying notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets slightly decreased to $2.19 billion, cash and equivalents increased to $399.5 million, total liabilities decreased to $1.03 billion, and total stockholders' equity rose to $1.16 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $399,464 | $330,362 | | Total current assets | $881,361 | $881,812 | | Goodwill | $735,523 | $734,274 | | Total assets | $2,193,872 | $2,210,758 | | **Liabilities & Equity** | | | | Total current liabilities | $370,157 | $428,446 | | Convertible senior notes, net | $568,114 | $566,571 | | Total liabilities | $1,030,307 | $1,080,621 | | Total stockholders' equity | $1,163,565 | $1,130,137 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2023 total revenues decreased 10% to $299.0 million, with net income falling to $3.5 million, while the six-month period reported a net loss of $11.5 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $298,973 | $331,386 | $589,602 | $650,214 | | Gross profit | $134,443 | $158,092 | $259,472 | $308,139 | | Income (loss) from operations | $7,748 | $12,485 | $(15,215) | $17,569 | | Net income (loss) | $3,451 | $9,069 | $(11,549) | $17,282 | | Diluted EPS | $0.08 | $0.20 | $(0.26) | $0.37 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly improved to $85.7 million for H1 2023, driven by better working capital management, with net cash used in investing at $28.5 million and provided by financing at $7.5 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $85,673 | $(25,547) | | Net cash used in investing activities | $(28,457) | $(25,550) | | Net cash provided by (used in) financing activities | $7,465 | $(33,571) | | Net increase (decrease) in cash | $64,829 | $(86,791) | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes detail revenue recognition, debt, leases, goodwill, share-based compensation, and restructuring, confirming the company operates as a single segment focused on medication management solutions - The company manages its operations as a single segment for assessing performance and making operating decisions, with the CEO as the Chief Operating Decision Maker (CODM)[32](index=32&type=chunk) Disaggregation of Revenues by Type (in thousands) | Revenue Type | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Connected devices, software licenses, and other | $167,475 | $215,632 | $332,622 | $423,710 | | Consumables | $20,961 | $18,174 | $41,529 | $35,971 | | Technical services | $57,191 | $53,303 | $110,548 | $102,472 | | Advanced Services | $53,346 | $44,277 | $104,903 | $88,061 | | **Total revenues** | **$298,973** | **$331,386** | **$589,602** | **$650,214** | - As of June 30, 2023, the company had remaining performance obligations not yet included in deferred revenue of **$288.7 million**, primarily from non-cancellable technical and Advanced Services contracts[45](index=45&type=chunk) - The company has a **$575.0 million** principal amount of 0.25% convertible senior notes due in 2025, with a carrying value of **$568.1 million** and a fair value of **$581.6 million** as of June 30, 2023[69](index=69&type=chunk)[49](index=49&type=chunk)[77](index=77&type=chunk) - In connection with a restructuring plan initiated in November 2022, the company incurred **$6.0 million** in employee severance costs during the first six months of 2023[117](index=117&type=chunk)[120](index=120&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, business strategy, and liquidity, attributing Q2 2023 revenue decline to lower product sales due to health system constraints, while affirming sufficient liquidity for the next twelve months [Business Strategy](index=34&type=section&id=Business%20Strategy) The company's strategy focuses on the Autonomous Pharmacy vision, addressing pharmacy challenges through technology and intelligence across four key market categories - Omnicell is focused on delivering solutions to drive positive medication management outcomes across four key market categories[137](index=137&type=chunk) - **Point of Care:** Expanding use of dispensing systems within hospitals, capitalizing on the replacement cycle of older models, and pursuing competitive conversions[137](index=137&type=chunk)[138](index=138&type=chunk) - **Central Pharmacy and IV Compounding:** Automating manual, error-prone processes to reallocate labor, enhance safety, and reduce waste, an area with nascent adoption[137](index=137&type=chunk)[138](index=138&type=chunk) - **Specialty Pharmacy and 340B Program:** Investing in revenue-generating activities for health systems to manage complex specialty drugs and optimize 340B programs[137](index=137&type=chunk)[138](index=138&type=chunk) - **Retail, Institutional, and Payer:** Capitalizing on the shift of care to non-acute settings by providing solutions that improve patient engagement and reduce total care costs[137](index=137&type=chunk)[138](index=138&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Total revenues declined 10% in Q2 2023 and 9% in H1 2023 due to lower product sales, while services revenue grew 13%, and gross margin contracted due to fixed costs Revenue Performance (in thousands) | Revenue Type | Q2 2023 | Q2 2022 | Change | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Product revenues | $188,436 | $233,806 | (19)% | $374,151 | $459,681 | (19)% | | Services and other revenues | $110,537 | $97,580 | 13% | $215,451 | $190,533 | 13% | | **Total revenues** | **$298,973** | **$331,386** | **(10)%** | **$589,602** | **$650,214** | **(9)%** | - The decrease in product revenues was primarily due to lower revenues from the automated dispensing systems business, resulting from ongoing health systems' capital budget and labor constraints[144](index=144&type=chunk)[147](index=147&type=chunk) Gross Margin Performance | Period | 2023 | 2022 | | :--- | :--- | :--- | | Q2 Gross Margin | 45% | 48% | | H1 Gross Margin | 44% | 47% | - The decrease in gross margin was primarily due to lower product revenues, as the decrease in cost of product revenues did not decrease proportionally due to fixed costs like labor and overhead[155](index=155&type=chunk)[158](index=158&type=chunk) - Selling, general, and administrative (SG&A) expenses decreased by **$15.7 million (13%)** in Q2 2023, primarily due to lower headcount-related expenses, commissions, and consulting costs, as well as the absence of prior-year ransomware-related expenses[160](index=160&type=chunk)[161](index=161&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity strengthened with cash increasing to $399.5 million and working capital to $511.2 million, driven by $85.7 million in operating cash flow, with a $500 million revolving credit facility available Liquidity Position (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $399,464 | $330,362 | | Working capital | $511,204 | $453,366 | - Net cash provided by operating activities was **$85.7 million** for the first six months of 2023, compared to net cash used of **$25.5 million** in the same period of 2022, with improvement driven by a decrease in accounts receivable and inventories[179](index=179&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) - As of June 30, 2023, the company had **$417.7 million** available under its **$500.0 million** revolving credit facility with no outstanding balance[175](index=175&type=chunk) - There were no stock repurchases during the six months ended June 30, 2023, with **$2.7 million** remaining available under the 2016 Repurchase Program[177](index=177&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from foreign currency and interest rates, with no significant changes reported, and no foreign exchange forward contracts outstanding as of June 30, 2023 - The company is exposed to foreign currency exchange rate fluctuations, primarily with the British Pound and the Euro, and had no outstanding foreign exchange forward contracts as of June 30, 2023[191](index=191&type=chunk) - Interest rate risk exposure comes from borrowing activities, with fixed-rate convertible senior notes having a carrying amount of **$568.1 million** and a fair market value of **$581.6 million** as of June 30, 2023, and no outstanding balance on the variable-rate A&R Credit Agreement[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting identified during the quarter - Based on an evaluation, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[196](index=196&type=chunk) - There were no changes in internal control over financial reporting during the three months ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[198](index=198&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 13 for legal proceedings, highlighting the settlement and final court approval of the Heard Action class action lawsuit on April 6, 2023 - The company settled the 'Heard Action' class action lawsuit for a total payment of **$4.3 million**, with final court approval on April 6, 2023, and final payment by April 21, 2023[93](index=93&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022, have been reported - There are no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022[202](index=202&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Omnicell did not repurchase any shares of its common stock under its existing repurchase program during the second quarter of 2023 - The company did not repurchase any shares of its common stock during the three months ended June 30, 2023[203](index=203&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) No Rule 10b5-1 trading plans were adopted or terminated, and a correction was disclosed for an inadvertent exclusion of $87.6 million in remaining performance obligations as of March 31, 2023 - The company identified that approximately **$87.6 million** in remaining performance obligations were inadvertently excluded from the amount previously reported as of March 31, 2023, with the corrected balance being **$286.8 million**[207](index=207&type=chunk)

Omnicell, Inc. (NASDAQ:OMCL) Q2 2023 Earnings Conference Call August 1, 2023 4:30 PM ET Company Participants Kathleen Nemeth - Head of IR Randall Lipps - Chief Executive Officer Nchacha Etta - EVP and Chief Financial Officer Conference Call Participants Scott Schoenhaus - KeyBanc Allen Lutz - Bank of America Stan Berenshteyn - Wells Fargo Matt Hewitt - Craig Hallum Capital Group Bill Sutherland - the Benchmark Company David Larsen - BTIG Jessica Tassan - Piper Sandler Operator Good afternoon and welcome eve ...

Table of Contents 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, 2023 OR ☐ 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 OMNI ...

Financial Data and Key Metrics Changes - Total revenues for Q1 2023 were $291 million, a decrease of $7 million or down 2% from the prior quarter and a decrease of $28 million or down 9% year-over-year [57] - Non-GAAP EBITDA for Q1 2023 was $27 million, an increase of $1 million compared to the previous quarter but a decrease of $24 million year-over-year [66] - Non-GAAP earnings per share for Q1 2023 were $0.39, compared to $0.33 in the prior quarter and $0.83 in the same period last year [66] Business Line Data and Key Metrics Changes - Services revenues for Q1 2023 were $105 million, an increase of 12% over Q1 2022, indicating successful digital transformation efforts [58] - The specialty pharmacy service continues to gain traction, with new partnerships established in Q1 2023, including a major Illinois health system and a Texas-based medical center [46] Market Data and Key Metrics Changes - The healthcare industry is facing ongoing labor constraints and capital budget challenges, which are expected to persist throughout 2023 [11] - Despite these challenges, there is a noted stabilization in the market, with health systems increasingly recognizing the need for automated medication management solutions [35][39] Company Strategy and Development Direction - The company is focused on integrating recent acquisitions to enhance its advanced services offerings, including ReCept, FDS Amplicare, and MarkeTouch Media [37] - A strategic alliance with Long Island University was announced to open the Center for Innovative Medication Management, aimed at fostering pharmacy education and technology [48][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic uncertainties while executing its growth strategy [18][55] - The company anticipates a sequential revenue growth from the first half to the second half of 2023, supported by a healthy backlog [70] Other Important Information - The company is undergoing a search for a new CFO as the current CFO is set to step down [28] - The company published its 2022 ESG report, highlighting efforts to protect patient data and foster a culture of inclusivity [27] Q&A Session Summary Question: Can you provide updates on the Specialty Services pipeline and the 340B opportunity? - Management indicated strong growth in the pipeline for Specialty Services, particularly in response to health systems' needs for specialty pharmacy operations [12] Question: What is the expectation for inflation trends in 2023? - Management expects pricing impacts to exceed inflation, with sufficient semiconductor inventory to cover most of the year [64][65] Question: How is the backlog trending as we approach midyear? - Management noted that the backlog remains healthy, with significant revenue expected to come from it [71] Question: What part of EnlivenHealth is resonating most with retail pharmacies? - The focus is on patient engagement and chronic care management, with retail pharmacies seeking better solutions for revenue cycle management [52][53] Question: What is the outlook for the point-of-care XT product line? - Management expects a stable continuation of the upgrade cycle for the XT series, despite some choppiness during the pandemic [97]