Omnicell(OMCL) - 2020 Q4 - Annual Report

Forward-Looking Statements and Factors That May Affect Future Results This section outlines forward-looking statements on future performance, market growth, and financial targets, noting actual results may differ due to inherent risks Forward-Looking Statements This section details forward-looking statements on COVID-19 impact, sales, market growth, and financial targets, emphasizing that actual results may differ due to inherent risks - Forward-looking statements cover expectations regarding the continuing impact of the COVID-19 pandemic on workforce, operations, customers, and suppliers, as well as anticipated effects on business, financial condition, liquidity, and results of operations[13] - Key areas of forward-looking statements include future sales pipeline, product bookings, extent and timing of future revenues, market size/growth, drivers of demand for solutions, and expansion in product categories[13] - The company's ability to acquire and integrate businesses, introduce new products annually, deliver on the autonomous pharmacy vision, and invest in cloud infrastructure are also subject to forward-looking statements[13] PART I ITEM 1. Business Omnicell leads in transforming pharmacy care through medication management automation and adherence tools, aiming for a fully autonomous pharmacy model via a cloud-based platform - Omnicell is a leader in transforming the pharmacy care delivery model, utilizing medication management automation solutions and adherence tools to empower healthcare systems and pharmacies[18] - The company's vision is to achieve a fully autonomous pharmacy through automation, intelligence, and advanced services, powered by a single, cloud-based platform, to improve operational efficiencies and patient outcomes[18][19] - Omnicell's solutions are used by over 7,000 facilities worldwide for automation and analytics, and more than 50,000 institutional and retail pharmacies for medication adherence and population health[20] Overview This section provides an overview of Omnicell's mission to transform pharmacy care through automation and its global reach - Omnicell aims to transform pharmacy care by replacing manual, error-prone processes with automation, a cloud-based platform, and advanced services, supporting the vision of a fully autonomous pharmacy[18] - Over 7,000 facilities globally use Omnicell's automation and analytics solutions to improve pharmacy workflows, increase efficiency, reduce medication errors, and enhance patient safety[20] - More than 50,000 institutional and retail pharmacies in North America and the UK leverage Omnicell's medication adherence and population health solutions to improve patient engagement and prescription adherence[20] Operating Segments Omnicell operates as a single segment, with performance evaluated at a consolidated level by the Chief Operating Decision Maker - Omnicell manages its operations as a single segment, with the CEO acting as the Chief Operating Decision Maker (CODM), evaluating performance at a consolidated level using key financial data[23] Business Strategy Omnicell's strategy focuses on executing the autonomous pharmacy vision through automation, intelligence, and advanced services on a cloud-based platform - Omnicell's strategy is to be the care provider's most trusted partner, executing the autonomous pharmacy vision through automation, intelligence, and advanced services on a single, cloud-based platform[24] - The company addresses significant pharmacy challenges like medication errors, drug shortages, waste, and manual processes, driving demand for digitization and virtualization[24] - Omnicell targets four market categories: Point of Care (expanding dispensing systems), Central Pharmacy (automating manual processes with solutions like IVX Workflow and XR2), 340B Software-Enabled Services (optimizing program savings and compliance), and Retail, Institutional, and Payer (improving patient engagement and adherence with EnlivenHealth solutions)[25][26][28] Environmental, Social, and Governance Initiatives Omnicell is committed to improving health outcomes and lowering costs, with initial ESG disclosures aligned with SASB, TCFD, and GRI guidelines - Omnicell views itself as a company with a social mission, focused on improving health outcomes and lowering healthcare costs through reinventing the pharmacy care delivery model[30] - The company published initial ESG disclosure in December 2020, aligned with SASB, TCFD, and GRI guidelines, focusing on sustainability, ethical sourcing, and diversity & inclusion[31] Industry Background and Market The healthcare industry faces consolidation and economic pressures, driving demand for integrated medication management and adherence solutions - The healthcare industry is experiencing significant consolidation, increasing the need for integrated medication management automation solutions on a single platform to improve patient and financial outcomes[34] - Healthcare providers face economic pressures from rising costs of labor, prescription drugs, and new medical technology, driving demand for efficient healthcare delivery and pharmacy automation[35] - Medication non-adherence is a costly problem, estimated at $528 billion annually in 2016, leading to increased hospital readmissions and deteriorated treatment outcomes, which Omnicell's EnlivenHealth portfolio aims to address[39] Government Regulation Omnicell's global operations are subject to complex healthcare, privacy, product, and anti-corruption regulations, with non-compliance posing significant risks - Omnicell's global operations are subject to complex state, federal, and international laws and regulations, including those related to healthcare, privacy and security (HIPAA, GDPR), product compliance, import/export, trade, fraud and abuse, environmental standards, and anti-corruption[40][41][43] - Through the Aesynt acquisition, Omnicell has Class I and Class II medical devices subject to FDA regulation and compliance with FDA Quality System Regulation and medical device reporting[42] - Compliance with these evolving global regulations is costly, and any failure could result in fines, penalties, or other sanctions[45][46] Products and Services Omnicell integrates offerings on a cloud infrastructure, investing in automation, intelligence, and technology-enabled services to advance the autonomous pharmacy vision - Omnicell plans to integrate its offerings on a cloud infrastructure and invest in broadening solutions across three key areas: Automation, Intelligence, and Technology-Enabled Services, in line with the autonomous pharmacy vision[48] - Automation products include central pharmacy automation (e.g., XR2, IV compounding), point-of-care dispensing systems (e.g., XT Series), and medication adherence solutions for retail and institutional pharmacies[48][50][53][54] - Intelligence offerings leverage data analytics and predictive intelligence, such as Omnicell One for inventory optimization and drug diversion monitoring, and comprehensive 340B solutions for savings and compliance[60][61] - Technology-Enabled Services provide comprehensive, customer-centric adoption services, including Central Pharmacy IV Compounding and Dispensing Services, and Professional Services to help customers achieve clinical and business objectives[65][66][67] Acquisitions Omnicell acquires businesses and technologies, such as the 340B Link business, to expand product lines and strategic fit, enhancing software-enabled services - Omnicell acquires businesses and technologies to expand product lines and strategic fit, such as the 340B Link business acquired on October 1, 2020[68][69] - The 340B Link acquisition added a comprehensive suite of software-enabled services and solutions for managing compliance and capturing 340B drug cost savings for eligible healthcare entities[69] Sales and Distribution Omnicell primarily generates revenue in the U.S. through direct sales and GPO contracts, with long-term agreements with major health systems - Approximately 89% of Omnicell's revenue for the year ended December 31, 2020, was generated in the United States, with direct sales to end-user customers in the US and Canada[71] - The company has 145 long-term, sole-source agreements with the top 300 U.S. health systems as of December 31, 2020, with sales cycles for automation systems typically ranging from 12 to 24 months[73] - Omnicell contracts with Group Purchasing Organizations (GPOs) and has a Federal Supply Schedule contract, with sales to members of the ten largest GPOs and Federal agencies accounting for approximately 60% of total consolidated revenues in 2020[74] Manufacturing and Inventory Omnicell's manufacturing involves final assembly and testing of third-party components, relying on limited suppliers for raw materials, with production based on customer orders - Omnicell's manufacturing process for automation products involves final assembly and testing of components, with many sub-assemblies and components provided by third-party contract manufacturers, some based in Asia[79] - The company relies on a limited number of suppliers for raw materials used in consumable medication packages[80] - Production is based on customer order backlog, with equipment and software installation typically occurring 2 weeks to 12 months after order, and consumables shipped within 1 to 4 weeks[82] Competition Omnicell operates in intensely competitive markets for medication management, facing rivals with greater resources and evolving business models - Omnicell operates in intensely competitive markets for medication management automation and adherence solutions, competing on factors such as price, quality, innovation, product features, installation, service, and brand recognition[83] - The company expects continued and increased competition from current and future competitors, many of whom have greater financial, technical, and marketing resources[83] Intellectual Property and Proprietary Technology Omnicell protects its intellectual property through patents, trademarks, copyrights, trade secrets, and contractual restrictions in the U.S. and abroad - Omnicell protects its intellectual property through a combination of patents, trademarks, copyright, trade secret laws, confidentiality procedures, contractual restrictions, and licensing arrangements[85] - The company pursues patent protection in the U.S. and foreign jurisdictions for proprietary technology, with existing patents expiring between 2021 and 2038[86] Research and Development R&D efforts are driven by customer collaboration to address unmet needs, with significant investments in the cloud-based platform and robotic automation - Research and development efforts are driven by customer collaboration to address unmet needs and challenges[89] - Significant investments are made in the autonomous pharmacy vision, particularly in the cloud-based platform, technology-enabled software and services, and robotic automation capabilities[89] Human Capital Management Omnicell employs approximately 2,860 individuals worldwide, maintaining high employee satisfaction and a commitment to diversity, equity, and inclusion - As of December 31, 2020, Omnicell had approximately 2,860 employees worldwide, with 2,470 in the United States and Canada[90] - The company achieved an overall employee satisfaction (ESAT) score of 77, exceeding the average for similarly-sized companies, reflecting positive employee relations[90] - Omnicell is committed to diversity, equity, and inclusion (DEI), prohibiting discrimination and planning to launch a comprehensive DEI strategy in 2021[94][95] Business under Government Contracts U.S. government hospital contracts often involve five-year leases with annual budget funding cycles, posing a risk if funding is not secured - U.S. government hospital customers often sign five-year leases with payments subject to one-year government budget funding cycles, posing a risk if annual funding is not received[96] Financing Practices Relating to Working Capital Omnicell offers multi-year, non-cancelable sales contracts to help finance system purchases, often selling lease receivables to third-party finance companies - Omnicell offers multi-year, non-cancelable sales contracts to help healthcare facilities finance system purchases, and sells most multi-year lease receivables to third-party leasing finance companies[75][97] Product Backlog Product backlog represents firm orders for medication management solutions, with most expected to be installed and billed within one year Product Backlog | Metric | 2020 ($ thousands) | 2019 ($ thousands) | |---|---|---| | Product Backlog | 924 | 588 | - Product backlog represents firm orders for medication management automation solutions and adherence tools, with the majority expected to be installed, billed, and accepted within one year[98] - Backlog is an indication of customer willingness to install solutions, but not necessarily indicative of future sales due to potential changes in order configurations or installation schedules[98] Available Information Omnicell files reports with the SEC, including 10-K, 10-Q, 8-K, and proxy statements, accessible on the SEC and company websites - Omnicell files reports with the SEC, including 10-K, 10-Q, 8-K, and proxy statements, which are available on the SEC's website (www.sec.gov) and the company's website (www.omnicell.com)[100](index=100&type=chunk) Information About Our Executive Officers This section provides a list of Omnicell's executive officers as of the Form 10-K filing date, including their age and position Executive Officers as of Form 10-K Filing Date | Name | Age | Position | |---|---|---| | Randall A. Lipps | 63 | President, Chief Executive Officer, and Chairman of the Board of Directors | | Dan S. Johnston | 57 | Executive Vice President and Chief Legal and Administrative Officer | | Peter J. Kuipers | 49 | Executive Vice President and Chief Financial Officer | | Scott P. Seidelmann | 45 | Executive Vice President and Chief Commercial Officer | ITEM 1A. Risk Factors This section details significant risks including COVID-19 impact, new solution development, intense competition, substantial debt, and the transition to subscription models, which could materially affect Omnicell's operations - The ongoing COVID-19 pandemic poses risks to Omnicell's workforce, operations, customers, and suppliers, potentially leading to delayed purchasing decisions, supply chain disruptions, and increased economic uncertainty[107][108][109][110][111][112] - Failure to timely and cost-effectively develop new solutions or enhance existing ones, or lack of market acceptance for new offerings, could harm the business, especially regarding the autonomous pharmacy vision[115][116][117] - Omnicell operates in highly competitive markets, facing challenges from competitors with greater resources, potential price competition, strategic acquisitions by rivals, and evolving business models[118][119] - Substantial debt, including $575.0 million in Convertible Senior Notes due 2025, could limit financial flexibility, access to capital, and increase vulnerability to adverse economic conditions[123][124][125] - The transition to selling more products with Software-as-a-Service (SaaS) or Solution-as-a-Service subscriptions presents risks such as significant investment costs, potential temporary revenue reduction, and customer non-renewal[128][129] - Compliance with privacy, data protection, and information security laws (e.g., HIPAA, GDPR) is costly, and any failure could result in investigations, litigation, fines, and reputational damage[132][133][136] Risk Factors Related to our Business and Industry This section outlines specific risks related to Omnicell's business and the broader industry, including operational, market, and regulatory challenges Risks Related to Ownership of our Common Stock This section details risks associated with owning Omnicell's common stock, including market volatility and potential impacts on shareholder value Risk Factors Related to our Notes This section outlines risks specifically related to Omnicell's outstanding notes, including their impact on financial flexibility and potential market value General Risk Factors This section covers general risk factors that could broadly impact Omnicell's business, financial condition, and operational results ITEM 1B. Unresolved Staff Comments There are currently no unresolved issues with respect to any SEC staff's written comments - As of the filing date, Omnicell has no unresolved issues with SEC staff comments[190] ITEM 2. Properties Omnicell's headquarters are in a leased facility in Mountain View, California, with other leased facilities globally for various operations - Omnicell's headquarters are in a leased facility in Mountain View, California[191] Material Leased Facilities and Primary Functions | Site | Major Activity | Approximate Square Footage | |---|---|---| | St. Petersburg, Florida | Administration, marketing, research and development, sales, and manufacturing | 167,700 | | Cranberry Township, Pennsylvania | Administration, marketing, research and development, sales, technical support, and training | 119,400 | | Warrendale, Pennsylvania | Manufacturing and administration | 107,400 | | Mountain View, California | Administration, marketing, and research and development | 99,900 | | Raleigh, North Carolina | Administration, sales, marketing, and research and development | 65,700 | | Irlam, United Kingdom | Administration, sales, marketing, and distribution center | 61,000 | | Milpitas, California | Manufacturing | 46,300 | | Waukegan, Illinois | Technical services, support, training, and repair center | 38,500 | | Plano, Texas | Administration, sales, marketing, and research and development | 23,500 | | Bochum, Germany | Administration, sales, marketing, distribution, and manufacturing center | 19,000 | - The company also has smaller rented facilities in Ohio, Germany, France, Italy, China, UAE, Australia, and the UK[191] ITEM 3. Legal Proceedings Omnicell is involved in legal proceedings, including a class action lawsuit and a trade secret misappropriation complaint, which the company intends to vigorously defend - Omnicell is a defendant in a class action lawsuit (Corey Heard v. Omnicell, Inc.) alleging violations of the Illinois Biometric Information Privacy Act (BIPA), with a motion to dismiss currently pending oral argument[541][542] - Becton, Dickinson and Company (BD) filed a complaint against Omnicell alleging misappropriation under the Defend Trade Secrets Act and other claims, related to a former BD employee who also worked for Omnicell[543] - Omnicell has not recorded material accruals for contingent liabilities related to these legal proceedings, believing any potential loss is not probable or reasonably estimable, and intends to defend vigorously[544] ITEM 4. Mine Safety Disclosures This item is not applicable to Omnicell, Inc - Mine Safety Disclosures are not applicable to Omnicell, Inc[194] PART II ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Omnicell's common stock trades on NASDAQ, with no cash dividends paid, and the company repurchased shares in 2020 with remaining authorization - Omnicell's common stock is traded on the NASDAQ Global Select Market under the symbol "OMCL"[197] - As of February 17, 2021, there were 81 registered stockholders of record[197] - Omnicell has never declared or paid cash dividends on its common stock and does not anticipate doing so in the foreseeable future, expecting to retain future earnings for business operations and expansion[198] - In September 2020, Omnicell repurchased 749,300 shares of common stock for approximately $53.0 million in a privately negotiated transaction concurrent with the issuance of convertible senior notes[203][301] - As of December 31, 2020, $54.9 million remained available for future repurchases under existing stock repurchase programs[301] ITEM 6. Selected Financial Data This section summarizes Omnicell's selected consolidated financial data for 2016-2020, including revenues, profits, and balance sheet items, adjusted for ASC 606 Selected Consolidated Statements of Operations Data (In thousands, except per share amounts) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | |---|---|---|---|---|---| | Total revenues | $892,208 | $897,027 | $787,309 | $712,714 | $695,908 | | Gross profit | $413,292 | $436,912 | $372,330 | $318,637 | $317,085 | | Income from operations | $35,526 | $78,352 | $44,392 | $11,145 | $21,405 | | Net income | $32,194 | $61,338 | $37,729 | $30,518 | $9,756 | | Net income per share: Basic | $0.76 | $1.48 | $0.96 | $0.81 | $0.27 | | Net income per share: Diluted | $0.74 | $1.43 | $0.93 | $0.79 | $0.26 | | Shares Used in Per Share Calculations: Basic | 42,583 | 41,462 | 39,242 | 37,483 | 36,156 | | Shares Used in Per Share Calculations: Diluted | 43,743 | 42,943 | 40,559 | 38,712 | 36,864 | Selected Consolidated Balance Sheet Data (In thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | |---|---|---|---|---|---| | Total assets | $1,824,504 | $1,240,810 | $1,081,242 | $1,016,362 | $966,884 | | Long-term debt | $467,201 | $50,000 | $135,417 | $194,917 | $245,731 | | Total liabilities | $857,001 | $395,556 | $401,625 | $462,021 | $508,048 | | Total stockholders' equity | $967,503 | $845,254 | $679,617 | $554,341 | $458,836 | - The 2020 financial results include the 340B Link Business from October 2020, and all data is adjusted for the full retrospective adoption of Accounting Standards Codification 606, Revenue from Contracts with Customers[207] ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Omnicell's financial condition and results for 2020 and 2019, covering business overview, COVID-19 impact, accounting policies, revenues, expenses, and liquidity Overview This section provides an overview of Omnicell's business expansion, product bookings growth, and the impact of the COVID-19 pandemic and acquisitions - Omnicell's business has expanded from single-point solutions to a platform of products and services advancing the autonomous pharmacy vision, leading to larger deal sizes and more comprehensive customer relationships[214] Product Bookings Growth (YoY) | Metric | 2020 ($ thousands) | 2019 ($ thousands) | Change (%) | |---|---|---|---| | Product Bookings | 1,002 | 813 | 23% | - Product bookings increased by 23% in 2020, driven by successful growth strategies in the comprehensive platform and differentiated products, and expanding customer portfolio[215] - The COVID-19 pandemic caused delays in purchasing decisions and implementations in H1 2020, but customers returned to pre-pandemic purchasing patterns in Q3 2020, increasing the strategic relevance of Omnicell's solutions[224] - Omnicell acquired the 340B Link business on October 1, 2020, for $225.0 million, adding software-enabled services for 340B drug cost savings and compliance[225] Critical Accounting Policies and Estimates This section details key accounting policies and estimates, including revenue recognition, credit losses, inventory, capitalized software, and goodwill impairment - Key accounting policies requiring significant judgment and estimates include revenue recognition, allowance for credit losses, inventory valuation, capitalized software development costs, impairment of goodwill and intangibles, business combinations, convertible senior notes, share-based compensation, and income taxes[227][397] - Revenue is recognized when performance obligations are satisfied, with control generally passing upon product installation and acceptance for complex systems, or shipment for other products. Services are recognized over time[236][405] - The company adopted ASU 2016-13 on January 1, 2020, for credit losses, moving to an "expected loss" model, which resulted in an immaterial cumulative-effect adjustment to retained earnings[469] - Software development costs are capitalized once technological feasibility is established and amortized over estimated product lives (generally five years), while costs prior to this stage are expensed as R&D[248][445] Results of Operations This section analyzes Omnicell's revenues, costs, gross profit, operating expenses, and income taxes for the years ended December 31, 2020 and 2019 Total Revenues (Year Ended December 31) | Revenue Category | 2020 ($ thousands) | 2019 ($ thousands) | Change ($ thousands) | Change (%) | |---|---|---|---|---| | Product revenues | 636,031 | 659,602 | (23,571) | (4)% | | Services and other revenues | 256,177 | 237,425 | 18,752 | 8% | | Total revenues | 892,208 | 897,027 | (4,819) | (1)% | - Product revenues decreased by 4% in 2020, primarily due to the COVID-19 pandemic impacting health systems' focus on essential activities[271] - Services and other revenues increased by 8%, driven by $10.2 million from the newly-acquired 340B Link Business and continued growth in the installed customer base[272] Cost of Revenues and Gross Profit (Year Ended December 31) | Metric | 2020 ($ thousands) | 2019 ($ thousands) | Change ($ thousands) | Change (%) | |---|---|---|---|---| | Cost of product revenues | 354,004 | 344,914 | 9,090 | 3% | | As a percentage of related revenues | 56% | 52% | - | - | | Cost of services and other revenues | 124,912 | 115,201 | 9,711 | 8% | | As a percentage of related revenues | 49% | 49% | - | - | | Total cost of revenues | 478,916 | 460,115 | 18,801 | 4% | | As a percentage of total revenues | 54% | 51% | - | - | | Gross profit | 413,292 | 436,912 | (23,620) | (5)% | | Gross margin | 46% | 49% | - | - | - Gross margin decreased from 49% in 2019 to 46% in 2020, primarily due to lower revenues from COVID-19, employee-related restructuring expenses, and increased amortization of capitalized software development costs[281] Operating Expenses and Interest and Other Income (Expense), Net (Year Ended December 31) | Metric | 2020 ($ thousands) | 2019 ($ thousands) | Change ($ thousands) | Change (%) | |---|---|---|---|---| | Research and development | 70,161 | 68,644 | 1,517 | 2% | | As a percentage of total revenues | 8% | 8% | - | - | | Selling, general, and administrative | 307,605 | 289,916 | 17,689 | 6% | | As a percentage of total revenues | 34% | 32% | - | - | | Total operating expenses | 377,766 | 358,560 | 19,206 | 5% | | As a percentage of total revenues | 42% | 40% | - | - | | Interest and other income (expense), net | (6,177) | (4,419) | (1,758) | 40% | - Selling, general, and administrative expenses increased by $17.7 million, driven by increased headcount (including 340B Link Business) and acquisition-related expenses, partially offset by cost savings from reduced travel and commissions[284] Provision for (Benefit from) Income Taxes (Year Ended December 31) | Metric | 2020 ($ thousands) | 2019 ($ thousands) | Change ($ thousands) | Change (%) | |---|---|---|---|---| | Provision for (benefit from) income taxes | (2,845) | 12,595 | (15,440) | (123)% | | Effective tax rate on earnings | (10)% | 17% | - | - | - The company recorded an income tax benefit of $2.8 million in 2020, resulting in a negative effective tax rate of 10%, primarily due to favorable impacts from excess tax benefits from equity-based compensation and R&D credits[287] Liquidity and Capital Resources This section discusses Omnicell's cash position, working capital, debt, and cash flow activities from operations, investing, and financing Cash Position and Working Capital (December 31) | Metric | 2020 ($ thousands) | 2019 ($ thousands) | |---|---|---| | Cash | 485,928 | 127,210 | | Working Capital | 552,991 | 246,242 | | Ratio of current assets to current liabilities | 3.0:1 | 2.0:1 | - Omnicell's cash and cash equivalents significantly increased to $485.9 million at December 31, 2020, from $127.2 million in 2019, and working capital more than doubled[290] - In September 2020, Omnicell issued $575.0 million in 0.25% Convertible Senior Notes due 2025, with net proceeds used for convertible note hedge transactions, stock repurchases, repayment of revolving credit facility, and the 340B Link Business acquisition[296][297] Net Cash Provided by (Used in) Activities (Year Ended December 31) | Activity | 2020 ($ thousands) | 2019 ($ thousands) | |---|---|---| | Operating activities | 185,870 | 145,008 | | Investing activities | (279,866) | (61,664) | | Financing activities | 456,269 | (23,479) | | Effect of exchange rate changes on cash and cash equivalents | 437 | 153 | | Net increase in cash and cash equivalents | 362,710 | 60,018 | - Net cash provided by operating activities increased to $185.9 million in 2020, driven by net income, non-cash adjustments, and favorable changes in accounts receivable and inventories[307] - Net cash used in investing activities significantly increased to $279.9 million in 2020, primarily due to the $225.0 million acquisition of the 340B Link Business[310] - Net cash provided by financing activities was $456.3 million in 2020, mainly from the issuance of convertible senior notes and sale of warrants, partially offset by debt repayments and stock repurchases[312] Contractual Obligations (as of December 31, 2020, In thousands) | Obligation | Total | 2021 | 2022 - 2023 | 2024 - 2025 | 2026 and thereafter | |---|---|---|---|---|---| | Operating leases | $72,532 | $15,290 | $24,327 | $15,493 | $17,422 | | Purchase obligations | $72,751 | $69,893 | $2,338 | $479 | $41 | | Convertible senior notes | $582,148 | $1,398 | $2,875 | $577,875 | — | | Total | $727,431 | $86,581 | $29,540 | $593,847 | $17,463 | ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk Omnicell is exposed to market risks from foreign currency and interest rate fluctuations, using hedging strategies to mitigate potential adverse impacts - Omnicell is exposed to market risks from foreign currency exchange rate fluctuations (primarily British Pound and Euro) and interest rates[317][318] - The company uses foreign exchange forward contracts to mitigate foreign currency risk, but had no outstanding contracts as of December 31, 2020[318] - As of December 31, 2020, there was no outstanding balance under the A&R Credit Agreement, and the net carrying amount of convertible senior notes was $467.2 million, with a fair market value of $782.3 million[319] - Omnicell previously used interest rate swap agreements to hedge against adverse interest rate fluctuations but had no outstanding agreements as of December 31, 2020[320][321] ITEM 8. Financial Statements and Supplementary Data This section presents Omnicell's unaudited quarterly results for 2020 and 2019, supplementing the audited Consolidated Financial Statements and related Notes 2020 Consolidated Statements of Operations Data (Quarter Ended, In thousands, except per share data) | Metric | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | |---|---|---|---|---| | Total revenues | $249,202 | $213,699 | $199,621 | $229,686 | | Gross profit | $123,654 | $96,791 | $83,225 | $109,622 | | Income (loss) from operations | $20,214 | $10,152 | $(6,991) | $12,151 | | Net income (loss) | $16,377 | $8,805 | $(4,299) | $11,311 | | Net income (loss) per share: Basic | $0.39 | $0.21 | $(0.10) | $0.27 | | Net income (loss) per share: Diluted | $0.37 | $0.20 | $(0.10) | $0.26 | 2019 Consolidated Statements of Operations Data (Quarter Ended, In thousands, except per share data) | Metric | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |---|---|---|---|---| | Total revenues | $248,292 | $228,805 | $217,413 | $202,517 | | Gross profit | $123,603 | $112,147 | $104,045 | $97,117 | | Income from operations | $22,182 | $24,646 | $18,763 | $12,761 | | Net income | $22,095 | $19,983 | $15,976 | $3,284 | | Net income per share: Basic | $0.53 | $0.48 | $0.39 | $0.08 | | Net income per share: Diluted | $0.51 | $0.46 | $0.37 | $0.08 | - The unaudited quarterly results are prepared on the same basis as audited Consolidated Financial Statements, and operating results for any quarter are not necessarily indicative of future results[322] ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[324] ITEM 9A. Controls and Procedures Management concluded that Omnicell's disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Omnicell's management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of December 31, 2020, ensuring reasonable assurance for timely and accurate SEC reporting[325][326] - Management assessed and concluded that internal control over financial reporting was effective as of December 31, 2020, based on the COSO Criteria[327][328] - Deloitte & Touche LLP, the independent registered public accounting firm, issued an unqualified attestation report on the effectiveness of internal control over financial reporting[329] - There were no material changes in internal control over financial reporting during the year ended December 31, 2020[330] ITEM 9B. Other Information There is no other information to report under this item - No other information is required to be reported under this item[331] PART III ITEM 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from Omnicell's 2021 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Annual Meeting of Stockholders Proxy Statement[335] - The company's written Code of Conduct applies to all directors and employees, including executive officers, and is available on its website[338] ITEM 11. Executive Compensation Information concerning director and executive officer compensation is incorporated by reference from Omnicell's Proxy Statement - Information regarding director and executive officer compensation, Compensation Committee interlocks, and insider participation is incorporated by reference from the Proxy Statement[339] ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Details on security ownership of beneficial owners and management, and equity compensation plans, are incorporated by reference from Omnicell's Proxy Statement - Information on security ownership of certain beneficial owners and management, and securities authorized for issuance under equity compensation plans, is incorporated by reference from the Proxy Statement[340] ITEM 13. Certain Relationships, Related Transactions and Director Independence Information regarding related party transactions and director independence is incorporated by reference from Omnicell's Proxy Statement - Information on related party transactions and director independence is incorporated by reference from the Proxy Statement[341][342] ITEM 14. Principal Accountant Fees and Services Information concerning principal accountant fees and services is incorporated by reference from Omnicell's Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the Proxy Statement[342] PART IV ITEM 15. Exhibits and Financial Statement Schedules This section lists consolidated financial statements, including reports, balance sheets, statements of operations, and cash flows, along with Financial Statement Schedule II and exhibits - The section includes Consolidated Financial Statements: Reports of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Stockholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[345] - Financial Statement Schedule II: Valuation and Qualifying Accounts is also included[345] - A comprehensive index to exhibits, detailing descriptions, forms, file numbers, and filing dates for incorporated documents, is provided[345][598][599][600] Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP issued an unqualified opinion on Omnicell's consolidated financial statements and internal control over financial reporting - Deloitte & Touche LLP issued an unqualified opinion on Omnicell's consolidated financial statements for the period ended December 31, 2020, in conformity with U.S. GAAP[349] - The firm also issued an unqualified opinion on the effectiveness of Omnicell's internal control over financial reporting as of December 31, 2020[350] - Critical audit matters identified include Inventory Valuation (due to management judgment in estimating excess and slow-moving inventory) and Capitalized Software - Software Development Costs for External Use (due to subjectivity in determining capitalized costs)[355][356][357][358] Report of Independent Registered Public Accounting Firm (Internal Control) Deloitte & Touche LLP issued an unqualified opinion on the effectiveness of Omnicell's internal control over financial reporting as of December 31, 2020 - Deloitte & Touche LLP expressed an unqualified opinion that Omnicell maintained effective internal control over financial reporting as of December 31, 2020, based on COSO criteria[364] - The audit was conducted in accordance with PCAOB standards, obtaining reasonable assurance about the effectiveness of internal control over financial reporting[367] Consolidated Balance Sheets This section presents Omnicell's consolidated balance sheets as of December 31, 2020 and 2019, detailing assets, liabilities, and stockholders' equity Consolidated Balance Sheets (as of December 31, In thousands) | Asset/Liability | 2020 | 2019 | |---|---|---| | ASSETS | | | | Cash and cash equivalents | $485,928 | $127,210 | | Accounts receivable and unbilled receivables, net | $190,117 | $218,362 | | Inventories | $96,298 | $108,011 | | Total current assets | $829,414 | $483,238 | | Property and equipment, net | $59,073 | $54,246 | | Goodwill | $499,309 | $336,539 | | Intangible assets, net | $168,211 | $124,867 | | Total assets | $1,824,504 | $1,240,810 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $40,309 | $46,380 | | Accrued compensation | $55,750 | $44,155 | | Deferred revenues, net | $100,053 | $90,894 | | Total current liabilities | $276,423 | $236,996 | | Convertible senior notes, net | $467,201 | — | | Total liabilities | $857,001 | $395,556 | | Total stockholders' equity | $967,503 | $845,254 | | Total liabilities and stockholders' equity | $1,824,504 | $1,240,810 | Consolidated Statements of Operations This section presents Omnicell's consolidated statements of operations for the years ended December 31, 2020, 2019, and 2018 Consolidated Statements of Operations (Year Ended December 31, In thousands, except per share data) | Metric | 2020 | 2019 | 2018 | |---|---|---|---| | Product revenues | $636,031 | $659,602 | $569,595 | | Services and other revenues | $256,177 | $237,425 | $217,714 | | Total revenues | $892,208 | $897,027 | $787,309 | | Cost of product revenues | $354,004 | $344,914 | $312,360 | | Cost of services and other revenues | $124,912 | $115,201 | $102,619 | | Total cost of revenues | $478,916 | $460,115 | $414,979 | | Gross profit | $413,292 | $436,912 | $372,330 | | Research and development | $70,161 | $68,644 | $64,843 | | Selling, general, and administrative | $307,605 | $289,916 | $263,095 | | Total operating expenses | $377,766 | $358,560 | $327,938 | | Income from operations | $35,526 | $78,352 | $44,392 | | Interest and other income (expense), net | $(6,177) | $(4,419) | $(8,776) | | Income before provision for income taxes | $29,349 | $73,933 | $35,616 | | Provision for (benefit from) income taxes | $(2,845) | $12,595 | $(2,113) | | Net income | $32,194 | $61,338 | $37,729 | | Net income per share: Basic | $0.76 | $1.48 | $0.96 | | Net income per share: Diluted | $0.74 | $1.43 | $0.93 | Consolidated Statements of Comprehensive Income This section presents Omnicell's consolidated statements of comprehensive income for the years ended December 31, 2020, 2019, and 2018 Consolidated Statements of Comprehensive Income (Year Ended December 31, In thousands) | Metric | 2020 | 2019 | 2018 | |---|---|---|---| | Net income | $32,194 | $61,338 | $37,729 | | Other comprehensive income (loss), net of reclassification adjustments: | | | | | Unrealized loss on interest rate swap contracts, net of tax | — | $(420) | $(421) | | Foreign currency translation adjustments | $3,924 | $1,828 | $(4,320) | | Other comprehensive income (loss) | $3,924 | $1,408 | $(4,741) | | Comprehensive income | $36,118 | $62,746 | $32,988 | Consolidated Statements of Stockholders' Equity This section presents Omnicell's consolidated statements of stockholders' equity for the years ended December 31, 2020, 2019, and 2018 Consolidated Statements of Stockholders' Equity (Year Ended December 31, In thousands) | Metric | 2020 | 2019 | 2018 | |---|---|---|---| | Balance as of December 31, 2017 | $554,341 | - | - | | Net income | $32,194 | $61,338 | $37,729 | | Other comprehensive income (loss) | $3,924 | $1,408 | $(4,741) | | Share-based compensation | $44,697 | $34,049 | $28,885 | | Stock repurchases | $(53,035) | — | — | | Equity component of convertible senior note issuance, net of issuance costs | $97,830 | — | — | | Purchase of convertible note hedge | $(100,625) | — | — | | Sale of warrants | $51,290 | — | — | | Balance as of December 31, 2020 | $967,503 | $845,254 | $679,617 | Consolidated Statements of Cash Flows This section presents Omnicell's consolidated statements of cash flows for the years ended December 31, 2020, 2019, and 2018 Consolidated Statements of Cash Flows (Year Ended December 31, In thousands) | Activity | 2020 | 2019 | 2018 | |---|---|---|---| | Net cash provided by operating activities | $185,870 | $145,008 | $103,966 | | Net cash used in investing activities | $(279,866) | $(61,664) | $(54,374) | | Net cash provided by (used in) financing activities | $456,269 | $(23,479) | $(13,597) | | Effect of exchange rate changes on cash and cash equivalents | $437 | $153 | $(1,227) | | Net increase in cash and cash equivalents | $362,710 | $60,018 | $34,768 | | Cash, cash equivalents, and restricted cash at beginning of period | $127,210 | $67,192 | $32,424 | | Cash, cash equivalents, and restricted cash at end of period | $489,920 | $127,210 | $67,192 | Supplemental Cash Flow Information (Year Ended December 31, In thousands) | Metric | 2020 | 2019 | 2018 | |---|---|---|---| | Cash paid for interest | $522 | $3,582 | $7,487 | | Cash paid for taxes, net of refunds | $10,343 | $7,761 | $3,489 | Notes to Consolidated Financial Statements This section provides detailed notes to Omnicell's consolidated financial statements, offering additional context and disclosures Note 1. Organization and Summary of Significant Accounting Policies This note outlines Omnicell's organizational structure and summarizes its significant accounting policies Note 2. Business Combinations This note details Omnicell's accounting policies and disclosures related to business combinations Note 3. Revenues This note provides detailed information on Omnicell's revenue recognition policies and disaggregated revenue Note 4. Net Income Per Share This note outlines the calculation of basic and diluted net income per share for Omnicell Note 5. Fair Value of Financial Instruments This note describes Omnicell's financial instruments and their fair value measurements Note 6. Balance Sheet Components This note provides detailed breakdowns of various components within Omnicell's balance sheets Note 7. Property and Equipment This note details Omnicell's property and equipment, including their carrying amounts and depreciation policies Note 8. Goodwill and Intangible Assets This note provides information on Omnicell's goodwill and intangible assets, including impairment testing Note 9. Debt and Credit Agreements This note details Omnicell's debt obligations and credit agreements, including terms and conditions Note 10. Convertible Senior Notes This note provides comprehensive information on Omnicell's convertible senior notes, including their terms and accounting Note 11. Lessor Leases This note details Omnicell's accounting for leases where it acts as a lessor Note 12. Lessee Leases This note details Omnicell's accounting for leases where it acts as a lessee Note 13. Commitments and Contingencies This note outlines Omnicell's commitments and contingencies, including legal proceedings and other obligations Note 14. Employee Benefits and Share-Based Compensation This note details Omnicell's employee benefit plans and share-based compensation arrangements Note 15. Stock Repurchase Program This note provides information on Omnicell's stock repurchase programs and related activities Note 16. Equity Offerings This note details Omnicell's equity offerings and related transactions Note 17. Income Taxes This note provides detailed information on Omnicell's income tax provision, deferred taxes, and effective tax rate Note 18. Restructuring Expenses This note details Omnicell's restructuring expenses, including the nature and amounts of such costs SCHEDULE II Valuation and Qualifying Accounts This schedule provides details on Omnicell's valuation and qualifying accounts, including allowances for receivables and sales-type leases Valuation and Qualifying Accounts (Year Ended December 31, In thousands) | Account | Balance at Beginning of Period | Charged (Credited) to Costs and Expenses | Debited (Credited) to Other Accounts | Amounts Written Off | Other Adjustments | Balance at End of Period | |---|---|---|---|---|---|---| | 2020 | | | | | | | | Accounts receivable and unbilled receivables | $3,227 | $1,095 | — | $(535) | $499 | $4,286 | | Long-term unbilled receivables | — | — | — | — | $30 | $30 | | Net investment in sales-type leases | $225 | $40 | — | — | — | $265 | | Total allowances deducted from assets | $3,452 | $1,135 | — | $(535) | $529 | $4,581 | | 2019 | | | | | | | | Accounts receivable and unbilled receivables | $2,582 | $2,488 | — | $(1,986) | $143 | $3,227 | | Long-term unbilled receivables | — | — | — | — | — | — | | Net investment in sales-type leases | $214 | $11 | — | — | — | $225 | | Total allowances deducted from assets | $2,796 | $2,499 | — | $(1,986) | $143 | $3,452 | | 2018 | | | | | | | | Accounts receivable and unbilled receivables | $5,738 | $(127) | $12 | $(3,010) | $(31) | $2,582 | | Long-term unbilled receivables | — | — | — | — | — | — | | Net investment in sales-type leases | $192 | $10 | $12 | — | — | $214 | | Total allowances deducted from assets | $5,930 | $(117) | $24 | $(3,010) | $(31) | $2,796 | ITEM 16. Form 10-K Summary This item is not applicable to Omnicell, Inc - Form 10-K Summary is not applicable[346] SIGNATURES This section contains the authorized signatures for the Annual Report on Form 10-K, including officers and directors Signatures The Annual Report on Form 10-K was duly signed on behalf of Omnicell, Inc. by its authorized officers and directors on February 24, 2021 - The report was signed on February 24, 2021, by Peter J. Kuipers, Executive Vice President & Chief Financial Officer, on behalf of Omnicell, Inc[604] - Signatories include Randall A. Lipps (CEO, President, and Chairman), Peter J. Kuipers (EVP & CFO), Joseph B. Spears (SVP, Chief Accounting Officer), and several Directors[607]