UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended June 30, 2020


~~For the quarterly period ended September 30, 2017~~
OR
o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 000-33043

OMNICELL, INC.

(Exact name of registrant as specified in its charter)



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

590 East Middlefield Road

Mountain View, CA 94043

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

(650) 251-6100

(~~Registrant's~~Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

OMCL

NASDAQ Global Select Market

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

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

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

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

~~Large accelerated filer~~ ý

~~Accelerated filer~~ o

~~Non-accelerated filer~~ o

~~(Do not check if a~~

~~smaller reporting company)~~

~~Smaller reporting company~~ o

~~Emerging growth company~~ o

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

☐

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

As of ~~October 26, 2017,~~July 24, 2020, there were ~~37,932,401~~42,763,115 shares of the ~~registrant's~~registrant’s common stock, $0.001 par value, outstanding.

~~OMNICELL, INC.~~

~~TABLE OF CONTENTS~~

Table of Contents

OMNICELL, INC.

TABLE OF CONTENTS


					Page
PART I			FINANCIAL INFORMATION
Item 1.			Condensed Consolidated Financial Statements (Unaudited)		3
			Condensed Consolidated Balance Sheets (Unaudited) as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019		3
			Condensed Consolidated Statements of Operations (Unaudited) for the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016~~2019		4
			Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016~~2019		5
			Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and six months ended June 30, 2020 and 2019		6
			Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016~~2019		68
			Notes to Condensed Consolidated Financial Statements		79
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations		2527
Item 3.			Quantitative and Qualitative Disclosures about Market Risk		3839
Item 4.			Controls and Procedures		3940

PART II			OTHER INFORMATION		41
~~PART II~~Item 1.			~~OTHER INFORMATION~~Legal Proceedings		4041
Item 1.1A.			~~Legal Proceedings~~Risk Factors		4041
~~Item 1A.~~			~~Risk Factors~~	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			5459
Item 3.			Defaults Upon Senior Securities		5459
Item 4.			Mine Safety Disclosures		5459
Item 5.			Other Information		5459
Item 6.			Exhibits		5460

~~Signatures~~Signature					55
~~Index to Exhibits~~		5661

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

OMNICELL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30,
2017 December 31,
2016
(In thousands, except par value)

ASSETS
Current assets:
Cash and cash equivalents $ 7,466
$ 54,488
Accounts receivable, net of allowances of $5,279 and $4,796, respectively 171,869
150,303
Inventories 92,239
69,297
Prepaid expenses 28,044
28,646
Other current assets 15,763
12,674
Total current assets 315,381
315,408
Property and equipment, net 40,219
42,011
Long-term investment in sales-type leases, net 15,986
20,585
Goodwill 334,780
327,724
Intangible assets, net 174,227
190,283
Long-term deferred tax assets 5,629
4,041
Other long-term assets 37,596
35,051
Total assets $ 923,818
$ 935,103

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 51,182
$ 27,069
Accrued compensation 27,380
26,722
Accrued liabilities 33,061
31,195
Long-term debt, current portion, net 13,410
8,410
Deferred revenue, net 80,837
87,516
Total current liabilities 205,870
180,912
Long-term deferred revenue 16,376
17,051
Long-term deferred tax liabilities 40,527
51,592
Other long-term liabilities 9,625
8,210
Long-term debt, net 178,923
245,731
Total liabilities 451,321
503,496
Commitments and contingencies (Note 10)

Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued —
—
Common stock, $0.001 par value, 100,000 shares authorized; 47,064 and 45,778 shares issued; 37,919 and 36,633 shares outstanding, respectively 47
46
Treasury stock at cost, 9,145 shares outstanding (185,074 ) (185,074 )
Additional paid-in capital 565,406
525,758
Retained earnings 98,294
100,396
Accumulated other comprehensive loss (6,176 ) (9,519 )
Total stockholders’ equity 472,497
431,607
Total liabilities and stockholders’ equity $ 923,818
$ 935,103


	June 30, 2020		December 31, 2019

	(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	133,583	$	127,210
Accounts receivable and unbilled receivables, net of allowances of $3,204 and $3,227, respectively	188,918		218,362
Inventories	114,245		108,011
Prepaid expenses	13,297		14,478
Other current assets	15,122		15,177
Total current assets	465,165		483,238
Property and equipment, net	57,866		54,246
Long-term investment in sales-type leases, net	20,961		19,750
Operating lease right-of-use assets	52,537		56,130
Goodwill	335,034		336,539
Intangible assets, net	115,710		124,867
Long-term deferred tax assets	14,154		14,142
Prepaid commissions	44,822		48,862
Other long-term assets	116,197		103,036
Total assets	$	1,222,446	$	1,240,810

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	34,587	$	46,380
Accrued compensation	41,057		44,155
Accrued liabilities	52,979		55,567

Deferred revenues, net	107,940		90,894
Total current liabilities	236,563		236,996
Long-term deferred revenues	6,101		7,083
Long-term deferred tax liabilities	29,561		39,090
Long-term operating lease liabilities	46,690		50,669
Other long-term liabilities	16,070		11,718
Long-term debt	—		50,000
Total liabilities	334,985		395,556
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; 0 shares issued	—		—
Common stock, $0.001 par value, 100,000 shares authorized; 51,902 and 51,277 shares issued; 42,757 and 42,132 shares outstanding, respectively	52		51
Treasury stock at cost, 9,145 shares outstanding, respectively	(185,074)		(185,074)
Additional paid-in capital	820,632		780,931
Retained earnings	265,540		258,792
Accumulated other comprehensive loss	(13,689)		(9,446)
Total stockholders’ equity	887,461		845,254
Total liabilities and stockholders’ equity	$	1,222,446	$	1,240,810

The accompanying notes are an integral part of these unaudited ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


														Three Months Ended June 30,						Six Months Ended June 30,
	Three months ended September 30,						Nine months ended September 30,							2020		2019		2020		2019
	2017			2016			2017			2016
	(In thousands, except per share data)													(In thousands, except per share data)
Revenues:													Revenues:
Product	$	135,103		$	133,621		$	362,089		$	392,190
Product revenues													Product revenues	$	138,942	$	158,379	$	309,015	$	303,989
Services and other revenues	51,679			43,116			156,132			128,458			Services and other revenues	60,679		59,034		120,292		115,941
Total revenues	186,782			176,737			518,221			520,648			Total revenues	199,621		217,413		429,307		419,930
Cost of revenues:													Cost of revenues:
Cost of product revenues	79,725			76,188			225,051			224,412			Cost of product revenues	85,779		84,583		176,051		163,394
Cost of services and other revenues	22,204			19,041			66,150			56,766			Cost of services and other revenues	30,617		28,785		60,409		55,374
Total cost of revenues	101,929			95,229			291,201			281,178			Total cost of revenues	116,396		113,368		236,460		218,768
Gross profit	84,853			81,508			227,020			239,470			Gross profit	83,225		104,045		192,847		201,162
Operating expenses:													Operating expenses:
Research and development	16,414			15,264			50,128			42,896			Research and development	20,830		16,848		39,482		32,926
Selling, general and administrative	58,725			61,316			186,818			189,912
Selling, general, and administrative													Selling, general, and administrative	69,386		68,434		148,205		136,712

Total operating expenses	75,139			76,580			236,946			232,808			Total operating expenses	90,216		85,282		187,687		169,638
Income (loss) from operations	9,714			4,928			(9,926		)	6,662			Income (loss) from operations	(6,991)		18,763		5,160		31,524
Interest and other income (expense), net	(2,732		)	(2,721		)	(4,992		)	(6,773		)	Interest and other income (expense), net	174		(1,629)		(648)		(3,039)
Income (loss) before provision for income taxes	6,982			2,207			(14,918		)	(111		)	Income (loss) before provision for income taxes	(6,817)		17,134		4,512		28,485
Provision for (benefit from) income taxes	751			224			(11,232		)	(557		)	Provision for (benefit from) income taxes	(2,518)		1,158		(2,500)		9,225
Net income (loss)	$	6,231		$	1,983		$	(3,686	)	$	446		Net income (loss)	$	(4,299)	$	15,976	$	7,012	$	19,260
Net income (loss) per share:													Net income (loss) per share:
Basic	$	0.17		$	0.05		$	(0.10	)	$	0.01		Basic	$	(0.10)	$	0.39	$	0.16	$	0.47

Diluted	$	0.16		$	0.05		$	(0.10	)	$	0.01		Diluted	$	(0.10)	$	0.37	$	0.16	$	0.45
Weighted-average shares outstanding:													Weighted-average shares outstanding:
Basic	37,698			36,332			37,266			36,020			Basic	42,659		41,371		42,509		41,033
Diluted	38,973			37,079			37,266			36,695			Diluted	42,659		42,945		43,616		42,646

The accompanying notes are an integral part of these unaudited ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

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


														Three Months Ended June 30,						Six Months Ended June 30,
	Three months ended September 30,						Nine months ended September 30,							2020		2019		2020		2019
	2017			2016			2017			2016
	(In thousands)													(In thousands)
Net income (loss)	$	6,231		$	1,983		$	(3,686	)	$	446		Net income (loss)	$	(4,299)	$	15,976	$	7,012	$	19,260
Other comprehensive income (loss), net of reclassification adjustments:
Unrealized gains (losses) on interest rate swap contracts	(74		)	108			(45		)	108
Other comprehensive income (loss), net of reclassification adjustments and taxes:													Other comprehensive income (loss), net of reclassification adjustments and taxes:
Unrealized losses on interest rate swap contracts													Unrealized losses on interest rate swap contracts	—		(103)		—		(420)
Foreign currency translation adjustments	1,389			(502		)	3,388			(5,296		)	Foreign currency translation adjustments	451		(971)		(4,243)		(302)
Other comprehensive income (loss)	1,315			(394		)	3,343			(5,188		)	Other comprehensive income (loss)	451		(1,074)		(4,243)		(722)
Comprehensive income (loss)	$	7,546		$	1,589		$	(343	)	$	(4,742	)	Comprehensive income (loss)	$	(3,848)	$	14,902	$	2,769	$	18,538

The accompanying notes are an integral part of these unaudited ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

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

Nine months ended September 30,
2017 2016
(In thousands)
Operating Activities
Net income (loss) $ (3,686 ) $ 446
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 38,542
43,905
Loss on disposal of fixed assets 128
(9 )
Share-based compensation expense 16,315
14,063
Income tax benefits from employee stock plans 11
1,256
Deferred income taxes (11,071 ) (4,767 )
Amortization of debt financing fees 1,192
1,192
Changes in operating assets and liabilities, net of business acquisitions:
Accounts receivable (21,710 ) (25,802 )
Inventories (22,942 ) (7,745 )
Prepaid expenses 602
(5,782 )
Other current assets (5,133 ) (89 )
Investment in sales-type leases 6,643
(5,296 )
Other long-term assets (150 ) 1,153
Accounts payable 23,717
5,573
Accrued compensation 658
(687 )
Accrued liabilities 4,021
(1,901 )
Deferred revenue (7,354 ) 12,819
Other long-term liabilities 865
(2,299 )
Net cash provided by operating activities 20,648
26,030
Investing Activities
Purchases of intangible assets, intellectual property and patents (160 ) (1,311 )
Software development for external use (10,121 ) (10,569 )
Purchases of property and equipment (9,374 ) (10,005 )
Business acquisitions, net of cash acquired (4,446 ) (271,458 )
Net cash used in investing activities (24,101 ) (293,343 )
Financing Activities
Proceeds from debt 37,000
247,051
Repayment of debt and revolving credit facility (100,000 ) (25,000 )
Payment for contingent consideration (2,400 ) (3,000 )
Proceeds from issuances under stock-based compensation plans 26,468
16,516
Employees' taxes paid related to restricted stock units (3,133 ) (1,917 )
Net cash provided by (used in) financing activities (42,065 ) 233,650
Effect of exchange rate changes on cash and cash equivalents (1,504 ) (1,267 )
Net decrease in cash and cash equivalents (47,022 ) (34,930 )
Cash and cash equivalents at beginning of period 54,488
82,217
Cash and cash equivalents at end of period $ 7,466
$ 47,287

Supplemental disclosure of non-cash activities
Unpaid purchases of property and equipment $ 886
$ 948
Effect of adoption of new accounting standard $ 1,582
$ —


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

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

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

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

The accompanying notes are an integral part of these unaudited ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


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

	(In thousands)
Balances as of December 31, 2018	49,480	$	50	(9,145)	$	(185,074)	$	678,041	$	197,454	$	(10,854)	$	679,617
Net income	—	—		—	—		—		3,284		—		3,284
Other comprehensive income	—	—		—	—		—		—		352		352
At the market equity offering, net of costs	243	—		—	—		20,216		—		—		20,216
Share-based compensation	—	—		—	—		8,410		—		—		8,410
Issuance of common stock under employee stock plans	628	—		—	—		20,526		—		—		20,526
Tax payments related to restricted stock units	—	—		—	—		(1,920)		—		—		(1,920)
Balances as of March 31, 2019	50,351	50		(9,145)	(185,074)		725,273		200,738		(10,502)		730,485
Net income	—	—		—	—		—		15,976		—		15,976
Other comprehensive loss	—	—		—	—		—		—		(1,074)		(1,074)
At the market equity offering, net of costs	217	—		—	—		17,590		—		—		17,590
Share-based compensation	—	—		—	—		8,260		—		—		8,260
Issuance of common stock under employee stock plans	216	1		—	—		4,806		—		—		4,807
Tax payments related to restricted stock units	—	—		—	—		(2,802)		—		—		(2,802)
Balances as of June 30, 2019	50,784	$	51	(9,145)	$	(185,074)	$	753,127	$	216,714	$	(11,576)	$	773,242

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

Table of Contents

OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
	2020		2019

	(In thousands)
Operating Activities
Net income	$	7,012	$	19,260
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	28,779		25,874
Loss on disposal of property and equipment	—		399



Share-based compensation expense	22,010		16,670



Deferred income taxes	(9,409)		3,810
Amortization of operating lease right-of-use assets	5,157		5,226
Amortization of debt issuance costs	482		1,145
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables	28,236		(9,244)
Inventories	(7,271)		(4,466)
Prepaid expenses	1,181		1,021
Other current assets	219		(830)
Investment in sales-type leases	(1,375)		(4,412)
Prepaid commissions	4,040		1,536
Other long-term assets	(4,580)		3,061
Accounts payable	(11,254)		2,066
Accrued compensation	(3,098)		(8,041)
Accrued liabilities	(2,824)		1,810
Deferred revenues	16,264		253
Operating lease liabilities	(5,186)		(5,269)
Other long-term liabilities	4,352		3,891
Net cash provided by operating activities	72,735		53,760
Investing Activities

Software development for external use	(20,002)		(22,581)
Purchases of property and equipment	(13,211)		(9,369)

Net cash used in investing activities	(33,213)		(31,950)
Financing Activities

Repayment of debt and revolving credit facility	(50,000)		(60,000)
At the market equity offering, net of offering costs	—		37,806
Proceeds from issuances under stock-based compensation plans	21,162		25,333
Employees’ taxes paid related to restricted stock units	(3,470)		(4,722)


Net cash used in financing activities	(32,308)		(1,583)
Effect of exchange rate changes on cash and cash equivalents	(841)		63
Net increase in cash and cash equivalents	6,373		20,290
Cash and cash equivalents at beginning of period	127,210		67,192
Cash and cash equivalents at end of period	$	133,583	$	87,482




Supplemental disclosure of non-cash activities
Unpaid purchases of property and equipment	$	366	$	711
Transfers between inventory and property and equipment, net	$	—	$	1,428

Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,335	$	557

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

Table of Contents

OMNICELL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Organization and Summary of Significant Accounting Policies

Business

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

Basis of ~~presentation~~Presentation

The accompanying unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the financial position of the Company as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the results of ~~its~~ operations and comprehensive income (loss) for the three and six months ended June 30, 2020 and 2019, and cash flows for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016.~~2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. ~~generally accepted accounting principles~~Generally Accepted Accounting Principles (“GAAP”) have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the ~~Company's~~Company’s annual report on Form 10-K for the year ended December 31, ~~2016~~2019 filed with the SEC on February ~~28, 2017.~~26, 2020, except as discussed in the sections entitled “Allowance for Credit Losses” and “Recently Adopted Authoritative Guidance” below. The ~~Company's~~Company’s results of operations and comprehensive income (loss) for the three and six months ended June 30, 2020 and cash flows for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017~~2020 are not necessarily indicative of results that may be expected for the year ending December 31, ~~2017,~~2020, or for any future period.

Principles of ~~consolidation~~Consolidation

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

Reclassifications and Adjustments

Certain ~~prior year~~prior-year amounts have been reclassified to conform towith current-period presentation. This reclassification was a change in the ~~2017~~ presentation ~~with~~of certain items in the ~~adoption~~disaggregation of ~~ASU 2016-09,~~ ~~Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. Additionally, see "Recently adopted authoritative guidance"~~product revenues for the ~~effects~~three and six months ended June 30, 2019 in Note 2, Revenues, of ~~first quarter adoption of ASU 2016-09.~~the Notes to Condensed Consolidated Financial Statements. This change was not deemed material and was included to conform with current-period classification and presentation.

Use of ~~estimates~~Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the ~~Company's~~Company’s Condensed Consolidated Financial Statements and accompanying Notes. Management bases its estimates on historical experience and various other assumptions believed to be ~~reasonable.~~reasonable, including any potential impacts arising from the novel coronavirus (“COVID-19”) pandemic. Although these estimates are based on ~~management's~~management’s best knowledge of current events and actions that may impact the Company in the future, actual results may be different from the estimates.

The ~~Company's~~Company’s critical accounting policies are those that affect its financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, accounts receivable and notes receivable from investment in sales-type leases, inventory valuation, capitalized software development costs, valuation and impairmentAs of ~~goodwill, purchased intangibles and long-lived assets, fair~~June 30, 2020, the Company is not aware of any events or circumstances that would require an update to its estimates, judgments, or revisions to the carrying value of its assets ~~acquired and liabilities assumed~~or liabilities. Given the ongoing uncertainty surrounding the COVID-19 pandemic, events or circumstances may arise that could result in ~~business combination, share-based compensation, and accounting for income taxes.~~a change in estimates, judgments, or revisions to the carrying value of the Company’s assets or liabilities.

Segment ~~reporting~~Reporting

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company's Chief Operating Decision Maker ("CODM") is its Chief Executive Officer. The CODM allocates resources and evaluates the performance of the ~~Company's segments~~Company at the consolidated level using information about its revenues, gross profit, ~~and~~ income from ~~operations. Such evaluation excludes general corporate-level costs that~~operations, and other key financial data. All significant operating decisions are ~~not specific to either~~based upon an analysis of the ~~reportable segments~~Company as 1 operating segment, which is the same as its reporting segment.

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Allowance for Credit Losses

The Company is exposed to credit losses primarily through sales of its products and services, as well as its sales-type leasing arrangements. The Company performs credit evaluations of its customers’ financial condition in order to assess each customer’s ability to pay. These evaluations require significant judgment and are ~~managed separately at~~based on a variety of factors including, but not limited to, current economic trends, payment history, and a financial review of the ~~corporate level. Corporate-level costs include expenses related~~customer. The Company continues to ~~executive management, finance~~monitor customers’ creditworthiness on an ongoing basis.

The Company maintains an allowance for credit losses for accounts receivable, unbilled receivables, and ~~accounting, human resources, legal, training~~net investment in sales-type leases based on expected credit losses resulting from the inability of its customers to make required payments. The allowance for credit losses is measured using a loss rate method, considering factors such as customers’ credit risk, historical loss experience, current conditions, and ~~development,~~forecasts. The allowance for credit losses is measured on a collective (pool) basis by aggregating customer balances with similar risk characteristics. The Company also records a specific allowance based on an analysis of individual past due balances or customer-specific information, such as a decline in creditworthiness or bankruptcy. Actual collection losses may differ from management’s estimates, and ~~certain~~such differences could be material to the Company’s financial position and results of operations.

The allowance for credit losses is presented in the Condensed Consolidated Balance Sheets as a deduction from the respective asset balance. The following table summarizes the Company’s allowance for credit losses by asset type:


	June 30, 2020		December 31, 2019

	(In thousands)
Allowance for credit losses:
Accounts receivable and unbilled receivables	$	3,204	$	3,227
Long-term unbilled receivables ⁽¹⁾	33		—
Net investment in sales-type leases ⁽²⁾	248		225

⁽¹⁾Included in other ~~administrative expenses. See Note 13, Segment~~long-term assets in the Condensed Consolidated Balance Sheets.

⁽²⁾Includes both current and ~~Geographical Information,~~long-term portions presented in other current assets and long-term investment in sales-type leases, net, respectively.

Changes in the allowances for ~~additional information on segment reporting.~~

credit losses were not significant for the three and six months ended June 30, 2020 and 2019.

Recently Adopted Authoritative Guidance

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted ~~authoritative~~ASU 2018-15 on January 1, 2020 on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In ~~March~~June 2016, the FASB issued ASU ~~No. 2016-09.~~ ~~This~~ ~~ASU simplifies several aspects~~2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, that modifies or replaces existing models for trade and other receivables, debt securities, loans, and certain other financial instruments. For instruments measured at amortized cost, including trade and lease receivables, loans, and held-to-maturity debt securities, the standard replaced the current “incurred loss” approach with an “expected loss” model. Entities are required to estimate expected credit losses over the life of the ~~accounting for share-based payment transactions, including~~instrument, considering available relevant information about the ~~income tax consequences, classification of awards as either equity or liabilities, and classification on the statement~~collectibility of cash ~~flows. The provision of ASU No. 2016-09 is effective for annual periods beginning after December 15, 2016,~~flows, including information about past events, current conditions, and ~~interim periods within those annual periods.~~reasonable and supportable forecasts. The Company adopted the new standard ~~effective~~on January 1, 2017. The impact of adoption was the recording of excess tax benefits within income tax expense, rather than in Additional Paid in Capital of $2.1 million and $4.7 million for the three and nine months ended September 30, 2017, respectively. ~~Additionally, in the first quarter of 2017, the Company recognized the previously unrecognized excess tax benefits~~2020 using the modified retrospective transition method, which resulted in athe recognition of an immaterial cumulative-effect adjustment ~~of $1.6 million~~ to retained earnings.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~, which simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under ASC 350, “Intangibles-Goodwill and Other.” Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the current ASC 350 requirement to calculate a goodwill impairment charge using Step 2. ASU 2017-04 is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company adopted ASU 2017-04 effective January 1, 2017. The adoption of this authoritative guidance did not have impact on the Company's Condensed Consolidated Financial Statements or related disclosures for the periods presented.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations~~, which clarifies the definition of a business and provides a screen to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company adopted ASU 2017-01 effective January 1, 2017. The adoption of this authoritative guidance did not have impact on the Company's Condensed Consolidated Financial Statements or related disclosures for the periods presented.

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815)~~, which simplifies the application of the hedge accounting guidance and improves the financial reporting, specifically simplifies designation and measurement for qualifying hedging relationships and the presentation of hedge results. ASU 2017-12 is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods with early adoption permitted. The Company adopted ASU 2017-12 effective August 1, 2017. The adoption of this authoritative guidance did not have impact on the Company's Condensed Consolidated Financial Statements or related disclosures for the periods presented.

Recently ~~issued authoritative guidance~~

~~In May 2014, the FASB issued ASU 2014-09-Revenue from Contracts with Customers~~, which outlines a single, comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, accordingly, it is possible more judgment and estimates may be required within the revenue recognition process than is required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The FASB has recently issued several amendments to ASU 2014-09, including clarification on accounting for licenses of intellectual property and identifying performance obligations. ASU 2014-09 will be effective for the Company beginning January 1, 2018.

The two permitted transition methods under ASU 2014-09 are the full retrospective method, in which case ASU 2014-09 would be applied to each prior reporting period presented and the cumulative effect of applying ASU 2014-09 would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying ASU 2014-09 would be recognized at the date of initial application. While the Company currently expects to apply the full retrospective method, the Company is continuing to evaluate the availability of information and resources necessary and may decide the benefit of applying the full retrospective method is not significant enough to support the cost.

Currently, the Company is in the process of reviewing its historical contracts to quantify the impact on its consolidated financial statements. The most significant impact of the standard relates to accounting for term software license revenue, contingent income, and commission expense. Specifically, under the standard the Company expects to recognize revenue on term software licenses upon installation of the license rather than ratably over the life of the term license. Additionally, the

standard no longer requires deferral of contingent revenue in transactions where the amount charged to the customer for a particular performance obligation is less than the allocation of standalone selling price which will result in earlier recognition of revenue. Finally, the standard requires expense to be recognized for incremental costs incurred to obtain a contract, primarily commission expense, on a systematic basis that is consistent with the transfer to the customer of the product and services to which the cost relates, including an estimate of the period of service renewals for the transaction. Currently, the Company recognizes commission expense at the time of recognizing the related product revenue. The Company is also in the process of assessing the appropriate changes to its business processes and upgrading its systems and controls to support recognition and disclosure under ASU 2014-09. The Company expects to complete its assessment process within the last quarter of 2017.Issued Authoritative Guidance

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

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Note 2. ~~Business Acquisitions~~Revenues

~~2017 Acquisitions~~Revenue Recognition

~~On April 12, 2017,~~The Company earns revenues from sales of its products and related services, which are sold in the ~~Company completed the acquisition of all~~healthcare industry, its principal market. The Company’s customer arrangements typically include one or more of the ~~membership interest of Dixie Drawl, LLC d/b/a InPharmics ("InPharmics") pursuant to InPharmics' Member Interest Purchase Agreement. InPharmics is a technology~~following performance obligations:

Products. Software-enabled equipment that manages and ~~services company that provides advanced pharmacy informatics solutions to hospital pharmacies. The total consideration for~~regulates the transaction was $5.0 million, net of cash on hand at signing of $0.3 million. Approximately $0.5 million of the total consideration was classified as a long-term liability for potential settlement of performance obligations. The Company accounted for the acquisition of InPharmics in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date. The purchase price was preliminary allocated to intangible assets in the amount of $1.9 million, which included developed technology and customer contracts, with the remainder allocated to goodwill. The results of the InPharmics' operations have been included in our consolidated results of operations, and presented as part of the Automation and Analytics segment.

~~2016 Acquisitions~~

On January 5, 2016, the Company completed the acquisition of all of the membership interests of Aesynt pursuant to the Aesynt Securities Purchase Agreement. Aesynt is a provider of automated medication management systems, including dispensing robots with storage solutions, medication storage and dispensing ~~carts~~of pharmaceuticals, consumable blister cards and ~~cabinets, I.V. sterile preparation robotics,~~packaging equipment and ~~software, including software related to~~other medical supplies.

Software. On premise or cloud-based subscription solutions that improve medication management. The total consideration was $271.5 million, net of cash on hand at signing of $8.2 million. The results of Aesynt's operations have been included in the Company's consolidated results of operations asmanagement and adherence outcomes or enable incremental functionality of the ~~time~~Company’s equipment.

Installation. Installation of equipment as integrated systems at customer sites.

Post-installation technical support. Phone support, on-site service, parts, and access to unspecified software updates and enhancements, if and when available.

Professional services. Other customer services, such as technology-enabled services, training, and consulting.

A portion of the ~~acquisition,~~Company’s sales are made to customers who are members of Group Purchasing Organizations (“GPOs”). GPOs are often owned fully or in part by the Company’s customers, and ~~presented as part of the Automation & Analytics segment.~~

~~On December 8, 2016,~~ the Company pays fees to the GPO on completed its acquisition of ateb, Inc., and Ateb Canada Ltd. (together, “Ateb”) pursuant to Ateb's Securities Purchase Agreement for $40.7 million of cash consideration, net of $0.9 million cash on hand. The cash consideration, included the repayment of Ateb indebtedness and other adjustments provided for in the Ateb's Securities Purchase Agreement. Ateb is a provider of pharmacy-based patient care solutions and the medication synchronization solutions leader to independent and chain pharmacies. The results of Ateb's operations have been included in the Company's consolidated results of operations as of the time of the acquisition, and presented as part of the Medication Adherence segment.

contracts. The Company ~~accounted~~considers these fees consideration paid to customers and records them as reductions to revenue. Fees to GPOs were $1.7 million and $2.6 million for the ~~acquisitions~~three months ended June 30, 2020 and 2019, respectively, and $4.6 million and $4.8 million for the six months ended June 30, 2020 and 2019, respectively.

Disaggregation of Aesynt and Ateb in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition dates, respectively.Revenues

The following table ~~represents~~summarizes the ~~allocation~~Company’s product revenues disaggregated by revenue type for the three and six months ended June 30, 2020 and 2019:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands)
Hardware and software	$	116,919	$	133,005	$	259,352	$	251,819
Consumables	18,063		21,795		41,333		45,502
Other	3,960		3,579		8,330		6,668
Total product revenues	$	138,942	$	158,379	$	309,015	$	303,989

The following table summarizes the Company’s revenues disaggregated by geographic region, which is determined based on customer location, for the three and six months ended June 30, 2020 and 2019:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands)
United States	$	178,052	$	195,811	$	385,786	$	375,831
Rest of world ⁽¹⁾	21,569		21,602		43,521		44,099
Total revenues	$	199,621	$	217,413	$	429,307	$	419,930

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

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Contract Assets and Contract Liabilities

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


	June 30, 2020		December 31, 2019

	(In thousands)
Short-term unbilled receivables, net ⁽¹⁾	$	9,602	$	11,707
Long-term unbilled receivables, net ⁽²⁾	16,132		12,260
Total contract assets	$	25,734	$	23,967

Short-term deferred revenues, net	$	107,940	$	90,894
Long-term deferred revenues	6,101		7,083
Total contract liabilities	$	114,041	$	97,977

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

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

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

Short-term deferred revenues of $107.9 million and $90.9 million include deferred revenues from product sales and service contracts, net of deferred cost of sales of $19.6 million and $13.1 million, as of June 30, 2020 and December 31, 2019, respectively. The short-term deferred revenues from product sales relate to delivered and invoiced products, pending installation and acceptance, expected to occur within the ~~liabilities assumed by~~next twelve months. During the three and six months ended June 30, 2020, the Company ~~during each acquisition,~~recognized revenues of $20.9 million and $64.3 million, respectively, ~~reconciled to the purchase price transferred~~that were included in the ~~Company's Consolidated Balance Sheet:~~corresponding gross short-term deferred revenues balance of $104.0 million as of December 31, 2019.

Aesynt Ateb
(preliminary)
Total
(in thousands)
Cash $ 8,164
$ 902
$ 9,066
Accounts receivable 43,312
7,761
51,073
Inventory 19,021
225
19,246
Other current assets 3,787
1,239
5,026
      Total current assets 74,284
10,127
84,411
Property and equipment 10,389
2,447
12,836
Intangibles 123,700
12,500
136,200
Goodwill 163,599
21,651
185,250
Other non-current assets 968
334
1,302
      Total assets 372,940
47,059
419,999
Current liabilities 26,753
2,314
29,067
Deferred revenue 25,512
2,776
28,288
Non-current deferred tax liabilities 38,622
—
38,622
Other non-current liabilities 2,431
367
2,798
   Total liabilities 93,318
5,457
98,775
Total purchase price $ 279,622
$ 41,602
$ 321,224
Total purchase price, net of cash received $ 271,458
$ 40,700
$ 312,158

~~The $163.6~~Long-term deferred revenues include deferred revenues from service contracts of $6.1 million and $7.1 million as of ~~goodwill arising from~~June 30, 2020 and December 31, 2019, respectively. Remaining performance obligations primarily relate to maintenance contracts and are recognized ratably over the Aesynt acquisition is primarily attributed to sales of future products and services and Aesynt's assembled workforce. The goodwill has been assigned to the Automation & Analytics segment and is not deductible for tax purposes.

~~The $21.7 million of goodwill arising from the Ateb acquisition is primarily attributed to sales of future products and services and Ateb's assembled workforce.~~

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

Aesynt Ateb (Preliminary)
Fair value Weighted
average
useful life Fair value Weighted
average
useful life
(In thousands) (In years) (In thousands) (In years)
Customer relationships $ 58,200
14-16 $ 8,900
12
Developed technology 38,800
8 3,400
5
Backlog 20,200
1-3 — —
In-process research and development ⁽¹⁾
3,900
— — —
Non-compete 1,800
3 100
1
Trade names 800
1 100
1
Total purchased intangible assets $ 123,700
$ 12,500

⁽¹⁾~~The amortization~~remaining term of the ~~in-process R&D assets begins when the in-process R&D projects are complete.~~contract, generally not more than five years.

Significant Customers

~~Aesynt Acquisition~~

~~Customer relationships represent the fair value~~There were no customers that accounted for more than 10% of the ~~underlying relationships~~Company’s total revenues for the three and ~~agreements with Aesynt’s~~six months ended June 30, 2020 and 2019. Also, there were no customers ~~acquired developed technology represents~~that accounted for more than 10% of the fair value of Aesynt products that have reached technological feasibility and were part of Aesynt’s product offerings at the date of acquisition, backlog represents the fair value of sales order backlog at the date of acquisition, non-compete intangible asset represents the fair value of non-compete agreements with former key members of Aesynt's management, and trade name represents the fair value of brand and name recognition associated with the marketing of Aesynt’s products and services. In-process research and development ("IPR&D") represents the fair value of incomplete Aesynt research and development projects that had not reached technological feasibilityCompany’s accounts receivable balance as of ~~the date of acquisition. Incremental costs incurred for those projects are expensed as incurred in research~~June 30, 2020 and ~~development.~~December 31, 2019.

The fair value of trade names, acquired developed technology, and acquired IPR&D was determined based on an income approach using the relief-from-royalty method at the royalty rates of 0.5%, 4% to 8% and 12.5%, respectively. The fair value of customer relationships, backlog, and non-compete intangible assets were determined based on an income approach using the discounted cash flow method, at the discounted rates of 13%, 10% and13%, respectively. The intangible assets, except customer relationship and IPR&D, are being amortized over their estimated useful lives using the straight line method of amortization. The customer relationship intangible asset is being amortized using a double-declining method of amortization as such method better represents the economic benefits to be obtained. In accordance with authoritative guidance, the IPR&D is accounted for as an indefinite-lived intangible asset until completion or abandonment of the associated research and development efforts. IPR&D is tested for impairment during the period it is considered an indefinite lived asset. IPR&D related projects are expected to be completed in two to three years. As of September 30, 2017, none of the IPR&D projects have been completed, and they have progressed as previously estimated and are expected to be completed in fiscal 2018.

~~Ateb Acquisition~~

Customer relationships represent the fair value of the underlying relationships and agreements with Ateb’s customers expected to result in future sales, acquired developed technology represents the fair value of Ateb intellectual property incorporated in their products, non-compete intangible asset represents the fair value of non-compete agreements with former key members of Ateb's management, and trade name represents the fair value of brand and name recognition associated with the marketing of Ateb’s products and services.

The fair value of Ateb trade names and acquired developed technology was determined based on an income approach using the relief-from-royalty method at the royalty rates of 0.5% and 5% to 6%, respectively. The fair value of customer relationships, and non-compete intangible assets were determined based on an income approach using the discounted cash flow method, both using a 15% discount rate. The intangible assets for non-compete agreements and trade name are being amortized over their estimated useful lives using the straight line method of amortization. The intangible assets for customer relationship and developed technology are being amortized using a double-declining method of amortization as such method better represents the economic benefits to be obtained.

Note 3. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of shares outstanding during the ~~period, less shares repurchased.~~period. In periods of net loss, all potential common shares are anti-dilutive, so diluted net loss per share equals the basic net loss per share. In periods of net income, diluted net income per share is computed by dividing net income for the period by the basic weighted-average number of shares plus any dilutive potential common stock outstanding during the period. Potential common stock includes the effect of outstanding dilutive stock options, restricted stock awards, and restricted stock units computed using the treasury stock method. Any anti-dilutive weighted-average dilutive shares related to stock award plans are excluded from the computation of the diluted net income per share.

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The basic and diluted net income (loss) per share ~~calculation~~calculations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016 is~~2019 were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands, except per share data)
Net income (loss)	$	(4,299)	$	15,976	$	7,012	$	19,260
Weighted-average shares outstanding — basic	42,659		41,371		42,509		41,033
Effect of dilutive securities from stock award plans	—		1,574		1,107		1,613
Weighted-average shares outstanding — diluted	42,659		42,945		43,616		42,646

Net income (loss) per share - basic	$	(0.10)	$	0.39	$	0.16	$	0.47
Net income (loss) per share - diluted	$	(0.10)	$	0.37	$	0.16	$	0.45

Anti-dilutive weighted-average shares related to stock award plans	4,931		741		1,929		748

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands, except per share data)
Net income (loss) $ 6,231
$ 1,983
$ (3,686 ) $ 446
Weighted-average shares outstanding — basic 37,698
36,332
37,266
36,020
Effect of dilutive securities from stock award plans 1,275
747
—
675
Weighted-average shares outstanding — diluted $ 38,973
$ 37,079
37,266
36,695
Net income (loss) per share - basic $ 0.17
$ 0.05
$ (0.10 ) $ 0.01
Net income (loss) per share - diluted $ 0.16
$ 0.05
$ (0.10 ) $ 0.01

Anti-dilutive weighted-average shares related to stock award plans 1,383
326
3,757
1,255

Note 4. Cash and Cash Equivalents and Fair Value of Financial Instruments

Cash and cash equivalents of ~~$7.5~~$133.6 million and ~~$54.5~~$127.2 million as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively, consisted of ~~demand deposits only.~~bank accounts with major financial institutions.

Fair ~~value hierarchy~~Value Hierarchy

The Company measures its financial instruments at fair value. The Company’s cash and cash equivalents are classified within Level 1 of the fair value hierarchy as they are valued primarily using quoted market prices utilizing market observable inputs. The Company's ~~foreign currency~~interest rate swap contracts and debt are classified within Level 2 as the valuation inputs are based on quoted prices ~~and~~or market observable data of similar instruments. ~~In accordance with the 2015 Avantec share purchase agreement, the Company agreed~~Refer to ~~make potential earn-out payments of $3.0 million based on the achievement of bookings targets. The Company has concluded that only $2.4 million~~ Note 8, Debt and Credit Agreements, of the ~~total potential earn out payment has been earned, which was paid out during the three month period ended September 30, 2017.~~

~~The following table represents the fair value hierarchy of~~Notes to Condensed Consolidated Financial Statements for further information regarding the Company’s ~~financial assets and financial liabilities measured at fair value as of September 30, 2017:~~

Level 1 Level 2 Level 3 Total
(In thousands)
Interest rate swap contracts $ —
$ 1,200
$ —
$ 1,200
Total financial assets $ —
$ 1,200
$ —
$ 1,200

~~There have been no transfers between fair value measurement levels during the nine months ended September 30, 2017 and September 30, 2016.~~

~~The following table represents the fair value hierarchy of the Company’s financial assets and financial liabilities measured at fair value as of December 31, 2016:~~

Level 1 Level 2 Level 3 Total
(In thousands)
Interest rate swap contracts

$ —
$ 1,245
$ —
$ 1,245
Total financial assets $ —
$ 1,245
$ —
$ 1,245
Contingent consideration liability $ —
$ —
$ 2,400
$ 2,400
Total financial liabilities $ —
$ —
$ 2,400
$ 2,400

~~Net investment in sales-type leases.~~ ~~The carrying amount of the Company's sales-type lease receivables is a reasonable estimate of fair value, as the unearned interest income is immaterial.~~

credit facilities.

Interest Rate Swap Contracts

The Company uses interest rate swap agreements to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on a portion of its outstanding debt. The ~~Company's~~Company’s interest rate swaps, which are designated as cash flow hedges, involve the receipt of variable amounts from counterparties in exchange for the Company making fixed-rate payments over the life of the agreements. The Company does not hold or issue any derivative financial instruments for speculative trading purposes.

During 2016, the Company entered into an interest rate swap agreement with a combined notional amount of $100.0 million with one ~~counter-party~~counterparty that became effective on June 30, 2016 and ~~is maturing~~matured on April 30, 2019. The swap agreement ~~requires~~required the Company to pay a fixed rate of 0.8% and ~~provides~~provided that the Company ~~will receive~~received a variable rate based on the one month ~~LIBOR rate~~London Interbank Offered Rate (“LIBOR”), subject to a LIBOR floor of 0.0%. Amounts payable by or due to the Company ~~will be~~were net settled with the respective ~~counter-party~~counterparty on the last business day of each month, commencing July 31, 2016.

~~The fair value~~

Table of the interest rate swap agreements at September 30, 2017 and December 31, 2016 was $1.2 million and $1.2 million, respectively. There were no amounts reclassified into current earnings due to ineffectiveness during the periods presented.Contents

Note 5. Balance Sheet Components

Balance sheet details as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 are presented in the tables below:

September 30,
2017 December 31,
2016
(In thousands)
Inventories:
Raw materials $ 20,736
$ 14,322
Work in process 10,769
7,800
Finished goods 60,734
47,175
Total inventories $ 92,239
$ 69,297

Prepaid expense
Prepaid commissions $ 11,622
$ 13,176
Other prepaid expenses 16,422
15,470
Total prepaid expense $ 28,044
$ 28,646

Property and equipment:
Equipment $ 70,343
$ 64,384
Furniture and fixtures 6,881
6,517
Leasehold improvements 10,143
9,778
Software 37,574
35,607
Construction in progress 8,083
7,211
Property and equipment, gross 133,024
123,497
Accumulated depreciation and amortization (92,805 ) (81,486 )
Total property and equipment, net $ 40,219
$ 42,011

Other long term assets:
Capitalized software, net $ 36,713
$ 33,233
Other assets 883
1,818
Total other long term assets, net $ 37,596
$ 35,051


						June 30, 2020		December 31, 2019
	September 30, 2017		December 31, 2016
						(In thousands)
Inventories:					Inventories:
Raw materials					Raw materials	$	32,101	$	31,331
Work in process					Work in process	7,833		7,620
Finished goods					Finished goods	74,311		69,060
Total inventories					Total inventories	$	114,245	$	108,011

Other long-term assets:					Other long-term assets:
Capitalized software, net					Capitalized software, net	$	94,166	$	85,070
Unbilled receivables, net					Unbilled receivables, net	16,132		12,260
Deferred debt issuance costs					Deferred debt issuance costs	4,218		4,700
Other assets					Other assets	1,681		1,006
Total other long-term assets					Total other long-term assets	$	116,197	$	103,036

Accrued liabilities:					Accrued liabilities:
Operating lease liabilities, current portion					Operating lease liabilities, current portion	$	10,463	$	10,058
Advance payments from customers	$	7,780	$	7,030	Advance payments from customers	4,651		4,006
Rebates and lease buyouts	5,943		4,025		Rebates and lease buyouts	18,690		14,911
Group purchasing organization fees	3,380		3,737		Group purchasing organization fees	4,250		5,934
Taxes payable	5,575		4,003		Taxes payable	2,963		3,744
Other accrued liabilities	10,383		12,400		Other accrued liabilities	11,962		16,914
Total accrued liabilities	$	33,061	$	31,195	Total accrued liabilities	$	52,979	$	55,567

The following tables summarize the changes in accumulated balances of other comprehensive income (loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~2019:


	Three Months Ended June 30,
	2020										2019
	Foreign currency translation adjustments		Unrealized gain (loss) on interest rate swap hedges		Total		Foreign currency translation adjustments		Unrealized gain (loss) on interest rate swap hedges		Total

	(In thousands)
Beginning balance	$	(14,140)	$	—	$	(14,140)	$	(10,605)	$	103	$	(10,502)
Other comprehensive income (loss) before reclassifications	451		—		451		(971)		48		(923)
Amounts reclassified from other comprehensive income (loss), net of tax	—		—		—		—		(151)		(151)
Net current-period other comprehensive income (loss), net of tax	451		—		451		(971)		(103)		(1,074)
Ending balance	$	(13,689)	$	—	$	(13,689)	$	(11,576)	$	—	$	(11,576)

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																			Six Months Ended June 30,
	Three months ended September 30,																		2020										2019
	2017									2016									Foreign currency translation adjustments		Unrealized gain (loss) on interest rate swap hedges		Total		Foreign currency translation adjustments		Unrealized gain (loss) on interest rate swap hedges		Total
	Foreign currency translation adjustments			Unrealized gain (loss) on interest rate swap hedges			Total			Foreign currency translation adjustments			Unrealized gain (loss) on interest rate swap hedges		Total
	(In thousands)																		(In thousands)
Beginning balance	$	(8,765	)	$	1,274		$	(7,491	)	$	(7,524	)	$	—	$	(7,524	)	Beginning balance	$	(9,446)	$	—	$	(9,446)	$	(11,274)	$	420	$	(10,854)
Other comprehensive income (loss) before reclassifications	1,389			35			1,424			(502		)	108		(394		)	Other comprehensive income (loss) before reclassifications	(4,243)		—		(4,243)		(302)		148		(154)
Amounts reclassified from other comprehensive income (loss), net of tax	—			(109		)	(109		)	—			—		—			Amounts reclassified from other comprehensive income (loss), net of tax	—		—		—		—		(568)		(568)
Net current-period other comprehensive income (loss), net of tax	1,389			(74		)	1,315			(502		)	108		(394		)	Net current-period other comprehensive income (loss), net of tax	(4,243)		—		(4,243)		(302)		(420)		(722)
Ending balance	$	(7,376	)	$	1,200		$	(6,176	)	$	(8,026	)	$	108	$	(7,918	)	Ending balance	$	(13,689)	$	—	$	(13,689)	$	(11,576)	$	—	$	(11,576)

Nine months ended September 30,
2017 2016
Foreign currency translation adjustments Unrealized gain (loss) on interest rate swap hedges Total Foreign currency translation adjustments Unrealized gain (loss) on interest rate swap hedges Total

(In thousands)

Beginning balance $ (10,764 ) $ 1,245
$ (9,519 ) $ (2,730 ) $ —
$ (2,730 )
     Other comprehensive income (loss) before reclassifications 3,388
111
3,499
(5,296 ) 108
(5,188 )
     Amounts reclassified from other comprehensive income (loss), net of tax —
(156 ) (156 ) —
—
—
     Net current-period other comprehensive income (loss), net of tax 3,388
(45 ) 3,343
(5,296 ) 108
(5,188 )
Ending balance $ (7,376 ) $ 1,200
$ (6,176 ) $ (8,026 ) $ 108
$ (7,918 )

Note 6. ~~Net Investment in Sales-Type Leases~~Property and Equipment

~~On a recurring basis, we enter into sales-type lease transactions with~~The following table represents the ~~majority varying in length from one to five years. The receivables~~property and equipment balances as ~~a result~~ of ~~these types of transactions are collateralized by the underlying equipment leased and consist of the following components at September~~June 30, ~~2017~~2020 and December 31, ~~2016:~~ 2019:


	June 30, 2020		December 31, 2019

	(In thousands)
Equipment	$	98,691	$	88,569
Furniture and fixtures	7,878		7,925
Leasehold improvements	19,839		18,979
Software	49,424		48,309
Construction in progress	6,428		6,179
Property and equipment, gross	182,260		169,961
Accumulated depreciation and amortization	(124,394)		(115,715)
Total property and equipment, net	$	57,866	$	54,246

Depreciation and amortization expense of property and equipment was $4.7 million and $4.4 million for the three months ended June 30, 2020 and 2019, respectively, and $9.0 million and $8.4 million for the six months ended June 30, 2020 and 2019, respectively.

September 30,
2017 December 31,
2016
(In thousands)
Net minimum lease payments to be received $ 26,173
$ 33,591
Less: Unearned interest income portion (1,986 ) (2,763 )
Net investment in sales-type leases 24,187
30,828
Less: Short-term portion⁽¹⁾
(8,201 ) (10,243 )
Long-term net investment in sales-type leases $ 15,986
$ 20,585
The geographic location of the Company's property and equipment, net, is based on the physical location in which it is located. The following table summarizes the geographic information for property and equipment, net, as of June 30, 2020 and December 31, 2019:


	June 30, 2020		December 31, 2019

	(In thousands)
United States	$	51,811	$	48,769
Rest of world ⁽¹⁾	6,055		5,477
Total property and equipment, net	$	57,866	$	54,246

⁽¹⁾~~The short-term portion~~No individual country represented more than 10% of ~~the net investments in sales-type leases is included in other current assets in the Condensed Consolidated Balance Sheets.~~total property and equipment, net.

The Company evaluates its sales-type leases individually and collectively for impairment. The allowance for credit losses were $0.2 million and $0.3 million as of September 30, 2017 and of December 31, 2016, respectively.

~~At September 30, 2017, the future minimum lease payments under sales-type leases are as follows:~~

September 30,
2017
(In thousands)
Remaining three months of 2017 $ 2,470
2018 8,038
2019 6,474
2020 4,548
2021 2,749
Thereafter 1,894
Total $ 26,173

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Note 7. Goodwill and Intangible Assets

Goodwill

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

Automation and
Analytics

Medication
Adherence
Total
(In thousands)
Net balance as of December 31, 2016 $ 215,082
$ 112,642
$ 327,724
Goodwill acquired 3,113
819
3,932
Foreign currency exchange rate fluctuations 2,351
773
3,124
Net balance as of September 30, 2017 $ 220,546
$ 114,234
$ 334,780

Goodwill acquired in the Automation and Analytics segment represents the value assigned to goodwill as part of the InPharmics acquisition. Goodwill acquired in the Medication Adherence segment represents adjustments to the preliminary value assigned to goodwill in connection with Ateb acquisition to reflect measurement period adjustments related to accounts receivable and other non-current assets of $0.1 million and $0.7 million, respectively.


	December 31, 2019		Additions		Foreign currency exchange rate fluctuations		June 30, 2020

	(In thousands)
Goodwill	$	336,539	$	—	$	(1,505)	$	335,034

Intangible ~~assets, net~~Assets, Net

The carrying amounts and useful lives of ~~intangibles~~intangible assets as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016 are~~2019 were as follows:


	June 30, 2020
	Gross carrying amount ⁽¹⁾		Accumulated amortization		Foreign currency exchange rate fluctuations		Net carrying amount		Useful life (years)

	(In thousands, except for years)
Customer relationships	$	134,889	$	(58,871)	$	(1,360)	$	74,658	10 - 30
Acquired technology	77,029		(40,033)		5		37,001		5 - 20
Backlog	1,150		(934)		—		216		4
Trade names	7,650		(5,374)		10		2,286		6 - 12
Patents	3,217		(1,669)		1		1,549		2 - 20


Total intangibles assets, net	$	223,935	$	(106,881)	$	(1,344)	$	115,710

September 30, 2017

Gross
carrying
amount

Accumulated
amortization
Foreign currency exchange rate fluctuations
Net
carrying
amount

Useful life
(years)
(In thousands, except for years)
Customer relationships $ 133,456
$ (30,421 ) $ 297
$ 103,332
1 - 30
Acquired technology 74,457
(19,493 ) 75
55,039
3 - 20
Backlog 21,702
(16,654 ) —
5,048
1 - 5
Trade names 8,683
(4,508 ) 13
4,188
1 - 12
Patents 3,290
(1,331 ) (6 ) 1,953
2 - 20
Non-compete agreements 1,900
(1,133 ) —
767
3
In-process technology 3,900
—
—
3,900
—
Total intangibles assets, net $ 247,388
$ (73,540 ) $ 379
$ 174,227


	December 31, 2019
	Gross carrying amount ⁽¹⁾		Accumulated amortization		Foreign currency exchange rate fluctuations		Net carrying amount		Useful life (years)

	(In thousands, except for years)
Customer relationships	$	135,234	$	(54,860)	$	(1,058)	$	79,316	10 - 30
Acquired technology	77,142		(36,194)		5		40,953		3 - 20
Backlog	1,150		(791)		—		359		4
Trade names	7,650		(5,037)		11		2,624		6 - 12
Patents	3,217		(1,603)		1		1,615		2 - 20


Total intangibles assets, net	$	224,393	$	(98,485)	$	(1,041)	$	124,867

December 31, 2016

Gross carrying
amount

Accumulated
amortization
Foreign currency exchange rate fluctuations
Net
carrying
amount

Useful life
(years)
(In thousands, except for years)
Customer relationships $ 133,358
$ (20,930 ) $ (596 ) $ 111,832
1 - 30
Acquired technology 73,599
(13,287 ) (159 ) 60,153
3 - 20
Backlog 20,550
(14,083 ) —
6,467
1 - 3
Trade names 8,667
(3,887 ) (31 ) 4,749
1 - 12
Patents 3,154
(1,264 ) —
1,890
2 - 20
Non-compete agreements

1,900
(608 ) —
1,292
3
In-process technology

3,900
—
—
3,900
—
Total intangibles assets, net $ 245,128
$ (54,059 ) $ (786 ) $ 190,283

⁽¹⁾The differences in gross carrying amounts between periods are primarily due to the write-off of certain fully amortized intangible assets.

Amortization expense of intangible assets was ~~$6.4~~$4.4 million and ~~$8.9~~$4.7 million for the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016, respectively. Amortization expense of intangible assets was $19.4~~2019, respectively, and $8.9 million and ~~$27.2~~$9.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively.

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

September 30, 2017
(In thousands)
Remaining three months of 2017 $ 6,166
2018 23,302
2019 17,837
2020 16,631
2021 15,065
Thereafter (excluding in-process technology) 91,326
Total $ 170,327


	June 30, 2020

	(In thousands)
Remaining six months of 2020	$	8,592
2021	16,120
2022	14,770
2023	13,675
2024	7,916
Thereafter	54,637
Total	$	115,710

Note 8. Debt and Credit Agreements

2016 Senior Credit Facility

On January 5, 2016, the Company entered into a ~~$400~~$400.0 million senior secured credit facility pursuant to a credit agreement ~~by and among the Company, the~~with certain lenders, ~~from time to time party thereto,~~ Wells Fargo Securities, LLC as ~~Sole Lead Arranger~~sole lead arranger, and Wells Fargo Bank, National Association as administrative agent ~~(the “Credit~~(as subsequently amended as discussed below, the “Prior Credit Agreement”). The Prior Credit Agreement ~~provides~~provided for (a) a five-year revolving credit facility of ~~$200~~$200.0 million, which was subsequently increased pursuant to the amendment discussed below (the ~~“Revolving~~“Prior Revolving Credit Facility”) and (b) a five-year ~~$200~~$200.0 million term loan facility (the ~~“Term~~“Prior Term Loan Facility” and together with the Prior Revolving Credit Facility, the ~~“Facilities”~~“Prior Facilities”). In addition, the Prior Credit

Agreement ~~includes~~included a letter of credit sub-limit of up to ~~$10~~$10.0 million and a swing line loan sub-limit of up to ~~$10~~$10.0 million. The Prior Credit Agreement ~~expires on~~had an expiration date of January 5, 2021, upon which date all remaining outstanding borrowings ~~are~~were due and payable.

Loans under the Prior Facilities ~~bear~~bore interest, at the Company’s option, at a rate equal to either (a) ~~the~~ LIBOR, ~~Rate,~~ plus an applicable margin ranging from 1.50% to 2.25% per annum based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the Prior Credit Agreement), or (b) an alternate base rate equal to the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50%, and (iii) LIBOR for an interest period of one month, plus an applicable margin ranging from 0.50% to 1.25% per annum based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the ~~2016~~Prior Credit Agreement). Undrawn commitments under the Prior Revolving Credit Facility ~~will be~~were subject to a commitment fee ranging from 0.20% to 0.35% per annum based on the Company’s Consolidated Total Net Leverage Ratio on the average daily unused portion of the Prior Revolving Credit Facility.

On each of April 11, 2017 and December 26, 2017, the parties entered into amendments to the Prior Credit Agreement. Under these amendments, the Prior Revolving Credit Facility was increased from $200.0 million to $315.0 million, and certain other modifications were made. In connection with the December 2017 amendment, the Company incurred and capitalized an additional $2.1 million of debt issuance costs.

2019 Revolving Credit Facility

On November 15, 2019, the Company refinanced the Prior Credit Agreement and entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo Securities, LLC, Citizens Bank, N.A., and JPMorgan Chase Bank, N.A., as joint lead arrangers and Wells Fargo Bank, National Association, as administrative agent. The A&R Credit Agreement replaced the Prior Credit Agreement and provides for (a) a five-year revolving credit facility of $500.0 million (the “Current Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million (the “Incremental Facility”). In addition, the A&R Credit Agreement includes a letter of credit ~~participation fee~~sub-limit of up to $15.0 million and a swing line loan sub-limit of up to $25.0 million. The A&R Credit Agreement has an expiration date of November 15, 2024, upon which date all remaining outstanding borrowings will be due and payable.

On November 15, 2019, the $80.0 million outstanding term loan balance under the Prior Facilities was transferred to the Current Revolving Credit Facility.

Loans under the Current Revolving Credit Facility bear interest, at the Company’s option, at a rate equal to either (a) LIBOR, plus an applicable margin ranging from ~~1.50%~~1.25% to ~~2.25%~~2.00% per annum based on the Company’s Consolidated Total Net Leverage Ratio ~~will accrue~~(as defined in the A&R Credit Agreement), or (b) an alternate base rate equal to the highest of (i) the prime rate,

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(ii) the federal funds rate plus 0.50%, and (iii) LIBOR for an interest period of one month plus 1.00%, plus an applicable margin ranging from 0.25% to 1.00% per annum based on the Company’s Consolidated Total Net Leverage Ratio. Undrawn commitments under the Current Revolving Credit Facility are subject to a commitment fee ranging from 0.15% to 0.30% per annum based on the Company’s Consolidated Total Net Leverage Ratio on the average daily ~~amount~~unused portion of ~~letter~~the Current Revolving Credit Facility. The applicable margin for and certain other terms of ~~credit exposure.~~

any term loans under the Incremental Facility will be determined prior to the incurrence of such loans. The Company is permitted to make voluntary prepayments at any time without payment of a premium or ~~penalty, except for any amounts relating to the LIBOR breakage indemnity described in the Credit Agreement.~~ penalty.

The Company is required to make mandatory prepayments under the Term Loan Facility with (a) net cash proceeds from any issuances of debt (other than certain permitted debt) and (b) net cash proceeds from certain asset dispositions (other than certain asset dispositions) and insurance and condemnation events (subject to reinvestment rights and certain other exceptions). Loans under the Term Loan Facility will amortize in quarterly installments, equal to 5% per annum of the original principal amount thereof during the first two years, which shall increase to 10% per annum during the third and fourth years, and 15% per annum during the fifth year, with the remaining balance payable on January 5, 2021. The Company is required to make mandatory prepayments under the Revolving Credit Facility if at any time the aggregate outstanding principal amount of loans together with the total amount of outstanding letters of credit exceeds the aggregate commitments, with such mandatory prepayment to be equal to the amount of such excess.

~~The~~A&R Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, dividends, and other distributions. The A&R Credit Agreement contains financial covenants that require the Company and its subsidiaries to not exceed a maximum consolidated total net leverage ratio and maintain a minimum ~~fixed charge~~interest coverage ratio. In addition, the A&R Credit Agreement contains certain customary events of default including, but not limited to, failure to pay interest, principal and fees or other amounts when due, material misrepresentations or misstatements in any representation or warranty, covenant defaults, certain cross defaults to other material indebtedness, certain judgment defaults and events of bankruptcy. The Company’s obligations under the A&R Credit Agreement and any swap obligations and banking services obligations owing to a lender (or an affiliate of a lender) are guaranteed by certain of its domestic subsidiaries and secured by substantially all of its and ~~the~~such subsidiary guarantors’ assets. In connection with entering into the A&R Credit Agreement, and as a condition precedent to borrowing loans thereunder, the Company and certain of the Company’s other direct and indirect subsidiaries have entered into certain ancillary agreements, including, but not limited to, a reaffirmation agreement, which amends certain terms of the existing collateral agreement and ~~subsidiary~~reaffirms their obligations under the existing guaranty agreement. The Company was in full compliance with all covenants as of June 30, 2020.

~~On January 5, 2016,~~The refinancing of the Prior Credit Agreement was evaluated in accordance with Accounting Standards Codification (“ASC”) 470-50, Debt - Modifications and Extinguishments. In determining whether the refinancing was to be accounted for as a debt extinguishment or a debt modification, the Company ~~borrowed~~considered whether lenders within the ~~full $200.0 million under~~syndicate remained the ~~Term Loan Facility~~same or changed and ~~$55.0 million under~~whether the ~~Revolving~~changes in debt terms were substantial. This assessment was performed on an individual lender basis within the syndicate. As a result, the refinancing was accounted for as a modification with the exception of certain lenders that exited the syndicate. The exit of certain lenders resulted in an immaterial write-off of existing unamortized debt issuance costs. The remaining unamortized debt issuance costs related to debt modification, along with the new deferred costs, will be amortized over the remaining term of the A&R Credit Facility to complete the Aesynt acquisition and pay related fees and expenses. On December 2, 2016, the Company borrowed $40.0 million under the Revolving Credit Facility to complete the Ateb acquisition and pay related fees and expenses. On April 3, 2017, the Company borrowed an additional $10.0 million under the Revolving Credit Facility to pay for the InPharmics acquisition and fund its operations. On July 7, 2017 and July 31, 2017, the Company borrowed an additional $15.0 million and $12.0 million, respectively, under the Revolving Credit Facility to fund its operations. As of September 30, 2017 the Company has repaid $134.5 million borrowed under these Facilities, which includes $100.0 million repaid during the nine months ended September 30, 2017.

~~On April 11, 2017, the parties entered into the First Amendment to Credit Agreement and Collateral~~ Agreement. Under this amendment, (i) the maximum capital expenditures limit in any fiscal year for property, plant and equipment and software development increased from $35.0 million to $45.0 million, and (ii) the maximum limit for non-permitted investments increased from $10.0 million to $20.0 million.

In connection with ~~these Facilities,~~the A&R Credit Agreement, the Company incurred ~~$7.9~~and capitalized an additional $2.3 million of debt issuance costs. ~~The debt issuance costs were capitalized and presented as a direct deduction from the carrying amount of that debt liability in accordance with the accounting guidance.~~ The debt issuance costs are being amortized to interest expense using the ~~straight line~~straight-line method ~~from~~through 2024. Amortization expense related to debt issuance ~~date through 2021.~~ costs was approximately $0.2 million and $0.6 million for the three months ended June 30, 2020 and 2019, respectively, and approximately $0.5 million and $1.1 million for the six months ended June 30, 2020 and 2019, respectively.

Interest expense (exclusive of fees and debt issuance cost amortization) was approximately ~~$1.6 million and $1.2~~$0.9 million for the three months ended ~~September~~June 30, ~~2017~~2019, and ~~2016, respectively. Interest expense (exclusive of fees and issuance cost amortization) was~~ approximately ~~$4.6~~$0.2 million and ~~$4.0~~$2.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively. NaN interest expense was incurred during the three months ended June 30, 2020 as there was 0 outstanding balance under the Current Revolving Credit Facility during the three months ended June 30, 2020.

The ~~Company was~~following table represents changes in ~~full compliance with all covenants as of September 30, 2017 and December 31, 2016.~~

~~The components~~the carrying amount of the Company’s debt ~~obligations~~obligations:


	Current Revolving Credit Facility

	(In thousands)
Balance as of December 31, 2019	$	50,000
Proceeds	—
Repayments	(50,000)
Balance as of June 30, 2020	$	—

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


	(In thousands)
Balance as of December 31, 2019	$	4,700
Additions	—
Amortization	(482)
Balance as of June 30, 2020	$	4,218

Note 9. Lessor Leases

Sales-Type Leases

On a recurring basis, the Company enters into multi-year, sales-type lease agreements, with the majority varying in length from one to five years. The Company optimizes cash flows by selling a majority of its non-U.S. government sales-type leases to third-party leasing finance companies on a non-recourse basis. The Company has no obligation to the leasing company once the lease has been sold. Some of the Company's sales-type leases, mostly those relating to U.S. government hospitals which comprise approximately 61% of the lease receivable balance, are retained in-house.

The following table presents the Company’s income recognized from sales-type leases for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2020 and 2019:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands)
Sales-type lease revenues	$	6,612	$	13,309	$	13,004	$	24,816
Cost of sales-type lease revenues	(2,655)		(5,575)		(5,224)		(10,395)
Selling profit on sales-type lease revenues	$	3,957	$	7,734	$	7,780	$	14,421

Interest income on sales-type lease receivables	$	526	$	399	$	987	$	808

The receivables as a result of these types of transactions are ~~as follows:~~collateralized by the underlying equipment leased and consist of the following components at June 30, 2020 and December 31, 2019:


	June 30, 2020		December 31, 2019

	(In thousands)
Net minimum lease payments to be received	$	33,750	$	32,360
Less: Unearned interest income portion	(2,855)		(2,840)
Net investment in sales-type leases	30,895		29,520
Less: Current portion ⁽¹⁾	(9,934)		(9,770)
Long-term investment in sales-type leases, net	$	20,961	$	19,750

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

December 31, 2016 Borrowings Repayment / Amortization September 30, 2017
(In thousands)
Term loan facility $ 192,500
$ —
$ (7,500 ) $ 185,000
Revolving credit facility 68,000
37,000
(92,500 ) 12,500
   Total debt under the facilities 260,500
37,000
(100,000 ) 197,500
   Less: Deferred issuance cost (6,359 ) —
1,192
(5,167 )
   Total Debt, net of deferred issuance cost $ 254,141
$ 37,000
$ (98,808 ) $ 192,333
Long term debt, current portion, net of deferred issuance cost 8,410
13,410
   Long term debt, net of deferred issuance cost $ 245,731
$ 178,923

~~As of September 30, 2017, the~~The carrying amount of ~~debt~~the Company’s sales-type lease receivables is a reasonable estimate of ~~$197.5 million approximates~~fair value.

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


	June 30, 2020

	(In thousands)
Remaining six months of 2020	$	6,838
2021	8,769
2022	8,005
2023	5,802
2024	3,031
Thereafter	1,305
Total future minimum sales-type lease payments	33,750
Present value adjustment	(2,855)
Total net investment in sales-type leases	$	30,895

Operating Leases

The Company entered into certain leasing agreements that were classified as operating leases prior to the adoption of ~~$199.2 million. The Company's debt facilities~~ASC 842, Leases, on January 1, 2019. These agreements in place prior to January 1, 2019 will continue to be treated as operating leases, however any new leasing agreements entered into on or after January 1, 2019 under these programs are classified and accounted for as sales-type leases in accordance with ASC 842. The operating lease arrangements generally have initial terms of one to seven years.

The following table represents the Company’s income recognized from operating leases for the three and six months ended June 30, 2020 and 2019:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands)
Rental income	$	3,024	$	3,365	$	6,001	$	6,652

Note 10. Lessee Leases

The Company has operating leases for office buildings, data centers, office equipment, and vehicles. The Company’s leases have initial terms of one to 12 years. As of June 30, 2020, the Company did not have any additional material operating leases that were entered into, but not yet commenced.

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


	June 30, 2020

	(In thousands)
Remaining six months of 2020	$	6,890
2021	13,572
2022	12,296
2023	8,660
2024	8,059
Thereafter	20,170
Total operating lease payments	69,647
Present value adjustment	(12,494)
Total operating lease liabilities ⁽¹⁾	$	57,153

_________________________________________________

⁽¹⁾Amount consists of a ~~Level 3~~current and long-term portion of operating lease liabilities of $10.5 million and $46.7 million, respectively. The short-term portion of the operating lease liabilities is included in accrued liabilities in the ~~fair value hierarchy.~~ Condensed Consolidated Balance Sheets.

Operating lease costs were $3.4 million and $3.6 million for the three months ended June 30, 2020 and 2019, respectively, and $7.0 million and $7.3 million for the six months ended June 30, 2020 and 2019, respectively. Short-term lease costs and variable lease costs were immaterial for the three and six months ended June 30, 2020 and 2019.

The ~~calculation of the fair value is based on a discounted~~following table summarizes supplemental cash flow ~~model using observable market inputs~~information related to the Company’s operating leases for the six months ended June 30, 2020 and ~~taking into consideration variables such as interest~~2019:


	Six Months Ended June 30,
	2020		2019

	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	7,067	$	7,391
Right-of-use assets obtained in exchange for new lease liabilities	$	1,335	$	557

The following table summarizes the weighted-average remaining lease term and weighted-average discount rate ~~changes, comparable instruments, and long-term credit ratings.~~

~~Note 9. Deferred revenue~~

~~Short-term deferred revenue includes deferred revenue from product sales and service contracts, net of deferred cost of sales of $14.5 million and $14.2 million~~related to the Company’s operating leases as of ~~September~~June 30, ~~2017~~2020 and December 31, 2016, respectively. The short-term deferred revenues from product sales relate to the delivered and invoiced products, pending installation and acceptance, expected to occur within the next twelve months.2019:

~~Long-term deferred revenue includes deferred revenue from service contracts of $16.4 million and $17.1 million, as of September 30, 2017 and December 31, 2016, respectively.~~


	June 30, 2020		December 31, 2019
Weighted-average remaining lease term, years	6.1		6.4
Weighted-average discount rate, %	6.4	%	6.4	%

Note ~~10.~~11. Commitments and Contingencies

~~Lease commitments~~

The Company leases office space and office equipment under operating leases. Commitments under operating leases primarily relate to leasehold property and office equipment. At September 30, 2017, the minimum future payments on non-cancelable operating leases were as follows:

(In thousands)
Remaining three months of 2017 $ 3,203
2018 12,447
2019 12,270
2020 10,972
2021 10,316
Thereafter 31,168
Total minimum future lease payments $ 80,376

Purchase ~~obligations~~Obligations

In the ordinary course of business, the Company issues purchase orders based on its current manufacturing needs. ~~At September~~As of June 30, ~~2017,~~2020, the Company had non-cancelable purchase commitments of ~~$59.9~~$66.3 million, of which $64.7 million are expected to be paid within the ~~next twelve months.~~ year ending December 31, 2020.

Legal Proceedings

The Company is currently involved in various legal proceedings. As required under ASC 450, Contingencies, the Company accrues for contingencies when it believes that a loss is probable and that it can reasonably estimate the amount of any such loss. The Company has not recorded any accrual for contingent liabilities associated with ~~any current~~the legal proceedings described below based on its belief that any potential loss, while reasonably possible, is not probable. Further, any possible range of loss in these matters cannot be reasonably estimated at this time. The Company believes that it has valid defenses with respect to legal proceedings pending against it. However, litigation is inherently unpredictable, and it is possible that cash flows or

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or results of operations could be materially affected in any particular period by the unfavorable resolution of this contingency or because of the diversion of ~~management's~~management’s attention and the creation of significant expenses.

On January 10, 2018, a lawsuit was filed against a number of individuals, governmental agencies, and corporate entities, including the Company and one of its former subsidiaries, Aesynt Incorporated (“Aesynt”), which, through a series of mergers, has been merged into the Company, in the Circuit Court for the City of Richmond, Virginia, captioned Ruth Ann Warner, as Guardian of Jonathan James Brewster Warner v. Centra Health, Inc., et al., Case No. CL18-152-1. The complaint sought monetary recovery of compensatory and punitive damages in addition to certain declaratory relief based upon, as against the individuals, governmental agencies, and corporate entities other than the Company and Aesynt, allegations of the use of excessive force, unlawful detention, false imprisonment, battery, simple and gross negligence and negligent hiring, detention, and training; and, as against the Company and Aesynt, claims of product liability, negligence, and breach of implied warranties. The Company and Aesynt were never served with the complaint. Upon motion of the plaintiff, the Court issued an order on February 21, 2019 nonsuiting (dismissing) the case without prejudice. On August 21, 2019, a new lawsuit was filed against the Company and Aesynt, in the Circuit Court for the County of Albemarle, Virginia, captioned Ruth Ann Warner, as Guardian of Jonathan James Brewster Warner v. Aesynt Incorporated, et al., Case No CL19-1301. The complaint seeks monetary recovery of damages based upon claims of product liability, negligence, and breach of implied warranties. The Company and Aesynt have not been served with the complaint. The Company intends to defend the lawsuit vigorously.

A declaratory judgment action was filed against the Company, on August 30, 2018, in the United States District Court for the Northern District of California, captioned Zurich American Insurance Company; American Guarantee & Liability Company v. Omnicell, Inc. and Does 1-10, inclusive, Case No. 3:18-CV-05345. The complaint seeks a declaration that the plaintiffs have no duty to defend or indemnify the Company in connection with the underlying litigation, Yana Mazya, et al. v. Northwestern Lake Forest Hospital, et al., Case No. 2018-CH-07161 pending in the Circuit Court of Cook County, Illinois, Chancery Division (a class action lawsuit filed against a customer of the Company, the customer’s parent company, and two vendors of medication dispensing systems, one of which is the Company, seeking statutory damages and certain declaratory, injunctive, and other relief based on causes of action directed to allegations of violation of the Illinois Biometric Information Privacy Act (“BIPA”) and of negligence by the defendants from which the Company was subsequently dismissed without prejudice) (“Mazya Action”), together with claims for reimbursement and unjust enrichment relating to the defense of the Mazya Action in the form of attorneys’ fees and other related costs. The Company has not responded to the complaint. On February 12, 2019, the Court stayed the action pending the outcome of the Mazya Action and administratively closed the case. On October 15, 2019, the plaintiffs filed a ~~party~~notice advising the Court of the dismissal of the Company from the Mazya Action and requesting that the Court lift the stay in the case and set dates for filing a responsive pleading by the Company and initial discovery and scheduling matters. By order dated November 13, 2019, the Court (i) lifted the stay in the case, (ii) set a case management conference for February 5, 2020, and (iii) ordered the parties to ~~any legal proceedings that~~file a joint case management ~~believes may have~~statement by January 29, 2020. The parties subsequently reached a ~~material impact~~settlement of the case in principle and the Court, after notice of the parties, continued the case management conference until April 29, 2020. The parties entered into a written settlement agreement on April 9, 2020. Since the conditions precedent in the settlement agreement to dismissing the case had not yet been fulfilled, the Court, upon the petition of the parties, again continued the case management conference until May 27, 2020. Upon fulfillment of the conditions precedent to finalizing the settlement, the plaintiffs filed a notice of dismissal with prejudice on May 4, 2020, thereby finally terminating the action.

A class action lawsuit was filed against the Company, on June 5, 2019, in the Circuit Court of Cook County, Illinois, Chancery Division, captioned Corey Heard, individually and on behalf of all others similarly situated, v. Omnicell, Inc., Case No. 2019-CH-06817. The complaint seeks class certification, monetary damages in the form of statutory damages for willful and/or reckless or, in the alternative, negligent violation of BIPA, and certain declaratory, injunctive, and other relief based on causes of action directed to allegations of violation of BIPA by the Company. The complaint was served on the ~~Company's financial position~~Company on June 13, 2019. On July 31, 2019, the Company filed a motion to stay or ~~results~~consolidate the case with the Mazya Action. The Court subsequently, on October 10, 2019, denied the motion, without prejudice, as being moot in view of ~~operations.~~the Company’s dismissal from the Mazya Action. The Company filed a motion to dismiss the complaint on October 31, 2019. The motion to dismiss is fully-briefed. The hearing on the Company’s motion to dismiss was previously set for March 16, 2020, was continued to May 27, 2020, and then was subsequently continued again to September 2, 2020. The Company intends to defend the lawsuit vigorously.

Note ~~11.~~12. Income Taxes

The Company generally provides for income taxes in interim periods based on the estimated annual effective tax rate for the year, adjusting for discrete items in the quarter in which they arise. ~~For the three month ended September 30, 2017, the provision for income taxes was computed based on the actual effective tax rate for the year-to-date by applying the discrete method.~~ The ~~Company determined that as small changes in estimated “ordinary” income result in significant changes in the estimated~~ annual ~~effective tax rate, the actual effective tax rate provided a more accurate income tax provision for the reporting period ended September 30, 2017. The estimated~~ effective tax rate before discrete items was ~~34.4%~~28.0% and ~~38.3%~~24.8% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively.

The ~~estimated~~Company’s effective tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 was based on best estimates, which may fluctuate through the remainder of the year due to the volatility and uncertainty of global economic conditions in connection with the COVID-19 pandemic.

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Due to continuing global operational centralization activities and legal entity rationalization, the Company recognized gain on the sale of certain intellectual property rights by Aesynt B.V. to Omnicell, Inc., which resulted in a tax expense, net of tax benefit, of $9.6 million during the six months ended June 30, 2019. In March 2020, Aesynt B.V. subsequently merged with and into Aesynt Holding B.V., with Aesynt Holding B.V. surviving and changing its name to Omnicell B.V. The Company did not recognize a gain or loss from such activities during the six months ended June 30, 2020. The Company also recognized a discrete tax benefit related to equity compensation in the amount of $3.3 million and $7.0 million for the six months ended June 30, 2020 and 2019, respectively.

The 2020 annual effective tax rate before discrete items differed from the statutory rate of ~~35%~~21% primarily due to the unfavorable impact of state income taxes, ~~foreign rate differential,~~non-deductible compensation and equity charges, and non-deductible ~~equity charges, which were~~expenses, partially offset by the favorable impact of ~~the Research & Development credits.~~research and development credits and foreign derived intangible income (“FDII”) benefit deduction. The 2019 annual effective tax rate ~~for the nine months ended September 30, 2016~~before discrete items differed from the statutory rate of ~~35%~~21% primarily due to the unfavorable impact of state income taxes, non-deductible equity charges, and non-deductible expenses, partially offset by the favorable impact of research and development credits, foreign rate differential, and FDII benefit deduction.

On March 27, 2020, the ~~IRS settlement~~Coronavirus Aid, Relief and ~~release of tax reserves,~~Economic Security Act (the “CARES Act”) was signed into law in response to the ~~domestic production activities deduction, Research & Development credits and a calculated benefit in state income taxes, offset by unfavorable items such as non-deductible transaction costs~~COVID-19 pandemic. The CARES Act, among other provisions, includes provisions related to refundable payroll tax credits, deferment of the ~~Aesynt transaction,~~employer portion of certain payroll taxes, net operation losses carryback periods, alternative minimum tax credit refunds, modification to net interest expense deduction limitation, and ~~non-deductible equity charges under ASC 740-718.~~technical amendments to tax depreciation methods for qualified improvement property placed in service after December 31, 2017. The provisions of the CARES Act did not have a material impact on the Company’s income taxes.

As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company had gross unrecognized tax benefits of ~~$6.8~~$17.3 million and ~~$6.5~~$16.8 million, respectively. It is the Company’s policy to classify accrued interest and penalties as part of the unrecognized tax benefits, but to record interest and penalties in ~~operating expense.~~interest and other income (expense), net in the Condensed Consolidated Statements of Operations. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the amount of accrued interest and penalties was ~~$1.2~~$1.1 million and ~~$0.7~~$1.0 million, respectively.

As of September 30, 2017, calendar years 2011 and thereafter are open and subject to potential examination in one or more jurisdictions. However, our research credit carryforwards that may be used in future years are subject to adjustment, if and when utilized. As such our federal and California tax years remain open from 2015 and 1992, respectively. During fiscal 2016, the Internal Revenue Service and theThe Company ~~settled all outstanding items related to the audit of the Company's federal~~files income tax returns in the United States and various states and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities, including major jurisdictions such as the United States, Germany, Italy, Netherlands, and the United Kingdom. With few exceptions, as of June 30, 2020, the Company was no longer subject to United States, state, and foreign examination for ~~the fiscal year ended December 31, 2014.~~years before 2016, 2015, and 2015, respectively.

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

Note ~~12.~~13. Employee Benefits and Share-Based Compensation

~~Stock based plans~~Stock-Based Plans

For a detailed explanation of the Company's stock plans, ~~and subsequent changes, please~~ refer to Note ~~11,~~ 13, Employee Benefits and ~~Stock-Based~~Share-Based Compensation, of the Company's ~~Annual Report~~annual report on Form 10-K for the year ended December 31, ~~2016~~2019 filed with the SEC on February ~~28, 2017.~~ 26, 2020.

~~Share-based compensation expense~~Share-Based Compensation Expense

The following table sets forth the total share-based compensation expense recognized in the ~~Company's~~Company’s Condensed Consolidated Statements of ~~Operations:~~Operations for the three and six months ended June 30, 2020 and 2019:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands)
Cost of product and service revenues	$	2,130	$	1,416	$	3,900	$	2,878
Research and development	1,854		1,584		3,622		3,286
Selling, general, and administrative	7,367		5,260		14,488		10,506
Total share-based compensation expense	$	11,351	$	8,260	$	22,010	$	16,670

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Three months ended Nine months ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
(In thousands)
Cost of product and service revenues $ 882
$ 628
$ 2,727
$ 1,821
Research and development 915
825
2,651
2,267
Selling, general and administrative 3,462
3,224
10,937
9,975
Total share-based compensation expense $ 5,259
$ 4,677
$ 16,315
$ 14,063

Stock Options and ESPP Shares

The following ~~weighted average~~ assumptions ~~are~~were used to value stock options and Employee Stock Purchase Plan ~~("ESPP"~~(“ESPP”) shares ~~issued~~granted pursuant to the ~~Company's~~Company’s equity incentive plans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~2019:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

Stock options
Expected life, years	4.7		4.3		4.7		4.4
Expected volatility, %	42.2	%	33.2	%	37.9	%	33.2	%
Risk-free interest rate, %	0.5	%	2.1	%	0.9	%	2.3	%
Estimated forfeiture rate, %	5.7	%	7.2	%	5.7	%	7.2	%
Dividend yield, %	—	%	—	%	—	%	—	%

Three months ended Nine months ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Stock Option Plans
Expected life, years 4.67
4.92
4.67
4.92
Expected volatility, % 28.1 % 30.0 % 29.2 % 31.4 %
Risk free interest rate, % 1.81 % 1.21 % 1.83 % 1.34 %
Estimated forfeiture rate % 7.7 % 8.6 % 7.7 % 8.6 %
Dividend yield, % — % — % — % — %



	~~Three months ended~~				~~Nine months ended~~
	~~September 30,~~ ~~2017~~		~~September 30,~~ ~~2016~~		~~September 30, 2017~~		~~September 30, 2016~~
~~Employee Stock Purchase Plan~~
~~Expected life, years~~	~~0.5-2.0~~		~~0.5-2.0~~		~~0.5-2.0~~		~~0.5-2.0~~
~~Expected volatility, %~~	~~26.7-32.1%~~		~~25.8-34.8%~~		~~25.8-32.8%~~		~~25.8-34.8%~~
~~Risk free interest rate, %~~	~~0.61-1.39%~~		~~0.41-0.79%~~		~~0.52-1.39%~~		~~0.34-0.79%~~
~~Dividend yield, %~~	—	%	—	%	—	%	—	%


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

Employee stock purchase plan shares
Expected life, years	0.5 - 2.0		0.5 - 2.0		0.5 - 2.0		0.5 - 2.0
Expected volatility, %	30.4% - 39.9%		28.2% - 38.4%		30.4% - 39.9%		28.2% - 38.4%
Risk-free interest rate, %	1.4% - 2.7%		1.3% - 2.7%		1.4% - 2.7%		1.3% - 2.7%
Dividend yield, %	—	%	—	%	—	%	—	%

Stock ~~options activity~~Options Activity

The following table summarizes the share option activity under the Company’s equity incentive plans during the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2020:

Number of
Shares

Weighted-Average
Exercise Price

Weighted-Average
Remaining Years

Aggregate
Intrinsic Value
(In thousands, except per share data)
Stock Options
Outstanding at December 31, 2016 3,214
$ 26.06
7.3 $ 26,331
Granted 504
38.87

Exercised (668 ) 21.66

Expired (6 ) 27.53

Forfeited (79 ) 32.54

Outstanding at September 30, 2017 2,965
$ 29.06
7.4 $ 65,247
Exercisable at September 30, 2017 1,252
$ 22.36
5.5 $ 35,915
Vested and expected to vest at September 30, 2017 and thereafter 2,965
$ 29.06
7.4 $ 65,247


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

	(In thousands, except per share data)
Outstanding at December 31, 2019	3,902	$	52.75	7.7	$	113,198
Granted	674	80.63
Exercised	(315)	37.28
Expired	(7)	56.83
Forfeited	(126)	62.61
Outstanding at June 30, 2020	4,128	$	58.17	7.4	$	65,499
Exercisable at June 30, 2020	1,699	$	41.50	6.0	$	50,644
Vested and expected to vest at June 30, 2020 and thereafter	3,945	$	57.46	7.3	$	64,859

The weighted-average fair value per share of options granted during the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 was ~~$12.49~~$26.03 and ~~$10.32,~~$24.40, respectively, and the weighted-average fair value per share of options granted during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 was ~~$11.22~~$26.21 and ~~$8.82,~~$24.20, respectively. The intrinsic value of options exercised during the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 was ~~$6.8~~$2.5 million and ~~$2.1~~$7.2 million, respectively, and ~~the intrinsic value of options exercised~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 was ~~$14.6~~$12.4 million and ~~$5.0~~$24.3 million, ~~respectively,~~respectively.

As of ~~September~~June 30, ~~2017,~~2020, total unrecognized compensation cost related to unvested stock options was ~~$13.7~~$47.4 million, which is expected to be recognized over a weighted-average vesting period of 2.8 years.

Employee Stock Purchase Plan Activity

For the six months ended June 30, 2020 and 2019, employees purchased approximately 217,000 and 210,000 shares of common stock, respectively, under the ESPP at weighted average prices of $43.51 and $40.20, respectively. As of June 30, 2020, the unrecognized compensation cost related to the shares to be purchased under the ESPP was approximately $5.5 million and is expected to be recognized over a weighted-average period of 1.2 years.

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

~~The following table summarizes~~Summaries of the restricted stock activity under the Company’s ~~equity incentive plans during~~2009 Equity Incentive Plan, as amended (the “2009 Plan”) are presented below for the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2020:

Number of
Shares

Weighted-Average
Grant Date Fair Value

Weighted-Average
Remaining Years

Aggregate
Intrinsic Value
(In thousands, except per share data)
Restricted Stock Units ("RSUs")
Outstanding at December 31, 2016 505
$ 31.42
1.6 $ 17,135
Granted 93
37.86

Vested (126 ) 29.19

Forfeited (16 ) 32.17

Outstanding and unvested at September 30, 2017 456
$ 33.33
1.2 $ 23,257

~~The weighted-average grant date fair value per share of RSUs granted during the nine months ended September 30, 2017 and September 30, 2016 was $37.86 and $29.19, respectively.~~


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

	(In thousands, except per share data)
Restricted stock units
Outstanding at December 31, 2019	544	$	66.65	1.6	$	44,492
Granted (Awarded)	89	81.25
Vested (Released)	(81)	56.57
Forfeited	(41)	63.67
Outstanding and unvested at June 30, 2020	511	$	71.03	1.5	$	36,062

As of ~~September~~June 30, ~~2017,~~2020, total unrecognized compensation ~~expense~~cost related to RSUs was ~~$11.4~~$32.5 million, which is expected to be recognized over the remaining weighted-average vesting period of ~~2.4~~2.9 years.


	Number of Shares	Weighted-Average Grant Date Fair Value

	(In thousands, except per share data)
Restricted stock awards
Outstanding at December 31, 2019	17	$	81.92
Granted (Awarded)	21	68.11
Vested (Released)	(17)	81.92

Outstanding and unvested at June 30, 2020	21	$	68.11

Number of
Shares

Weighted-Average
Grant Date Fair Value
(In thousands, except per share data)
Restricted Stock Awards ("RSAs")
Outstanding at December 31, 2016 30
$ 31.57
Granted 24
41.10
Vested (30 ) 31.58
Forfeited —
—
Outstanding and unvested at September 30, 2017 24
$ 41.05

As of ~~September~~June 30, ~~2017,~~2020, total unrecognized compensation cost related to RSAs was ~~$0.6~~$1.2 million, which is expected to be recognized over the remaining weighted-average vesting period of ~~0.64~~0.9 years.

~~Performance-based restricted stock unit activity~~Performance-Based Restricted Stock Units (“PSUs”)

~~The following table summarizes~~A summary of the performance-based restricted stock activity under the ~~Company’s equity incentive plans during~~2009 Plan is presented below for the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2020:


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

	(In thousands, except per share data)
Outstanding at December 31, 2019	134	$	55.82
Granted	63	82.41
Vested	(44)	54.25
Forfeited	(5)	81.72
Outstanding and unvested at June 30, 2020	148	$	66.69

Number of
Shares

Weighted-Average
Grant Date Fair Value Per Unit
(In thousands, except per share data)
Performance-based Restricted Stock Units ("PSUs")
Outstanding at December 31, 2016 184
$ 24.89
Granted 146
33.89
Vested (69 ) 24.43
Forfeited —
—
Outstanding and unvested at September 30, 2017 261
$ 30.06

~~The weighted-average grant date fair value per share of PSUs granted during the nine months ended September 30, 2017 and 2016 was $33.89 and $24.66, respectively.~~ As of ~~September~~June 30, ~~2017,~~2020, total unrecognized compensation cost related to PSUs was ~~$3.5~~approximately $5.4 million, which is expected to be recognized over the remaining weighted-average vesting period of ~~1.3~~1.4 years.

~~Employee Stock Purchase Plan activity~~

~~For the nine months ending September 30, 2017 and 2016, purchases under the ESPP were approximately 465,696 and 420,000 shares at weighted average prices~~

Table of ~~$25.78 and $23.23, respectively. As of September 30, 2017, the unrecognized~~Contents

~~compensation cost related to the shares to be purchased under the ESPP was approximately $1.6 million and is expected to be recognized over a weighted-average period of 1.6 years.~~

Summary of ~~shares reserved~~Shares Reserved for ~~future issuance~~Future Issuance under ~~equity incentive plans~~Equity Incentive Plans

The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of ~~September~~June 30, ~~2017:~~

2020:



			Number of Shares

			(In thousands)
Share options outstanding			~~2,965~~4,128
Non-vested restricted ~~share~~stock awards			~~741~~680
Shares authorized for future issuance			~~2,191~~2,029
ESPP shares available for future issuance			~~2,365~~1,322
Total shares reserved for future issuance			~~8,262~~8,159

Stock Repurchase Program

On August 2, 2016, the Company's Board of Directors (the ~~"Board"~~“Board”) authorized a stock repurchase program providing for the repurchase of up to $50.0 million of the Company’s common stock (the “2016 Repurchase Program”). The 2016 Repurchase Program is in addition to the stock repurchase program approved by the Board on November 4, ~~2014 (the “2014 Repurchase Program”).~~2014. As of ~~September~~June 30, ~~2017,~~2020, the maximum dollar value of shares that may yet be purchased under the two repurchase programs was $54.9 million. The stock repurchase programs do not obligate the Company to repurchase any specific number of shares, and the Company may terminate or suspend the repurchase ~~program~~programs at any time.

During the three and ~~nine~~six months ~~period~~ ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, the Company did ~~not~~0t repurchase any of its outstanding common stock.

Note ~~13. Segment~~14. Equity Offerings

On November 3, 2017, the Company entered into a Distribution Agreement (the “Distribution Agreement”) with J.P. Morgan Securities LLC, Wells Fargo Securities, LLC, and ~~Geographical Information~~

~~The Company's Chief Operating Decision Maker ("CODM") is~~HSBC Securities (USA) Inc., as its ~~Chief Executive Officer. The CODM allocates resources~~sales agents, pursuant to which the Company may offer and ~~evaluates~~sell from time to time through the ~~performance~~sales agents up to $125.0 million maximum aggregate offering price of the ~~Company's segments using information about its revenues, gross profit, and income from operations. Such evaluation excludes general corporate-level costs~~Company’s common stock. Sales of the common stock pursuant to the Distribution Agreement may be made in negotiated transactions or transactions that are ~~not specific~~deemed to ~~either~~be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the ~~reportable segments and are managed separately at the corporate level. Corporate-level costs include expenses related~~Nasdaq Stock Market, or sales made to executive management, finance and accounting, human resources, legal, training and development, and certain administrative expenses. The two operating segments, which are the same as the Company's two reportable segments, are as follows:or through a market maker other than on an exchange.

~~Automation and Analytics~~

The Automation and Analytics segment is organized around the design, manufacturing, selling and servicing of medication and supply dispensing systems, pharmacy inventory management systems, and related software. The Automation and Analytics products are designed to enable the Company's customers to enhance and improve the effectiveness of the medication-use process, the efficiency of the medical-surgical supply chain, overall patient care and clinical and financial outcomes of medical facilities. Through modular configuration and upgrades, the Company's systems can be tailored to specific customer needs.

~~Medication Adherence~~

The Medication Adherence segment includes primarily the manufacturing and selling of consumable medication blister cards, packaging equipment and ancillary products and services. These products are used to manage medication administration outside of the hospital setting and include medication adherence products, which consist of proprietary medication packaging systems and related products for use by institutional pharmacies servicing long-term care, and correctional facilities or retail pharmacies serving patients in their local communities.

~~The following tables summarize the financial performance of the Company's reportable segments, including a reconciliation of income from segment operations to income from total operations:~~

Three months ended
September 30, 2017 September 30, 2016
Automation and
Analytics Medication
Adherence Total Automation and
Analytics Medication
Adherence Total
(In thousands)
Revenues $ 154,651
$ 32,131
$ 186,782
$ 152,437
$ 24,300
$ 176,737
Cost of revenues 79,740
22,189
101,929
77,828
17,401
95,229
Gross profit 74,911
9,942
84,853
74,609
6,899
81,508
Operating expenses 46,849
9,901
56,750
49,123
6,137
55,260
Income (loss) from segment operations $ 28,062
$ 41
$ 28,103
$ 25,486
$ 762
$ 26,248
Corporate costs 18,389
21,320
Income (loss) from operations $ 9,714
$ 4,928

Nine months ended
September 30, 2017 September 30, 2016

Automation and
Analytics

Medication
Adherence
Total
Automation and
Analytics

Medication
Adherence

Total
(In thousands)
Revenues $ 427,250
$ 90,971
$ 518,221
$ 450,043
$ 70,605
$ 520,648
Cost of revenues 229,218
61,983
291,201
233,401
47,777
281,178
Gross profit 198,032
28,988
227,020
216,642
22,828
239,470
Operating expenses 146,651
31,196
177,847
151,108
17,518
168,626
Income (loss) from segment operations $ 51,381
$ (2,208 ) $ 49,173
$ 65,534
$ 5,310
$ 70,844
Corporate costs 59,099
64,182
Income (loss) from operations $ (9,926 ) $ 6,662

~~Significant customers~~

~~There were no customers that accounted for more than 10% of our total revenues for~~For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020, the Company did not sell any of its common stock under the Distribution Agreement.

For the three months ended June 30, 2019, the Company received gross proceeds of $17.9 million from sales of its common stock under the Distribution Agreement and ~~2016. Also, there were no customers that accounted for more than 10%~~incurred issuance costs of ~~our accounts receivable as~~$0.3 million on sales of ~~September~~approximately 217,000 shares of its common stock at an average price of approximately $82.51 per share.

For the six months ended June 30, ~~2017~~2019, the Company received gross proceeds of $38.5 million from sales of its common stock under the Distribution Agreement and ~~December 31, 2016.~~incurred issuance costs of $0.7 million on sales of approximately 460,000 shares of its common stock at an average price of approximately $83.81 per share.

As of June 30, 2020, the Company had an aggregate of $31.5 million available to be offered under the Distribution Agreement.

~~Geographical Information~~

~~Revenues~~

Three months ended
September 30,
2017 September 30,
2016
(In thousands)
United States $ 164,190
$ 155,989
Rest of world ⁽¹⁾
22,592
20,748
Total revenues $ 186,782
$ 176,737

Nine months ended
September 30,
2017 September 30,
2016
(In thousands)
United States $ 449,755
$ 445,470
Rest of world ⁽¹⁾
68,466
75,178
Total revenues $ 518,221
$ 520,648

⁽¹⁾~~No individual country represented more than 10% of the respective totals.~~

~~Property and equipment, net~~

September 30,
2017 December 31,
2016
(In thousands)
United States $ 33,620
$ 36,497
Rest of world ⁽¹⁾
6,599
5,514
Total property and equipment, net $ 40,219
$ 42,011

⁽¹⁾~~No individual country represented more than 10% of the respective totals.~~

~~Property and equipment, net is attributed to the geographic location in which it is located.~~

Note ~~14.~~15. Restructuring Expenses

~~On February 15, 2017,~~In the first quarter of 2020, the Company announced a company-wide organizational realignment initiative in order to more effectively align its ~~plan to reduce its workforce by approximately 100 full-time employees~~organizational infrastructure and ~~close~~operations with the ~~Company’s Nashville, Tennessee and Slovenia facilities. The plan is expected to be completed in fiscal year 2017. The estimated total cost for~~strategic vision of the ~~plan is $4.3 million, which includes estimated employee severance cost of approximately $3.8 million, and facility-related costs of approximately $0.5 million.~~

During the nine months ended September 30, 2017, the Company accrued $3.8 million of severance and related expenses, and paid out $3.2 million. The remaining unpaid balance of $0.6 million accrued severance and related expenses as of September 30, 2017 is presented as a component of accrued compensation in the Condensed Consolidated Balance Sheet.

There were $0.6 million of facility-related costs incurred during the nine months ended September 30, 2017, of which $0.2 million was paid out. The remaining unpaid balance of $0.4 million accrued facilities-related expenses as of September 30, 2017 is presented as a component of accrued liabilities in the Condensed Consolidated Balance Sheet.

~~For the three and nine months periods ending September 30, 2017, the total restructuring expense was $0 and $4.3 million, respectively.~~

~~During~~autonomous pharmacy. In the second quarter of ~~2016,~~2020, the Company ~~integrated~~continued its ~~Sales~~organizational realignment initiative, as well as initiated a restructuring plan to help mitigate the adverse impact of the COVID-19 pandemic on its business and ~~Field organizations in North America to better serve its customers which resulted in a reduction in headcount of 36 employees. Accordingly,~~financial results. During the three and six months ended June 30, 2020, the Company incurred ~~approximately $1.7 million of restructuring expenses in the nine months ended September 30, 2016, based on agreements with~~

~~terminated employees covering salary~~ and ~~benefit continuation. As of September 30, 2016 the restructuring program has been concluded.~~

~~Note 15. Subsequent Event~~

~~On October 2, 2017 and October 10, 2017, the Company borrowed $12.0~~accrued $6.4 million and $10.0 million, respectively, ~~under~~of employee severance costs and related expenses. As of June 30, 2020, the ~~Revolving Credit Facility~~unpaid balance related to ~~fund its operations.~~this restructuring plan was $6.6 million.

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


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

	(In thousands)
Cost of product and service revenues	$	2,489	$	2,564
Research and development	2,918		3,716
Selling, general, and administrative	949		3,681
Total restructuring expense	$	6,356	$	9,961

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

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the ~~United States~~ Securities Act of 1933 ~~as amended,~~(the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 ~~and the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts are~~(the “Exchange Act”). The forward-looking statements ~~and~~ are contained ~~principally~~throughout this report, including in the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

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

•our expectations regarding our future pipeline and product bookings;

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

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

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

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

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

•our ability to deliver on the ~~extent and timing of future revenues, including the amounts of~~autonomous pharmacy vision, as well as our plan to integrate our current ~~backlog, which represents firm orders~~offerings and technologies on a cloud infrastructure and invest in broadening our solutions across certain key areas as we execute on this vision;

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

•our belief that ~~have not completed installation~~our solutions and ~~therefore have not been recognized as revenue;~~vision for fully autonomous medication management are strongly aligned with long-term trends in the healthcare market and well-positioned to address the evolving needs of the healthcare institutions;

•planned new products and services;

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

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

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

•the operating margins or earnings per share goals we may set;

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

•our projected target long-term revenues and revenue growth rate, long-term operating margins, and free cash flow conversion;

•our ability to protect our intellectual property and operate our business without infringing ~~upon~~ the intellectual property rights of others;

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

•our expected future uses of cash and the sufficiency of our sources of funding; and

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

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

Such risks inand uncertainties include those described throughout this ~~annual~~quarterly report, ~~in greater detail~~including in Part II - Item 1A. “Risk Factors” below and Part I - Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. ~~Also, forward-looking statements represent our estimates and assumptions only as of the date of this annual report.~~ You should ~~also~~carefully read this ~~annual~~quarterly report and the documents that we reference in this ~~annual~~quarterly report and have filed as exhibits, ~~completely~~as well as other documents we file from time to time with the Securities and Exchange Commission, with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements in this quarterly report represent our estimates and assumptions only as of the date of this quarterly report. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those expressed or implied in any forward-looking statements, even if new information becomes available in the future.

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

Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

We own various trademarks ~~copyrights~~ and ~~trade names~~service marks used in our business, including the ~~following: Omnicell~~^®following registered and unregistered marks which appear in this report: Omnicell®, the Omnicell logo, ~~OmniRx~~Ateb^®, ~~OmniCenter~~InPharmics^®, ~~OmniSupplier~~Aesynt^®, ~~OmniBuyer~~^®~~, SafetyStock~~^®~~, WorkflowRx™, OmniLinkRx™, Optiflex™, SinglePointe™, AnywhereRN™, Anesthesia Workstation™ , Savvy™, MTS Medication Technologies~~^®~~, the MTS Medication Technologies logo, Medlocker~~^®~~, AccuFlex~~^®~~, Autobond ™, AutoGen ™, easyBLIST™, Pandora~~^®~~, OnDemand~~^®, ~~Multi-Med™, RxMap~~^®,MTS-350 ™, MTS-400 ™, MTS-500 ™ SureMed, ROBOT-Rx®, MedCarousel®, MedShelf-Rx™, PROmanager-Rx™, PACMED™, NarcStation™, PakPlus-Rx®, i.v.STATION™, i.v.SOFT®, Enterprise Medication Manager™, ~~XT Anesthesia Workstation™,~~and Performance ~~Center™, Time My Meds~~® ~~and~~ ~~Automation Decision Support™~~ Center^TM. This report also includes ~~other~~the trademarks and service marks ~~and trade names~~ of other companies. All other trademarks and service marks used in this report are ~~trademarks~~the marks of their respective holders.

OVERVIEW

Our Business

We are a leading provider of ~~comprehensive~~medication management automation solutions and ~~business analytics software solutions~~adherence tools for ~~patient-centric~~healthcare systems and pharmacies. As we build on the vision of the autonomous pharmacy - a more fully automated and digitized system of medication management - we believe we will further help enable healthcare providers to improve patient safety, increase efficiency, lower costs, tighten regulatory compliance, and ~~supply management across the entire healthcare continuum, from the acute care hospital setting to post-acute skilled nursing and long-term care~~address population health challenges.

Over 6,000 facilities ~~to the home. Our Omnicell Automation and Analytic customers~~ worldwide use our ~~medication~~ automation ~~supply chain~~ and analytics solutions to help ~~enable them to~~ increase operational efficiency, reduce medication errors, deliver actionable intelligence, and improve patient safety.

~~Omnicell Medication Adherence solutions, including the MTS and Ateb brands, provide innovative medication adherence packaging solutions that can help reduce costly hospital readmissions and enable~~ More than 40,000 institutional and retail pharmacies ~~worldwide~~across North America and the United Kingdom leverage our innovative medication adherence and population health solutions to ~~maintain high accuracy~~improve patient engagement and ~~quality standards in medication dispensing and administration while optimizing productivity and controlling costs.~~

adherence to prescriptions, helping to reduce costly hospital readmissions. We sell our product and consumable solutions together with related service offerings. ~~Revenue~~Revenues generated in the United States represented ~~88%~~89% and ~~88%~~90% of our total ~~revenue~~revenues for the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~87%~~90% and ~~86%~~89% of our total ~~revenue~~revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016.~~ 2019, respectively.

Over the past several years, our business has expanded from a single-point solution to a platform of products and services that will help to further the vision of the autonomous pharmacy. This has resulted in larger deal sizes across multiple products and installations for customers and, we believe, more comprehensive, valuable, and enduring relationships.

We ~~expect~~utilize product bookings as an indicator of the success of our business. Product bookings consist of all firm orders, as evidenced generally by a non-cancelable contract and purchase order for equipment and software products, and by a purchase order for consumables. Equipment and software product bookings are generally installable within twelve months of booking,

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and other than sales based on subscription services, generally recorded as revenue upon customer receipts of goods or acceptance of the installation.

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

Our full-time headcount was approximately 2,780 and 2,700 on June 30, 2020 and December 31, 2019, respectively.

We have not ~~sold~~ in the past sold, and have no future plans to sell, our products, either directly or indirectly, to customers located in countries that are identified as state sponsors of terrorism by the U.S. Department of State, ~~and are~~or those subject to economic sanctions and export controls.

Operating Segments

We manage our ~~business~~operations as ~~two~~a single segment for the purposes of assessing performance and making operating ~~segments,~~decisions. Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer. The CODM allocates resources and evaluates the performance of Omnicell at the consolidated level using information about its revenues, gross profit, income from operations, and other key financial data. All significant operating decisions are based upon an analysis of Omnicell as one operating segment, which ~~are~~is the same as our ~~two reportable segments: Automation~~reporting segment.

Strategy

We are committed to being the care provider’s most trusted partner and ~~Analytics,~~executing on the vision of the autonomous pharmacy by delivering automation, intelligence, and ~~Medication Adherence.~~services designed to transform the pharmacy care delivery model, helping to dramatically improve outcomes and lower costs for our healthcare partners. We believe there are significant challenges in pharmacy that drive the demand for our solutions and represent large market opportunities in three product categories:

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

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

•Retail, Institutional, and Payer. We believe the Retail, Institutional, and Payer market represents a large opportunity as the majority of drugs are distributed in the non-acute sector. New technology is ~~organized around~~leading to innovation at traditional retail providers, which combined with the ~~design,~~move to value-based care results, we believe will incentivize the market to adopt solutions to help providers and payers engage patients in new ways that lower the total cost of care. We believe adoption of our Population Health Solutions portfolio of software products and services, along with medication adherence packaging, will increase adherence performance rates, increase prescription volume for our customers and reduce hospital and emergency room visits due to improved adherence.

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

Omnicell’s Response to Coronavirus (COVID-19)

In March 2020, the COVID-19 outbreak was declared a global pandemic by the World Health Organization and a U.S national emergency. Efforts to contain the spread of COVID-19 continue, with the implementation of travel restrictions, shelter-in-place orders, business closures and suspensions, cancelled events, and social distancing. Countries and territories are in varying stages of restrictions and re-opening in response to the COVID-19 pandemic, and certain jurisdictions have begun re-opening only to return to restrictions due to increasing levels of COVID-19 cases.

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Keeping in mind our role in the healthcare industry, we are continuing to closely monitor the COVID-19 pandemic. Our top priorities remain protecting the health and well-being of our customers, their patients, and our employees, while maintaining business continuity to meet the needs of our customers. In order to operate in a safe manner, we are following the health and safety guidelines of the U.S. Centers for Disease Control and Prevention, and local and state public health departments in each of the regions where we operate. All of our manufacturing, ~~selling,~~distribution, and ~~servicing~~other facilities are operating under these guidelines. Our manufacturing and distribution facilities have remained open due to our qualification as an essential business and to date, we have not experienced disruptions in our manufacturing activities. In addition to increased cleaning and disinfection processes at our manufacturing facilities, we continue to adhere to alternative scheduling procedures to enhance social distancing protocols. We have also procured and distributed personal protective equipment (“PPE”) to our customer-facing and manufacturing personnel consistent with guidelines we developed to help ensure proper distribution and use of such PPE. The vast majority of our non-manufacturing and non-customer facing personnel have transitioned to a work from home environment.

To support the needs of our customers on the frontline of the pandemic, during the first quarter of 2020, we launched a Rapid Response program to fast-track production and deployment of our XT Series automated dispensing systems to our customers. We streamlined our ordering and installation processes with preconfigured XT Series medication and supply dispensing systems ~~pharmacy inventory management systems,~~designed to offer our customers flexibility and ~~related software. Our Automation~~maximum emergency impact. We believe these models have ample capacity and ~~Analytics products~~flexibility to meet a wide variety of needs of our customers, while maintaining security, safety, and workflow efficiency. In addition, to minimize the need for on-site visits and respect social distancing protocols, we are ~~designed~~providing remote service options, training programs, and product demonstrations for our customers, leveraging technology to enable our sales team to operate in a remote sales environment, as well as providing our customers with options to ~~enhance and improve the effectiveness of the medication-use process, the efficiency of the medical-surgical~~self-install certain automation products.

From a supply chain ~~overall patient care and clinical and financial outcomes of medical facilities. Through modular configuration and upgrades,~~perspective, we are working closely with our ~~systems can be tailored~~vendors to ~~specific customer needs.~~

~~Medication Adherence~~

The Medication Adherence segment includes the development, manufacturing and selling of consumable medication blister cards, packaging equipment, pharmacy-based patient care software solutions including a medication synchronization platform, and ancillary products and services. These products are used to manage medication administration outside of the hospital setting and include medication adherence products sold under the brand name MTS, SureMed, Ateb, and the Omnicell brands. MTS products consist of proprietary medication packaging systems and related products for use by institutional pharmacies servicing long-term care and correctional facilities, or retail pharmacies serving patients in their local communities. Recently acquired Ateb is a provider of pharmacy-based patient care solutions and medication synchronization to independent and chain pharmacies.

~~For further description of our operating segments, refer to Note 13, Segment and Geographical Information, of the Notes to Consolidated Financial Statements in this quarterly report.~~

~~Strategy~~

The healthcare market is experiencing a period of substantive change. The adoption of electronic healthcare records, new regulatory constraints, and changes in the reimbursement structure have caused healthcare institutions to re-examine their operating structures, re-prioritize their investments, and seek efficiencies. We believe our customers’ evolving operating environment creates challenges for any supplier, but also affords opportunities for suppliers thathelp ensure we are able to ~~partner with~~source key components and maintain appropriate inventory levels to meet customer demand. Although we have not experienced disruptions in our supply chain to date, we cannot predict how long the pandemic and measures intended to contain the spread of COVID-19 will continue and what effect COVID-19 and the associated containment measures will have on our suppliers and vendors, in particular for any of our suppliers and vendors that may not qualify as essential businesses and suffer more significant disruptions to their business operations.

Health systems, particularly in areas experiencing higher levels of COVID-19 cases, continue to face increased costs due to large surge expenditures to cover COVID-19 caseload and increasing prices for needed equipment, decreased revenue due to cancelled or postponed elective procedures and other reduced demand, as well as cash flow challenges. We believe these financial pressures have led our customers to delay or defer purchasing decisions and/or implementation of our solutions and expect that our customers may continue such delays and deferrals for the near to medium-term future. Moreover, the COVID-19 pandemic and measures to contain its impact have caused material disruptions in both national and global financial markets and economies. During the second quarter of 2020, we continued to see some delays in product bookings and expect to see lower product bookings and revenues during the fiscal year 2020 compared to management’s expectations prior to the COVID-19 outbreak. Additionally, our ability to access hospitals in order to perform implementations of capital equipment has been delayed in some cases, as many hospitals are consumed with treating sick patients. While the environment continues to change rapidly, we are beginning to see more positive indicators for our business in terms of both product bookings and revenues. In many regions, elective surgeries have resumed, and we have been able to resume some on-site sales activities in regions less impacted by COVID-19. Additionally, the overall level of system implementations has also been increasing. Based on management's current expectations, we believe that the product bookings and revenues in the second quarter of 2020 represent the lowest quarter of 2020, and we expect that product bookings and revenues will increase sequentially through the third and fourth quarters of 2020. In response to the COVID-19 pandemic, we have implemented and continue to focus on cost reduction initiatives in all aspects of our business, including, but not limited to, reduced travel costs, decreases certain in employee-related expenses, negotiating discounts with vendors, and delayed hiring and capital expenditures. Furthermore, during the second quarter of 2020, in addition to continuing our previously announced organizational realignment initiative to further align our organizational infrastructure and operations with the strategic vision of the autonomous pharmacy, we initiated a restructuring plan to help ~~them meet~~mitigate the ~~changing demands. We~~adverse impact of the COVID-19 pandemic on our business and financial results.

In addition, on March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law in response to the COVID-19 pandemic, and provides tax relief to businesses. The CARES Act includes deferral of certain payroll taxes, relief for retaining employees, and certain other provisions. Although the provisions of the CARES Act did not have a material impact on our income taxes, we are currently benefiting from the deferral of certain payroll taxes through the end of fiscal year 2020.

While our fiscal year 2020 results will be impacted by the challenges and ~~intend~~opportunities brought on by the COVID-19 pandemic, we remain confident in the overall health of our business, in our ability to navigate through these unusual times, and

Table of Contents

in our ability to continue to ~~invest in the strategies which~~execute on our long-term strategy, as we believe our customers and potential customers are increasingly embracing the vision of a fully autonomous pharmacy. However, the full impact of the COVID-19 pandemic and related containment measures cannot be predicted and to date, the COVID-19 pandemic and related containment measures have ~~generated~~adversely affected and ~~will~~we expect they may continue to ~~generate~~adversely affect, perhaps materially, our ~~revenue and earnings growth, while supporting our customers’ initiatives and needs. These strategies include:~~

~~Development of differentiated solutions.~~ We invest in the development of products that we believe bring patient safety and workflow efficiency to our customers’ operations that they cannot get from other competing solutions. These differentiators may be as small as how a transaction operates or information provided on a report or as large

as the entire automation of a workflow that would otherwise be completed manually. We intend to continue our focus on differentiating our products, and we carefully assess our investments regularly as we strive to ensure those investments provide the solutions most valuable to our customers.

~~Deliver our solutions to new markets~~.Areas of healthcare where work is done manually may benefit from our existing solutions. These areas include hospitals that continue to employ manual operations, healthcare segments of the U.S. market outside hospitals and markets outside the United States. We weigh the cost of entering these new markets against the expected benefits and focus on the markets that we believe are most likely to adopt our products.

~~Expansion of our solutions through acquisitions and partnerships.~~ Our acquisitions have generally been focused on automation of manual workflows or data analytics, which is the enhancement of data for our customers’ decision-making processes. We believe that expansion of our product lines through acquisition and partnerships to meet our customers changing and evolving expectations is a key component to our historical and future success.

Our investments have been consistent with the strategies outlined above. To differentiate our solutions from others available in the market, in December 2016 we introduced the XT Series, our new generation of medication and supply automation that is fully integrated on our Unity enterprise platform. The XT Series includes automated medication and supply dispensing cabinets, the Anesthesia Workstation, and Controlled Substance Manager. The XT Automated Medication Cabinets have been integrated with Connect-Rx® from Aesynt, so customers in the United States who use AcuDose-Rx® cabinets can take advantage of the XT Series hardware without changing their software or server infrastructure. As part of this product introduction, we developed a new hardware and electronics architecture for the XT Series. Additionally, in February 2017 we introduced VBM 200F, an automated pharmacy solution that fills and checks SureMed® multiple medication blister cards utilizing guided light, barcode and RFID technologies to allow the filled tray to be audited throughout the entire packing process. This technology helps ensure that pharmacies have the competitive advantage to easily scale their business, ~~to help improve adherence and patient outcomes.~~

Consistent with our strategy to enter new markets, we have made investments in our selling, general and administrative expenses to expand our sales team and market to new customers. Our international efforts have focused primarily on Western Europe, where we sell solutions through a direct sales team in the United Kingdom, France, and Germany and through resellers in other markets; and in the Middle Eastern countries of the Arabian Peninsula. We have also expanded our sales efforts to medication adherence customers in the United States which has allowed us to sell our automated dispensing solutions and other products to this market.

Expansion of our solutions through acquisitions and partnerships include our acquisition of MTS in 2012, our acquisition of Surgichem in August 2014, our acquisitions of Mach4 and Avantec in April 2015, our acquisition of Aesynt in January 2016, our acquisition of Ateb in December 2016, and most recently, our acquisition of InPharmics in April 2017. Surgichem is a provider of medication adherence products in the United Kingdom. Mach4 is a provider of automated medication management systems to retail and hospital pharmacy customers primarily in Europe, with additional installations in China, the Middle East and Latin America. Avantec develops medication and supply automation products that complement our solutions for configurations suited to the United Kingdom marketplace, and has been the exclusive United Kingdom distributor for our medication and supply automation solutions since 2005. Aesynt is a provider of automated medication management systems, including dispensing robots with storage solutions, medication storage and dispensing carts and cabinets, I.V. sterile preparation robotics and software, including software related to medication management. Ateb is a provider of pharmacy-based patient care solutions and medication synchronization to independent and chain pharmacies. InPharmics is a technology and services company that provides advanced pharmacy informatics solutions to hospital pharmacies. We have also developed relationships with major providers of hospital information management systems with the goal of enhancing the interoperability of our products with their systems. We believe that enhanced interoperability will help reduce implementation costs, time, and maintenance for shared clients, while providing new clinical workflows designed to enhance efficiency and patient safety.

~~We believe that the success of our three leg strategy of differentiated products, expansion into new markets and acquisition and partnership in future periods, will be based on, among other factors:~~

Our expectation that the overall market demand for healthcare services will increase as the population grows, life expectancies continue to increase and the quality and availability of healthcare services increases;

Our expectation that the environment of increased patient safety awareness, increased regulatory control, increased demand for innovative products that improve the care experience and increased need for workflow efficiency through the adoption of technology in the healthcare industry will make our solutions a priority in the capital budgets of healthcare facilities; and

~~Our belief that healthcare customers will continue to value a consultative customer experience from their suppliers.~~

Among other financial measures, we utilize product bookings to assess the current success of our strategies. Product bookings consist of all firm orders, as evidenced by a contract and purchase order for equipment and software, and by a purchase order for consumables. Equipment and software bookings are installable within twelve months and, other than subscription based sales, generally are recorded as revenue upon customer acceptance of the installation. Consumables are recorded as revenue upon shipment to a customer or receipt by the customer, depending upon contract terms. Consumable bookings are generally recorded as revenue within one month.

In addition to product solution sales, we provide services to our customers. Our healthcare customers expect a high degree of partnership involvement from their technology suppliers throughout their ownership of the products. We provide extensive installation planning and consulting as part of every product sale and included in the initial price of the solution. Our customers' medication control systems are mission critical to their success and our customers require these systems to be functional at all times. To help assure the maximum availability of our systems, our customers typically purchase maintenance and support contracts in one, two or five year increments. As a result of the growth of our installed base of customers, our service revenues have also grown. We strive to provide the best service possible, as measured by third-party rating agencies and by our own surveys, to assure our customers continue to seek service maintenance from us.

In the future, we expect our strategies to evolve as the business environment of our customers evolves, but for our focus to remain on improving healthcare with solutions that help change the practices in ways that improve patient and provider outcomes. We expect our investment in differentiated products, new markets, and acquisitions and partnerships to continue. In 2017, we also intend to manage our business to operating profit margins similar to those achieved in 2016, bringing our strategies to bear in all the markets in which we participate.

On February 15, 2017, we announced our intention to create Centers of Excellence (“COE”) for product development, engineering and manufacturing, with the Point of Use COE located at our facilities in California, the Robotics and Central Pharmacy COE located at our facilities near Pittsburgh, Pennsylvania, and the Medication Adherence Consumables COE located at our facilities in St. Petersburg, Florida. As part of this initiative, we reduced our workforce by approximately 100 full-time employees, or about 4% of the total headcount, closed our Nashville, Tennessee facility, and plan to close our Slovenia facilities in the fourth quarter of 2017. Our full-time headcount was approximately 2,331 and 2,444 on September 30, 2017 on December 31, 2016, respectively.

~~Recent Acquisitions~~

On January 5, 2016, we completed the acquisition of all of the membership interests of Aesynt. Aesynt is a provider of automated medication management systems, including dispensing robots with storage solutions, medication storage and dispensing carts and cabinets, I.V. sterile preparation robotics and software, including software related to medication management. The purchase price consideration was $271.5 million, net of cash acquired of $8.2 million. The results of Aesynt's operations have been included in our consolidated results of operations, ~~since January 6, 2016,~~financial condition, and ~~presented as part of the Automation and Analytics segment.~~liquidity.

On December 8, 2016, we completed our acquisition of ateb, Inc., and Ateb Canada Ltd. (together, “Ateb”). Ateb is a provider of pharmacy-based patient care solutions and the medication synchronization solutions leader to independent and chain pharmacies with over one million active pharmacy patients. The purchase price consideration was $40.7 million, net of cash acquired of $0.9 million. The results of Ateb's operations have been included in our consolidated results of operations beginning December 9, 2016, and presented as part of the Medication Adherence segment.

On April 12, 2017, we completed the acquisition of InPharmics, a technology and services company that provides advanced pharmacy informatics solutions to hospital pharmacies. The purchase price consideration was $5.0 million, net of cash acquired of $0.3 million. The results of InPharmics' operations have been included in our consolidated results of operations beginning April 13, 2017, and presented as part of the Automation and Analytics segment.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

We believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our Condensed Consolidated Financial Statements:

•Revenue recognition;

~~Accounts~~•Allowance for credit losses for accounts receivable, unbilled receivables, and ~~notes receivable (net~~net investment in sales-type ~~leases);~~leases;

~~Inventory valuation;~~•Leases;

~~Capitalized software~~•Inventory;

•Software development ~~cost;~~costs;

~~Valuation and impairment~~•Impairment of goodwill and intangible ~~assets~~assets;

•Share-based compensation; and ~~other long-lived assets;~~

~~Business combinations;~~

~~Valuation of share-based awards; and~~

•Accounting for income taxes.

There ~~have been~~were no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, ~~2016.~~

~~Recently adopted and issued authoritative guidance~~

~~Refer to~~2019, except as discussed in “Recently Adopted Authoritative Guidance” in Note 1, Organization and Summary of Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report.

Recently Issued Authoritative Guidance

Refer to Note 1, Organization and Summary of Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements in this quarterly report for a description of recently ~~adopted and~~ issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial ~~positions~~position, and cash flows.

RESULTS OF OPERATIONS

Total Revenues


												Three Months Ended June 30,
	Three months ended September 30,															Change in
							Change in					2020		2019		$		%
	2017			2016			$		%
	(Dollars in thousands)											(Dollars in thousands)
Product revenues	$	135,103		$	133,621		$	1,482	1	%	Product revenues	$	138,942	$	158,379	$	(19,437)	(12)%
Percentage of total revenues	72		%	76		%					Percentage of total revenues	70%		73%
Service and other revenues	51,679			43,116			8,563		20	%
Services and other revenues											Services and other revenues	60,679		59,034		1,645		3%
Percentage of total revenues	28		%	24		%					Percentage of total revenues	30%		27%
Total revenues	$	186,782		$	176,737		$	10,045	6	%	Total revenues	$	199,621	$	217,413	$	(17,792)	(8)%

Product revenues represented ~~72%~~70% and ~~76%~~73% of total revenues for the three months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016,~~2019, respectively. Product revenues ~~increased~~decreased by ~~$1.5~~$19.4 million, due to increased sales for the Medication Adherence segment of $2.9 million, offset by decreased sales for the Automation and Analytics segment of $1.4 million. The decrease in the Automation and Analytics segment was attributed to a slower conversion of bookings and backlog into revenue due to the introduction of the new XT series of products introduced in the fourth quarter of 2016. The increase in the Medication Adherence segment was attributed to higher completed installations compared to the three months ended September 30, 2016, primarily due to the ~~introduction in~~impact of the ~~fourth~~COVID-19 pandemic as health systems have been focusing resources on COVID-19 essential activities during the second quarter of ~~2016 our VBM product line. In addition, $1.1 million of the increase was attributed to the Ateb acquisition in the fourth quarter of 2016.~~2020.

~~Service~~Services and other revenues represented ~~28%~~30% and ~~24%~~27% of total revenues for the three months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016,~~2019, respectively. ~~Service~~Services and other revenues include revenues from service and maintenance contracts, and rentals of automation systems. ~~Service~~Services and other revenues increased by ~~$8.6~~$1.6 million, primarily due to an increase ~~from our~~

~~Automation and Analytics segment of $3.7 million attributed to higher service renewal fees, driven mainly by an increase~~ in our installed customer ~~base. Service~~base for our XT Series automated dispensing systems and other revenues from the Medication Adherence segment increased $4.9 million, primarily attributed to Ateb, acquired in the fourth quarter of 2016, which contributed $5.0 million to the service revenue during the three months ended September 30, 2017.IV solutions.

Our international sales represented ~~12%~~11% and ~~12%~~10% of total revenues for the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and are expected to be affected by foreign currency exchange ~~rates~~rate fluctuations. We are unable to predict the extent to which ~~revenue~~revenues in future periods will be impacted by changes in foreign currency exchange rates.


													Six Months Ended June 30,
	Nine months ended September 30,																Change in
							Change in						2020		2019		$		%
	2017			2016			$			%
	(Dollars in thousands)												(Dollars in thousands)
Product revenues	$	362,089		$	392,190		$	(30,101	)	(8	)%	Product revenues	$	309,015	$	303,989	$	5,026	2%
Percentage of total revenues	70		%	75		%						Percentage of total revenues	72%		72%
Service and other revenues	156,132			128,458			27,674			22	%
Services and other revenues												Services and other revenues	120,292		115,941		4,351		4%
Percentage of total revenues	30		%	25		%						Percentage of total revenues	28%		28%
Total revenues	$	518,221		$	520,648		$	(2,427	)	—	%	Total revenues	$	429,307	$	419,930	$	9,377	2%

Product revenues represented ~~70% and 75%~~72% of total revenues for both the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016, respectively.~~2019. Product revenues ~~decreased~~increased by ~~$30.1~~$5.0 million, primarily due to ~~decreased sales for~~ the ~~Automation and Analytics segment~~growth of $35.4 million, partially offset by increased sales for the Medication Adherence segment of $5.3 million. The decrease in the Automation and Analytics segment was attributed to slower conversion of bookings and backlog into revenueXT Series automated dispensing systems as a result of increased XT Series upgrades from the ~~introduction~~previous generation of the XT series products in the fourth quarter of 2016. The increase in the Medication Adherence segment was attributed to higher machine sales compared to the nine months ended September 30, 2016, primarilyproduct, competitive conversions, and other add-on equipment, partially offset by lower revenues due to the ~~introduction~~impact of ~~VBM product series in~~ the ~~fourth~~COVID-19 pandemic as health systems have been focusing resources on COVID-19 essential activities during the second quarter of ~~2016. In addition, $2.7 million of the increase was attributed to Ateb.~~2020.

~~Service~~Services and other revenues represented ~~30% and 25%~~28% of total revenues for both the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016, respectively. Service~~2019. Services and other revenues include revenues from service and maintenance contracts, and rentals of automation systems. ~~Service~~Services and other revenues increased by ~~$27.7~~$4.4 million, primarily due to an increase ~~from our Automation and Analytics segment of $12.6 million attributed to higher service renewal fees driven mainly by an increase~~ in our installed customer ~~base. Service~~base for our XT Series automated dispensing systems and other revenues from the Medication Adherence segment increased $15.1 million, primarily attributed to Ateb, which contributed $15.5 million to the service revenue during the nine months ended September 30, 2017.IV solutions.

~~International revenues~~Our international sales represented ~~13%~~10% and ~~14%~~11% of total revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and are expected to be affected by foreign currency exchange ~~rates~~rate fluctuations. The decrease as a percentage of our total revenues in international revenues were primarily related to our recently acquired companies, Aesynt and Ateb, which have a higher market presence in United States compared to international markets. We are unable to predict the extent to which ~~revenue~~revenues in future periods will be impacted by changes in foreign currency exchange rates.

Our ability to continue to grow ~~revenue~~revenues is dependent on our ability to continue to obtain orders from customers, our ability to produce quality products and consumables to fulfill customer demand, the volume of installations we are able to complete, our ability to meet customer needs by providing a quality installation experience, and our flexibility in manpower allocations among customers to complete installations on a timely basis. The timing of our product revenues for equipment is primarily dependent on when our customers’ schedules allow for installations.

~~Financial Information by Segment~~

~~Revenues~~

Three months ended September 30,
Change in
2017 2016 $ %
Revenues: (Dollars in thousands)
Automation and Analytics $ 154,651
$ 152,437
$ 2,214
1.5 %
Percentage of total revenues 83 % 86 %
Medication Adherence 32,131
24,300
7,831
32 %
Percentage of total revenues 17 % 14 %
Total revenues $ 186,782
$ 176,737
$ 10,045
6 %

The ~~$2.2 million increase in Automation and Analytics~~effects of the COVID-19 pandemic have had an adverse impact on our revenues for the three months ended ~~September~~June 30, ~~2017~~2020. The pandemic continues to create uncertainties related to delays in ~~comparison~~installations and potential reductions in hospitals’ capital and overall spending in the near to medium-term future, and depending on the severity and duration of the COVID-19 pandemic and related containment measures, potentially into the longer-term. During the second quarter of 2020, we continued to see some delays in product bookings and expect to see lower product bookings and revenues during the fiscal year 2020 compared to management’s expectations prior to the ~~three months ended September 30, 2016 was due~~COVID-19 outbreak. While the environment continues to ~~an increase~~change rapidly and there are uncertainties related to delays in ~~service~~installations and potential reductions in hospitals’ capital and overall spending, we are beginning to see more positive indicators for our business in terms of both product bookings and revenues. In many regions, elective surgeries have resumed, and we have been able to resume some on-site sales activities in regions less impacted by COVID-19. Additionally, the overall level of system implementations has also been increasing. Based on management's current expectations, we believe that the product bookings and revenues ~~of $3.7 million, partially offset by a decrease in product revenue of $1.4 million. The decrease in product revenue~~ in the ~~Automation~~second quarter of 2020 represent the lowest quarter of 2020, and ~~Analytics segment was attributed to slower conversion of~~we expect that product bookings and ~~backlog into revenue as result~~revenues will increase sequentially through the third and fourth quarters of 2020. We cannot estimate the ~~introduction of~~full extent to which the ~~XT series products~~COVID-19 pandemic will impact our revenues in ~~the fourth quarter of 2016. The service revenue increase of $3.7 million was primarily attributed to higher service renewal fees driven mainly by an increase in installed customer base.~~

Medication Adherence revenues increased by $7.8 million for the three months ended September 30, 2017 in comparison to the three months ended September 30, 2016. The increase in revenue was due to an increase in product revenue of $2.9 million and an increase in service revenue of $4.9 million. The product revenue increase of $2.9 million was attributed primarily to the introduction of the VBM product series in the fourth quarter of 2016. The service revenue increase of $4.9 million was primarily attributed to Ateb, which contributed $5.0 million to the service revenue during the three months ended September 30, 2017.

Nine months ended September 30,
Change in
2017 2016 $ %
Revenues: (Dollars in thousands)
Automation and Analytics $ 427,250
$ 450,043
$ (22,793 ) (5 )%
Percentage of total revenues 82 % 86 %
Medication Adherence 90,971
70,605
20,366
29 %
Percentage of total revenues 18 % 14 %
Total revenues $ 518,221
$ 520,648
$ (2,427 ) — %

The $22.8 million decrease in Automation and Analytics revenues for the nine months ended September 30, 2017 in comparison to the nine months ended September 30, 2016 was due to a decrease in product revenue of $35.4 million, partially offset by an increase in service revenues of $12.6 million. The decrease in the Automation and Analytics segment was attributed to a slower conversion of bookings and backlog into revenue due to the introduction of the new XT series of products in the fourth quarter of 2016. While we have experienced larger deal sizes, the administrative process of converting our existing bookings of G4 products into XT series products has decelerated revenue recognition during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Service revenue increase of $12.6 million was primarily attributed to higher service renewal fees driven mainly by an increase in installed customer base.

Medication Adherence revenues increased by $20.4 million for the nine months ended September 30, 2017 in comparison to the nine months ended September 30, 2016. The increase in revenue was comprised of an increase in product revenue of $5.3 million and increase in service revenue of $15.1 million. Product revenue increase of $5.3 million was attributed primarily to the introduction of the VBM product series in the fourth quarter of 2016. The service revenue increase of $15.1 million was primarily attributed to Ateb, which contributed $15.5 million to the service revenue during the nine months ended September 30, 2017.future periods.

Cost of Revenues and Gross Profit

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


	Three Months Ended June 30,
					Change in
	2020		2019		$		%

	(Dollars in thousands)
Cost of revenues:
Cost of product revenues	$	85,779	$	84,583	$	1,196	1%
As a percentage of related revenues	62%		53%
Cost of services and other revenues	30,617		28,785		1,832		6%
As a percentage of related revenues	50%		49%
Total cost of revenues	$	116,396	$	113,368	$	3,028	3%
As a percentage of total revenues	58%		52%

Gross profit	$	83,225	$	104,045	$	(20,820)	(20)%
Gross margin	42%		48%

Three months ended September 30,
Change in
2017 2016 $ %
Cost of revenues: (Dollars in thousands)
Automation and Analytics $ 79,740
$ 77,828
$ 1,912
2 %
As a percentage of related revenues 52 % 51 %
Medication Adherence 22,189
17,401
4,788
28 %
As a percentage of related revenues 69 % 72 %
Total cost of revenues $ 101,929
$ 95,229
$ 6,700
7 %
As a percentage of total revenues 55 % 54 %

Gross profit:
Automation and Analytics $ 74,911
$ 74,609
$ 302
— %
Automation and Analytics gross margin 48 % 49 %
Medication Adherence 9,942
6,899
3,043
44 %
Medication Adherence gross margin 31 % 28 %
Total gross profit $ 84,853
$ 81,508
$ 3,345
4 %
Total gross margin 45 % 46 %

Nine months ended September 30,
Change in
2017 2016 $ %
Cost of revenues: (Dollars in thousands)
Automation and Analytics $ 229,218
$ 233,401
$ (4,183 ) (2 )%
As a percentage of related revenues 54 % 52 %
Medication Adherence 61,983
47,777
14,206
30 %
As a percentage of related revenues 68 % 68 %
Total cost of revenues $ 291,201
$ 281,178
$ 10,023
4 %
As a percentage of total revenues 56 % 54 %

Gross profit:
Automation and Analytics $ 198,032
$ 216,642
$ (18,610 ) (9 )%
Automation and Analytics gross margin 46 % 48 %
Medication Adherence 28,988
22,828
6,160
27 %
Medication Adherence gross margin 32 % 32 %
Total gross profit $ 227,020
$ 239,470
$ (12,450 ) (5 )%
Total gross margin 44 % 46 %

~~Cost of Revenues.~~ Cost of revenues for the three months ended ~~September~~June 30, ~~2017~~2020 compared to the three months ended ~~September~~June 30, ~~2016~~2019 increased by ~~$6.7~~$3.0 million, of which ~~$1.9~~$1.2 million was attributed to the increase ofin cost of ~~revenue in our Automation~~product revenues and ~~Analytics segment and $4.8~~$1.8 million was attributed to the increase ofin cost of ~~revenue in our Medication Adherence segment.~~services and other revenues. The increase ~~of the~~in cost of ~~revenue in the Automation~~product revenues was primarily driven by certain fixed costs, such as labor and ~~Analytics is consistent~~overhead, which have not decreased proportionally with the ~~increase of revenue of $2.2 million~~decrease in ~~the Automation and Analytics~~product revenues for the three months ended ~~September~~June 30, ~~2017~~2020, as well as an increase in employee-related expenses related to restructuring initiatives, partially offset by cost-saving initiatives. The increase in cost of services and other revenues was primarily driven by the increase in services and other revenues of $1.6 million for the three months ended June 30, 2020 compared to the three months ended ~~September~~June 30, ~~2016.~~ 2019, as well as additional investments in our service business to support new product offerings.

The ~~increase~~overall decrease in gross margin primarily relates to lower revenues due to the impact of the ~~cost of revenue in the Medication Adherence segment was attributed~~COVID-19 pandemic and employee-related expenses related to ~~Ateb, which contributed $3.1 million to the increase.~~

Cost of revenues for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 increased by $10.0 million, $14.2 million of which was attributed to the increased cost of revenue in our Medication Adherence segment, partially offset by $4.2 million of decrease in cost of revenue in our Automation and Analytics segment. The decrease of the cost of revenue in the Automation and Analytics segment was attributed to a decrease of $35.4 million in product revenue and costs attributed to the XT series manufacturing ramp up, including addressing quality concerns,restructuring initiatives, partially offset by lower amortization expenses of acquired technology and integration related expenses related to the Aesynt acquisition. The increase of the cost of revenue in the Medication Adherence segment was mainly attributed to Ateb, which contributed $9.1 million to the increase, and increased equipment sales including VBM medication packaging products.

~~Gross Profit.~~ ~~Gross~~costs associated with cost-saving initiatives. Our gross profit for the three months ended ~~September~~June 30, ~~2017~~2020 was $83.2 million, as compared to $104.0 million for the three months ended June 30, 2019.


	Six Months Ended June 30,
					Change in
	2020		2019		$		%

	(Dollars in thousands)
Cost of revenues:
Cost of product revenues	$	176,051	$	163,394	$	12,657	8%
As a percentage of related revenues	57%		54%
Cost of services and other revenues	60,409		55,374		5,035		9%
As a percentage of related revenues	50%		48%
Total cost of revenues	$	236,460	$	218,768	$	17,692	8%
As a percentage of total revenues	55%		52%

Gross profit	$	192,847	$	201,162	$	(8,315)	(4)%
Gross margin	45%		48%

Cost of revenues for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 increased by ~~$3.3~~$17.7 million, of which $12.7 million was attributed to the increase in cost of product revenues and $5.0 million was attributed to the increase in cost of services and other revenues. The increase in cost of product revenues is reflective of investments made to support expected annual revenue levels which were impacted by the COVID-19 pandemic. While product revenues increased by $5.0 million for the six months ended June 30, 2020, cost of product revenues increased by $12.7 million primarily driven by certain fixed costs, such as labor and overhead. The increase in cost of product revenues was also driven by an increase in employee-related expenses related to restructuring initiatives, partially offset by cost-saving initiatives. The increase in cost of services and other revenues was primarily driven by the increase in services and other revenues of $4.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, as well as additional investments in our service business to support new product offerings.

The overall decrease in gross margin primarily relates to lower revenues during the three months ended June 30, 2020 due to the impact of the COVID-19 pandemic, employee-related expenses related to restructuring initiatives, and additional investments in our service business, partially offset by lower costs associated with cost-saving initiatives. Our gross profit for the six months ended June 30, 2020 was $192.8 million, as compared to $201.2 million for the six months ended June 30, 2019.

The effects of the COVID-19 pandemic have had an adverse impact on our cost of revenues and gross margins for the three months ended June 30, 2020. We continue to expect to incur additional costs related to the COVID-19 pandemic including, but not limited to, additional compensation for certain essential employees and the purchase of personal protective equipment for our customer-facing and manufacturing personnel. However, the full impact the COVID-19 pandemic will have on gross margins cannot be estimated.

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


	Three Months Ended June 30,
					Change in
	2020		2019		$		%

	(Dollars in thousands)
Operating expenses:
Research and development	$	20,830	$	16,848	$	3,982	24%
As a percentage of total revenues	10%		8%
Selling, general, and administrative	69,386		68,434		952		1%
As a percentage of total revenues	35%		31%
Total operating expenses	$	90,216	$	85,282	$	4,934	6%
As a percentage of total revenues	45%		39%

Interest and other income (expense), net	$	174	$	(1,629)	$	1,803	(111)%

Research and Development. Research and development expenses increased by $4.0 million for the three months ended June 30, 2020 compared to the three months ended ~~September~~June 30, ~~2016 as a result of~~2019. The increase was primarily attributed to an increase ~~in gross profit for the Medication Adherence segment~~ of ~~$3.0 million as a result of the Ateb acquisition.~~

Gross profit for the nine months ended September 30, 2017 decreased by $12.5 million compared to the nine months ended September 30, 2016 primarily due to the decrease in sales as part of the XT series product introduction, partially offset by approximately $9.1 million of gross profit from Ateb.

~~Operating Expenses and Income (loss) from Operations~~$2.9

Three months ended September 30,
Change in
2017 2016 $ %
Operating expenses: (Dollars in thousands)
Research and development $ 16,414
$ 15,264
$ 1,150
8 %
As a percentage of total revenues 9 % 9 %
Selling, general and administrative 58,725
61,316
(2,591 ) (4 )%
As a percentage of total revenues 31 % 35 %
Total operating expenses $ 75,139
$ 76,580
$ (1,441 ) (2 )%
As a percentage of total revenues 40 % 43 %

Income (loss) from operations:
Automation and Analytics $ 28,062
$ 25,486
$ 2,576
10 %
Operating margin 18 % 17 %
Medication Adherence 41
762
(721 ) (95 )%
Operating margin — % 3 %
Corporate Expenses 18,389
21,320
(2,931 ) (14 )%
Total income (loss) from operations $ 9,714
$ 4,928
$ 4,786
97 %
Total operating margin 5 % 3 %

~~Research and Development.~~ ~~The $1.2~~ million in employee-related expenses related to restructuring initiatives, as well as an increase of $0.7 million in other employee-related expenses in the research and development function.

Selling, General, and Administrative. Selling, general, and administrative expenses increased by $1.0 million for the three months ended ~~September~~June 30, ~~2017~~2020 compared to the three months ended ~~September~~June 30, ~~2016~~2019, primarily due to overall growth of operations and increase in overall headcount. The increase was primarily due to an increase of $4.0 million in employee-related expenses primarily related to increased headcount and an increase of $0.9 million of employee-related expenses related to restructuring initiatives, partially offset by certain cost savings, including reduced travel costs, and lower commission expenses attributable to lower bookings and revenues.

Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by $1.8 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily driven by a $1.8 million decrease in other expenses as other income remained consistent period over period. The decrease in other expenses was primarily due to lower interest expense as a result of lower outstanding debt balance during the three months ended June 30, 2020 as compared to the three months ended June 30, 2019 as well as favorable foreign currency fluctuations during the period.


	Six Months Ended June 30,
					Change in
	2020		2019		$		%

	(Dollars in thousands)
Operating expenses:
Research and development	$	39,482	$	32,926	$	6,556	20%
As a percentage of total revenues	9%		8%
Selling, general, and administrative	148,205		136,712		11,493		8%
As a percentage of total revenues	35%		33%
Total operating expenses	$	187,687	$	169,638	$	18,049	11%
As a percentage of total revenues	44%		40%

Interest and other income (expense), net	$	(648)	$	(3,039)	$	2,391	(79)%

Research and Development. Research and development expenses increased by $6.6 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. The increase was primarily attributed to an increase of $3.7 million in employee-related expenses related to restructuring initiatives, as well as an increase of $1.8 million in other employee-related expenses in the research and development function. The increased spend is a result of our continued investments into automation, intelligence, and the cloud data platform.

Selling, General, and Administrative. Selling, general, and administrative expenses increased by $11.5 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to overall growth of operations and increase in overall headcount. The increase was primarily due to an increase of $10.5 million in employee-related expenses primarily related to increased headcount, an increase of $3.7 million in employee-related expenses related to restructuring initiatives, and an increase of $1.5 million in consulting expenses, partially offset by certain cost savings, including reduced travel costs, and lower commission expenses attributable to lower bookings and revenues.

In response to the COVID-19 pandemic, we have implemented and continue to focus on cost reduction initiatives in all aspects of our business, including, but not limited to, reduced travel costs, decreases in employee-related expenses, negotiating discounts with vendors, and delayed hiring and capital expenditures. However, we cannot predict the full impact of the COVID-19 pandemic on our operating expenses.

Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by $2.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily driven by a $1.9 million decrease in other expenses and a $0.5 million increase in other income. The decrease in other expenses was primarily due to lower interest expense as a result of lower outstanding debt balance during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. The increase in other income was primarily attributable to rebates and benefits from certain arrangements outside of our normal course of business.

Provision for (Benefit from) Income Taxes


	Three Months Ended June 30,
					Change in
	2020		2019		$		%

	(Dollars in thousands)
Provision for (benefit from) income taxes	$	(2,518)	$	1,158	$	(3,676)	(317)%


	Six Months Ended June 30,
					Change in
	2020		2019		$		%

	(Dollars in thousands)
Provision for (benefit from) income taxes	$	(2,500)	$	9,225	$	(11,725)	(127)%

Our annual effective tax rate before discrete items was 28.0% and 24.8% for the six months ended June 30, 2020 and 2019, respectively. The increase in the estimated annual effective tax rate for the six months ended June 30, 2020 compared to the same period in 2019 was primarily due to state income taxes and non-deductible equity charges, partially offset by an increase in research and development ~~expenses of $1.5 million in our Medication Adherence segment as result of the Ateb acquisition which contributed $1.3 million to the increase.~~

~~Selling, General and Administrative~~. The $2.6 million decrease in selling, general and administrative expenses for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was primarily due to the decrease in corporate-related expenses of $3.2 million as a result of a decrease in employee-related expenses and a decrease of $1.7 million in our Automation and Analytics segment due to lower amortization expenses from the acquired intangible assets, partially offset by an increase of $2.3 million in our Medication Adherence segment primarily due to the Ateb acquisition, which contributed $2.2 million to the increase.

~~Operating Income (Loss).~~ Operating income from our Automation and Analytics segment increased by $2.6 million due to the higher gross margin of $0.3 million, partially offset by lower research and development and selling, general and administrative costs of $2.3 million. Operating income from our Medication Adherence segment decreased by $0.7 million due to higher research and development and selling, general and administrative costs of attributed to Ateb, which accounted for $3.4 million of the increase, partially offset by higher gross margin of $3.0 million.

Nine months ended September 30,
Change in
2017 2016 $ %
Operating expenses: (Dollars in thousands)
Research and development $ 50,128
$ 42,896
$ 7,232
17 %
As a percentage of total revenues 10 % 8 %
Selling, general and administrative 186,818
189,912
(3,094 ) (1.6 )%
As a percentage of total revenues 36 % 36 %
Total operating expenses $ 236,946
$ 232,808
$ 4,138
2 %
As a percentage of total revenues 46 % 45 %

Income (loss) from operations:
Automation and Analytics $ 51,381
$ 65,534
$ (14,153 ) (22 )%
Operating margin 12 % 15 %
Medication Adherence (2,208 ) 5,310
(7,518 ) (142 )%
Operating margin (2 )% 8 %
Corporate Expenses 59,099
64,182
(5,083 ) (8 )%
Total income (loss) from operations $ (9,926 ) $ 6,662
$ (16,588 ) (249 )%
Total operating margin (2 )% 1 %

~~Research and Development.~~ Research and development expenses increased by $7.2 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increase was primarily driven by an increase of $4.9 million in our Medication Adherence segment, mainly due to the acquisition of Ateb in the fourth quarter of 2016, which accounted for $3.9 million of this segment's increase, and an increase of $1.4 million for the Automation and Analytics segment research and development expenses, primarily due to restructuring expenses.

~~Selling, General and Administrative~~. Selling, general and administrative expenses decreased by $3.1 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The decrease was due to a $5.8 million decrease from our Automation and Analytics segment, and a decrease of $6.0 million in our corporate expenses, partially offset by an increase of $8.8 million in our Medication Adherence segment. The decrease in our Automation and Analytics segment was mainly due to lower amortization expense related to intangible assets and restructuring expenses as most restructuring activities related to this segment were concluded during the nine months ended September 30, 2016. The decrease in our corporate expenses was mainly due to lower integration and acquisition related cost as well as an overall reduction in cost as part of cost saving initiatives. The increase in the Medication Adherence segment is attributed to Ateb, which contributed $7.9 million.

~~Operating Income (Loss).~~ Operating income from our Automation and Analytics segment decreased by $14.2 million due to the lower gross margin of $18.6 million, partially offset by selling, general and administrative costs. Operating income from our Medication Adherence segment decreased by $7.5 million due to increased research and development and selling, general and administrative costs of $11.8 million attributed to Ateb, partially offset by higher gross margin of $6.2 million.

credits.

Provision for ~~(benefit from) Income Taxes~~

Three months ended
Change in
September 30,
2017 September 30,
2016 $ %
(Dollars in thousands)
Provision for (benefit from) income taxes $ 751
$ 224
$ 527
235 %

Nine months ended
Change in
September 30,
2017 September 30,
2016 $ %
(Dollars in thousands)
Provision for (benefit from) income taxes $ (11,232 ) $ (557 ) $ (10,675 ) 1,917 %

~~Our estimated effective tax rate before discrete items was 34.4% and 38.3%~~income taxes for the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, respectively. The decrease in the estimated effective tax rate for the nine months ended September 30, 2017 compared to the same period in 2016 was primarily due to changes in the mix of earnings with differing statutory rates and a decrease in domestic production activities deduction. Additionally, the Company adopted ASU 2016-09 effective January 1, 2017 and is now recognizing all excess tax benefits and tax deficiencies as income tax expense or benefit. An2020 included net discrete income tax benefit of ~~approximately $2.1~~$3.8 million, ~~and $4.7~~primarily due to a $3.3 million tax benefit from equity compensation.

Provision for income taxes for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017, respectively, was recorded as~~2019 included net discrete income tax expense of $2.2 million. The net discrete income tax expense is primarily related to recognized gain on the sale of certain intellectual property rights by Aesynt B.V. to Omnicell, Inc. in the first quarter of 2019, offset by a ~~result~~discrete income tax benefit of $7.0 million related to equity compensation. In March 2020, Aesynt B.V. subsequently merged with and into Aesynt Holding B.V., with Aesynt Holding B.V. surviving and changing its name to Omnicell B.V.

Refer to Note 12, Income Taxes, of the ~~adoption of ASU 2016-09.~~Notes to Condensed Consolidated Financial Statements included in this quarterly report for more details.

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of $133.6 million at June 30, 2020 compared to $127.2 million at December 31, 2019. All of our cash and cash equivalents are invested in bank accounts with major financial institutions.

Our cash position and working capital at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 were as follows:


	June 30, 2020		December 31, 2019

	(In thousands)
Cash	$	133,583	$	127,210
Working Capital	$	228,602	$	246,242

September 30,
2017 December 31,
2016
(In thousands)
Cash and cash equivalents $ 7,466
$ 54,488

Working Capital $ 109,511
$ 134,496

~~All of our cash and cash equivalents for these periods were invested in bank demand deposits.~~ Our ratio of current assets to current liabilities was ~~1.5:~~2.0:1 at ~~September~~both June 30, ~~2017 compared to 1.7:1 at~~2020 and December 31, ~~2016.~~2019.

Sources of Cash

Credit Agreements

On January 5, 2016, we entered into a ~~$400~~$400.0 million senior secured credit facility pursuant to a credit agreement ~~by and among us, the~~with certain lenders, ~~from time to time party thereto,~~ Wells Fargo Securities, LLC as sole lead arranger, and Wells Fargo Bank, National Association, as administrative agent ~~(the “Credit~~(as subsequently amended as discussed below, the “Prior Credit Agreement”). The Prior Credit Agreement ~~provides~~provided for a ~~$200~~$200.0 million term loan facility (the ~~“Term~~“Prior Term Loan Facility”), and prior to the amendment discussed below, a ~~$200~~$200.0 million revolving credit facility (the ~~“Revolving~~“Prior Revolving Credit Facility” and together with the Prior Term Loan Facility, the ~~“Facilities”~~“Prior Facilities”). In addition, the Prior Credit Agreement included a letter of credit sub-limit of up to $10.0 million and a swing line loan sub-limit of up to $10.0 million.

On April 11, 2017 and December 26, 2017, we entered into amendments to the Prior Credit Agreement. Under these amendments, the Prior Revolving Credit Facility was increased from $200.0 million to $315.0 million and certain other modifications were made.

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On November 15, 2019, we refinanced the Prior Credit Agreement and entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo Securities, LLC, Citizens Bank, N.A., and JPMorgan Chase Bank, N.A., as joint lead arrangers and Wells Fargo Bank, National Association, as administrative agent. The A&R Credit Agreement replaced the Prior Credit Agreement and provides for (a) a five-year revolving credit facility of $500.0 million (the “Current Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million. In addition, the A&R Credit Agreement includes a letter of credit sub-limit of up to ~~$10~~$15.0 million and a swing line loan sub-limit of up to ~~$10~~$25.0 million. On November 15, 2019, the $80.0 million outstanding term loan balance under the Prior Facilities was transferred to the Current Revolving Credit Facility.

As of June 30, 2020, there was no outstanding loan balance for the Current Revolving Credit Facility and we were in full compliance with all covenants. Refer to Note 8, Debt and Credit Agreements, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report. We expect to use future loans under the Current Revolving Credit Facility, if any, for working capital, potential acquisitions, and other general corporate ~~purposes, including acquisitions. The Credit~~purposes.

Distribution Agreement ~~replaced~~

On November 3, 2017, we entered into a Distribution Agreement (the “Distribution Agreement”) with J.P. Morgan Securities LLC, Wells Fargo Securities, LLC and HSBC Securities (USA) Inc., as our ~~Credit Agreement, dated September 25, 2013, by~~sales agents, pursuant to which we may offer and ~~among the Company, the lenders~~sell from time to time ~~party thereto and Wells Fargo Bank, National Association,~~through the sales agents up to $125.0 million maximum aggregate offering price of our common stock. Sales of the common stock pursuant to the Distribution Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as ~~administrative agent, as amended.~~

~~Loans~~defined in Rule 415 under the ~~Facilities bear interest, at our option, at a rate equal to either (a) the LIBOR Rate, plus an applicable margin ranging from 1.50% to 2.25% per annum based~~Securities Act of 1933, including sales made directly on the ~~our Consolidated Total Net Leverage Ratio (as defined~~Nasdaq Stock Market, or sales made to or through a market maker other than on an exchange. We intend to use the net proceeds from the sale, if any, of common stock in the ~~Credit Agreement), or (b) an alternate base rate equal to~~offering for general corporate purposes, which may include, without limitation, the ~~highest~~acquisition of ~~(i)~~complementary businesses, the ~~prime rate, (ii)~~repayment of outstanding indebtedness, capital expenditures, and working capital.

For the ~~federal funds rate plus 0.50%,~~three and ~~(iii) LIBOR for an interest period~~six months ended June 30, 2020, we did not sell any of ~~one month, plus an applicable margin ranging from 0.50% to 1.25% per annum based on~~ our ~~Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement). Undrawn commitments~~common stock under the ~~Revolving Credit Facility will be subject to a commitment fee ranging~~Distribution Agreement.

For the three months ended June 30, 2019, we received gross proceeds of $17.9 million from ~~0.20% to 0.35%~~sales of our common stock under the Distribution Agreement and incurred issuance costs of $0.3 million on sales of approximately 217,000 shares of our common stock at an average price of approximately $82.51 per ~~annum based~~share.

For the six months ended June 30, 2019, we received gross proceeds of $38.5 million from sales of our common stock under the Distribution Agreement and incurred issuance costs of $0.7 million on sales of approximately 460,000 shares of our ~~Consolidated Total Net Leverage Ratio on the~~common stock at an average ~~daily unused portion~~price of ~~the Revolving Credit Facility. A letter of credit~~

~~participation fee ranging from 1.50% to 2.25%~~approximately $83.81 per ~~annum based on our Consolidated Total Net Leverage Ratio will accrue on the average daily amount of letter of credit exposure.~~

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to us and our subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, dividends and other distributions. The Credit Agreement contains financial covenants that require us and our subsidiaries to not exceed a maximum consolidated total leverage ratio and maintain a minimum fixed charge coverage ratio. The Credit Agreement also includes financial covenants requiring us not to exceed a maximum consolidated total leverage ratio of 3.00:1 (subject to certain exceptions) and to maintain a minimum fixed charge coverage ratio of 1.50:1.share.

As of ~~September~~June 30, ~~2017,~~2020, we had an aggregate of $31.5 million available to be offered under the ~~outstanding balance from the facilities (before netting deferred issuance cost) was $197.5 million. We were in full compliance with all covenants.~~Distribution Agreement.

Uses of Cash

Our future uses of cash are expected to be primarily for working capital, capital expenditures, ~~loan principal and interest payments,~~ and other contractual obligations. We also expect a continued use of cash for potential acquisitions and ~~acquisition assessment~~acquisition-related activities.

In accordance with the 2015 Avantec share purchase agreement, we agreed to make potential earn-out payments based on the achievement of bookings targets. Payments earned and paid during the year ended December 31, 2016 were $3.0 million and payments earned and paid to sellers for the period ended September 30, 2017 were $2.4 million.

Our stock repurchase programs have a total of $54.9 million remaining for future repurchases as of ~~September~~June 30, ~~2017,~~2020, which may result in additional use of cash. ~~See "Stock~~Refer to “Stock Repurchase ~~Program"~~Program” under Note ~~12.~~ 13, Employee Benefits and Share-Based Compensation, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report. There were no stock repurchases during the six months ended June 30, 2020 and 2019.

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

We believe that our current financial position and resources will allow us to manage the anticipated impact of the COVID-19 pandemic on our business for the foreseeable future, including any potential changes in timing of revenue recognition or potential extensions in customer payments. However, COVID-19 and related measures to contain its impact have caused material disruptions in both national and global financial markets and economies. The future impact of COVID-19 and these containment measures cannot be predicted with certainty and may increase our borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition, and liquidity, and we cannot assure that

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we will have access to external financing at times and on terms we consider acceptable, or at all, or that we will not experience other liquidity issues going forward.

Cash Flows

The following table summarizes, for the periods indicated, selected items in our Condensed Consolidated Statements of Cash ~~Flows (as adjusted for adoption of ASU 2016-09):~~

Flows:


								Six Months Ended June 30,
	Nine months ended							2020		2019
	September 30, 2017			September 30, 2016
	(In thousands)							(In thousands)
Net cash provided by (used in):							Net cash provided by (used in):
Operating activities	$	20,648		$	26,030		Operating activities	$	72,735	$	53,760
Investing activities	(24,101		)	(293,343		)	Investing activities	(33,213)		(31,950)
Financing activities	(42,065		)	233,650			Financing activities	(32,308)		(1,583)
Effect of exchange rate changes on cash and cash equivalents	(1,504		)	(1,267		)	Effect of exchange rate changes on cash and cash equivalents	(841)		63
Net decrease in cash and cash equivalents	$	(47,022	)	$	(34,930	)
Net increase in cash and cash equivalents							Net increase in cash and cash equivalents	$	6,373	$	20,290

Operating ~~activities~~Activities

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

Net cash provided by operating activities was ~~$20.6~~$72.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, primarily ~~as a result~~consisting of ~~the~~ net ~~loss~~income of ~~$3.7~~$7.0 million adjusted for non-cash items of $47.0 million and changes in assets and ~~liabilities.~~liabilities of $18.7 million. The non-cash items primarily consisted of depreciation and amortization expense of ~~$38.5~~$28.8 million, ~~and~~ share-based compensation expense of ~~$16.3~~$22.0 million, amortization of operating lease right-of-use assets of $5.2 million, amortization of debt issuance costs of $0.5 million, and a change in deferred income taxes of ~~$11.1 million and $1.2 million of amortization of debt financing fees. The net cash outflow which was contributed to changes~~$9.4 million. Changes in assets and liabilities include cash inflows from (i) a decrease in accounts receivable and unbilled receivables of $28.2 million primarily due to an increase in ~~accounts receivable~~collections and a decrease in billings due to timing of ~~$21.7~~shipments, (ii) an increase in deferred revenues of $16.3 million primarily due to the timing of ~~collections,~~shipments in order to meet customers’ implementation schedules and recognition of revenues for product requiring installation, (iii) an increase in other long-term liabilities of $4.4 million, (iv) a decrease in prepaid commissions of $4.0 million, and (v) a decrease in prepaid expenses of $1.2 million. These cash inflows were partially offset by (i) a decrease in accounts payable of $11.3 million primarily due to an overall decrease in spending, as well as timing of payments, (ii) an increase in inventories of ~~$22.9~~$7.3 million ~~for inventory buildup in~~to support of

forecasted sales, (iii) a decrease in ~~deferred revenue~~operating lease liabilities of ~~$7.4~~$5.2 million, ~~due to the timing of orders and revenue being recognized for installed product, and~~ (iv) an increase in other ~~current~~long-term assets of ~~$5.1 million. These outflows were partially offset by an increase in accounts payable of $23.7~~$4.6 million, ~~primarily due to the increase in inventory and timing of payments,~~(v) a decrease in ~~the~~accrued compensation of $3.1 million, (vi) a decrease in accrued liabilities of $2.8 million, and (vii) an increase in investment in sales-type leases of ~~$6.6 million, and an increase in other accrued liabilities of $4.0~~$1.4 million.

Net cash provided by operating activities was ~~$26.0~~$53.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, primarily ~~as a result~~consisting of ~~$0.4 million in~~ net income of $19.3 million adjusted for non-cash items ~~and~~of $53.1 million, offset by changes in assets and ~~liabilities.~~liabilities of $18.6 million. The non-cash items primarily consisted of depreciation and amortization expense of ~~$43.9~~$25.9 million, share-based compensation expense of ~~$14.1~~$16.7 million, amortization of operating lease right-of-use assets of $5.2 million, amortization of debt issuance costs of $1.1 million, and a change in deferred income taxes of ~~$4.8~~$3.8 million. ~~The cash outflow attributed to changes~~Changes in assets and liabilities ~~includes~~include cash outflows from (i) an increase in accounts receivable and unbilled receivables of ~~$25.8~~$9.2 million primarily due to ~~increased product shipments late~~an increase in ~~the quarter,~~billings, (ii) a decrease in accrued compensation of $8.0 million primarily due to a decrease in accrued commissions and restructuring expenses, as well as timing of payroll, (iii) a decrease in operating lease liabilities of $5.3 million, (iv) an increase in inventories of ~~$7.7~~$4.5 million tofor inventory buildup in support of forecasted sales ~~(iii) increases~~of new and existing products, and (v) an increase in ~~long-term~~ investment in sales-type leases of ~~$5.3~~$4.4 million. These cash outflows were partially offset by (i) an increase in other long-term liabilities of $3.9 million, ~~due to two significant lease transactions entered into during the year,~~(ii) a decrease in other long-term assets of $3.1 million, (iii) an increase in accounts payable of $2.1 million, (iv) ~~increases~~an increase in ~~prepaid expenses~~accrued liabilities of ~~$5.8~~$1.8 million, ~~mainly due to~~(v) a decrease in prepaid commissions ~~and prepaid income taxes, (v) a decrease in accrued liabilities~~ of ~~$1.9~~$1.5 million, ~~due to timing of payments to employees related liabilities~~ and (vi) a decrease in ~~the other-long term liabilities~~prepaid expenses of ~~$2.3~~$1.0 million. These amounts were partially offset by an increase in the accounts payables of $5.6 million due to timing of payments, an increase in deferred revenue of $12.8 million due to timing of orders and revenue being recognized for installed product, and decreases in other long-term assets of $1.2 million.

Investing ~~activities~~Activities

Net cash used in investing activities was ~~$24.1~~$33.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, which consisted of capital expenditures of $13.2 million for property and equipment, and $20.0 million for costs of software development for external use.

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Net cash used in investing activities was $32.0 million for the six months ended June 30, 2019, which consisted of capital expenditures of $9.4 million for property and equipment, ~~$10.3~~and $22.6 million for costs of software development ~~mainly related to the Performance Center offering and purchase of intangibles, and $4.4 million attributable to the acquisition of InPharmics.~~

Net cash used in investing activities was $293.3 million for the nine months ended September 30, 2016, $271.5 million of which was attributable to the acquisition of Aesynt. Capital expenditures related to purchases of property and equipment, software development costs for external ~~use, and purchases of intangible assets contributed $10.0 million, $10.6 million, and $1.3 million, respectively.~~use.

Financing ~~activities~~Activities

Net cash used in financing activities was ~~$42.1~~$32.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, primarily ~~from~~due to the repayment of ~~$100.0~~$50.0 million of the ~~credit facilities~~Current Revolving Credit Facility and ~~$3.1~~$3.5 million in ~~employees'~~employees’ taxes paid related to restricted stock unit vesting, partially offset by ~~$26.5~~$21.2 million in proceeds from employee stock option exercises and employee stock plan purchases.

Net cash used in financing activities was $1.6 million for the six months ended June 30, 2019, primarily due to the repayment of $60.0 million of the Prior Facilities and $4.7 million in employees’ taxes paid related to restricted stock unit vesting, partially offset by $25.3 million in proceeds from employee stock option exercises and employee stock plan purchases, and ~~$37.0~~$37.8 million ~~proceeds from term loan and revolving credit facilities.~~

~~Net cash provided by financing activities was $233.7 million for the nine months ended September 30, 2016 as a result~~ of proceeds from ~~term loan and revolving credit facilities~~sales of ~~$247.1 million, net of deferred issuance cost of $7.9 million, and $16.5 million in proceeds from employee~~our common stock ~~option exercises and employee stock plan purchases. The increase in cash provided from financing activities was partially offset by repayment of $25.0 million of~~under the ~~credit facilities, payment of contingent consideration of $3.0 million related to the Avantec acquisition, and $1.9 million in employees' taxes paid related to restricted stock units~~Distribution Agreement.

Contractual Obligations

There have been no significant changes during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 to the contractual obligations disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of our annual report on Form 10-K for the year ended December 31, ~~2016.~~2019.

~~We had $337.8 million in contractual commitments to third parties for non-cancelable~~Contractual obligations as of June 30, 2020 were as follows:


	Payments due by period
	Total		Remainder of 2020		2021 - 2022		2023 - 2024		2025 and thereafter

	(In thousands)
Operating leases ⁽¹⁾	$	69,647	$	6,890	$	25,868	$	16,719	$	20,170
Purchase obligations ⁽²⁾	66,313		64,679		848		689		97


Total ⁽³⁾	$	135,960	$	71,569	$	26,716	$	17,408	$	20,267

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

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

⁽³⁾Refer to Note 11, Commitments and ~~revolving credit facility as~~ Contingencies, of ~~September 30, 2017 as follows:~~the Notes to Condensed Consolidated Financial Statements included in this quarterly report.

Payments due by period
Total Remainder of 2017 2018 and 2019 2020 and 2021 Thereafter
(In thousands)
Operating leases ⁽¹⁾
$ 80,376
$ 3,203
$ 24,717
$ 21,288
$ 31,168
Purchase obligations ⁽²⁾
59,928
46,477
11,343
1,173
935
Term loan facility ⁽³⁾
185,000
2,500
37,500
145,000
—
Revolving credit facility ⁽³⁾
12,500
—
—
12,500
—
Total ⁽⁴⁾
$ 337,804
$ 52,180
$ 73,560
$ 179,961
$ 32,103


⁽¹⁾	~~Commitments under operating leases relate primarily to leasehold property and office equipment.~~

⁽²⁾

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


⁽³⁾	Amounts shown for term loan and revolving credit facility are principal repayments only. Due to use of interest rate swaps, the cash interest expense is partly variable and partly fixed, and is not reflected in the above table. Refer to Note 8, Debt, of the Notes to the Condensed Consolidated Financial Statements included in this quarterly report.

⁽⁴⁾

We have recorded $6.8 million for uncertain tax positions under long-term liabilities as of September 30, 2017 in accordance with U.S. GAAP. As these liabilities do not reflect actual tax assessments, the timing and amount of payments we might be required to make will depend upon a number of factors. Accordingly, as the timing and amount of payment cannot be estimated, the $6.8 million in uncertain tax position liabilities have not been included in the table above.

Off-Balance Sheet Arrangements

As of ~~September~~June 30, ~~2017,~~2020, we had no off-balance sheet arrangements as defined under Regulation S-K 303(a)(4) of the ~~Securities~~ Exchange Act ~~of 1934, as amended,~~ and the instructions thereto.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Interest Rate Fluctuation Risk~~

We are exposed to interest rate risk through our borrowing activities. As of September 30, 2017, we had total debt under the Credit Agreement (before netting issuance costs) of $197.5 million. See Note 8, Debt, of the Notesmarket risks related to ~~the Condensed Consolidated Financial Statements included in this quarterly report.~~

~~We use interest rate swap agreements to protect against adverse~~ fluctuations in ~~interest~~foreign currency exchange rates by reducing our exposure to variability in cash flows relating to interest payments on a portion of its outstanding debt. Our interest rate swaps, which are designated as cash flow hedges, involve the receipt of variable amounts from counterparties in exchange for us making fixed-rate payments over the life of the agreements. We do not hold or issue any derivative financial instruments for speculative trading purposes. During 2016, we entered into an interest rate swap agreement with a combined notional amount of $100 million with one counter-party that became effective beginning on June 30, 2016 and matures on April 30, 2019. At September 30, 2017, the total debt under the credit facility exposed to interest rate fluctuation risk was $100.0 million. An immediate increase of 1% in interest rate would result in $1.0 million of interest expense per year.

Our financial investments consist of cash and, at times, money market funds. The primary objective of our investment activities is to preserve principal and ensure liquidity while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. When our investments include money market funds, we are somewhat exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, we do not believe an immediate 1% change in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates. ~~As of September 30, 2017, we did not have any investments in money market funds.~~

Foreign Currency Exchange Risk

We operate in foreign countries which expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies, the most significant of which isare the British ~~Pound.~~Pound and the Euro. In order to manage foreign currency risk, at times we enter into foreign exchange forward contracts to mitigate risks associated with changes in spot exchange rates of mainly non-functional currency denominated assets or liabilities of our foreign subsidiaries. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. By working only with major banks and closely monitoring current market conditions, we seek to limit the risk that counterparties to these contracts may be unable to perform. We do not enter into derivative contracts for trading purposes. As of ~~September~~June 30, ~~2017,~~2020, we did not have any outstanding foreign exchange forward contracts.

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Interest Rate Fluctuation Risk

We are exposed to interest rate risk through our borrowing activities. As of June 30, 2020, there was no outstanding balance under the A&R Credit Agreement. Refer to Note 8, Debt and Credit Agreements, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report.

We use interest rate swap agreements to protect against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows relating to interest payments on a portion of our outstanding debt. Our interest rate swaps, which are designated as cash flow hedges, involve the receipt of variable amounts from counterparties in exchange for us making fixed-rate payments over the life of the agreements. We do not hold or issue any derivative financial instruments for speculative trading purposes. As of June 30, 2020, we did not have any outstanding interest rate swap agreements. Our interest rate swap agreement matured during the second quarter of 2019.

There ~~have been~~were no significant changes in our market risk exposures during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 as compared to the market risk exposures disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7A, of our annual report on Form 10-K for the year ended December 31, ~~2016.~~2019.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

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

Limitations on Effectiveness of Controls

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

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the three months ended ~~September~~June 30, ~~2017.~~2020.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth under ~~"Legal Proceedings"~~“Legal Proceedings” in Note ~~10,~~ 11, Commitments and Contingencies, of the Notes to ~~the~~ Condensed Consolidated Financial Statements included in this quarterly report is incorporated herein by reference.

ITEM 1A. RISK FACTORS

We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition or results of operations. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations. If any of these risks occur, our business, results of operations, or financial condition could suffer and the market price of our common stock could decline.

In assessing these risks, you should also refer to other information contained in this quarterly report on Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Condensed Consolidated Financial Statements and related Notes. We have marked with an asterisk (*) those risks, when applicable, that reflect substantive changes from, or additions to, the risks described in our annual report on Form 10-K for the year ended December 31, ~~2016,~~2019, if any.

We may not be able to successfully integrate acquired businesses or technologies into our existing business, including those of Aesynt, Ateb and InPharmics, which could negatively impact our operating results. *

As a part of our business strategy we may seek to acquire businesses, technologies or products in the future. For example, in April 2015, we acquired Mach4 and the entire remaining issued share capital of Avantec not previously owned by us, in January 2016, we acquired Aesynt, in December 2016, we acquired Ateb and in April 2017, we acquired InPharmics. We cannot provide assurance that any acquisition or any future transaction we complete will result in long-term benefits to us or our stockholders, or that our management will be able to integrate or manage the acquired business effectively. Acquisitions entail numerousface risks ~~including difficulties associated with the integration of operations, technologies, products and personnel that, if realized, could harm our operating results. Risks~~ related to ~~potential acquisitions include, but are not limited to:~~

~~difficulties in combining previously separate businesses into a single unit~~outbreaks of contagious diseases or other adverse public health epidemics, including the ongoing global novel coronavirus (COVID-19) pandemic, which has had an adverse effect and, depending on the ~~complexity of managing a more dispersed organization as sites are acquired;~~

~~complying with international labor laws that may restrict our ability to right-size organizations~~severity and ~~gain synergies across acquired operations;~~

~~complying with regulatory requirements, such as those~~duration of the ~~Food and Drug Administration, that we were not previously subject to;~~

the substantial costs that may be incurred and the substantial diversion of management's attention from day-to-day business when evaluating and negotiating such transactions and then integrating an acquired business;

discovery, after completion of the acquisition, of liabilities assumed from the acquired business or of assets acquired that are broader in scope and magnitude or are more difficult to manage than originally assumed;

~~failure to achieve anticipated benefits such as cost savings and revenue enhancements;~~

~~difficulties related to assimilating the products or key personnel of an acquired business;~~

~~failure to understand and compete effectively in markets in which we~~COVID-19 pandemic, could have ~~limited previous experience; and~~

~~difficulties in integrating newly acquired products and solutions into~~ a ~~logical offering that our customers understand and embrace.~~

~~Successful integration of acquired operations, products and personnel into Omnicell may place a significant burden~~material adverse effect on the combined company's management and internal resources. We may also experience difficulty in effectively integrating the different cultures and practices of any acquired entity. The challenges of integrating acquired entities could disrupt the combined company's ongoing business, distract its management focus from other opportunities and challenges, and increase expenses and working capital requirements. The diversion of management attention and any difficulties encountered in the transition and integration process could harm our business, financial condition, and ~~operating results.~~results of operations.*

WeAs a global provider of solutions for healthcare systems, our business may ~~fail~~be adversely impacted by public health crises such as the ongoing global COVID-19 pandemic. In December 2019, an outbreak of the coronavirus which causes COVID-19 was first reported in Wuhan, China. The contagious disease spread to ~~realize~~most of the ~~potential benefits~~countries in the world and throughout the United States, and, in March 2020, was declared a global pandemic by the World Health Organization and a U.S. national emergency. In the United States and many countries across the globe, efforts to contain the spread and mitigate the impact of ~~recently acquired businesses.~~

COVID-19 continue, with the implementation of quarantines, government restrictions on travel and movement (including shelter-in-place orders), business closures and suspensions, cancelled events and activities, social distancing and other voluntary and/or mandated changes in behavior. Countries and territories are in varying stages of restrictions and re-opening in response to the COVID-19 pandemic, and certain jurisdictions have begun re-opening only to return to restrictions due to increasing levels of COVID-19 cases. Accordingly, the duration and severity of the COVID-19 pandemic, continuing government responses thereto, and the related impacts on our business are highly uncertain and remain difficult to predict. The continued spread of COVID-19, concerns over the pandemic and related containment measures have adversely impacted our workforce and operations, as well as those of our customers and suppliers, and have had an adverse effect and, depending on the severity and duration of the ongoing COVID-19 pandemic, could have a material adverse effect on our business, financial condition, and results of operations.

In ~~2016~~these challenging and dynamic circumstances, we ~~acquired Aesynt~~are working to maintain business continuity in order to support the needs of our customers, while protecting the health and ~~Ateb,~~well-being of our customers, their patients and our own employees (including those who are carrying out business-critical activities, such as service, implementation, training, supply chain and certain research and development activities). We have prohibited non-essential travel while prioritizing travel that is essential to the implementation and support of our products, suspended participation in ~~April 2017~~group meetings and events while leveraging remote communication technology, and the vast majority of our non-manufacturing and non-customer facing personnel have transitioned to a work from home environment. While our manufacturing and distribution facilities have remained open due to our qualification as an essential business, we ~~acquired InPharmics, in an effort~~have increased cleaning and disinfection processes, implemented alternative scheduling procedures at our manufacturing facilities to ~~realize certain potential benefits, including expansion~~enhance social distancing protocols, and procured and distributed personal protective equipment (“PPE”) to our customer-facing and manufacturing personnel consistent with guidelines we developed to help ensure proper distribution and use of such PPE. If significant or critical portions of our workforce are unable to work effectively, or at all, as a result of the ~~combined businesses~~COVID-19 pandemic, including because of illness, quarantines, facility closures, ineffective remote work arrangements or technology failures or limitations, our operations would be materially adversely impacted. In addition, we have suspended in-person participation in certain customer, industry and ~~broader market opportunities. However,~~investor meetings and other events, or such events have been cancelled, postponed or moved to virtual-only experiences, which has reduced our ability to ~~realize these potential benefits depends~~engage with the healthcare and investor communities, and could negatively impact our business.

To support the needs of our customers on the frontline of the COVID-19 pandemic, during the first quarter of 2020, we launched a Rapid Response program to accelerate production and deployment of our XT Series automated dispensing systems to our customers. We streamlined our ordering and installation processes with preconfigured XT Series medication and supply

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dispensing systems designed to offer our customers flexibility and maximum emergency impact. However, our Rapid Response program may not meet customer expectations. In addition, to minimize the need for on-site visits and respect social distancing protocols, we are providing remote service options, training programs, and product demonstrations for our customers, leveraging technology to enable our sales team to operate in a remote sales environment, as well as providing our customers with options to self-install certain automation products. However, our remote training materials, and sales and service capabilities may be less effective than our ordinary in-person programs and service visits, which could adversely affect our relationships with new and prospective customers and harm our business.

Demand for our solutions, many of which involve a significant initial financial commitment from our customers, is largely dependent on our ~~successfully combining the businesses of Omnicell, Aesynt, Ateb~~customers’ financial strength and ~~InPharmics. The combined company may fail to realize the potential benefits~~capital and operating budgets. As a result of the ~~acquisition~~pandemic, many health systems, particularly in areas experiencing increasing levels of COVID-19 cases, continue to face increased costs due to large surge expenditures to cover COVID-19 caseload and increasing prices for needed equipment, decreased revenue due to cancelled or postponed elective procedures and other reduced demand, as well as cash flow challenges. In addition, due to social distancing concerns, our customers may cancel, defer or delay purchases or installations of our solutions in order to reduce the number of personnel entering their facilities. Decisions by our customers to cancel, defer or delay capital expenditure projects, generally reduced capital expenditures by healthcare facilities, and financial losses sustained by health systems as a ~~variety~~result of ~~reasons, including~~ the ~~following:~~

~~inability~~ COVID-19 pandemic to the extent not offset by financial assistance by federal, state and/or ~~failure~~local governments, could decrease demand for our products and related services, resulting in decreased revenue and lower revenue growth rates, which would adversely affect our operating results, perhaps materially. For example, during the second quarter of 2020, we continued to ~~expand~~see some delays in product bookings and ~~sales;~~expect to see lower product bookings and revenues during the fiscal year 2020 compared to management’s expectations prior to the COVID-19 outbreak. Furthermore, during the second quarter of 2020, in addition to continuing our previously announced organizational realignment initiative to further align our organizational infrastructure and operations with the strategic vision of the autonomous pharmacy, we initiated a restructuring plan to help mitigate the adverse impact of the COVID-19 pandemic on our business and financial results.

In addition, we cannot predict how long the pandemic and measures intended to contain the spread of COVID-19 will continue and what effect COVID-19 and the associated containment measures will have on our suppliers and vendors, in particular for any of our suppliers and vendors that may not qualify as essential businesses and may continue to suffer more significant disruptions to their business operations. Although we have not experienced any material disruptions to our supply chain to date, any future prolonged disruption to our suppliers in impacted countries and territories, whether as a result of restricted travel, quarantine requirements, or closures of factories or businesses, or otherwise, could significantly disrupt our supply chain and impact our ability to produce our products to meet customer demand, which would negatively impact our sales and operating results.

Furthermore, the COVID-19 pandemic has significantly increased economic and demand uncertainty and has led to disruption and volatility in the global capital markets, which could increase the cost of capital and adversely impact access to capital not only for us, but also for our customers and suppliers. Weak economic conditions and inability to ~~maintain business relationships with customers and suppliers of newly acquired companies, such as Ateb and InPharmics, due to post-acquisition disruption;~~

~~inability or failure to effectively coordinate sales and marketing efforts to communicate the capabilities of the combined company;~~

~~inability or failure to successfully integrate and harmonize financial reporting and information technology systems;~~

~~inability or failure to achieve the expected operational and cost efficiencies; and~~

~~loss of key employees.~~

~~The actual integration may result~~access capital in additional and unforeseen expenses or delays. If we are not able to successfully integrate the acquired businesses and their operations, or if there are delays in combining the businesses, the anticipated benefits of the acquisition may not be realized fullya timely manner, or at all, could reduce our customers’ demand for our products and services, which would adversely affect our operating results, perhaps materially. In addition, a recession, depression or other sustained adverse market event resulting from the pandemic could materially and adversely affect our business and the market price of our common stock.

The global COVID-19 pandemic continues to rapidly evolve, and the full extent to which COVID-19 will continue to impact our business, results of operations, and financial position will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the severity and duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the effectiveness of actions taken in the United States and other countries to contain and treat the disease, and the effectiveness of recent re-openings.

To the extent the COVID-19 pandemic continues to adversely affect our business and financial results, it may ~~take~~also have the effect of heightening certain other risks described in this “Risk Factors” section, including, but not limited to, those relating to unfavorable economic and market conditions, our ability to develop new products or enhance existing products, our need to generate sufficient cash flows to service our indebtedness, our tax rates, and our international operations.

Unfavorable economic and market conditions, a decreased demand in the capital equipment market, and uncertainty regarding the rollout of government legislation in the healthcare industry could adversely affect our operating results.*

Customer demand for our products is significantly linked to the strength of the economy. If decreases in demand for capital equipment caused by weak economic conditions and decreased corporate and government spending, including due to economic disruption caused by public health crises such as the COVID-19 pandemic, any effects of fiscal budget balancing at the federal level, proposed legislative changes or other uncertainties in connection with the current election year, deferrals or delays of capital equipment projects, longer time frames for capital equipment purchasing decisions, or generally reduced

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expenditures for capital solutions occurs, we will experience decreased revenues and lower revenue growth rates, and our operating results could be materially and adversely affected.

Additionally, as the U.S. Federal Government implements healthcare reform legislation, and as Congress, regulatory agencies, and other state governing organizations continue to ~~realize than expected.~~review and assess additional healthcare legislation and regulations, there may be an impact on our business. Healthcare facilities may decide to postpone or reduce spending until the implications of such healthcare enactments are more clearly understood, which may affect the demand for our products and harm our business.

If we fail to develop new products or enhance our existing products to react to rapid technological change and market demands in a timely and cost-effective manner, or if more newly developed solutions, such as our XT Series, XR2 Automated Central Pharmacy System, and IVX Workflow, are not adopted in the same time frame and/or quantity as we anticipate, this could have a material adverse effect on our business, ~~will suffer.~~financial condition, and results of operations.*

We must develop new products or enhance our existing products with improved technologies to meet rapidly evolving customer requirements. We are constantly engaged in the development process for next generation products, and we need to successfully design our next generation and other products for customers who continually require higher performance and functionality at lower costs. The development process for these advancements is lengthy and usually requires us to accurately anticipate technological innovations and market trends. Developing and enhancing these products can be time-consuming, costly, and complex. Our ability to fund product development and enhancements partially depends on our ability to generate revenues from our existing products.

There is a risk that these new product developments, such as our XT Series, XR2 Automated Central Pharmacy System and IVX semi-automated workflow solution, product enhancements, or ~~enhancements,~~preconfigured/non-customizable product offerings such as our Rapid Response XT Series automated dispensing systems, will be late, will have technical problems, will fail to meet customer or market specifications ~~and~~or will not be competitive with other products using alternative technologies that offer comparable performance and functionality. For example, we experienced technical quality issues with respect to early shipments of our XT Series automated dispensing systems to customers. These issues required significant resources to analyze the source of the deficiencies and implement corrective actions. We may discover technical quality issues in the future related to new products, or product enhancements, that require analysis and corrective action, which could damage our reputation and have a material adverse effect on our business, financial condition and results of operations.

While our business strategy includes a goal of advancing our platform with new product introductions annually, we may be unable to successfully develop additional next generation products, new products or product ~~enhancements.~~enhancements on an annual basis or at all. Our next generation products, such as our XT Series, or any ~~new~~of our newer products, such as our ~~M5000 and VBM 200/F packaging equipment for multimedication blister cards,~~XR2 Automated Central Pharmacy System or IVX Workflow, or product enhancements may not be accepted in new or existing markets.

Our ~~business will suffer if we fail~~ability to execute successfully on our recently-launched vision of a fully digitized and autonomous pharmacy depends on our ability to continue to develop and introduce new products or product enhancements, and integrate new products with existing offerings, in furtherance of this vision in a timely manner orand on a cost-effective basis. If we fail to do so, we may be unable to achieve the vision of the autonomous pharmacy, we may not realize the anticipated benefits of our investments in support of this vision, and this could have a material adverse effect on our business, financial condition, and results of operations.

We operate in highly competitive markets, and we may be unable to compete successfully against new entrants and established companies with greater resources and/or existing business relationships with our current and potential customers.*

The markets in which we operate are intensely competitive. We expect continued and increased competition from current and future competitors, many of which have significantly greater financial, technical, marketing and other resources than we do. Our current direct competitors in the medication management automation solutions market include Becton, Dickinson and Company; ARxIUM; Cerner Corporation; Swisslog Healthcare as a division of KUKA; PAR Excellence Systems, Inc.; TECSYS Inc.; Baxter Healthcare Corporation; Grifols, S.A.; Willach Pharmacy Solutions; Yuyama Co., Ltd; RoboPharma B.V.; Meditech-Pharma; KLS GmbH; and Gollmann Kommissioniersysteme GmbH. Our current direct competitors in the medication adherence solutions market include Drug Package, Inc.; ARxIUM; Manchac Technologies, LLC; RX Systems, Inc.; McKesson Corporation; Digital Pharmacist Inc.; Tabula Rasa Healthcare, Inc. (through its acquisition of PrescribeWellness); Synergy Medical; Parata Systems; Medicine-On-Time; Cardinal Health, Inc.; WebsterCare; Becton, Dickinson and Company (through its BD ROWA brand); TriaTech Medical Systems Inc. (through its STOCKART brand); and JVM Co. Ltd.

The competitive challenges we face in the markets in which we operate include, but are not limited to, the following:

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•certain competitors may offer or have the ability to offer a broader range of solutions in the marketplace that we are unable to match;

•certain competitors may develop alternative solutions to the customer problems our products are designed to solve that may provide a better customer outcome or a lower cost of operation;

•certain competitors may develop new features or capabilities for their products not previously offered that could compete directly with our products;

•competitive pressures could result in increased price competition for our products and services, fewer customer orders, and reduced gross margins, any of which could harm our business;

•current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties, including larger, more established healthcare supply companies, thereby increasing their ability to develop and offer a broader suite of products and services to address the needs of our prospective customers;

•our competitive environment has recently experienced a significant degree of consolidation which could lead to competitors developing new business models that require us to adapt how we market, sell, or distribute our products; for example, in 2018, we initiated a company-wide organizational realignment in order to align our organizational infrastructure to centrally manage our business, including the marketing, sale, and distribution of our products, in part to address the continuing consolidation in the healthcare industry;

•other established or emerging companies may enter the markets in which we operate with products and services that are preferred by our current and potential customers based on factors such as features, capabilities, or cost;

•our competitors may develop, license, or incorporate new or emerging technologies or devote greater resources to the development, promotion, and sale of their products and services than we do;

•certain competitors have greater brand name recognition and a more extensive installed base of medication management automation solutions or other products and services than we do, and such advantages could be used to increase their market share;

•certain competitors may have existing business relationships with our current and potential customers, which may cause these customers to purchase competing products and services from these competitors; and

•our competitors may secure products and services from suppliers on more favorable terms or secure exclusive arrangements with suppliers or buyers that may impede the sales of our products and services.

If we fail to compete successfully against new entrants and established companies, it could materially adversely affect our business, financial condition, results of operations, and cash flows.

Any reduction in the demand for or adoption of our medication management automation solutions, medication packaging systems, or related services would reduce our revenues.*

Our medication management automation solutions represent only one approach to managing the distribution of pharmaceuticals and supplies at acute healthcare facilities, and our medication packaging systems represent only one way of managing medication distribution at non-acute care facilities. While a significant portion of domestic acute care facilities have adopted some level of medication and/or supply automation, a significant portion of domestic and international healthcare facilities still use traditional approaches in some form that do not include fully automated methods of medication management. As a result, we must continuously educate existing and prospective customers about the advantages of our products, which requires significant sales efforts, particularly when we are seeking to replace an incumbent supplier of medication management automation solutions, and can cause longer sales cycles. Despite our significant efforts and extensive time commitments in sales to healthcare facilities, we cannot be assured that our efforts will result in sales to these customers.

In addition, our medication management automation solutions and our more complex automated packaging systems typically represent a sizable initial capital expenditure for healthcare organizations. Changes in the budgets of these organizations and the timing of spending under these budgets can have a significant effect on the demand for our medication management automation solutions, medication packaging systems, and related services. These budgets are often supported by cash flows that can be negatively affected by declining investment income and influenced by limited resources, increased operational and financing costs, macroeconomic conditions such as unemployment rates, and conflicting spending priorities among different departments. Any decrease in expenditures by healthcare facilities or increased financing costs (including as a

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result of the impacts of public health crises such as the ongoing COVID-19 pandemic) could decrease demand for our medication management automation solutions, medication packaging systems, and related services, and reduce our revenues.

The transition to selling more products which include a software as a service or solution as a service subscription presents a number of risks.

We currently offer our IV compounding robots, Medication Packager products, and XR2 Automated Central Pharmacy System together with personnel to operate the equipment, through subscription agreements. We also offer Performance Center, Patient Engagement, and certain other products and solutions as a subscription and/or service. IVX Workflow also contains a payment stream as part of the license fees in its pricing structure. As we continue to execute on the autonomous pharmacy vision and grow subscription and cloud-based offerings, we may offer additional products and services on a subscription basis. The transition to selling more products and services on a subscription basis presents a number of risks. The shift requires an investment of technical, financial, compliance and sales resources, and we cannot guarantee that we will recoup the costs of such investments, or that these investments will improve our long-term growth and results of operations. If adoption of certain subscription products takes place faster than anticipated, the shift to subscription revenues from capital equipment sales will defer revenue recognition and we may experience a temporary reduction of revenues. If any of our subscription products do not substantially meet customer requirements, customers may cancel subscriptions, causing a decline in revenue. Customers may elect not to renew their subscriptions upon expiration, or they may attempt to renegotiate pricing or other contractual terms at or prior to renewal on terms that are less favorable to us. In addition, since revenue is generally recognized over the term of the subscription, any decrease in customer purchases of our subscription-based products and services will not be fully reflected in our operating results until future periods, and it will also be more difficult for us to rapidly increase our revenue through additional subscription sales in any one period.

When we experience delays in installations of our medication management automation solutions or our more complex medication packaging systems, and such delays result in delays in our ability to recognize revenue, our competitive position, results of operations, and financial condition could be harmed.*

The purchase of our medication management automation solutions or our more complex medication packaging systems is often part of a customer’s larger initiative to re-engineer its pharmacy and their distribution and materials management systems. As a result, our sales cycles are often lengthy. The purchase of our systems often entails larger strategic purchases by customers that frequently require more complex and stringent contractual requirements and generally involve a significant commitment of management attention and resources by prospective customers. These larger and more complex transactions often require the input and approval of many decision-makers, including pharmacy directors, materials managers, nurse managers, financial managers, information systems managers, administrators, lawyers, and boards of directors. In addition, new product announcements, such as that of our XT Series, can cause a delay in our customers’ decisions to purchase our products or convert pending orders for our older products to those of our newer products, such as the XT Series. For these and other reasons, the sales cycle associated with sales of our medication management automation solutions and our more complex medication packaging systems is often lengthy and subject to a number of delays over which we have little or no control. A delay in, or loss of, sales of these systems (including as a result of the impacts of public health crises such as the ongoing COVID-19 pandemic) could have an adverse effect upon our operating results and could harm our business.

In addition, and in part as a result of the complexities inherent in larger transactions, the time between the purchase and installation of our systems can generally range from two weeks to one year. Delays in installation can occur for reasons that are often outside of our control. We have also experienced fluctuations in our customer and transaction size mix, which makes our ability to forecast our product bookings more difficult. Because we recognize revenues for our medication management automation solutions and our more complex medication packaging systems only upon installation at a customer’s site, any delay in installation (including as a result of the impacts of public health crises such as the ongoing COVID-19 pandemic) will also cause a delay in the recognition of the revenues for those systems.

We are subject to laws, regulations, and other legal obligations related to privacy, data protection, and information security, and the costs of compliance with, and potential liability associated with, our actual or perceived failure to comply with such obligations could harm our business.

We receive, store, and process personal information and other data from and about customers, in addition to our employees and services providers. In addition, our customers use our solutions to obtain and store personal information, including personal health information. For example, our customers use our Omnicell Patient Engagement platform to guide and track patient notes, interventions and appointments, which involves the collection of personal health information of patients. Our handling of data is subject to a variety of laws and regulations by state, local, and foreign agencies, as well as contractual obligations and industry standards. Regulatory focus on data privacy and security concerns continues to increase globally, and laws and regulations concerning the collection, use, and disclosure of personal information are expanding and becoming more complex. In the United States, these include federal health information privacy laws (such as the Health Insurance Portability

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and Accountability Act of 1996 ("HIPAA"), discussed below), security breach notification laws, and consumer protection laws, as well as state laws addressing privacy and data security. For example, The California Consumer Privacy Act of 2018, which became effective in January 2020 and enforceable by the California Attorney General on July 1, 2020, imposes additional obligations on companies that process information on California residents.

Internationally, various foreign jurisdictions in which we operate have established, or are developing, their own data privacy and security legal framework with which we or our customers must comply. In certain cases, these international laws and regulations are more restrictive than many regulations in the United States. For example, within the European Union, the General Data Protection Regulation (“GDPR”), which became effective in May 2018, imposes more stringent data protection requirements on U.S.-based companies such as ours which receive or process personal information from EU residents, and establishes greater penalties for non-compliance. Violations of the GDPR can result in penalties up to the greater of €20.0 million or 4% of global annual revenues, and may also lead to damages claims by data controllers and data subjects. Such penalties are in addition to any civil litigation claims by data controllers, customers, and data subjects. Further, Brexit (discussed in the risk factor “The United Kingdom’s recent withdrawal from the European Union could adversely affect us” below) has created uncertainty regarding the regulation of data protection in the United Kingdom. In particular, although the United Kingdom enacted a Data Protection Act in May 2018 that is designed to be consistent with the GDPR, uncertainty remains regarding how data transfers to and from the United Kingdom will be regulated following the Brexit Transition Period (also discussed below).

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may legally or contractually apply to us. We also expect that there will continue to be new proposed laws, regulations, and industry standards relating to privacy, data protection, and information security. We cannot predict the scope of any such future laws, regulations, and standards that may be applicable to us, or how courts, agencies, or data protection authorities might interpret current ones. It is possible that these laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the functionality of our solutions, and we cannot predict the impact of such potential, future, inconsistent interpretations.

Compliance with privacy, data protection, and information security laws, regulations, and other obligations is costly, and we may encounter difficulties, delays, or significant expenses in connection with our compliance, or because of our customers’ need to comply or our customers’ interpretation of their own legal requirements. In addition, any failure or perceived failure by us to comply with laws, regulations, policies, legal or contractual obligations, industry standards, or regulatory guidance relating to privacy or data security could result in governmental investigations and enforcement actions, litigation, fines and penalties, exposure to indemnification obligations or other liabilities, and adverse publicity, all of which could have an adverse effect on our reputation, as well as our business, financial condition, and results of operations. For example, as discussed further in the section entitled “Legal Proceedings” in Note 11, Commitments and Contingencies, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report, we are currently and have in the past been subject to certain class action lawsuits asserting, among other allegations, claims of violation of the Illinois Biometric Information Privacy Act.

If we experience a significant disruption in our information technology systems, breaches of data security, or cyber-attacks on our systems or solutions, our business could be adversely affected.*

We rely on information technology systems to keep financial records and corporate records, communicate with staff and external parties, and operate other critical functions, including sales and manufacturing processes. In addition, we also utilize third-party cloud services in connection with our operations. Our information technology systems and third-party cloud services are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses, public health crises such as the ongoing COVID-19 pandemic, other catastrophic events or environmental impact. If we were to experience a prolonged system disruption in our information technology systems or third-party cloud services, it could negatively impact the coordination of our sales, planning, and manufacturing activities, which could adversely affect our business. In addition, in order to maximize our information technology efficiency, we have physically consolidated our primary corporate data and computer operations. This concentration, however, exposes us to a greater risk of disruption to our internal information technology systems. Although we maintain offsite back-ups of our data, if operations at our facilities were disrupted, it may cause a material disruption in our business if we are not capable of restoring function on an acceptable time frame.

Our information technology systems and third-party cloud services are potentially vulnerable to cyber-attacks or other data security breaches, whether by employees or others, which may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of sensitive and confidential information of our employees, customers, suppliers, and others, any of which could have a material adverse effect on our business, financial condition, and results of operations. Moreover, a security breach or privacy violation that leads to disclosure or modification of, or prevents access to, patient information, including personally identifiable information or protected health information, could harm our reputation, result in litigation, compel us to comply with federal

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and/or state breach notification laws, subject us to mandatory corrective action, require us to verify the correctness of database contents, and otherwise subject us to liability under laws and regulations that protect personal data, resulting in increased costs or loss of revenues.

In addition, we sell certain solutions that receive, store, and process our customers’ data. For example, our Performance Center solution combines a cloud-based predictive intelligence platform with expert services designed to monitor pharmacy operations and recommend opportunities to help improve efficiency, regulatory compliance and patient outcomes. In addition, our Omnicell Patient Engagement platform is a private cloud-based solution that supports improving patient adherence goals through a single web-based platform that hosts functionality to guide and track patient notes, interventions and appointments. An effective attack on our solutions could disrupt the proper functioning of our solutions, allow unauthorized access to sensitive and confidential information of our customers (including protected health information), and disrupt our customers’ operations. Any of these events could cause our solutions to be perceived as having security vulnerabilities and reduce demand for our solutions, which could have a material adverse effect on our business, financial condition, and results of operations. These risks are likely to increase as we continue to grow our cloud-based offerings, including in support of the autonomous pharmacy vision, and as we receive, store, and process more of our customers’ data. We use third-party cloud providers in connection with certain of our cloud-based offerings or third-party providers to host our own data, in which case we rely on the processes, controls, and security such third parties have in place to protect the infrastructure. We also may acquire companies, products, services, and technologies and inherit such risks when we integrate these acquisitions within Omnicell.

While we have implemented a number of security measures designed to protect our systems and data, including firewalls, antivirus and malware detection tools, patches, log monitors, routine back-ups, system audits, routine password modifications, and disaster recovery procedures, and have designed certain security features into our solutions, such measures may not be adequate or implemented properly to prevent or fully address the adverse effect of such events, and in some cases we may be unaware of an incident or its magnitude and effects. Any failure to prevent such security breaches or privacy violations, or implement satisfactory remedial measures, could require us to expend significant resources to remediate any damage, disrupt our operations or the operations of our customers, damage our reputation, or expose us to a risk of financial loss, litigation, regulatory penalties, contractual indemnification obligations, or other liability because of lost or misappropriated information, including sensitive patient data. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position.*

~~In connection with the Aesynt Acquisition,~~On November 15, 2019, we ~~entered into a $400.0 million~~refinanced our existing senior secured credit facility pursuant to ~~a credit~~an amended and restated agreement ~~by and among us, the~~with certain lenders, ~~from time to time party thereto, Wells Fargo Securities, LLC, as sole lead arranger~~ and Wells Fargo Bank, National Association, as administrative agent (the ~~“Credit~~“A&R Credit Agreement”). The A&R Credit Agreement provides for a ~~$200.0~~five-year revolving credit facility of $500.0 million ~~term~~and an uncommitted incremental loan facility ~~and a $200.0 million revolving credit facility.~~of up to $250.0 million. At the closing of the Aesynt Acquisition, we incurred $255.0 million in secured debt under the Credit Agreement, consisting of $200.0 million of term loans and $55.0 million of revolving loans. In December 2016, we withdrew an additional $40.0 million fromJune 30, 2020, there was no outstanding loan balance for the revolving credit facility. In April 2017 and July 2017, we withdrew an additional $10.0 million and $27.0 million, respectively. As of September 30, 2017, $134.5 million of the credit facilities has been paid off. The remaining loan balances at September 30, 2017 were $185.0 million of term loans and $12.5 million of revolving loans.

Our debt may:

•limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, or other general business purposes;

•limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions, or other general business purposes;

•require us to use a substantial portion of our cash flow from operations to make debt service payments;

•limit our flexibility to plan for, or react to, changes in our business and industry;

•place us at a competitive disadvantage compared to our less leveraged competitors; and

•increase our vulnerability to the impact of adverse economic and industry conditions.

Our ability to meet our debt service obligations will depend on our future performance, which will be subject to financial, business, and other factors affecting our operations (including the impact of the ongoing COVID-19 pandemic), many of which are beyond our control. If we do not have sufficient funds to meet our debt service obligations, we may be required to refinance or restructure all or part of our existing debt, sell assets, borrow more money or sell securities, none of which we can assure you that we would be able to do in a timely manner, or at all.

In addition, as more fully described in the risk factor titled “Covenants in our A&R Credit Agreement restrict our business and operations in many ways, and if we do not effectively manage our compliance with these covenants, our financial conditions and results of operations could be adversely affected”

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below, the A&R Credit Agreement includes customary restrictive covenants that impose operating and financial restrictions on us, including restrictions on our ability to take actions that could be in our best interests.

In addition, borrowings under the A&R Credit Agreement bear interest based on the London Interbank Offered Rate (“LIBOR”). LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These ~~restrictive covenants~~reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of borrowings under the A&R Credit Agreement and other financial contracts that we may enter into that are indexed to LIBOR.

We may fail to realize the potential benefits of acquired businesses which could negatively affect our business, financial condition, and operating ~~covenants restricting, among other things,~~results.

We have in the past acquired businesses, including Aesynt and Ateb in 2016 and InPharmics in 2017, and expect to continue to seek to acquire businesses, technologies, or products in the future. We cannot provide assurance that any acquisition or any future transaction we complete will result in long-term benefits to us or our stockholders, or that we will be able to integrate or manage the acquired business effectively.

These transactions may involve significant challenges, uncertainties, and risks, including:

•difficulties in combining previously separate businesses into a single unit and the complexity of managing a more dispersed organization as sites are acquired;

•complying with international labor laws that may restrict our ability to ~~incur additional indebtedness, effect certain acquisitions or make other fundamental changes. The Credit Agreement also includes financial covenants requiring us~~right-size organizations and gain synergies across acquired operations;

•complying with regulatory requirements, such as those of the FDA, that we were not ~~to exceed a maximum consolidated total leverage ratio of 3.00:1 (subject to certain exceptions) and to maintain a minimum fixed charge coverage ratio of 1.50:1. Our~~ previously subject to;

•failure to ~~comply with~~understand and compete effectively in markets in which we have limited previous experience;

•the substantial costs that may be incurred and the substantial diversion of management’s attention from day-to-day business when evaluating and negotiating such transactions and then integrating an acquired business, including any unforeseen delays and expenditures that may result;

•discovery, after completion of the ~~covenants~~acquisition, of liabilities assumed from the acquired business or of assets acquired that are ~~included~~broader in ~~the Credit Agreement could result in a default under the terms~~scope and magnitude or are more difficult to manage than originally assumed;

•difficulties related to assimilating and retaining key personnel of ~~the Credit Agreement, which could permit the lenders to declare all or part of any outstanding borrowings to be immediately~~an acquired business, including due ~~and payable, or to refuse to permit additional borrowings under the revolving loan facility, which could restrict our operations, particularly our ability to respond~~ to changes in compensation, changes in management, reporting relationships, future prospects, office culture, or the direction of the acquired business;

•failure to achieve anticipated benefits such as cost savings and revenue enhancements;

•difficulties in integrating newly acquired products and solutions in our offerings to our customers and an inability or failure to expand product bookings and sales;

•the inability to maintain business relationships with customers and suppliers of newly acquired companies due to post-acquisition disruption;

•the inability or failure to effectively coordinate sales and marketing efforts to communicate the capabilities of the combined company;

•the inability or failure to successfully integrate and harmonize financial reporting and information technology systems; and

•the inability or failure to achieve the expected operational and cost efficiencies.

If we are not able to successfully integrate or manage the acquired businesses and their operations, or if there are delays in combining the businesses, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected and our business, ~~or to take specified actions to take advantage of certain business opportunities that~~financial condition, and operating results may be presented to us. In addition, if we are unable to repay those amounts, the administrative agent and the lenders under the Credit Agreement could proceed against the collateral granted to them to secure that debt, which would seriously harm our business.negatively impacted.

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If goodwill or other intangible assets that we recorded in connection with the Aesynt, Ateb, and InPharmics ~~Acquisitions,~~acquisitions, or have recorded in connection with prior acquisitions, become impaired, we could be required to take significant charges against earnings.*

In connection with the accounting for the Aesynt and Ateb ~~Acquisitions~~acquisitions in 2016, and the InPharmics acquisition in 2017, we recorded a significant amount of goodwill and other intangible assets, and we maintain significant goodwill and other intangible assets relating to prior acquisitions, such as our acquisitions of MTS, Avantec, and Mach4. As of ~~September~~June 30, ~~2017,~~2020, we had recorded approximately ~~$507.1~~$449.2 million net, in goodwill and intangible assets in connection with past acquisitions. Under U.S. generally accepted accounting principles, ~~("GAAP"),~~ we must assess, at least annually and potentially more frequently, whether the value of goodwill and other indefinite-lived intangible assets has been impaired. Amortizing intangible assets will be assessed for impairment in the event of an impairment indicator. Any reduction or impairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could materially adversely affect our results of operations and shareholders’ equity in future periods.

Unfavorable economic and market conditions, a decreased demand in the capital equipment market and uncertainty regarding the rollout of government legislation in the healthcare industry could adversely affect our operating results.

Customer demand for our products is significantly linked to the strength of the economy. If decreases in demand for capital equipment caused by weak economic conditions and decreased corporate and government spending, including any effects of fiscal budget balancing at the federal level, deferrals or delays of capital equipment projects, longer time frames for capital equipment purchasing decisions or generally reduced expenditures for capital solutions occurs, we will experience decreased revenues and lower revenue growth rates and our operating results could be materially and adversely affected.

Additionally, as the U.S. Federal Government implements healthcare reform legislation, and as Congress, regulatory agencies and other state governing organizations continue to review and assess additional healthcare legislation and regulations, there may be an impact on our business. Healthcare facilities may decide to postpone or reduce spending until the implications of such healthcare enactments are more clearly understood, which may affect the demand for our products and harm our business.

The medication management and supply chain solutions market is highly competitive and we may be unable to compete successfully against new entrants and established companies with greater resources and/or existing business relationships with our current and potential customers.

The medication management and supply chain solutions market is intensely competitive. We expect continued and increased competition from current and future competitors, many of which have significantly greater financial, technical, marketing and other resources than we do. Our current direct competitors in the medication management and supply chain solutions market include Becton Dickinson/CareFusion Corporation, ARxIUM (through its acquisition of MedSelect, Inc. and Automed), Cerner Corporation, Talyst, Inc., Emerson Electronic Co. (through its acquisition of medDispense, L.P.), Swisslog Holding AG (which was acquired by KUKA), WaveMark Inc., ParExcellence Systems, Inc., Vanas N.V., Infor (formally Lawson Software, Inc.), Willach Pharmacy Solutions, DIH Technologies Co., Yuyama Co., Ltd, Robopharma B.V., Apostore GmbH, KlS Steuerungstechnik GmbH and Suzhou Iron Technology (China). Our current direct competitors in the medication packaging solutions market include Drug Package, Inc., AutoMed Technologies, Inc. (a subsidiary of ARxIUM), Manchac Technologies, LLC (through its Dosis product line) and RX Systems, Inc. in the United States, and Jones Packaging Ltd., Synergy Medical Systems, Manrex Ltd, and WebsterCare outside the United States.

~~The competitive challenges we face in the medication management and supply chain solutions market include, but are not limited to, the following:~~

~~certain competitors may offer or have the ability to offer a broader range of solutions in the marketplace that we are unable to match;~~

~~certain competitors may develop alternative solutions to the customer problems our products are designed to solve that may provide a better customer outcome or a lower cost of operation;~~

~~certain competitors may develop new features or capabilities for their products not previously offered that could compete directly with our products;~~

~~competitive pressures could result in increased price competition for our products and services, fewer customer orders and reduced gross margins, any of which could harm our business;~~

current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties, including larger, more established healthcare supply companies, such as the acquisition of CareFusion Corporation by Becton Dickenson Corporation, thereby increasing their ability to develop and offer a broader suite of products and services to address the needs of our prospective customers;

our competitive environment is currently experiencing a significant degree of consolidation which could lead to competitors developing new business models that require us to adapt how we market, sell or distribute our products;

other established or emerging companies may enter the medication management and supply chain solutions market with products and services that are preferred by our current and potential customers based on factors such as features, capabilities or cost;

~~our competitors may develop, license or incorporate new or emerging technologies or devote greater resources to the development, promotion and sale of their products and services than we do;~~

certain competitors have greater brand name recognition and a more extensive installed base of medication and supply dispensing systems or other products and services than we do, and such advantages could be used to increase their market share;

certain competitors may have existing business relationships with our current and potential customers, which may cause these customers to purchase medication and supply dispensing systems or automation solutions from these competitors; and

our competitors may secure products and services from suppliers on more favorable terms or secure exclusive arrangements with suppliers or buyers that may impede the sales of our products and services.

~~Any reduction in the demand for or adoption of our medication and supply systems, related services, or consumables would reduce our revenues.~~

Our medication and supply dispensing systems represent only one approach to managing the distribution of pharmaceuticals and supplies at acute healthcare facilities and our medication packaging systems represent only one way of managing medication distribution at non-acute care facilities. While a significant portion of domestic acute care facilities have

adopted some level of medication and/or supply automation, a significant portion of domestic and international healthcare facilities still use traditional approaches in some form that do not include fully automated methods of medication and supply management. As a result, we must continuously educate existing and prospective customers about the advantages of our products, which requires significant sales efforts, particularly when we are seeking to replace an incumbent supplier of medication and supply automation solutions and can cause longer sales cycles. Despite our significant efforts and extensive time commitments in sales to healthcare facilities, we cannot be assured that our efforts will result in sales to these customers.

In addition, our medication and supply dispensing systems and our more complex automated packaging systems typically represent a sizable initial capital expenditure for healthcare organizations. Changes in the budgets of these organizations and the timing of spending under these budgets can have a significant effect on the demand for our medication and supply dispensing systems and related services. These budgets are often supported by cash flows that can be negatively affected by declining investment income and influenced by limited resources, increased operational and financing costs, macroeconomic conditions such as unemployment rates and conflicting spending priorities among different departments. Any decrease in expenditures by healthcare facilities or increased financing costs could decrease demand for our medication and supply dispensing systems and related services and reduce our revenues.

Changing customer requirements could decrease the demand for our products and services, and our new product solutions may not achieve market acceptance.

The ~~medication management and supply chain solutions market is~~markets in which we operate are characterized by evolving technologies and industry standards, frequent new product introductions and dynamic customer requirements that may render existing products obsolete or less competitive. ~~The medication management and supply chain solutions market~~These markets could erode rapidly due to unforeseen changes in the features and functions of competing products, as well as the pricing models for such products. Our future success will depend in part upon our ability to enhance our existing products and services, and to develop and introduce new products and services to meet changing customer requirements. The process of developing products and services such as those we offer is extremely complex, and is expected to become increasingly more complex and expensive in the future as new technologies are introduced. If we are unable to enhance our existing products and services or develop new ~~products~~solutions to meet changing customer requirements, and bring such enhancements and ~~products~~solutions to market in a timely manner, demand for our products or services could decrease.

We cannot provide assurance that we will be successful in marketing any new products or services that we introduce, that new products or services will compete effectively with similar products or services sold by our competitors, or that the level of market acceptance of such products or services will be sufficient to generate expected revenues and synergies with our other products or services. For example, ~~we recently announced~~ our ~~new~~ XT Series, ~~solutions,~~XR2 Automated Central Pharmacy System, and ~~while~~IVX Workflow are relatively new to the ~~initial customer response has been positive,~~market and we cannot guarantee that demand ~~particularly in the near term,~~ will meet our expectations. ~~In addition, our M5000 and VBM 200/F automated pharmacy solutions for multi-medication blister card packaging are also new to the market.~~ Deployment of new products or services often requires interoperability with other Omnicell products or services as well as with healthcare ~~facilities'~~facilities’ existing information management systems. If these products or services fail to satisfy these demanding technological objectives, our customers may be dissatisfied, and we may be unable to generate future sales.

The healthcare industry faces changes to healthcare legislation and other healthcare reform, as well as financial constraints and consolidation, ~~that~~which could adversely affect the demand for our products and services.

The healthcare industry has faced, and will likely continue to face, significant financial constraints. U.S. government legislation such as the American Recovery and Reinvestment Act of 2009, the Patient Protection and Affordable Care Act of 2010, the Budget Control Act of 2011, and other health reform legislation, or the repeal of all or a portion of any such legislation, may cause customers to postpone purchases of our products due to reductions in federal healthcare program reimbursement rates and/or needed changes to their operations in order to meet the requirements of legislation. Our automation solutions often involve a significant financial commitment from our customers and, as a result, our ability to grow our business is largely dependent on our ~~customers'~~customers’ capital and operating budgets. To the extent legislation promotes spending on other initiatives or healthcare ~~providers~~providers’ spending declines or increases more slowly than we anticipate, demand for our products and services could decline.

~~Many healthcare~~Healthcare providers have consolidated to create larger healthcare delivery organizations in order to achieve economies of scale and/or greater market power. If this consolidation continues, it would increase the size of certain target customers, which could increase the cost, effort, and difficulty in selling our products to such target customers, or could cause our existing customers or potential new customers to begin utilizing our ~~competitors'~~competitors’ products if such customers are acquired by healthcare providers that prefer our ~~competitors'~~competitors’ products to ours. In addition, the resulting organizations could have greater bargaining power, which may lead to price erosion.

Demand for our consumable medication packages is time-sensitive and if we are not able to supply the demand from our institutional and retail pharmacy customers on schedule and with quality packaging products, they may use alternative means to distribute medications to their customers.

Approximately 10% of our revenue is generated from the sale of consumable medication packages, which are produced in our St. Petersburg, Florida facilities on a continuous basis and shipped to our institutional pharmacy and retail pharmacy customers shortly before they are required by those customers.The demands placed on institutional pharmacies and retail pharmacies by their customers represent real time requirements of those customers. Our customer agreements for the sale of consumable medication packages are typically short-term in nature and typically do not include any volume commitments on the part of the customer. Although our packaging may be considered the preferred method of maintaining control of medications during the medication distribution and administration process, institutional and retail pharmacies have alternative methods of distributing medications, including bulk and alternative packaging, and medication adherence packaging may be supplied by our competitors. To the extent that we are unable to supply quality packaging to our customers in a timely manner, that demand will be met via alternative distribution methods, including consumable medication packaging sold by our competitors, and our revenue will decline. Any disruption in the production capabilities of our St. Petersburg facilities will adversely affect our ability to ship our consumable medication packages and would reduce our revenue.

~~Our international operations may subject us to additional risks that can adversely affect our operating results.~~

We currently have operations outside of the United States, including sales efforts centered in Canada, Europe, the Middle East and Asia-Pacific regions and supply chain efforts in Asia. We intend to continue to expand our international operations, particularly in certain markets that we view as strategic, including China and the Middle East. Our international operations subject us to a variety of risks, including:

~~our reliance on distributors for the sale and post-sale support of our automated dispensing systems outside the United States and Canada;~~

~~the difficulty of managing an organization operating in various countries;~~

~~political sentiment against international outsourcing of production;~~

~~reduced protection for intellectual property rights, particularly in jurisdictions that have less developed intellectual property regimes;~~

~~changes in foreign regulatory requirements;~~

the requirement to comply with a variety of international laws and regulations, including privacy, labor, import, export, environmental standards, tax, anti-bribery and employment laws and changes in tariff rates;

~~fluctuations in currency exchange rates and difficulties in repatriating funds from certain countries;~~

additional investment, coordination and lead-time necessary to successfully interface our automation solutions with the existing information systems of our customers or potential customers outside of the United States; and

~~political unrest, terrorism and the potential for other hostilities in areas in which we have facilities.~~

~~If we are unable to anticipate and address these risks properly, our business or operating results will be harmed.~~

When we experience delays in installations of our medication and supply dispensing systems or our more complex medication packaging systems, resulting in delays in our ability to recognize revenue, our competitive position, results of operations and financial condition could be harmed.

The purchase of our medication and supply dispensing systems or our more complex medication packaging systems is often part of a customer's larger initiative to re-engineer its pharmacy and their distribution and materials management systems. As a result, our sales cycles are often lengthy. The purchase of our systems often entail larger strategic purchases by customers that frequently require more complex and stringent contractual requirements and generally involve a significant commitment of management attention and resources by prospective customers. These larger and more complex transactions often require the input and approval of many decision-makers, including pharmacy directors, materials managers, nurse managers, financial managers, information systems managers, administrators, lawyers and boards of directors. In addition, new product announcements, such as that of our new XT Series, can cause a delay in our customers' decision to purchase our products or convert orders from our older products to those of our newer products, such as the XT Series. For these and other reasons, the sales cycle associated with the sale of our medication and supply dispensing systems is often lengthy and subject to a number of delays over which we have little or no control. A delay in, or loss of, sales of our medication and supply dispensing systems could have an adverse effect upon our operating results and could harm our business.

In addition, and in part as a result of the complexities inherent in larger transactions, the time between the purchase and installation of our systems can range from two weeks to one year. Delays in installation can occur for reasons that are often outside of our control. We have also experienced fluctuations in our customer and transaction size mix, which makes our ability to forecast our product bookings more difficult. The introduction of our XT Series and our ability to manufacture sufficient

quantities, to meet our customers' installation schedules, has increased these forecasting difficulties. Because we recognize revenue for our medication and supply dispensing systems and our more complex medication packaging systems only upon installation at a customer's site, any delay in installation by our customers will also cause a delay in the recognition of the revenue for that system.

Government regulation of the healthcare industry could reduce demand for our products, or substantially increase the cost to produce our products.

The manufacture and sale of most of our current products are not regulated by the FDA, or the Drug Enforcement Administration ~~("DEA"~~(“DEA”). Through our acquisition of Aesynt, we have both a Class I and a Class 2,II, 510(k) exempt medical ~~device~~devices which are subject to FDA regulation and require compliance with the FDA Quality System Regulation as well as medical

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device reporting. Additional products may be regulated in the future by the FDA, DEA, or other federal agencies due to future legislative and regulatory initiatives or reforms. Direct regulation of our business and products by the FDA, DEA, or other federal agencies could substantially increase the cost to produce our products and increase the time required to bring those products to market, reduce the demand for our products, and reduce our revenues. In addition, healthcare providers and facilities that use our equipment and dispense controlled substances are subject to regulation by the DEA. The failure of these providers and facilities to comply with DEA requirements, including the Controlled Substances Act and its implementing regulations, could reduce demand for our products and harm our competitive position, results of operations, and financial condition. Pharmacies are regulated by individual state boards of pharmacy that issue rules for pharmacy licensure in their respective jurisdictions. State boards of pharmacy do not license or approve our medication ~~and supply dispensing systems;~~management automation solutions; however, pharmacies using our equipment are subject to state board approval. The failure of such pharmacies to meet differing requirements from a significant number of state boards of pharmacy could decrease demand for our products and harm our competitive position, results of operations, and financial condition. Similarly, hospitals must be accredited by an accrediting organization approved by the Centers for Medicare & Medicaid Services, such as The Joint Commission, in order to be eligible for Medicaid and Medicare funds. The Joint Commission does not ~~approve or~~ accredit medication ~~and supply dispensing systems;~~management automation solutions; however, ~~disapproval of~~failure by our ~~customers' medication and supply dispensing management methods and their failure~~customers to meet The Joint Commission ~~requirements~~standards for medication management could decrease demand for our products and harm our competitive position, results of operations, and financial condition.

While we have implemented a Privacy and Use of Information Policy and adhere to established privacy principles, use of customer information guidelines, and related federal and state statutes, we cannot assure you that we will be in compliance with all federal and state healthcare information privacy and security laws that we are directly or indirectly subject to, including, without limitation, ~~the Health Insurance Portability and Accountability Act of 1996 ("HIPAA").~~HIPAA. Among other things, this legislation required the Secretary of Health and Human Services to adopt national standards governing the conduct of certain electronic health information transactions and protecting the privacy and security of personally identifiable health information maintained or transmitted by ~~"covered~~“covered entities,"” which include pharmacies and other healthcare providers with which we do business.

The standards adopted to date include, among others, the ~~"Standards~~“Standards for Privacy of Individually Identifiable Health Information,"” which restrict the use and disclosure of personally identifiable health information by covered entities, and the ~~"Security~~“Security Standards,"” which require covered entities to implement administrative, physical, and technical safeguards to protect the integrity and security of certain electronic health information. Under HIPAA, we are considered a ~~"business associate"~~“business associate” in relation to many of our customers that are covered entities, and as such, most of these customers have required that we enter into written agreements governing the way we handle and safeguard certain patient health information we may encounter in providing our products and services, and may impose liability on us for failure to meet our contractual obligations. Further, pursuant to changes in HIPAA under the American Recovery and Reinvestment Act of 2009, ~~("ARRA"),~~ we are ~~now also~~ covered under HIPAA similar to other covered entities and in some cases, subject to the same civil and criminal penalties as a covered entity. A number of states have also enacted privacy and security statutes and regulations that, in some cases, are more stringent than HIPAA and may also apply directly to us. If our past or present operations are found to violate any of these laws, we may be subject to fines, penalties, and other sanctions.

Following the theft in November 2012 of Omnicell electronic device containing customer medical dispensing cabinets log files, we were subject to a putative class action complaint. The complaint was subsequently dismissed without prejudice and plaintiff failed to file an appeal within the requisite deadlines. There is no guarantee that, if we are involved in any similar litigation in the future, such an outcome will result. Any similar unauthorized disclosure of personal health information could cause us to experience contractual indemnification obligations under business associate agreements with certain customers, litigation against us, reputational harm and a reduction in demand from our customers. To the extent that this disclosure is deemed to be a violation of HIPAA or other privacy or security laws, we may be subject to significant fines, penalties and other sanctions.

In addition, we cannot predict the potential impact of future HIPAA standards and other federal and state privacy and security laws that may be enacted at any time on our customers or on Omnicell. These laws could restrict the ability of our

customers to obtain, use, or disseminate patient information, which could reduce the demand for our products or force us to redesign our products in order to meet regulatory requirements.

Our software products are complex and may contain defects, which could harm our reputation, results of operations, and financial condition.

We market products that contain software and products that are software only. Although we perform extensive testing prior to releasing software products, these products may contain undetected errors or bugs when first released. These may not be discovered until the product has been used by customers in different application environments. Failure to discover product deficiencies or bugs could require design modifications to previously shipped products or cause delays in the installation of our products and unfavorable publicity or negatively impact system shipments, any of which could harm our business, financial condition, and results of operations.

Our international operations may subject us to additional risks that can adversely affect our operating results.*

We currently have operations outside of the United States, including sales efforts centered in Canada, Europe, the Middle East, and Asia-Pacific regions, and supply chain efforts in Asia. We intend to continue to expand our international operations, particularly in certain markets that we view as strategic, including the Middle East. Our international operations subject us to a variety of risks, including:

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•our reliance on distributors for the sale and post-sale support of our medication management automation solutions outside the United States and Canada;

•the difficulty of managing an organization operating in various countries;

•political sentiment against international outsourcing of production;

•reduced protection for intellectual property rights, particularly in jurisdictions that have less developed intellectual property regimes, which could make it more costly for us to enforce, and more difficult for us to stop the infringement or misappropriation of, our intellectual property rights in these jurisdictions;

•changes in foreign regulatory requirements;

•the requirement to comply with a variety of international laws and regulations, including privacy and security, labor, import, export, trade, environmental standards, product compliance, tax, anti-bribery, and employment laws;

•fluctuations in currency exchange rates and difficulties in repatriating funds from certain countries;

•additional investment, coordination, and lead-time necessary to successfully interface our automation solutions with the existing information systems of our customers or potential customers outside of the United States;

•political unrest, terrorism, and the potential for other hostilities in areas in which we have facilities or operations;

•epidemics, pandemics or other major public health crises, such as the ongoing COVID-19 pandemic; and

•natural disasters.

If we are unable to anticipate and address these risks properly, our business or operating results will be harmed.

Furthermore, changes in export or import regulation and other trade barriers and uncertainties may have an adverse effect on our business. For example, the current U.S. administration has advocated greater restrictions on trade generally and tariff increases on certain goods imported into the United States, particularly from China. We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and other countries (including China), what products may be subject to such actions, or what actions may be taken by the other countries in retaliation. The adoption and expansion of trade restrictions, the occurrence of a trade war, other governmental action related to tariffs or trade agreements or policies, or the related uncertainties, has the potential to adversely impact our supply chain and costs, which could in turn adversely affect our business, financial condition, and results of operations.

In the past, we have experienced substantial fluctuations in customer demand, and we cannot be sure that we will be able to respond proactively to future changes in customer demand.

Our ability to adjust to fluctuations in our ~~revenue~~revenues while still achieving or sustaining profitability is dependent upon our ability to manage costs and control expenses. If our ~~revenue increases~~revenues increase or ~~decreases~~decrease rapidly, we may not be able to manage these changes effectively. Future growth is dependent on the continued demand for our products and services, the volume of installations we are able to complete, our ability to continue to meet our ~~customers'~~customers’ needs and provide a quality installation experience, and our flexibility in manpower allocations among customers to complete installations on a timely basis.

~~Regarding our expenses, our~~Our ability to control ~~expense~~expenses is dependent on our ability to continue to develop and leverage effective and efficient human and information technology systems, our ability to gain efficiencies in our workforce through the local and worldwide labor markets, and our ability to grow our outsourced vendor supply model. Our expense growth rate may equal or exceed our revenue growth rate if we are unable to streamline our operations, incur significant ~~R&D~~research and development expenses prior to, or without recognizing the benefits, of those solutions under development, incur acquisition-related integration expenses greater than those we anticipate, or fail to reduce the costs or increase the margins of our products. In addition, we may not be able to reduce our expenses to keep pace with any reduction in our revenue, which could harm our results of operations and financial position.

Covenants in our ~~credit agreement~~A&R Credit Agreement restrict our business and operations in many ways, and if we do not effectively manage our compliance with these covenants, our financial conditions and results of operations could be adversely affected.

The A&R Credit Agreement contains various customary covenants that limit our ability and/or our subsidiaries’ ability to, among other things:

•incur or assume liens or additional debt or provide guarantees in respect of obligations or other persons;

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•issue redeemable preferred stock;

•pay dividends or distributions or redeem or repurchase capital stock;

•prepay, redeem, or repurchase certain debt;

•make loans, investments, acquisitions, ~~(including acquisitions of exclusive licenses)~~ and capital expenditures;

•enter into agreements that restrict distributions from our subsidiaries;

•sell assets and capital stock of our subsidiaries;

•enter into certain transactions with affiliates; and

•consolidate or merge with or into, or sell substantially all of our assets to, another person.

The A&R Credit Agreement also includes financial covenants requiring us (i) not to exceed a maximum consolidated total net leverage ratio of ~~3.00:~~3.50:1 (subject to certain exceptions) and (ii) to maintain a minimum ~~fixed charge~~interest coverage ratio of ~~1.50:~~3.00:1. Our ability to comply with these financial covenants may be affected by events beyond our control. Our failure to comply with any of the covenants under the A&R Credit Agreement could result in a default under the terms of the A&R Credit Agreement, which could permit the administrative agent or the lenders to declare all or part of any outstanding borrowings to be immediately due and payable, or to refuse to permit additional borrowings under the revolving credit facility, which could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us. In addition, if we are unable to repay those amounts, the administrative agent and the lenders under the A&R Credit Agreement could proceed against the collateral granted to them to secure that debt, which would seriously harm our business.

If we are unable to recruit and retain skilled and motivated personnel, our competitive position, results of operations, and financial condition could be harmed.*

Our success is highly dependent upon the continuing contributions of our key management, sales, technical, and engineering staff. We believe that our future success will depend upon our ability to attract, train, and retain highly skilled and motivated personnel. As more of our products are installed in increasingly complex environments, greater technical expertise will be required. As our installed base of customers increases, we will also face additional demands on our customer service and support personnel, requiring additional resources to meet these demands. Furthermore, as we execute on the autonomous pharmacy vision and grow our cloud-based software as a service and solution as a service offerings, more specialized expertise will be required. We may experience difficulty in recruiting

qualified personnel. Competition for qualified technical, engineering, managerial, sales, marketing, financial reporting, and other personnel can be intense, and we may not be successful in attracting and retaining qualified personnel. Competitors have in the past attempted, and may in the future attempt, to recruit our employees. Furthermore, travel restrictions and social distancing associated with the ongoing COVID-19 pandemic may make it more difficult to recruit, hire and train qualified personnel or cause delays in these processes.

In addition, we have historically used stock options, restricted stock units, and other forms of equity compensation as key components of our employee compensation program in order to align ~~employees'~~employees’ interests with the interests of our stockholders, encourage employee retention, and provide competitive compensation packages. The effect of managing share-based compensation expense and minimizing shareholder dilution from the issuance of new shares may make it less favorable for us to grant stock options, restricted stock units, or other forms of equity compensation, to employees in the future. In order to continue granting equity compensation at competitive levels, we must seek stockholder approval for any increases to the number of shares reserved for issuance under our equity incentive plans, such as the share increase that was approved at our ~~2015~~2019 Annual Meeting of Stockholders, and we cannot assure you that we will receive such approvals in the future. Any failure to receive approval for ~~current or~~ future proposed increases could prevent us from granting equity compensation at competitive levels and make it more difficult to attract, retain, and motivate employees. Further, to the extent that we expand our business or product lines through the acquisition of other businesses, any failure to receive any such approvals could prevent us from securing employment commitments from such newly acquired employees. Failure to attract and retain key personnel could harm our competitive position, results of operations, and financial condition.

~~If we experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.~~

We rely on information technology systems to keep financial records and corporate records, communicate with staff and external parties and operate other critical functions, including sales and manufacturing processes. Our information technology systems are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses or environmental impact. If we were to experience a prolonged system disruption in our information technology systems, it could negatively impact the coordination of our sales, planning and manufacturing activities, which could adversely affect our business. In addition, in order to maximize our information technology efficiency, we have physically consolidated our primary corporate data and computer operations. This concentration, however, exposes us to a greater risk of disruption to our internal information technology systems. Although we maintain offsite back-ups of our data, if operations at our facilities were disrupted, it may cause a material disruption in our business if we are not capable of restoring function on an acceptable time frame.

In addition, our information technology systems are potentially vulnerable to data security breaches-whether by employees or others-which may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of sensitive and confidential information of our employees, customers, suppliers and others, any of which could have a material adverse effect on our business, financial condition and results of operations. Moreover, a security breach or privacy violation that leads to disclosure or modification of, or prevents access to, patient information, including personally identifiable information or protected health information, could harm our reputation, compel us to comply with federal and/or state breach notification laws, subject us to mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to liability under laws and regulations that protect personal data, resulting in increased costs or loss of revenue.

While we have implemented a number of protective measures, including firewalls, antivirus and malware detection tools, patches, log monitors, routine back-ups, system audits, routine password modifications and disaster recovery procedures, such measures may not be adequate or implemented properly to prevent or fully address the adverse effect of such events, and in some cases we may be unaware of an incident or its magnitude and effects. If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information, including sensitive patient data. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

~~If we are unable to successfully interface our automation solutions with the existing information systems of our customers, they may choose not to use our products and services.~~

For healthcare facilities to fully benefit from our automation solutions, our systems must interface with their existing information systems. This may require substantial cooperation, incremental investment and coordination on the part of our customers and may require coordination with third-party suppliers of the existing information systems. There is little uniformity in the systems currently used by our customers, which complicates the interfacing process. If these systems are not successfully interfaced, our customers could choose not to use or to reduce their use of our automation solutions, which would harm our business. Also, these information systems are impacted by regulatory forces, such as the HITECH Act, Meaningful Use Stages, and HIPAA Omnibus Rules, and may evolve their interoperability functionality accordingly. We expect

to comply with the mandatory standards and certifications that enable us to continuously interoperate with partner information system, but such symbiotic evolution in a changing regulatory environment can at times create an execution risk.

Additionally, our competitors may enter into agreements with providers of hospital information management systems that are designed to increase the interoperability of their respective products. To the extent our competitors are able to increase the interoperability of their products with those of the major hospital information systems providers, customers who utilize such information systems may choose not to use our products and services. In addition, hospital information systems providers may choose to develop their own solutions that could compete with ours. Furthermore, we expect the importance of interoperability to increase in the next few years. Regulations such as the HITECH Act Meaningful Use Stage 3 are expected to heavily focus on evidence and outcomes. Given our role in care delivery process, the data generated by our products may be a key input for assessing and reporting on clinical outcomes. This may elevate interoperability with information systems to a relative importance to our customers creating a business opportunity and risk.

Our failure to protect our intellectual property rights could negatively affect our ability to compete.

Our success depends in part on our ability to obtain patent protection for technology and processes, and our ability to preserve our trademarks, copyrights, and trade secrets. We have pursued patent protection in the United States and foreign jurisdictions for technology that we believe to be proprietary and for technology that offers us a potential competitive advantage for our products. We intend to continue to pursue such protection in the future. Our issued patents relate to various features of our medication management automation solutions and ~~supply dispensing systems and our~~medication packaging systems. We cannot assure you that we will file

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any patent applications in the future and that any of our patent applications will result in issued patents, or that, if issued, such patents will provide significant protection for our technology and processes. As an example, in September 2014, an action was brought against us, to, among other matters, correct the inventorship of certain patents owned by us. Furthermore, we cannot assure you that others will not develop technologies that are similar or superior to our technology or that others will not design around the patents we own. All of our system software is copyrighted and subject to the protection of applicable copyright laws. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary, which could harm our competitive position.

Our quarterly operating results may fluctuate and may cause our stock price to decline.*

Our quarterly operating results may vary in the future depending on many factors that include, but are not limited to, the following:

•our ability to successfully install our products on a timely basis and meet other contractual obligations necessary to recognize revenue;

~~our ability to execute the manufacturing ramp up and installations of our new XT Series;~~

~~the impact of the reduction in our workforce and closure of our Nashville, Tennessee and Slovenia facilities;~~

•our ability to continue cost reduction efforts;

~~our ability to implement development and manufacturing Centers of Excellence;~~

•the size, product mix, and timing of orders for our medication management automation solutions and ~~supply dispensing systems, and our~~ medication packaging systems, and their installation and integration;

•the overall demand for healthcare medication management automation solutions and ~~supply chain~~medication adherence solutions;

•changes in pricing policies by us or our competitors;

•the number, timing, and significance of product enhancements and new product announcements by us or our competitors;

•the timing and significance of any acquisition or business development transactions that we may consider or negotiate and the revenues, costs, and earnings that may be associated with these transactions;

•the relative proportions of revenues we derive from products and services;

•fluctuations in the percentage of sales attributable to our international business;

•our customers' budget cycles;

•changes in our operating expenses and our ability to stabilize expenses;

•expenses incurred to remediate product quality, security, or safety issues;

•our ability to generate cash from our accounts receivable on a timely basis;

•the performance of our products;

•changes in our business strategy;

•epidemics, pandemics or other major public health crises, such as the ongoing COVID-19 pandemic;

•macroeconomic and political conditions, including fluctuations in interest rates, tax increases, ~~and~~ availability of credit ~~markets;~~markets, and trade and tariff actions; and

•volatility in our stock price and its effect on equity-based compensation expense.

Due to all of these factors, our quarterly revenues and operating results are difficult to predict and may fluctuate, which in turn may cause the market price of our stock to decline.

If we are unable to maintain our relationships with group purchasing organizations (“GPOs”) or other similar organizations, we may have difficulty selling our products and services to customers represented by these organizations.

A number of ~~group purchasing organizations,~~GPOs, including HealthTrust Purchasing Group, Intalere~~(f.k.a.~~ (f.k.a. Amerinet, Inc.), ~~Vizient Inc,~~ Premier Inc., ~~Cardinal Health, AmerisourceBergen,~~The Resource Group, Resource Optimization & Innovation, LLC, and ~~HealthTrust Purchasing Group~~Vizient Inc., have negotiated standard contracts for our products on behalf of their member healthcare organizations. Members of these ~~group purchasing organizations~~GPOs may purchase under the terms of these contracts, which obligate us to pay the ~~group purchasing organization~~GPO a fee. We have also contracted with the United States General Services Administration, allowing the Department of Veteran Affairs, the Department of Defense, and other Federal Government

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customers to purchase our products. These contracts enable us to more readily sell our products and services to customers represented by these organizations. Some of our contracts with these organizations are terminable at the convenience of either party. The loss of any of these relationships could impact the breadth of our customer base and could impair our ability to meet our revenue targets or increase our revenues. These organizations may not renew our contracts on similar terms, if at all, and they may choose to terminate our contracts before they expire, any of which could cause our revenues to decline.

If we are not able to supply the demand from our institutional and retail pharmacy customers on schedule and with quality consumable medication packaging products, or if we are otherwise unable to maintain our relationships with major institutional pharmacies, wethey may ~~experience a decline in the~~use alternative means to distribute medications to their customers and our revenue from sales of blister cards and other consumables ~~sold to these customers.~~may decline.*

Approximately 10% of our revenues during the six months ended June 30, 2020 were generated from the sale of consumable medication packages, most of which are produced in our St. Petersburg, Florida facility on a continuous basis and are shipped out to fulfill the demands of our institutional and retail pharmacy customers domestically and abroad. The demands placed on institutional and retail pharmacies by their customers represent real time requirements of those customers. Our customer agreements for the sale of consumable medication packages are typically short-term in nature and typically do not include any volume commitments on the part of the customer. Although our packaging may be considered the preferred method of maintaining control of medications during the medication distribution and administration process, institutional and retail pharmacies have alternative methods of distributing medications, including bulk and alternative packaging, and medication adherence packaging may be supplied by our competitors. To the extent that we are unable to supply quality packaging to our customers in a timely manner, that demand will be met via alternative distribution methods, including consumable medication packaging sold by our competitors, and our revenues will decline. Any disruption in the production capabilities of our St. Petersburg facilities (including due to any impact from public health crises such as the ongoing COVID-19 pandemic) will adversely affect our ability to ship our consumable medication packages globally and would reduce our revenues.

In addition, the institutional pharmacy market consists of significant national suppliers of medications to non-acute care facilities, smaller regional suppliers, and very small local suppliers. ~~Although none of these customers comprised more than 10% of~~If we are unable to maintain our ~~total revenues for~~relationships with the ~~year ended December 31, 2016, the three largest~~major institutional pharmacies ~~have comprised 15% and 16% of our Medication Adherence segment revenues during the nine months ended September 30, 2017 and 2016, respectively. If these larger national suppliers were to~~we do business with, they may purchase consumable blister card components from alternative sources, or ifchoose to use alternatives to blister cards ~~were used~~ for medication control, and our revenues would decline.

If we are unable to successfully interface our automation solutions with the existing information systems of our customers, they may choose not to use our products and services.

For healthcare facilities to fully benefit from our automation solutions, our systems must interface with certain of their other information systems. This may require substantial cooperation, incremental investment, and coordination on the part of our customers, and may require coordination with third-party suppliers of the existing information systems. There is little uniformity in the systems currently used by our customers, which complicates the interfacing process. If these systems are not successfully interfaced, our customers could choose not to use or to reduce their use of our automation solutions, which would harm our business. Also, these information systems are impacted by regulatory forces, such as the Promoting Interoperability Program and HIPAA Omnibus Rules, and may evolve their interoperability functionality accordingly. We expect to comply with the mandatory standards and certifications that enable us to continuously interoperate with partner information systems, but such symbiotic evolution in a changing regulatory environment can at times create an execution risk.

Additionally, our competitors may enter into agreements with providers of hospital information systems that are designed to increase the interoperability of their respective products. To the extent our competitors are able to increase the interoperability of their products with those of the major hospital information systems providers, customers who utilize such information systems may choose not to use our products and services. In addition, hospital and physician office information systems providers may choose to develop their own solutions that could compete with ours. Furthermore, we expect the importance of interoperability to continue to increase in the next few years. Regulations such as the Quality Payment Program are expected to heavily focus on evidence and outcomes. Given our role in care delivery process, the data generated by our products may be a key input for assessing and reporting on clinical outcomes. This may elevate interoperability with information systems to a relative importance to our customers creating a business opportunity and risk.

We depend on a limited number of suppliers for our products, and our business may suffer if we were required to change suppliers to obtain an adequate supply of components, equipment, and raw materials on a timely basis.*

Although we generally use parts and components for our products with a high degree of modularity, certain components are presently available only from a single source or limited sources. We rely on a limited number of suppliers for the raw materials that are necessary in the production of our consumable medication packages. While we have generally been able to obtain adequate supplies of all components and raw materials in a timely manner from existing sources, or where necessary, from alternative sources of supply, we ~~have~~ entered into relationships with new suppliers in connection with the launch of

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our XT Series products. We engage multiple single source third-party manufacturers to build several of our sub-assemblies. The ~~risk~~risks associated with changing to alternative vendors, if necessary, for any of the numerous components used to manufacture our products could limit our ability to manufacture our products and harm our business. Due to our reliance on a few single source partners to build our hardware sub-assemblies and on a limited number of suppliers for the raw materials that are necessary in the production of our consumable medication packages, a reduction or interruption in supply from our partners or suppliers (including due to the impact of public health crises such as the ongoing COVID-19 pandemic), or a significant increase in the price of one or more components could have an adverse impact on our business, ~~operating~~ results of operations, and financial condition. In certain circumstances, the failure of any of our suppliers or us to perform adequately could result in quality control issues affecting end ~~users'~~users’ acceptance of our products. These impacts could damage customer relationships and could harm our business.

~~Our failure~~Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could cause our stock price to decline.

Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the ~~SEC~~Securities and Exchange Commission (“SEC”) require annual management assessments of the effectiveness of our internal control over financial reporting, and a report by our independent registered public accounting firm attesting to the effectiveness of internal control. If we fail to maintain effective internal control over financial reporting, as such standards are modified, supplemented, or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting.

If the market price of our common stock continues to be highly volatile, the investment value of our common stock may decline.*

Our common stock traded between ~~$31.85~~$54.24 and ~~$52.70~~$94.85 per share during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2020. The market price for shares of our common stock has been and may continue to be highly volatile. In addition, our announcements or external events may have a significant impact on the market price of our common stock. These announcements or external events may include:

•actual or anticipated changes in our operating results;

•whether our operating results or forecasts meet the expectations of securities analysts or investors;

•developments in our relationships with corporate customers;

•developments with respect to ~~the Aesynt and Ateb Acquisitions;~~recently acquired businesses;

•changes in the ratings of our common stock by securities ~~analysts;~~analysts or changes in their earnings estimates;

•announcements by us or our competitors of technological innovations or new products;

•announcements by us or our competitors of acquisitions of businesses, products or technologies; or other significant transactions by us or our competitors such as strategic partnerships or divestitures;

•actions by stockholders or short sellers of our common stock;

•the level of demand for our common stock, including short interest in our common stock;

•epidemics, pandemics or other major public health crises, such as the ongoing COVID-19 pandemic; or

•general economic and market conditions.

Furthermore, the stock market as a whole from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for technology companies. These broad market fluctuations may cause the market price of our common stock to decline irrespective of our performance. In addition, sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could lower the market price of our common stock.

In addition, stockholders have initiated class action lawsuits against companies following periods of volatility in the market prices of these companies’ stock. For example, ~~on March 19, 2015,~~in July 2019, a putative class action lawsuit was filed against Omnicell and ~~two~~certain of our ~~executive~~ officers inalleging that the U.S. District Court for the Northern District of California purporting to assert claims on behalf of a class of purchasers of Omnicell stock between May 2, 2014 and March 2, 2015. The complaint alleged that defendants violated ~~Sections 10(b) and 20(a) of the Securities Exchange Act of 1934~~federal securities laws by ~~purportedly~~ making certain materially false and misleading ~~statements regarding~~statements. While this action is concluded following the ~~existence~~lead plaintiff's filing of a “side letter” arrangement and the adequacy of internal controls that allegedly resulted in false and misleading financial statements. The Company and the individual defendants were not served with the complaint and on May 20, 2015, the plaintiff filed a notice of voluntary dismissal ~~of the lawsuit without prejudice.~~

~~Circumstances~~as to all defendants, we may ~~arise that could prevent the timely reporting of our financial information, which could harm our stock price and quotation on the NASDAQ Global Select Market.~~

On March 17, 2015, we announced that we were delaying the filing of our Annual Report on Form 10-K for the year ended December 31, 2014 (the "Annual Report") beyond the automatic 15-day extension period permitted under the rules of the Securities and Exchange Commission because of the internal investigation that we commenced following receipt of a notice from an Omnicell employee on February 27, 2015 alleging, among other matters, the existence of a “side letter” arrangement with an Omnicell customer for certain discounts and Omnicell products that were to be provided at no cost, but which were not reflected in the final invoices paid by such customer.

Because we were unable to timely file the Annual Report, on March 18, 2015, we received an expected written notification (the “Notice”) from the NASDAQ OMX Group, Inc. (“Nasdaq”) indicating that Omnicell was not in compliance with Nasdaq Listing Rule 5250(c)(1) for continued listing, due to the delay in filing the Annual Report beyond the extended filing due date. Under the Nasdaq continued listing rules, we had 60 calendar days from the date of the letter to either file the Annual Report or submit a plan to regain compliance.

During the period between the date the Annual Report was due and the date of its filing, our stock price experienced some volatility. We have concluded the investigation causing the delay of the filing of the Annual Report. Even though the results of the investigation led the Company to determine that effective internal control over financial reporting was maintained in all material respects and that there are no changes required to be made to the Company’s Consolidated Financial Statements, we cannot assure you that similar circumstances will not arise in the future ~~that will cause us~~be subject to ~~delay~~other class action lawsuits, especially following periods of volatility in the ~~filing~~market price of our ~~periodic financial reports,~~common stock.

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The United Kingdom’s recent withdrawal from the European Union could adversely affect us.

Following the result of a referendum in 2016, the United Kingdom (the “UK”) left the European Union (the “EU”) on January 31, 2020. The UK’s withdrawal from the EU is commonly referred to as “Brexit.” Pursuant to the formal withdrawal arrangements agreed between the UK and the EU, the UK is subject to a transition period until December 31, 2020 (the “Brexit Transition Period”), during which ~~could harm our stock price~~EU rules will continue to apply. Negotiations between the UK and ~~if such delay were~~the EU are expected to continue ~~for~~in relation to the customs and trading relationship between the UK and the EU following the expiry of the Brexit Transition Period. The effects of Brexit have been and are expected to continue to be far-reaching. Brexit and the perceptions as to its impact may adversely affect business activity and economic conditions in Europe and globally, and could continue to contribute to instability in global financial markets as well as uncertainty regarding the regulation of data protection in the UK. Brexit could also have the effect of disrupting the free movement of goods, services, and people between the UK and the EU. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate. The full effects of Brexit are uncertain and will remain so until after the Brexit Transition Period and the UK and EU reach a ~~period~~definitive resolution with regards to outstanding trade and legal matters. Lastly, as a result of ~~time, impact~~Brexit, other European countries may seek to conduct referenda with respect to their continuing membership with the EU. Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, the full extent to which our ~~continued listing on the NASDAQ Global Select Market.~~business, results of operations, and financial condition could be adversely affected by Brexit is uncertain.

Our U.S. government lease agreements are subject to annual budget funding cycles and mandated unilateral changes, which may affect our ability to enter into such leases or to recognize ~~revenue~~revenues, and sell receivables based on these leases.*

U.S. government customers that lease our equipment typically sign contracts with five-year payment terms that are subject to one-year government budget funding cycles. Further, the government has in certain circumstances mandated unilateral changes in its Federal Supply Services contract that could render our lease terms with the government less attractive. In our judgment and based on our history with these accounts, we believe these receivables are collectible. However, in the future, the failure of any of our U.S. government customers to receive their annual funding, or the government mandating changes to the Federal Supply Services contract could impair our ability to sell lease equipment to these customers or to sell our U.S. government receivables to third-party leasing companies. In addition, the ability to collect payments on unsold receivables could be impaired and may result in a write-down of our unsold receivables from U.S. government customers. The balance of our unsold leases to U.S. government customers was ~~$9.4~~$20.5 million as of ~~September~~June 30, ~~2017.~~2020.

If we fail to manage our inventory properly, our revenue, gross margin, and profitability could suffer.

Managing our inventory of components and finished products is a complex task. A number of factors, including, but not limited to, the need to maintain a significant inventory of certain components that are in short supply or that must be purchased in bulk to obtain favorable pricing, the general unpredictability of demand for specific products and customer

requests for quick delivery schedules, may result in us maintaining large amounts of inventory. Other factors, including changes in market demand, customer requirements, and technology, may cause our inventory to become obsolete. Any excess or obsolete inventory could result in inventory write-downs, which in turn could harm our business and results of operations.

Intellectual property claims against us could harm our competitive position, results of operations, and financial condition.

We expect that developers of medication ~~and supply dispensing systems~~management automation solutions and medication packaging systems will be increasingly subject to infringement claims as the number of products and competitors in our industry grows and the functionality of products in different industry segments overlaps. In the future, third parties may claim that we have infringed upon their intellectual property rights with respect to current or future products. We do not carry special insurance that covers intellectual property infringement claims; however, such claims may be covered under our traditional insurance policies. These policies contain terms, conditions, and exclusions that make recovery for intellectual property infringement claims difficult to guarantee. Any infringement claims, with or without merit, could be time-consuming to defend, result in costly litigation, divert ~~management's~~management’s attention and resources, cause product shipment delays or require us to enter into royalty or licensing agreements. These royalty or licensing agreements, if required, may not be available on terms acceptable to us, or at all, which could harm our competitive position, results of operations, and financial condition.

~~Our software products are complex and may contain defects, which could harm our reputation, results of operations and financial condition.~~

Product liability claims against us could harm our competitive position, results of operations and financial condition.

Our products ~~provide~~include medication management automation solutions and ~~supply chain management solutions~~medication adherence products and services for ~~the~~ healthcare ~~industry.~~systems and pharmacies. Despite the presence of healthcare and pharmacy professionals as intermediaries between our products and patients, if our products fail to provide accurate and timely information or operate as designed, customers, patients or their family members could assert claims against us for product liability. For example, as further discussed under “Legal Proceedings” in Note 11, Commitments and Contingencies, of the Notes to Condensed Consolidated Financial Statements included in this quarterly report, we are currently subject to certain lawsuits, asserting, among other allegations, claims of product liability. Moreover, failure of health care facility and pharmacy employees to use our products for

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their intended purposes could result in product liability claims against us. Litigation with respect to product liability claims, regardless of any outcome, could result in substantial cost to us, divert ~~management's~~management’s attention from operations, and decrease market acceptance of our products. We possess a variety of insurance policies that include coverage for general commercial liability and technology errors and omissions liability. We attempt to mitigate these risks through contractual terms negotiated with our customers. However, these policies and protective contractual terms may not be adequate against product liability claims. A successful claim brought against us, or any claim or product recall that results in negative publicity about us, could harm our competitive position, results of operations, and financial condition. Also, in the event that any of our products is defective, we may be required to recall or redesign those products.

We are dependent on technologies provided by third-party vendors, the loss of which could negatively and materially affect our ability to market, sell, or distribute our products.

Some of our products incorporate technologies owned by third parties that are licensed to us for use, modification, and distribution. For example, the VBM 200F is manufactured by a third party and sold by us pursuant to a distribution and supplier agreement. In addition, we recently entered into a reseller agreement with Kit Check, Inc. to offer BlueSight for Controlled Substances diversion prevention software to our customers. If we lose access to third-party technologies, such as our ability to distribute the VBM ~~200/F,~~200F or BlueSight for Controlled Substances, or we lose the ongoing rights to modify and distribute these technologies with our products, we will have to devote resources to independently develop, maintain and support the technologies ourselves, pay increased license costs, or transition to another vendor. Any independent development, maintenance or support of these technologies by us or the transition to alternative technologies could be costly, time consuming, and could delay our product releases and upgrade schedules. These factors could negatively and materially affect our ability to market, sell or distribute our products.

Complications in connection with our ongoing business information system upgrades, including those required to transition acquired entities onto information systems already utilized, and those implemented to adopt new accounting standards, may impact our results of operations, financial condition, and cash flows.*

We continue to upgrade our enterprise-level business information system with new capabilities and transition acquired entities onto information systems already utilized in the ~~company. In 2015,~~Company. For example, we ~~replaced~~are currently in the process of replacing the legacy Enterprise Requirements Planning systems used ~~in the acquired Surgichem business~~at Aesynt with systems currently in use in other parts of ~~Omnicell. In 2016, we replaced the legacy Enterprise Requirements Planning systems used in Mach4 with systems currently in use in other parts of~~

Omnicell, and we intend to do the same at ~~Aesynt.~~Ateb. Based upon the complexity of some of the upgrades, there is risk that we will not see the expected benefit from the implementation of these upgrades in accordance with their anticipated timeline and will incur costs in addition to those we have already planned for. In addition, in future years, we will need to comply with new accounting standards established by the Financial Accounting Standards Board ~~("FASB"~~(“FASB”) for ~~revenues, leases and other~~ components of our financial reporting. These new standards will require us to modify our accounting policies and financial reporting disclosure. We further anticipate that integration of these and possibly other new standards may require a substantial amount of ~~management's~~management’s time and attention, and require integration with our enterprise resource planning system. The implementation of the system and the adoption of future new standards, in isolation as well as together, could result in operating inefficiencies and financial reporting delays, and could impact our ability to timely record certain business ~~transactions timely.~~transactions. All of these potential results could adversely impact our results of operations, financial condition, and cash flows.

Outstanding employee stock options have the potential to dilute stockholder value and cause our stock price to decline.*

We grant stock options to certain of our employees as incentives to join Omnicell or as an on-going reward and retention vehicle. We had options outstanding to purchase approximately ~~3.0~~4.1 million shares of our common stock, at a weighted-average exercise price of ~~$29.06~~$58.17 per share as of ~~September~~June 30, ~~2017.~~2020. If some or all of these shares are sold into the public market over a short time period, the price of our common stock may decline, as the market may not be able to absorb those shares at the prevailing market prices. Such sales may also make it more difficult for us to sell equity securities in the future on terms that we deem acceptable.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or harm our business, financial condition, and results of operations.*

We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures, entering into licensing arrangements, or declaring dividends. If we raise additional funds from third parties, we may have to relinquish valuable rights to our technologies, or grant licenses on terms that are not favorable to us.

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For example, we filed a “shelf” registration statement on Form S-3 under the Securities Act in November 2017 (the “S-3 Registration Statement”), allowing us, from time to time, to offer any combination of registered common stock, preferred stock, debt securities, and warrants. Under this S-3 Registration Statement, we also entered into a distribution agreement (the “Distribution Agreement”) in November 2017 with J.P. Morgan Securities, LLC, Wells Fargo Securities, LLC, and HSBC Securities (USA) Inc., as our sales agents, pursuant to which we may offer and sell from time to time through “at-the-market” offerings, up to an aggregate of $125.0 million of our common stock through the sales agents. As of June 30, 2020, we had an aggregate of $31.5 million available to be offered under the Distribution Agreement.

If we are unable to raise additional funds through equity or debt financing when needed (including due to the impact of public health crises such as the COVID-19 pandemic on the global capital markets), our ability to market, sell or distribute our products may be negatively impacted and could harm our business, financial condition, and results of operations.

Changes in our tax rates, exposure to additional tax liabilities, or the adoption of new tax legislation ~~or exposure to additional tax liabilities~~ could adversely affect our ~~future results.~~business and financial condition.*

WeWe are subject to taxes in the United States and foreign jurisdictions. Our future effective tax rates could be affected by several factors, many of which are outside of our control, including: changes in the mix of earnings with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in federal, state, and international laws or their interpretation, adjustments to income tax expense upon the finalization of tax returns, changes in tax attribute, or changes in ~~tax laws or their interpretation.~~accounting principles. We regularly assess the likelihood of adverse outcomes to determine the adequacy of our provision for taxes. We are also subject to examination of our income tax returns by the Internal Revenue Service and other tax authorities. There can be no assurance that the outcomes from these examinations will not materially adversely affect our financial condition and operating results. Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be a material difference between the forecasted and the accrual tax rates, especially due to the volatility and uncertainty of global economic conditions resulting from the COVID-19 pandemic. Any increase in our effective tax rate would reduce our profitability.

Catastrophic events may disrupt our business and harm our operating results.*

We rely on our network infrastructure, data centers, enterprise applications, and technology systems for the development, marketing, support, and sales of our products, and for the internal operation of our business. These systems are susceptible to disruption or failure in the event of a major earthquake, fire, flood, ice and snow storms, cyber-attack, terrorist attack, telecommunications failure, epidemic or pandemic (such as the ongoing COVID-19 pandemic), or other catastrophic event. Many of these systems are housed or supported in or around our corporate headquarters located in Northern California, near major earthquake faults, and where a significant portion of our research and development activities and other critical business operations take place. Other critical systems, including our manufacturing facilities for our consumable medication packages, are housed in St. Petersburg, Florida, in communities that have been subject to significant tropical storms. Disruptions to or the failure of any of these systems, and the resulting loss of critical data, which is not quickly recoverable by the effective execution of disaster recovery plans designed to reduce such disruption, could cause delays in our product development, prevent us from fulfilling our ~~customers'~~customers’ orders, and could severely affect our ability to conduct normal business operations, the result of which would adversely affect our operating results.

~~Recent developments relating to the United Kingdom’s referendum vote in favor of leaving the European Union and related actions could adversely affect us~~.

The United Kingdom held a referendum on June 23, 2016 in which a majority voted for the United Kingdom’s (the "UK") withdrawal from the European Union (the "EU"). On March 29, 2017, the UK’s ambassador to the EU delivered a letter to the president of the European Council that gave formal notice under Article 50 of the Lisbon Treaty of Britain’s withdrawal from the EU, commonly referred to as “Brexit”. As a result, negotiations have commenced to determine the terms of the UK’s withdrawal from the EU as well as its relationship with the EU going forward, including the terms of trade between the UK and the EU. The effects of Brexit have been and are expected to continue to be far-reaching. Brexit and the perceptions as to its impact may adversely affect business activity and economic conditions in Europe and globally and could continue to contribute to instability in global financial markets. Brexit could also have the effect of disrupting the free movement of goods, services and people between the UK and the EU. However, the full effects of Brexit are uncertain and will depend on any agreements the UK may make to retain access to EU markets. Brexit could also lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate. Lastly, as a result of the Brexit, other European countries may seek to conduct referenda with respect to their continuing membership with the EU. Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, the full extent to which our business, results of operations and financial condition could be adversely affected by Brexit is uncertain.

~~The conflict minerals provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act could result in additional costs and liabilities.~~

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC established disclosure and reporting requirements for those companies that use "conflict minerals" mined from the Democratic Republic of Congo and adjoining countries, whether or not these products are manufactured by third parties. These new requirements could affect the sourcing of materials used in our products as well as the companies we use to manufacture our products. In circumstances where conflict minerals in our products are found to be sourced from the Democratic Republic of the Congo or surrounding countries, we may take actions to change materials or designs to reduce the possibility that our purchase of conflict minerals may fund armed groups in the region. These actions could add engineering and other costs to the manufacture of our products.

We expect to incur costs on an ongoing basis to comply with the requirements related to the discovery of the origin of the tantalum, tin, tungsten and gold used in our products, including components we purchase from third parties, and to audit our conflict minerals disclosures. Our reputation may also suffer if we have included conflict minerals originating in the Democratic Republic of the Congo or surrounding countries in our products.

Anti-takeover provisions in our charter documents and under Delaware law, and any stockholders' rights plan we may adopt in the future, make an acquisition of us, which may be beneficial to our stockholders, more difficult.

We are incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our charter documents as currently in effect may make a change in control of our ~~company~~Company more difficult, even if a change in control would be beneficial to the stockholders. Our anti-takeover provisions include provisions in our certificate of incorporation providing that stockholders' meetings may only be called by our Board of Directors and provisions in our bylaws providing that the stockholders may not take action by written consent and requiring that stockholders that desire to nominate any person for election to our Board of Directors or to make any proposal with respect to business to be conducted at a meeting of our stockholders be submitted in appropriate form to our Secretary within a specified period of time in advance of any such meeting. Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless, among other possibilities, our Board of Directors approves the transaction. Our Board of Directors may use these provisions to prevent changes in the management and control of our ~~company.~~Company. Also, under applicable Delaware law, our ~~board~~Board of ~~directors~~Directors may adopt additional anti-takeover measures in the future.

The stockholder rights plan adopted by our Board of Directors in February 2003 expired by its terms in February 2013. Our Board of Directors could adopt a similar plan in the future if it determines that such action is in the best interests of our

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stockholders. Such a plan may have the effect of discouraging, delaying or preventing a change in control of our ~~company~~Company that may be beneficial to our stockholders.

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

Stock Repurchase Programs

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, we did not repurchase any shares of our common stock under our stock repurchase programs. ~~Please refer~~Refer to “Stock Repurchase Program” under Note ~~12,~~ 13, Employee Benefits and Share-Based Compensation ~~and to~~, of the Notes to ~~the~~ Condensed Consolidated Financial Statements included in this quarterly report for more details.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

~~The information required by this Item is set forth in the Exhibit Index that follows the signature page~~

Incorporated By Reference

Exhibit Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of Omnicell, Inc.

10-Q

000-33043

3.1

9/20/2001

3.2

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

10-Q

000-33043

3.2

8/9/2010

3.3

Certificate of Designation of Series A Junior Participating Preferred Stock

10-K

000-33043

3.2

3/28/2003

3.4

Amended and Restated Bylaws of Omnicell, Inc.

10-Q

000-33043

3.4

5/4/2018

4.1

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

4.2

Form of Common Stock Certificate

S-1/A

333-57024

4.1

7/24/2001

10.1*⁺

Form of Option Grant Notice and Form of Global Option Agreement for 2009 Equity Incentive Plan, as amended

10.2*⁺

Form of Restricted Stock Unit Grant Notice and Form of Global Restricted Stock Unit Award Agreement for 2009 Equity Incentive Plan, as amended

31.1⁺

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

31.2⁺

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

32.1⁺

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

101.INS⁺

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

101.SCH⁺

Inline XBRL Taxonomy Extension Schema Document

101.CAL⁺

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF⁺

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB⁺

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE⁺

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104⁺

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

+Filed herewith.

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

Table of ~~this Report.~~Contents

~~SIGNATURES~~SIGNATURE

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

OMNICELL, INC.

Date:

~~November 3, 2017~~July 31, 2020

By:

/s/ Peter J. Kuipers

Peter J. Kuipers,

Executive Vice President & Chief Financial Officer

~~INDEX TO EXHIBITS~~

Incorporated By Reference
Exhibit Number Exhibit Description Form File No. Exhibit Filing Date

3.1
Amended and Restated Certificate of Incorporation of Omnicell, Inc.
S-1 333-57024 3.1 3/14/2001

3.2
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Omnicell, Inc.
10-Q 000-33043 3.2 8/9/2010

3.3
Certificate of Designation of Series A Junior Participating Preferred Stock
10-K 000-33043 3.2 3/28/2003

3.4
Bylaws of Omnicell, Inc., as amended
10-Q 000-33043 3.3 8/9/2007

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

4.2
Form of Common Stock Certificate
S-1/A 333-57024 4.1 7/24/2001

10.1*
2017 Executive Officers Annualized Base Salary
8-K 000-33043 10.1 7/25/17

31.1⁺

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

31.2⁺

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

32.1⁺

Certification of Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350) (1)

101.INS⁺
XBRL Instance Document

101.SCH⁺
XBRL Taxonomy Extension Schema Document

101.CAL⁺
XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF⁺
XBRL Taxonomy Extension Definition Linkbase Document

101.LAB⁺
XBRL Taxonomy Extension Labels Linkbase Document

101.PRE⁺
XBRL Taxonomy Extension Presentation Linkbase Document


⁺	~~Filed herewith.~~


^*	~~Indicates management contract or compensatory plan.~~

⁽¹⁾

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.



	Aesynt		Ateb (preliminary)		Total
	(in thousands)
Cash	$	8,164	$	902	$	9,066
Accounts receivable	43,312		7,761		51,073
Inventory	19,021		225		19,246
Other current assets	3,787		1,239		5,026
Total current assets	74,284		10,127		84,411
Property and equipment	10,389		2,447		12,836
Intangibles	123,700		12,500		136,200
Goodwill	163,599		21,651		185,250
Other non-current assets	968		334		1,302
Total assets	372,940		47,059		419,999
Current liabilities	26,753		2,314		29,067
Deferred revenue	25,512		2,776		28,288
Non-current deferred tax liabilities	38,622		—		38,622
Other non-current liabilities	2,431		367		2,798
Total liabilities	93,318		5,457		98,775
Total purchase price	$	279,622	$	41,602	$	321,224
Total purchase price, net of cash received	$	271,458	$	40,700	$	312,158



	Aesynt			Ateb (Preliminary)
	Fair value		Weighted average useful life	Fair value		Weighted average useful life
	(In thousands)		(In years)	(In thousands)		(In years)
Customer relationships	$	58,200	14-16	$	8,900	12
Developed technology	38,800		8	3,400		5
Backlog	20,200		1-3	—		—
In-process research and development ⁽¹⁾	3,900		—	—		—
Non-compete	1,800		3	100		1
Trade names	800		1	100		1
Total purchased intangible assets	$	123,700		$	12,500



	Level 1		Level 2		Level 3		Total
	(In thousands)
Interest rate swap contracts	$	—	$	1,200	$	—	$	1,200
Total financial assets	$	—	$	1,200	$	—	$	1,200



	September 30, 2017
	(In thousands)
Remaining three months of 2017	$	2,470
2018	8,038
2019	6,474
2020	4,548
2021	2,749
Thereafter	1,894
Total	$	26,173



	Automation and Analytics		Medication Adherence		Total
	(In thousands)
Net balance as of December 31, 2016	$	215,082	$	112,642	$	327,724
Goodwill acquired	3,113		819		3,932
Foreign currency exchange rate fluctuations	2,351		773		3,124
Net balance as of September 30, 2017	$	220,546	$	114,234	$	334,780



	September 30, 2017
	Gross carrying amount		Accumulated amortization			Foreign currency exchange rate fluctuations			Net carrying amount		Useful life (years)
	(In thousands, except for years)
Customer relationships	$	133,456	$	(30,421	)	$	297		$	103,332	1 - 30
Acquired technology	74,457		(19,493		)	75			55,039		3 - 20
Backlog	21,702		(16,654		)	—			5,048		1 - 5
Trade names	8,683		(4,508		)	13			4,188		1 - 12
Patents	3,290		(1,331		)	(6		)	1,953		2 - 20
Non-compete agreements	1,900		(1,133		)	—			767		3
In-process technology	3,900		—			—			3,900		—
Total intangibles assets, net	$	247,388	$	(73,540	)	$	379		$	174,227



	December 31, 2016
	Gross carrying amount		Accumulated amortization			Foreign currency exchange rate fluctuations			Net carrying amount		Useful life (years)
	(In thousands, except for years)
Customer relationships	$	133,358	$	(20,930	)	$	(596	)	$	111,832	1 - 30
Acquired technology	73,599		(13,287		)	(159		)	60,153		3 - 20
Backlog	20,550		(14,083		)	—			6,467		1 - 3
Trade names	8,667		(3,887		)	(31		)	4,749		1 - 12
Patents	3,154		(1,264		)	—			1,890		2 - 20
Non-compete agreements	1,900		(608		)	—			1,292		3
In-process technology	3,900		—			—			3,900		—
Total intangibles assets, net	$	245,128	$	(54,059	)	$	(786	)	$	190,283



	December 31, 2016			Borrowings		Repayment / Amortization			September 30, 2017
	(In thousands)
Term loan facility	$	192,500		$	—	$	(7,500	)	$	185,000
Revolving credit facility	68,000			37,000		(92,500		)	12,500
Total debt under the facilities	260,500			37,000		(100,000		)	197,500
Less: Deferred issuance cost	(6,359		)	—		1,192			(5,167		)
Total Debt, net of deferred issuance cost	$	254,141		$	37,000	$	(98,808	)	$	192,333
Long term debt, current portion, net of deferred issuance cost	8,410								13,410
Long term debt, net of deferred issuance cost	$	245,731							$	178,923



	(In thousands)
Remaining three months of 2017	$	3,203
2018	12,447
2019	12,270
2020	10,972
2021	10,316
Thereafter	31,168
Total minimum future lease payments	$	80,376



	Three months ended				Nine months ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
	(In thousands)
Cost of product and service revenues	$	882	$	628	$	2,727	$	1,821
Research and development	915		825		2,651		2,267
Selling, general and administrative	3,462		3,224		10,937		9,975
Total share-based compensation expense	$	5,259	$	4,677	$	16,315	$	14,063



	Payments due by period
	Total		Remainder of 2017		2018 and 2019		2020 and 2021		Thereafter
	(In thousands)
Operating leases ⁽¹⁾	$	80,376	$	3,203	$	24,717	$	21,288	$	31,168
Purchase obligations ⁽²⁾	59,928		46,477		11,343		1,173		935
Term loan facility ⁽³⁾	185,000		2,500		37,500		145,000		—
Revolving credit facility ⁽³⁾	12,500		—		—		12,500		—
Total ⁽⁴⁾	$	337,804	$	52,180	$	73,560	$	179,961	$	32,103