SECURITIES AND EXCHANGE COMMISSION

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. Yesý No o

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

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



Large ~~accelerated~~Accelerated Filer	☒	Accelerated filerý	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐
		~~Accelerated filer~~ o		~~Non-accelerated filer~~ o		~~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.								o ☐

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, 2018,~~25, 2019, there were ~~39,626,231~~41,938,099 shares of the registrant’s common stock, $0.001 par value, outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30,
2018 December 31,
2017
(In thousands, except par value)

ASSETS
Current assets:
Cash and cash equivalents $ 44,174
$ 32,424
Accounts receivable and unbilled receivables, net of allowances of $3,508 and $5,738, respectively 206,225
190,046
Inventories 99,231
96,137
Prepaid expenses 19,618
20,392
Other current assets 9,871
13,273
Total current assets 379,119
352,272
Property and equipment, net 50,484
42,595
Long-term investment in sales-type leases, net 17,448
15,435
Goodwill 336,517
337,751
Intangible assets, net 149,968
168,107
Long-term deferred tax assets 9,450
9,454
Prepaid commissions 40,441
41,432
Other long-term assets 68,948
49,316
Total assets $ 1,052,375
$ 1,016,362

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 38,367
$ 48,290
Accrued compensation 32,953
27,241
Accrued liabilities 35,777
35,693
Long-term debt, current portion, net 17,708
15,208
Deferred revenues, net 87,777
78,774
Total current liabilities 212,582
205,206
Long-term deferred revenues 10,634
10,623
Long-term deferred tax liabilities 32,593
41,446
Other long-term liabilities 10,192
9,829
Long-term debt, net 167,135
194,917
Total liabilities 433,136
462,021
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; 48,760 and 47,577 shares issued; 39,615 and 38,432 shares outstanding, respectively 49
48
Treasury stock at cost, 9,145 shares outstanding (185,074 ) (185,074 )
Additional paid-in capital 630,687
585,755
Retained earnings 182,661
159,725
Accumulated other comprehensive loss (9,084 ) (6,113 )
Total stockholders’ equity 619,239
554,341
Total liabilities and stockholders’ equity $ 1,052,375
$ 1,016,362



	September 30, 2019			December 31, 2018
	(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	137,277		$	67,192
Accounts receivable and unbilled receivables, net of allowances of $3,688 and $2,582, respectively	203,391			196,238
Inventories	105,813			100,868
Prepaid expenses	18,728			20,700
Other current assets	11,870			12,136
Total current assets	477,079			397,134
Property and equipment, net	54,877			51,500
Long-term investment in sales-type leases, net	21,494			17,082
Operating lease right-of-use assets	59,041			—
Goodwill	334,516			335,887
Intangible assets, net	129,163			143,686
Long-term deferred tax assets	30,607			15,197
Prepaid commissions	45,234			46,143
Other long-term assets	92,259			74,613
Total assets	$	1,244,270		$	1,081,242

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	48,449		$	38,038
Accrued compensation	33,499			41,660
Accrued liabilities	58,017			43,047
Deferred revenues, net	88,205			81,835
Total current liabilities	228,170			204,580
Long-term deferred revenues	7,979			10,582
Long-term deferred tax liabilities	60,917			41,484
Long-term operating lease liabilities	52,738			—
Other long-term liabilities	9,798			9,562
Long-term debt, net	77,135			135,417
Total liabilities	436,737			401,625
Commitments and contingencies (Note 11)
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; 51,050 and 49,480 shares issued; 41,905 and 40,335 shares outstanding, respectively	51			50
Treasury stock at cost, 9,145 shares outstanding, respectively	(185,074		)	(185,074		)
Additional paid-in capital	770,260			678,041
Retained earnings	236,697			197,454
Accumulated other comprehensive loss	(14,401		)	(10,854		)
Total stockholders’ equity	807,533			679,617
Total liabilities and stockholders’ equity	$	1,244,270		$	1,081,242

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	(In thousands)
Net income	$	19,983		$	13,628		$	39,243		$	22,936
Other comprehensive loss, net of reclassification adjustments and taxes:
Unrealized losses on interest rate swap contracts	—			(234		)	(420		)	(122		)
Foreign currency translation adjustments	(2,825		)	(907		)	(3,127		)	(2,849		)
Other comprehensive loss	(2,825		)	(1,141		)	(3,547		)	(2,971		)
Comprehensive income	$	17,158		$	12,487		$	35,696		$	19,965

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE INCOME (LOSS)~~STOCKHOLDERS’ EQUITY (UNAUDITED)

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
(In thousands)
Net income (loss) $ 13,628
$ 7,748
$ 22,936
$ (707 )
Other comprehensive income (loss), net of reclassification adjustments:
Unrealized losses on interest rate swap contracts (234 ) (74 ) (122 ) (45 )
Foreign currency translation adjustments (907 ) 1,389
(2,849 ) 3,388
Other comprehensive income (loss) (1,141 ) 1,315
(2,971 ) 3,343
Comprehensive income $ 12,487
$ 9,063
$ 19,965
$ 2,636



	Common Stock			Treasury Stock					Additional Paid-In Capital			Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)			Stockholders’ Equity
	Shares	Amount		Shares		Amount			Additional Paid-In Capital			Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)			Stockholders’ Equity
	(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
Net income	—	—		—		—			—			19,983		—			19,983
Other comprehensive loss	—	—		—		—			—			—		(2,825		)	(2,825		)
Share-based compensation	—	—		—		—			8,505			—		—			8,505
Issuance of common stock under employee stock plans	266	—		—		—			9,696			—		—			9,696
Tax payments related to restricted stock units	—	—		—		—			(1,068		)	—		—			(1,068		)
Balances as of September 30, 2019	51,050	$	51	(9,145	)	$	(185,074	)	$	770,260		$	236,697	$	(14,401	)	$	807,533

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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			Additional Paid-In Capital			Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)			Stockholders’ Equity
	(In thousands)
Balances as of December 31, 2017	47,577	$	48	(9,145	)	$	(185,074	)	$	585,755		$	159,725	$	(6,113	)	$	554,341
Net income	—	—		—		—			—			2,720		—			2,720
Other comprehensive income	—	—		—		—			—			—		2,674			2,674
Share-based compensation	—	—		—		—			6,528			—		—			6,528
Issuance of common stock under employee stock plans	428	—		—		—			9,541			—		—			9,541
Tax payments related to restricted stock units	—	—		—		—			(1,300		)	—		—			(1,300		)
Balances as of March 31, 2018	48,005	48		(9,145	)	(185,074		)	600,524			162,445		(3,439		)	574,504
Net income	—	—		—		—			—			6,588		—			6,588
Other comprehensive loss	—	—		—		—			—			—		(4,504		)	(4,504		)
Share-based compensation	—	—		—		—			7,238			—		—			7,238
Issuance of common stock under employee stock plans	341	—		—		—			6,576			—		—			6,576
Tax payments related to restricted stock units	—	—		—		—			(1,762		)	—		—			(1,762		)
Balances as of June 30, 2018	48,346	48		(9,145	)	(185,074		)	612,576			169,033		(7,943		)	588,640
Net income	—	—		—		—			—			13,628		—			13,628
Other comprehensive loss	—	—		—		—			—			—		(1,141		)	(1,141		)
Share-based compensation	—	—		—		—			7,085			—		—			7,085
Issuance of common stock under employee stock plans	414	1		—		—			11,611			—		—			11,612
Tax payments related to restricted stock units	—	—		—		—			(586		)	—		—			(586		)
Balances as of September 30, 2018	48,760	$	49	(9,145	)	$	(185,074	)	$	630,686		$	182,661	$	(9,084	)	$	619,238

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine months ended September 30,						Nine months ended September 30,
	2018			2017			2019			2018
	(In thousands)						(In thousands)
Operating Activities
Net income (loss)	$	22,936		$	(707	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income							$	39,243		$	22,936
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	37,490			38,542			39,525			37,490
Loss on disposal of fixed assets	136			128
Loss on disposal of property and equipment							436			136
Share-based compensation expense	20,851			16,315			25,175			20,851
Income tax benefits from employee stock plans	—			11
Deferred income taxes	(8,849		)	(9,182		)	4,023			(8,849		)
Amortization of operating lease right-of-use assets							7,917			—
Amortization of debt financing fees	1,718			1,192			1,718			1,718
Changes in operating assets and liabilities, net of business acquisitions:
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables	(16,179		)	(22,735		)	(7,716		)	(16,179		)
Inventories	(5,288		)	(22,942		)	(7,015		)	(5,288		)
Prepaid expenses	774			(972		)	(1,341		)	774
Other current assets	3,120			(5,133		)	974			3,120
Investment in sales-type leases	(1,732		)	6,643			(5,120		)	(1,732		)
Prepaid commissions	991			217			909			991
Other long-term assets	(6,188		)	(750		)	3,944			(6,188		)
Accounts payable	(8,439		)	23,717			10,316			(8,439		)
Accrued compensation	5,712			658			(8,161		)	5,712
Accrued liabilities	1,482			4,021			5,262			1,482
Deferred revenues	9,014			(9,240		)	3,900			9,014
Operating lease liabilities							(7,887		)	—
Other long-term liabilities	(1,035		)	865			4,086			(1,035		)
Net cash provided by operating activities	56,514			20,648			110,188			56,514
Investing Activities
Purchases of intangible assets, intellectual property, and patents	—			(160		)
Software development for external use	(22,213		)	(10,121		)	(34,129		)	(22,213		)
Purchases of property and equipment	(19,259		)	(9,374		)	(12,632		)	(19,259		)
Business acquisitions, net of cash acquired	—			(4,446		)
Net cash used in investing activities	(41,472		)	(24,101		)	(46,761		)	(41,472		)
Financing Activities
Proceeds from debt	—			37,000
Repayment of debt and revolving credit facility	(27,000		)	(100,000		)	(60,000		)	(27,000		)
Payment for contingent consideration	—			(2,400		)
At the market offering, net of offering costs							37,806			—
Proceeds from stock issuances under stock-based compensation plans	27,729			26,468			35,029			27,729
Employees’ taxes paid related to restricted stock units	(3,648		)	(3,133		)	(5,790		)	(3,648		)
Net cash used in financing activities	(2,919		)	(42,065		)
Net cash provided by (used in) financing activities							7,045			(2,919		)
Effect of exchange rate changes on cash and cash equivalents	(373		)	(1,504		)	(387		)	(373		)
Net increase (decrease) in cash and cash equivalents	11,750			(47,022		)
Net increase in cash and cash equivalents							70,085			11,750
Cash and cash equivalents at beginning of period	32,424			54,488			67,192			32,424
Cash and cash equivalents at end of period	$	44,174		$	7,466		$	137,277		$	44,174
Supplemental disclosure of non-cash activities
Unpaid purchases of property and equipment	$	388		$	886		$	756		$	388
Inventory transferred to property and equipment	$	2,194		$	—
Effect of adoption of ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718)”	$	—		$	1,582
Transfers between inventory and property and equipment, net							$	1,549		$	2,194
Transfers from prepaid expenses to property and equipment							$	3,313		$	—
Right-of-use assets obtained in exchange for new operating lease liabilities							$	957		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Organization and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the financial position of the Company as of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the results of operations and comprehensive income for the three and nine months ended September 30, ~~2018~~2019 and ~~September 30, 2017,~~2018, and cash flows for the nine months ended September 30, ~~2018~~2019 and ~~September 30, 2017.~~2018. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. ~~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 annual report on Form 10-K for the year ended December 31, ~~2017~~2018 filed with the SEC on February 27, ~~2018,~~2019, except as discussed in the ~~section~~sections entitled ~~“Revenue Recognition”~~“Lessor Leases”, “Lessee Leases”, and “Recently Adopted Authoritative Guidance” below. The Company’s results of operations and comprehensive income for the three and nine months ended September 30, ~~2018~~2019 and cash flows for the nine months ended September 30, ~~2018~~2019 are not necessarily indicative of results that may be expected for the year ending December 31, ~~2018,~~2019, or for any future period.

~~Certain prior-year amounts have been adjusted to conform with the adoption of ASC 606,~~ ~~Revenue from Contracts with Customers~~ (“ASC 606”), which became effective for the Company beginning on January 1, 2018. Refer to “Recently Adopted Authoritative Guidance” for the effects of adoption of ASC 606 and the section below for the updated revenue recognition policy.

Certain prior-year amounts have been reclassified to conform with current-period presentation. These reclassifications include (i) reclassification of revenues from services and other revenues to product revenues of $0.2 million and $0.5 million for the three and nine months ended September 30, 2017, respectively, related to software term-license sales, (ii) a change in inventories presentation related to allocation of inventories obsolete reserve between finished goods, raw materials, and work in progress in the Notes to the Condensed Consolidated Financial Statements, and (iii) a change in intangible assets presentation related to presenting foreign currency impact separately in the Notes to the Condensed Consolidated Financial Statements. In addition, $0.6 million was reclassified from services and other revenues to product revenues for the nine months ended September 30, 2018 in order to conform with the presentation for the three months ended September 30, 2018. These changes were not deemed material and were included to conform with current-period classification and presentation.

Principles of Consolidation

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

~~Revenue Recognition~~Segment Reporting

The Company's Chief Operating Decision Maker ("CODM") is its Chief Executive Officer. The CODM allocates resources and evaluates the performance of the Company ~~earns~~using information about its revenues, gross profit, income from ~~sales~~operations, and other key financial data. The Company previously operated and reported its business in 2 segments: Automation and Analytics, and Medication Adherence. In the fourth quarter of 2018, the Company introduced its vision of the Autonomous Pharmacy, a more fully automated and digitized system of medication ~~and medical and surgical supply automation systems, along with consumables and related services, which are sold~~management, in order to address changes in the healthcare industry as the Company executes on its ~~principal market. The transaction price~~plan to deliver end-to-end solutions with greater emphasis on automating manual processes for its customers. These industry changes include the continuing consolidation of ~~each contract with~~healthcare systems, rising pharmaceutical costs, and increased scrutiny on controlled substances. In an effort to deliver on its strategic vision, the Company initiated a ~~customer is allocated~~company-wide organizational realignment in the fourth quarter of 2018 to centrally manage its business operations, including the ~~identified performance obligations based on the relative fair value~~development and marketing of ~~each obligation. The Company’s customer arrangements typically include one or more of the following performance obligations:~~

~~Products.~~ ~~Software-enabled equipment that manages and regulates the storage and dispensing of pharmaceuticals, consumable blister cards and packaging equipment and other medical supplies.~~

~~Software.~~ ~~Additional software applications that enable incremental functionality~~all of the Company’s ~~equipment.~~

~~Installation.~~ ~~Installation of equipment~~products, sales and distribution, supply chain and inventory management, as ~~integrated systems at customer sites.~~

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

~~Professional services.~~ ~~Other customer services, such as training and consulting.~~

Prior to recognizing revenue, the Company identifies the contract, performance obligations, and transaction price, and allocates the transaction price to the performance obligations. All identified contracts meet the following required criteria:

~~Parties to the contract have approved the contract~~ (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations. A majority of the Company’s contracts are evidenced by a non-cancelable written agreement. Contracts for consumable products are generally evidenced by an order placed via phone or a manual purchase order.

~~Entity can identify each party’s rights regarding the goods or services to be transferred~~. Contract terms are documented within the written agreements. Where a written contract does not exist, such as for consumable products, the rights of each party are understood as following the Company’s standard business process and terms.

~~The entity can identify the payment terms for the goods or services to be transferred~~. Payment terms are documented within the agreement and are generally net 30 days from shipment of tangible product or services performed. Where a written contract does not exist, the Company’s standard payment terms are net 30 day terms.

~~The contract has commercial substance~~ (that is the risk, timing, or amount of the entity’s future cash flows is expected to change as a result of the contract.) The Company’s agreements are an exchange of cash for a combination of products and services which result in changes in the amount of the Company’s future cash flows.

~~It is probable the entity will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer~~. The Company performs a credit check for all significant customers or transactions and where collectability is not probable, payment in full or a substantial down payment is typically required to help assure the full agreed upon contract price will be collected.

The Company often enters into change orders which modify the product to be received by the customer pursuant to certain contracts. Changes to any contract are accounted for as a modification of the existing contract to the extent the goods and services to be delivered as part of the contract are generally consistent with the nature and type of those to be provided under the terms of the original contract. Examples of such change orders include the addition or removal of units of equipment or changes to the configuration of the equipment where the overall nature of the contract remains intact. The Company’s change orders generally result in the change being accounted for as modifications of existing contracts given the nature of the impacted orders.

Distinct goods or services are identified as performance obligations. A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer are considered a single performance obligation. Where a good or service is determined not to be distinct, the Company combines the good or service with other promised goods or services until a bundle of goods or services that is distinct is identified. To identify its performance obligations, the Company considers all of the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. When performance obligations are included in separate contracts, the Company considers an entire customer arrangement to determine if separate contracts should be considered combined for the purposes of revenue recognition. Most of the Company’s sales, other than renewals of support and maintenance, contain multiple performance obligations, with a combination of hardware systems, consumables and software products, support and maintenance, and professional services.

~~The transaction price of a contract is determined based on the fixed consideration, net of an estimate for variable consideration such as various discounts or rebates provided to customers.~~quality functions. As a result of ~~the Company’s commercial selling practices, contract prices~~this organizational realignment, all significant operating decisions are ~~generally fixed with minimal, if any, variable consideration.~~

~~The transaction price is allocated to separate performance obligations proportionally~~ based ~~on the standalone selling price~~upon an analysis of ~~each performance obligation. Standalone selling price is best evidenced by the price~~ the Company charges for the good or service when selling it separately in similar circumstances to similar customers. Other than for the renewal of annual support services contracts, the Company’s products and services are not generally sold separately. The Company uses an expected cost plus a margin approach to identify the standalone selling price of goods where separate sales transactions do not exist. For software and services which do not have a specific identifiable product cost,as one operating segment. Therefore, effective January 1, 2019, the Company ~~uses an amount discounted from~~started reporting as only 1 operating segment, which is the ~~list price~~same as ~~a best estimated selling price.~~

~~The Company recognizes revenue when~~ the ~~performance obligation~~reporting segment. Accordingly, prior period information has been ~~satisfied by transferring a promised good or service~~revised to a customer. The good or service is transferred when or as the customer obtains control of the good or service. Determining when control transfers requires management to make judgments that affect the timing of revenues recognized.

Generally, for products requiring a complex implementation, control passes when the product is installed and ready for use. For all other products, control generally passes when product has been shipped and title has passed. For maintenance contracts and certain other services provided on a subscription basis, control passes to the customer over time, generally ratably over the service term as the Company provides a stand-ready service to service the customer’s equipment. Time and material services transfer control to the customer at the time the services are provided. The portion of the transaction price allocated to the Company’s unsatisfied performance obligations recorded as deferred revenues at September 30, 2018 and December 31, 2017 were $98.4 million and $89.4 million, respectively, of which $87.8 million and $78.8 million, respectively, are expected to be completed within one year. Remaining performance obligations primarily relate to maintenance contracts and are recognized ratably over the remaining term of the contract, generally not more than five years.

~~Revenues, contract assets, and contract liabilities are recorded net of associated taxes.~~

~~The payment terms associated~~conform with the Company’s contracts vary, however, payment terms for product revenues are generally based on milestones tied to contract signing, shipment of products, and/or customer acceptance. Payment terms associated with the service portion of agreements are generally periodic and can be billed on a monthly, quarterly, or annual basis. In certain circumstances multiple years are billed at one time. The portion of these contract liabilities not expected to be recognized as revenue within twelve months of the balance sheet date are considered long term.

In the normal course of business, the Company typically does not accept product returns unless the item is defective as manufactured or the configuration of the product is incorrect. The Company establishes provisions for estimated returns based on historical product returns. The allowance for sales returns is not material to the Condensed Consolidated Financial Statements for any periods presented.

A portion of the Company's sales are made through multi-year lease agreements. Under sales-type leases, the Company recognizes revenue for its hardware and software products net of lease execution costs, such as post-installation product maintenance and technical support, at the net present value of the lease payment stream once its installation obligations have been met. The Company optimizes cash flows by selling a majority of its non-U.S. government 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 44% of the lease receivable balance, are retained in-house. Revenues from sales-type leases of $11.4 million and $5.9 million for the three months ended September 30, 2018 and 2017, respectively, and $28.8 million and $19.3 million for the nine months ended September 30, 2018 and 2017, respectively, are included in product revenues in the Condensed Consolidated Statements of Operations. Interest income in these leases is recognized in product revenues using the effective interest method.

A portion of the 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 the Company pays fees to the GPO on completed contracts. The Company considers these fees consideration paid to customers and records them as reductions to revenue. Fees to GPOs were $2.2 million and $2.1 million for the three months ended September 30, 2018 and 2017, respectively, and $6.2 million and $5.4 million for the nine months ended September 30, 2018 and 2017, respectively.

~~Contract Assets and Contract Liabilities~~

A contract asset is a right to consideration in exchange for goods or services that the Company has transferred to a customer when that right is conditional and is not just subject to the passage of time. A receivable will be recorded on the balance sheet when the Company has unconditional rights to consideration. A contract liability is an obligation to transfer goods or services for which the Company has received consideration, or for which an amount of consideration is due from the customer. Contract liabilities include customer deposits under non-cancelable contracts, and current and non-current deferred revenue balances. The Company’s contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.

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

September 30,
2018 December 31,
2017
(In thousands)
Short-term unbilled receivables - included in accounts receivable and unbilled receivables $ 9,475
$ 4,590
Long-term unbilled receivables - included in other long-term assets 15,573
9,475
Total contract assets $ 25,048
$ 14,065

Short-term deferred revenues $ 87,777
$ 78,774
Long-term deferred revenues 10,634
10,623
Total contract liabilities $ 98,411
$ 89,397

~~Significant changes in the contract assets and the contract liabilities balances during the~~ period are the result of the issuance of invoices and recognition of deferred revenues in the normal course of business. Unbilled contract assets which were invoiced during the three and nine months ended September 30, 2018 as a result of the right to invoice for the transaction consideration becoming unconditional were not material. The contract modifications entered into during the three and nine months ended September 30, 2018 did not have a significant impact on the Company’s contract assets or deferred revenues. During the three and nine months ended September 30, 2018, the Company recognized revenues of $10.9 million and $78.9 million, respectively, that was included in the corresponding deferred revenue balance as of December 31, 2017.

The Company has determined that the incentive portions of its sales commission plans require capitalization since these payments are directly related to sales achieved during a time period. These commissions are earned on the basis of the total purchase order value of new product bookings. Since there are not commensurate commissions earned on renewal of the service bookings, the Company concluded that the capitalized asset is related to services provided under both the initial contract and renewal periods. The Company applies a practical expedient to account for the incremental costs of obtaining a contract to a portfolio of contracts with similar characteristics as the Company expects the effect on the financial statements of applying the practical expedient would not differ materially from applying the accounting guidance to the individual contracts within the portfolio. A pool of contracts is defined as all contracts booked in a particular quarter. The amortization for the capitalized asset is an estimate of the pool’s original contract term, generally one to five years, plus an estimate of future customer renewal periods resulting in a total amortization period of ten years. Costs to obtain a contract are allocated amongst performance obligations and recognized as sales and marketing expense consistent with the pattern of revenue recognition. Capitalized costs are periodically reviewed for impairment. A portion of the pool’s capitalized asset is recorded as an expense after two quarters, which represents the estimated period during which the product revenue associated with the contract is recorded. The remaining contract cost is recorded as expense ratably over the ten year estimated initial and renewal service periods. The Company recognized contract cost expense of $5.3 million and $4.6 million during the three months ended September 30, 2018 and 2017, respectively, and $16.2 million and $13.3 million during the nine months ended September 30, 2018 and 2017, respectively. The portion of commission expenses paid as of the balance sheet date to be recognized in future periods is recorded in long term prepaid commissions on the Condensed Consolidated Balance Sheets. There was no impairment loss recorded related to capitalized prepaid commissions as of and for the three and nine months ended September 30, 2018.presentation.

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s Condensed Consolidated Financial Statements and accompanying Notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results may be different from the estimates. The Company’s critical accounting policies are those that affect its financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition; accounts receivable and notes receivable from investment in sales-type leases;

operating lease right-of-use assets and liabilities; inventory valuation; capitalized software development costs; ~~valuation and~~ impairment of goodwill; purchased intangibles and long-lived assets; ~~fair value of assets acquired and liabilities assumed in business combination;~~ share-based compensation; and accounting for income taxes.

The Company determines if an arrangement is a lease at inception. The transaction price is allocated to separate performance obligations, generally consisting of hardware and software products, installation, and post-installation technical support, proportionally based on the standalone selling price of each performance obligation. Standalone selling price is best evidenced by the price the Company charges for the good or service when selling it separately in similar circumstances to similar customers. Other than for the renewal of annual support services contracts, the Company’s products and services are not generally sold separately. The Company uses an amount discounted from the list price as a best estimated selling price.

The Company enters into non-cancelable sales-type lease arrangements, most of which do not have an option to extend the lease term. At the end of the lease term, the customer must either return the equipment or negotiate a new agreement, resulting in a new purchase or lease transaction. Failure of the customer to either return the equipment or negotiate a new agreement results in the contract becoming a month-to-month rental. Certain sales-type leases automatically renew for successive one year periods at the end of each lease term with written notice from the customer. The Company’s sales-type lease agreements do not contain any material residual value guarantees.

For sales-type leases, the Company recognizes revenues for its hardware and software products, net of lease execution costs, post-installation product maintenance, and technical support, at the net present value of the lease payment stream upon customer acceptance. The Company recognizes service revenues associated with the sales-type leases ratably over the term of the agreement in service revenues on the Condensed Consolidated Statements of Operations. The Company recognizes interest income from sales-type leases using the effective interest method. Both hardware and software revenues, and interest income from sales-types leases are recorded in product revenues on the Condensed Consolidated Statements of Operations.

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 54% of the lease receivable balance, are retained in-house.

The Company entered into certain leasing agreements that were classified as operating leases prior to the adoption of the new lease accounting standard. Those 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 the new lease accounting standard. The operating lease arrangements entered into prior to January 1, 2019 are non-cancelable, and most automatically renew for successive one year periods at the end of each lease term absent written notice from the customer. The Company’s operating lease agreements do not contain any material residual value guarantees.

For operating leases, rental income is generally recognized on a straight-line basis over the term of the associated lease, and recorded in services and other revenues in the Condensed Consolidated Statements of Operations. Leased assets under operating leases are carried at amortized cost net of accumulated depreciation in property and equipment, net on the Condensed Consolidated Balance Sheets. The depreciation expense of the leased assets is recognized on a straight-line basis over the contractual term of the associated lease, and recorded in cost of revenues in the Condensed Consolidated Statements of Operations.

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our lease contracts do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of the lease payments.

Many of the Company’s operating leases include an option to extend the lease. The specific terms and conditions of the extension options vary from lease to lease, but are consistent with standard industry practices in each area that the Company operates. The Company reviews each of its lease options at a time required by the terms of the lease contract, and notifies the lessor if it chooses to exercise the lease renewal option. Until the Company is reasonably certain that it will extend the lease contract, the renewal option periods will not be recognized as right-of-use assets or lease liabilities.

~~Segment Reporting~~Certain leases include provisions for early termination, which allows the contract parties to terminate their obligations under the lease contract. The terms and conditions of the termination options vary by contract. When the Company has made a decision to exercise an early termination option, the right-of-use assets and associated lease liabilities are remeasured in accordance with the present value of the remaining cash flows under the lease contract.

Certain building lease agreements include rental payments subject to change annually based on fluctuations in various indexes (i.e. Consumer Price Index (“CPI”), Retail Price Index, and other international indexes). Certain data center lease agreements include rental payments subject to change based on usage and CPI fluctuations. The changes based on usage and indexes are treated as variable lease costs and recognized in the period in which the obligation for those payments was incurred.

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 using information about its revenues, gross profit, and income from operations. Such evaluation excludes general corporate-level costs that areoperating lease agreements do not specific to either of the reportable segments and are managed separately at the corporate level. Corporate-level costs include expenses related to executive management, finance and accounting, human resources, legal, training and development, and certain other administrative expenses. See Note 14, Segment and Geographical Information, for additional information on segment reporting.contain any material residual value guarantees, restrictions, or restriction covenants.

Recently Adopted Authoritative Guidance

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (“FASB”) issued ~~ASC 606,~~ ~~Revenue from Contracts with Customer~~s, a new standard related to revenue recognition. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenues and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company adopted the standard using the full retrospective method effective beginning January 1, 2018.

Under the ASC 606 guidance, fees paid to GPOs are now presented as a reduction of product revenues, whereas these fees were considered a part of selling, general, and administrative costs under the previous guidance. The majority of the incremental costs incurred to obtain a contract, primarily commission expense, are recognized during the first year with the balance recognized ratably over a period of ten years. Additionally, revenue on term software licenses is recognized upon installation of the license rather than ratably over the life of the term license. Finally, the Company no longer defers the 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.

~~Adoption of the standard related to revenue recognition impacted the Company’s reported results as follows:~~

Three months ended September 30, 2017
As reported Adjustment As adjusted
(In thousands)
Revenues
Automation and Analytics $ 154,651
$ (34 ) $ 154,617
Medication Adherence 32,131
—
32,131
Gross profit
Automation and Analytics 74,911
(34 ) 74,877
Medication Adherence 9,942
—
9,942
Selling, general, and administrative expenses 58,725
(2,517 ) 56,208
Provision for income taxes 751
966
1,717
Net income $ 6,231
$ 1,517
$ 7,748
Net income per share - basic $ 0.17
$ 0.04
$ 0.21
Net income per share - diluted $ 0.16
$ 0.04
$ 0.20

Nine months ended September 30, 2017
As reported Adjustment As adjusted
(In thousands)
Revenues
Automation and Analytics $ 427,249
$ (1,878 ) $ 425,371
Medication Adherence 90,972
—
90,972
Gross profit
Automation and Analytics 198,032
(1,878 ) 196,154
Medication Adherence 28,988
—
28,988
Selling, general, and administrative expenses 186,818
(6,748 ) 180,070
Provision for (benefit from) income taxes (11,232 ) 1,891
(9,341 )
Net income (loss) $ (3,686 ) $ 2,979
$ (707 )
Net income (loss) per share - basic $ (0.10 ) $ 0.08
$ (0.02 )
Net income (loss) per share - diluted $ (0.10 ) $ 0.08
$ (0.02 )

December 31, 2017
As reported Adjustment As adjusted
(In thousands)
Accounts receivable and unbilled receivables, net $ 189,227
$ 819
$ 190,046
Prepaid expenses 36,060
(15,668 ) 20,392
Prepaid commissions —
41,432
41,432
Other long-term assets 39,841
9,475
49,316
Deferred revenues, net 86,104
(7,330 ) 78,774
Long-term, deferred revenues 17,244
(6,621 ) 10,623
Long-term, deferred tax liabilities 28,579
12,867
41,446
Stockholders’ equity 517,199
37,142
554,341

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement,~~ which modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for the Company beginning January 1, 2020, with early adoption permitted. The Company early adopted this guidance effective beginning July 1, 2018. The application of this guidance did not have a material effect on the Company’s consolidated financial statements.

~~Recently Issued Authoritative Guidance~~

~~In February 2016, the FASB issued ASU No.~~Accounting Standards Update (“ASU”) 2016-02,Leases (Topic 842). The FASB amended lease accounting requirements to begin recording assets and liabilities arising from most leases on the balance sheet. The new guidance ~~will~~ also ~~require~~requires significant additional disclosures about the amount and timing of cash flows from leases. ~~This~~The Company adopted this new guidance ~~will be effective for the Company beginning~~on January 1, 2019. In July 2018, the FASB issued amendments in ASU ~~No.~~ 2018-11, which provide a transition election to not restate comparative periods for the effects of applying the new standard. This transition election permits entities to change the date of initial application to the beginning of the year of adoption and to recognize the effects of applying the new standard as a cumulative-effect adjustment to the opening balance of retained earnings. The Company ~~expects to elect~~has elected this transition approach as well as elected the package of practical expedients permitted under the transition guidance within the new standard, which will allow the Company to carry forward the historical lease classification of contracts entered into prior to January 1, 2019. As a result of electing the package of practical expedients described above, existing leases and ~~recognize~~related initial direct costs have not been reassessed prior to the ~~cumulative~~effective date, and therefore, adoption of the lease standard did not have an impact on the Company’s previously reported consolidated financial statements.

The Company also elected the following practical expedients: (i) combining lease and non-lease components, (ii) leases with an initial term of 12 months or less are not recorded in the Condensed Consolidated Balance Sheets, and the associated lease payments are recognized in the Condensed Consolidated Statements of Operations on a straight-line basis over the lease term, and (iii) applying discount rates to operating leases using a portfolio approach.

From a lessor perspective, certain agreements that were previously classified as operating leases are classified as sales-type leases under the new lease accounting standard. The agreements in place prior to the adoption of the new lease accounting standard on January 1, 2019 will continue to be treated as operating leases.



	January 1, 2019
	Pre-ASC 842 Balances		ASC 842 Adoption Impact			Post-ASC 842 Balances
	(In thousands)
Operating lease right-of-use assets	$	—	$	66,008		$	66,008
Accrued liabilities ⁽¹⁾	43,047		10,067			53,114
Long-term operating lease liabilities	—		59,791			59,791
Other long-term liabilities ⁽²⁾	9,562		(3,850		)	5,712

_________________________________________________

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits the reclassification of the income tax effects of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) on items within accumulated other comprehensive income to retained earnings. These amounts are commonly

referred to as “stranded tax effects.” ASU 2018-02 ~~will be~~is effective for the Company beginning January 1, 2019. The ~~Company does not expect application~~adoption of this guidance todid not have a material effect on ~~its~~the Company’s consolidated financial ~~statements.~~statements and therefore no adjustment to retained earnings was made.

Recently Issued Authoritative Guidance

In August 2018, the FASB issued ASU 2018-15, ~~Intangibles—Goodwill~~Intangibles-Goodwill and ~~Other—Internal-Use~~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). ASU 2018-15 will be effective for the Company beginning January 1, 2020. The Company anticipates adopting ASU 2018-15 prospectively and does not expect the standard to have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 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 will replace the current “incurred loss” approach with an “expected loss” model. Entities will be required to estimate expected credit losses over the life of the instrument, considering available relevant information about the collectibility of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. ASU 2016-13 will be effective for the Company beginning January 1, 2020. The Company is in the process of evaluating the appropriate changes to necessary processes and controls to support the adoption of the new standard. The Company is currently evaluating the impact ASU ~~2018-15~~2016-13 will have on its consolidated financial statements.

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

Note 2. ~~Business Acquisitions~~Revenues

~~2017 Acquisitions~~

On April 12, 2017, the Company completed the acquisition of all of the membership interests of Dixie Drawl, LLC d/b/a InPharmics (“InPharmics”). InPharmics is a technology and services company that provides advanced pharmacy informatics solutions to hospital pharmacies. The total consideration for the transaction was $5.0 million, net of cash acquired of $0.3 million, and includes $0.5 million holdback for potential settlement of performance obligations. At September 30, 2018, this amount has been presented as a short-term liability.Revenue Recognition

The Company ~~accounted~~earns revenues from sales of its medication and supply dispensing automation systems, along with consumables and related services, which are sold in the healthcare industry, its principal market. The Company’s customer arrangements typically include one or more of the following performance obligations:

Products. Software-enabled equipment that manages and regulates the storage and dispensing of pharmaceuticals, consumable blister cards and packaging equipment and other medical supplies.

Software. Additional software applications that enable incremental functionality of the Company’s equipment or services.

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 training and consulting.

Disaggregation of ~~InPharmics in accordance with~~Revenues

The following table summarizes the ~~authoritative guidance~~Company’s product revenues disaggregated by revenue type for the three and nine months ended September 30, 2019 and 2018:



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(In thousands)
Hardware and software	$	144,305	$	125,733	$	399,548	$	345,215
Consumables	19,875		19,848		60,378		58,956
Other	4,308		4,128		12,551		10,833
Total product revenues	$	168,488	$	149,709	$	472,477	$	415,004

The following table summarizes the Company’s revenues disaggregated by geographic region, which is determined based on ~~business combinations; therefore,~~customer location, for the ~~tangible~~three and ~~intangible~~nine months ended September 30, 2019 and 2018:



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(In thousands)
United States	$	206,709	$	180,635	$	582,540	$	502,481
Rest of world ⁽¹⁾	22,096		23,632		66,195		73,078
Total revenues	$	228,805	$	204,267	$	648,735	$	575,559

_________________________________________________

Contract Assets and Contract Liabilities

The following table reflects the Company’s contract assets ~~acquired~~ and ~~liabilities assumed were recorded at fair value on~~contract liabilities:



	September 30, 2019		December 31, 2018
	(In thousands)
Short-term unbilled receivables - included in accounts receivable and unbilled receivables	$	15,524	$	9,191
Long-term unbilled receivables - included in other long-term assets	12,794		16,481
Total contract assets	$	28,318	$	25,672

Short-term deferred revenues, net	$	88,205	$	81,835
Long-term deferred revenues	7,979		10,582
Total contract liabilities	$	96,184	$	92,417

The portion of the ~~acquisition date. The purchase~~transaction price ~~was preliminarily~~ allocated to ~~intangible assets in~~ the ~~amount~~Company’s unsatisfied performance obligations for which invoicing has occurred is recorded as deferred revenues.

Short-term deferred revenues of ~~$1.9~~$88.2 million ~~which included developed technology~~ and ~~customer~~$81.8 million include deferred revenues from product sales and service contracts, ~~with~~net of deferred cost of sales, of $14.3 million and $11.1 million as of September 30, 2019 and December 31, 2018, respectively. The short-term deferred revenues from product sales relate to delivered and invoiced products, pending installation and acceptance, expected to occur within the ~~remainder allocated to goodwill.~~

~~The results~~next twelve months. During the three and nine months ended September 30, 2019, the Company recognized revenues of ~~the InPharmics’ operations have been~~$4.8 million and $69.8 million that were included in the ~~Company’s consolidated results~~corresponding gross short-term deferred revenues balance of ~~operations~~$92.9 million as of December 31, 2018.

Long-term deferred revenues include deferred revenues from service contracts of $8.0 million and $10.6 million as of September 30, 2019 and December 31, 2018, respectively. Remaining performance obligations primarily relate to maintenance contracts and are ~~presented as part~~recognized ratably over the remaining term of the ~~Automation~~contract, generally not more than five years.

Significant Customers

There were no customers that accounted for more than 10% of the Company’s total revenues for the three and ~~Analytics segment.~~nine months ended September 30, 2019 and 2018. Also, there were no customers that accounted for more than 10% of the Company’s accounts receivable as of September 30, 2019 and December 31, 2018.

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.



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(In thousands, except per share data)
Net income	$	19,983	$	13,628	$	39,243	$	22,936
Weighted-average shares outstanding — basic	41,771		39,432		41,283		39,015
Effect of dilutive securities from stock award plans	1,281		1,428		1,513		1,222
Weighted-average shares outstanding — diluted	43,052		40,860		42,796		40,237
Net income per share - basic	$	0.48	$	0.35	$	0.95	$	0.59
Net income per share - diluted	$	0.46	$	0.33	$	0.92	$	0.57

Anti-dilutive weighted-average shares related to stock award plans	1,060		673		832		1,176

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
(In thousands, except per share data)
Net income (loss) $ 13,628
$ 7,748
$ 22,936
$ (707 )
Weighted-average shares outstanding — basic 39,432
37,698
39,015
37,266
Effect of dilutive securities from stock award plans 1,428
1,275
1,222
—
Weighted-average shares outstanding — diluted $ 40,860
$ 38,973
40,237
37,266
Net income (loss) per share - basic $ 0.35
$ 0.21
$ 0.59
$ (0.02 )
Net income (loss) per share - diluted $ 0.33
$ 0.20
$ 0.57
$ (0.02 )

Anti-dilutive weighted-average shares related to stock award plans 673
1,383
1,176
3,757

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

Cash and cash equivalents of ~~$44.2~~$137.3 million and ~~$32.4~~$67.2 million as of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, consisted of ~~demand deposits only.~~bank accounts with major financial institutions.

Fair Value Hierarchy

The Company measures its financial instruments at fair value. The Company’s 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 interest rate swap contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

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, 2018:



	Level 1		Level 2		Level 3		Total
	(In thousands)
Interest rate swap contracts	$	—	$	562	$	—	$	562
Total financial assets	$	—	$	562	$	—	$	562

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 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 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 a variable rate based on the one month LIBOR rate subject to a LIBOR floor of 0.0%. Amounts payable by or due to the Company ~~will be~~were net settled with the respective counterparty on the last business day of each month, commencing July 31, 2016.

The fair value of the interest rate swap ~~agreements~~agreement at ~~September 30, 2018 and~~ December 31, ~~2017~~2018 was ~~$1.0 million and $1.4 million, respectively.~~$0.6 million. There were no amounts reclassified into current earnings due to ineffectiveness during the periods presented.

~~Fair Value Hierarchy~~

The Company measures its financial instruments at fair value. The Company’s 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 interest rate swap contracts and foreign currency contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

~~The following table represents the fair value hierarchy of the Company’s financial assets and financial liabilities measured at fair value as of September 30, 2018:~~

Level 1 Level 2 Level 3 Total
(In thousands)
Interest rate swap contracts $ —
$ 957
$ —
$ 957
Total financial assets $ —
$ 957
$ —
$ 957

~~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, 2017:~~

Level 1 Level 2 Level 3 Total
(In thousands)
Interest rate swap contracts $ —
$ 1,378
$ —
$ 1,378
Total financial assets $ —
$ 1,378
$ —
$ 1,378

~~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.~~

Note 5. Balance Sheet Components

Depreciation expense of property and equipment was $3.7 million and $3.8 million for the three months ended September 30, 2018 and 2017, respectively. Depreciation expense of property and equipment was $11.0 million and $12.1 million for the nine months ended September 30, 2018 and 2017, respectively.

The following ~~table summarizes~~tables summarize the changes in accumulated balances of other comprehensive income (loss) for the three and nine months ended September 30, 2019 and 2018:



	Three months ended September 30,
	2019								2018
	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	$	(11,576	)	$	—	$	(11,576	)	$	(8,896	)	$	953		$	(7,943	)
Other comprehensive income (loss) before reclassifications	(2,825		)	—		(2,825		)	(907		)	90			(817		)
Amounts reclassified from other comprehensive income (loss), net of tax	—			—		—			—			(324		)	(324		)
Net current-period other comprehensive income (loss), net of tax	(2,825		)	—		(2,825		)	(907		)	(234		)	(1,141		)
Ending balance	$	(14,401	)	$	—	$	(14,401	)	$	(9,803	)	$	719		$	(9,084	)



	Nine months ended September 30,
	2019									2018
	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	$	(11,274	)	$	420		$	(10,854	)	$	(6,954	)	$	841		$	(6,113	)
Other comprehensive income (loss) before reclassifications	(3,127		)	148			(2,979		)	(2,849		)	686			(2,163		)
Amounts reclassified from other comprehensive income (loss), net of tax	—			(568		)	(568		)	—			(808		)	(808		)
Net current-period other comprehensive income (loss), net of tax	(3,127		)	(420		)	(3,547		)	(2,849		)	(122		)	(2,971		)
Ending balance	$	(14,401	)	$	—		$	(14,401	)	$	(9,803	)	$	719		$	(9,084	)

Note 6. Property and Equipment

The following table represents the property and equipment balances as of September 30, 2019 and December 31, 2018:



	September 30, 2019			December 31, 2018
	(In thousands)
Equipment	$	83,233		$	75,417
Furniture and fixtures	8,521			7,844
Leasehold improvements	18,205			16,274
Software	47,756			42,048
Construction in progress	8,406			10,706
Property and equipment, gross	166,121			152,289
Accumulated depreciation and amortization	(111,244		)	(100,789		)
Total property and equipment, net	$	54,877		$	51,500

Depreciation and amortization expense of property and equipment was $4.5 million and $3.7 million for the three months ended September 30, 2019 and 2018, respectively. Depreciation and ~~2017:~~amortization expense of property and equipment was $12.9 million and $11.0 million for the nine months ended September 30, 2019 and 2018, respectively.

The geographic location of the Company's property and equipment, net, is based on the physical location in which it is located. The following table summarizes the geographic information for property and equipment, net, as of September 30, 2019 and December 31, 2018:

Three months ended September 30,
2018 2017
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 $ (8,896 ) $ 953
$ (7,943 ) $ (8,765 ) $ 1,274
$ (7,491 )
Other comprehensive income (loss) before reclassifications (907 ) 90
(817 ) 1,389
35
1,424
Amounts reclassified from other comprehensive income (loss), net of tax —
(324 ) (324 ) —
(109 ) (109 )
Net current-period other comprehensive income (loss), net of tax (907 ) (234 ) (1,141 ) 1,389
(74 ) 1,315
Ending balance $ (9,803 ) $ 719
$ (9,084 ) $ (7,376 ) $ 1,200
$ (6,176 )

Nine months ended September 30,
2018 2017
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 $ (6,954 ) $ 841
$ (6,113 ) $ (10,764 ) $ 1,245
$ (9,519 )
Other comprehensive income (loss) before reclassifications (2,849 ) 686
(2,163 ) 3,388
111
3,499
Amounts reclassified from other comprehensive income (loss), net of tax —
(808 ) (808 ) —
(156 ) (156 )
Net current-period other comprehensive income (loss), net of tax (2,849 ) (122 ) (2,971 ) 3,388
(45 ) 3,343
Ending balance $ (9,803 ) $ 719
$ (9,084 ) $ (7,376 ) $ 1,200
$ (6,176 )

~~Note 6. Net Investment in Sales-Type Leases~~

On a recurring basis, the Company enters into sales-type lease transactions with the majority varying in length from one to five years. The receivables as a result of these types of transactions are collateralized by the underlying equipment leased and consist of the following components at September 30, 2018 and December 31, 2017:

September 30,
2018 December 31,
2017
(In thousands)
Net minimum lease payments to be received $ 28,306
$ 25,899
Less: Unearned interest income portion (2,386 ) (1,695 )
Net investment in sales-type leases 25,920
24,204
Less: Short-term portion⁽¹⁾
(8,472 ) (8,769 )
Long-term net investment in sales-type leases $ 17,448
$ 15,435



	September 30, 2019		December 31, 2018
	(In thousands)
United States	$	49,235	$	44,684
Rest of world ⁽¹⁾	5,642		6,816
Total property and equipment, net	$	54,877	$	51,500

The Company evaluates its sales-type leases individually and collectively for impairment. The allowance for credit losses was $0.2 million as of September 30, 2018 and December 31, 2017, respectively.

~~At September 30, 2018, the future minimum lease payments under sales-type leases were as follows:~~

September 30,
2018
(In thousands)
Remaining three months of 2018 $ 3,043
2019 8,328
2020 6,462
2021 4,613
2022 3,930
Thereafter 1,930
Total $ 28,306

Note 7. Goodwill and Intangible Assets

Automation and
Analytics

Medication
Adherence
Total
(In thousands)
Net balance as of December 31, 2017 $ 220,851
$ 116,900
$ 337,751
Foreign currency exchange rate fluctuations (882 ) (352 ) (1,234 )
Net balance as of September 30, 2018 $ 219,969
$ 116,548
$ 336,517



	December 31, 2018		Additions		Foreign currency exchange rate fluctuations			September 30, 2019
	(In thousands)
Goodwill	$	335,887	$	—	$	(1,371	)	$	334,516

Intangible Assets, Net

The carrying amounts and useful lives of intangible assets as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows:


	September 30, 2018											September 30, 2019
	Gross carrying amount		Accumulated amortization			Foreign currency exchange rate fluctuations			Net carrying amount		Useful life (years)	Gross carrying amount ⁽¹⁾		Accumulated amortization			Foreign currency exchange rate fluctuations			Net carrying amount		Useful life (years)
	(In thousands, except for years)											(In thousands, except for years)
Customer relationships	$	135,234	$	(42,435	)	$	(1,003	)	$	91,796	1 - 30	$	135,234	$	(52,357	)	$	(1,480	)	$	81,397	1 - 30
Acquired technology	74,222		(27,011		)	123			47,334		3 - 20	77,142		(34,213		)	(28		)	42,901		3 - 20
Backlog	21,350		(19,823		)	—			1,527		1 - 4	1,150		(719		)	—			431		4
Trade names	7,650		(4,193		)	21			3,478		1 - 12	7,650		(4,868		)	6			2,788		1 - 12
Patents	3,239		(1,461		)	5			1,783		2 - 20	3,217		(1,571		)	—			1,646		2 - 20
Non-compete agreements	1,900		(1,750		)	—			150		3
In-process technology	3,900		—			—			3,900		—
Total intangibles assets, net	$	247,495	$	(96,673	)	$	(854	)	$	149,968		$	224,393	$	(93,728	)	$	(1,502	)	$	129,163



	December 31, 2018
	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	$	(45,029	)	$	(1,185	)	$	89,020	1 - 30
Acquired technology	78,122		(29,206		)	42			48,958		3 - 20
Backlog	21,350		(20,703		)	—			647		1 - 4
Trade names	7,650		(4,361		)	17			3,306		1 - 12
Patents	3,239		(1,488		)	4			1,755		2 - 20
Non-compete agreements	1,900		(1,900		)	—			—		3
Total intangibles assets, net	$	247,495	$	(102,687	)	$	(1,122	)	$	143,686

December 31, 2017

Gross carrying
amount

Accumulated
amortization
Foreign currency exchange rate fluctuations
Net
carrying
amount

Useful life
(years)
(In thousands, except for years)
Customer relationships $ 135,234
$ (33,988 ) $ (787 ) $ 100,459
1 - 30
Acquired technology 74,222
(21,345 ) 221
53,098
3 - 20
Backlog 21,350
(17,182 ) —
4,168
1 - 4
Trade names 7,650
(3,688 ) 40
4,002
1 - 12
Patents 3,239
(1,369 ) 10
1,880
2 - 20
Non-compete agreements 1,900
(1,300 ) —
600
3
In-process technology 3,900
—
—
3,900
—
Total intangibles assets, net $ 247,495
$ (78,872 ) $ (516 ) $ 168,107


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

Amortization expense of intangible assets was ~~$5.8~~$4.6 million and ~~$6.4~~$5.8 million for the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Amortization expense of intangible assets was ~~$17.8~~$14.1 million and ~~$19.4~~$17.8 million for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

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



	September 30, 2019
	(In thousands)
Remaining three months of 2019	$	4,539
2020	17,457
2021	16,125
2022	14,780
2023	13,634
Thereafter	62,628
Total	$	129,163

September 30, 2018
(In thousands)
Remaining three months of 2018 $ 5,685
2019 17,954
2020 16,754
2021 15,417
2022 14,069
Thereafter (excluding in-process technology) 76,189
Total $ 146,068

Note 8. Debt and Credit Agreements

On January 5, 2016, the Company entered into a $400.0 million senior secured credit facility pursuant to a credit agreement with certain lenders, Wells Fargo Securities, LLC as sole lead arranger, and Wells Fargo Bank, National Association as administrative agent (the “Credit Agreement”). The Credit Agreement provides for (a) a five-year revolving credit facility of $200.0 million, which was subsequently increased pursuant to the amendment discussed below (the “Revolving Credit Facility”) and (b) a five-year $200.0 million term loan facility (the “Term Loan Facility” and together with the Revolving Credit Facility, the “Facilities”). In addition, the Credit Agreement includes 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. The Credit Agreement expires on January 5, 2021, upon which date all remaining outstanding borrowings are due and payable.

Loans under the Facilities bear 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 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 Credit Agreement). Undrawn commitments under the Revolving Credit Facility will be 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 Revolving Credit Facility. A letter of credit participation fee ranging from 1.50% to 2.25% per annum based on the Company’s consolidated total net leverage ratio will accrue on the average daily amount of letter of credit exposure.

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. The Company is

required to make mandatory prepayments under the Term Loan Facility with (a) net cash proceeds from any issuances of debt

~~(other~~ (other than certain permitted debt) and (b) net cash proceeds from certain asset dispositions (other than certain permitted 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 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 Credit Agreement contains financial covenants that require the Company and its subsidiaries to not exceed a maximum consolidated total leverage ratio and maintain a minimum fixed charge coverage ratio. The Company’s obligations under the 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 subsidiary guarantors’ assets. In connection with entering into the 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 collateral agreement and subsidiary guaranty agreement.

On April 11, 2017, the parties entered into the First Amendment to Credit Agreement and Collateral Agreement (the “Amended Credit 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.

On December 26, 2017, the parties entered into ~~another~~an amendment (the “Amendment”) to the Amended Credit Agreement. Pursuant to the Amendment, the Revolving Credit Facility provided for under the Amended Credit Agreement, was increased from $200.0 million to $315.0 million, and certain other modifications to the Amended Credit Agreement were made, including amendments to certain negative covenants.

In connection with these Facilities, the Company incurred $10.1 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.~~liability. The debt issuance costs are being amortized to interest expense using the straight line method from issuance date through 2021. Interest expense (exclusive of fees and issuance cost amortization) was approximately ~~$1.9~~$0.8 million and ~~$1.6~~$1.9 million for the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and approximately ~~$5.7~~$3.0 million and ~~$4.6~~$5.7 million for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Amortization expense related to fees and issuance cost was approximately $0.6 million ~~and $0.4 million~~ for both the three months ended September 30, ~~2018~~2019 and ~~2017, respectively,~~2018, and approximately $1.7 million ~~and $1.2 million~~ for both the nine months ended September 30, ~~2018~~2019 and ~~2017, respectively.~~2018. The Company was in compliance with all covenants as of September 30, ~~2018~~2019 and December 31, ~~2017.~~2018.

During the nine months ended September 30, ~~2018,~~2019, the Company repaid ~~$27.0~~$60.0 million under these Facilities.

The components of the Company’s debt obligations as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows:



	December 31, 2018			Borrowings		Repayment / Amortization			September 30, 2019
	(In thousands)
Term loan facility	$	140,000		$	—	$	(60,000	)	$	80,000
Revolving credit facility	—			—		—			—
Total debt under the facilities	140,000			—		(60,000		)	80,000
Less: Deferred issuance cost	(4,583		)	—		1,718			(2,865		)
Total long-term debt, net of deferred issuance cost	$	135,417		$	—	$	(58,282	)	$	77,135

December 31, 2017 Borrowings Repayment / Amortization September 30, 2018
(In thousands)
Term loan facility $ 182,500
$ —
$ (12,500 ) $ 170,000
Revolving credit facility 34,500
—
(14,500 ) 20,000
Total debt under the facilities 217,000
—
(27,000 ) 190,000
Less: Deferred issuance cost (6,875 ) —
1,718
(5,157 )
Total debt, net of deferred issuance cost $ 210,125
$ —
$ (25,282 ) $ 184,843
Long term debt, current portion, net of deferred issuance cost 15,208
17,708
Long term debt, net of deferred issuance cost $ 194,917
$ 167,135

As of September 30, ~~2018,~~2019, the carrying amount of debt of ~~$190.0~~$80.0 million approximates the comparable fair value of ~~$192.6~~$79.9 million. The Company’s debt facilities are classified as a Level 3 in the fair value hierarchy. The calculation of the fair value is based on a discounted cash flow model using observable market inputs and taking into consideration variables such as

interest rate changes, comparable instruments and long-term credit ratings. There have been no significant changes in the assumptions used as of September 30, ~~2018~~2019 as compared to ~~the period as of~~ December 31, ~~2017.~~2018.

Note 9. ~~Deferred Revenues~~Lessor Leases

~~Short-term deferred revenues of $87.8 million~~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 following table presents the Company’s income recognized from sales-type leases for the three and ~~$78.8 million include deferred revenues from product sales and service contracts, net of deferred cost of sales of $14.9 million and $16.9 million as of~~nine months ended September 30, ~~2018~~2019 and 2018:



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(In thousands)
Sales-type lease revenues	$	9,017	$	11,438	$	33,833	$	28,828
Interest income on sales-type lease receivables	$	527	$	315	$	1,335	$	896

The receivables as a result of these types of transactions are collateralized by the underlying equipment leased and consist of the following components at September 30, 2019 and December 31, ~~2017, respectively.~~ 2018:



	September 30, 2019			December 31, 2018
	(In thousands)
Net minimum lease payments to be received	$	34,057		$	28,295
Less: Unearned interest income portion	(3,116		)	(2,477		)
Net investment in sales-type leases	30,941			25,818
Less: Current portion ⁽¹⁾	(9,447		)	(8,736		)
Long-term net investment in sales-type leases	$	21,494		$	17,082


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

The ~~short-term deferred revenues from product sales relate to delivered~~carrying amount of the Company’s sales-type lease receivables is a reasonable estimate of fair value.

The Company evaluates its sales-type leases individually and ~~invoiced products, pending installation and acceptance, expected to occur within the next twelve months.~~

~~Long-term deferred revenues include deferred revenues from service contracts of $10.6~~collectively for impairment. The allowance for credit losses was $0.2 million as of both September 30, ~~2018~~2019 and December 31, ~~2017.~~2018.

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



	September 30, 2019
	(In thousands)
Remaining three months of 2019	$	4,111
2020	9,677
2021	7,304
2022	6,599
2023	4,585
Thereafter	1,781
Total future minimum sales-type lease payments	34,057
Present value adjustment	(3,116		)
Total net investment in sales-type leases	$	30,941

Operating Leases

The Company entered into certain leasing agreements that were classified as operating leases prior to the adoption of the new lease accounting standard. 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 the new lease accounting standard. 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 nine months ended September 30, 2019 and 2018:



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(In thousands)
Rental income	$	2,896	$	2,999	$	9,548	$	8,800

The net carrying value of the leased equipment under operating leases was $2.3 million and $2.6 million, which includes accumulated depreciation of $1.5 million and $1.2 million, as of September 30, 2019 and December 31, 2018, respectively. Depreciation expense of the leased equipment for both the three months ended September 30, 2019 and 2018 was $0.2 million, and depreciation expense of the leased equipment for the nine months ended September 30, 2019 and 2018 was $0.5 million and $0.3 million, respectively.

The maturity schedule of future minimum lease payments under operating leases was as follows:



	September 30, 2019
	(In thousands)
Remaining three months of 2019	$	3,072
2020	9,986
2021	6,908
2022	4,941
2023	2,914
Thereafter	1,229
Total future minimum operating lease payments	$	29,050

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 September 30, 2019, the Company did not have any additional material operating leases that were entered into, but not yet commenced.

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:



	September 30, 2019
	(In thousands)
Remaining three months of 2019	$	3,655
2020	13,576
2021	12,966
2022	11,832
2023	8,409
Thereafter	27,585
Total operating lease payments	78,023
Present value adjustment	(15,004		)
Total operating lease liabilities ⁽¹⁾	$	63,019

_________________________________________________


⁽¹⁾	Amount consists of a current and long-term portion of operating lease liabilities of $10.3 million and $52.7 million, respectively. The short-term portion of the operating lease liabilities is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

Prior to the adoption of the new lease accounting standard, the maturity schedule of future minimum lease payments under operating leases was as follows:



	December 31, 2018
	(In thousands)
2019	$	14,153
2020	13,104
2021	12,729
2022	11,809
2023	8,334
Thereafter	27,289
Total minimum future lease payments	$	87,418

Operating lease costs were $3.7 million and $11.0 million for the three and nine months ended September 30, 2019, respectively. Short-term lease costs and variable lease costs were immaterial for the three and nine months ended September 30, 2019.

The following table summarizes supplemental cash flow information related to the Company’s operating leases for the nine months ended September 30, 2019:



	Nine months ended September 30, 2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	11,023
Right-of-use assets obtained in exchange for new lease liabilities	$	957

The following table summarizes the weighted-average remaining lease term and weighted-average discount rate related to the Company’s operating leases as of September 30, 2019:



	September 30, 2019
Weighted-average remaining lease term, years	6.6
Weighted-average discount rate, %	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, 2018, the minimum future payments on non-cancelable operating leases were as follows:

(In thousands)
Remaining three months of 2018 $ 3,392
2019 13,329
2020 11,416
2021 10,458
2022 8,655
Thereafter 26,634
Total minimum future lease payments $ 73,884

Purchase Obligations

In the ordinary course of business, the Company issues purchase orders based on its current manufacturing needs. AtAs of September 30, ~~2018,~~2019, the Company had non-cancelable purchase commitments of ~~$75.9~~$75.3 million, of which $57.1 million are expected to be paid within the ~~next twelve months.~~ year ending December 31, 2019.

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 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 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 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 subsidiaries, Aesynt Incorporated (“Aesynt”), 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 seeks 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 ~~yet~~ been served with the complaint. The Company intends to defend the lawsuit vigorously.

On June 6, 2018, a ~~class-action~~class action lawsuit was 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, in the Circuit Court of Cook County, Illinois,

Chancery Division, captioned Yana Mazya, individually and on behalf of all others similarly situated v. Northwestern Lake Forest Hospital, Northwestern Memorial Healthcare, Omnicell, Inc. and Becton Dickinson, Case No. 2018-CH-07161. The complaint ~~seeks~~sought class certification, monetary damages in the form of statutory damages for willful and/or reckless or, in the alternative, negligent violation of the Illinois Biometric Information Privacy Act (“BIPA”), and certain declaratory, injunctive, and other relief based on causes of action directed to allegations of violation of BIPA and of negligence by the defendants. The complaint was served on the Company on June15, 2018. The Company’s obligation to respond to the complaint ~~has been~~was held in

abeyance pending a decision of the Illinois Supreme Court in a separate case involving BIPA issues. The Illinois Supreme Court issued its decision in that case on January 25, 2019. On April 10, 2019, subsequent to the court’s issuance of an order granting the plaintiff leave to file an amended complaint, the plaintiff filed an amended complaint adding a second named plaintiff and an affiliate of the Company’s customer as an additional defendant and, in addition to making other modifications to the complaint, removing the separate cause of action directed to negligence. The court ~~has scheduled~~established a ~~status conference~~deadline of May 13, 2019 for the defendants to answer or otherwise respond to the amended complaint. On May 10, 2019, defendants Northwestern Lake Forest Hospital, Northwestern Memorial Healthcare, and Northwestern Memorial Hospital removed the case to the United States District Court for the Northern District of Illinois, Eastern Division. Subsequently, on May 17, 2019, the Company and the other defendants in the case each filed a motion to dismiss the complaint for ~~February 20, 2019.~~failure to state a cause of action upon which relief could be granted. On June 14, 2019, plaintiffs filed a motion to remand the case to state court. The Court then entered an order, on June 19, 2019, denying plaintiffs’ motion to remand, granting defendants’ motions to dismiss with respect to the additionally-named plaintiff, and continuing the motions to dismiss with respect to the originally-named plaintiff. On July 2, 2019, the Court entered an order remanding the case to state court and denying the defendants’ motions to dismiss without prejudice to renewal of the motions in state court. On September 5, 2019, plaintiff filed a motion to voluntarily dismiss the Company ~~intends~~from the case without prejudice. The motion was granted by order of the Court dated October 10, 2019 and, as a result, the Company has been finally dismissed from the case without prejudice to ~~defend~~plaintiff refiling the ~~lawsuit vigorously.~~action.

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, the 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 (“~~Underlying~~Mazya Action”), disclosed above, together with claims for reimbursement and unjust enrichment relating to the defense of the ~~Underlying~~Mazya Action in the form of attorneys’ fees and other related costs. The Company has not ~~yet~~ responded to the complaint. ~~The Company filed a motion to stay proceedings in this litigation~~On February 12, 2019, the court stayed the action pending the outcome of the ~~Underlying Action. The court has granted~~Mazya Action and administratively closed the ~~Company’s motion to stay~~case. On October 15, 2019, the ~~requirement to respond to~~plaintiffs filed a notice advising the ~~complaint pending the resolution~~Court of the ~~motion to~~dismissal of the Company from the Mazya Action and requesting that the Court lift the stay in the ~~litigation.~~case and set dates for filing a responsive pleading by the Company and initial discovery and scheduling matters. The Company intends to defend the lawsuit vigorously.

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 on June 13, 2019. On July 31, 2019, the Company filed a motion to stay or 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 the Company’s dismissal from the Mazya Action. The Company filed a motion to dismiss the complaint on October 31, 2019. The Court has scheduled a case status conference for November 7, 2019 at which time the Company intends to present its motion to dismiss to the Court. The Company intends to defend the lawsuit vigorously.

On July 18, 2019, a putative class action lawsuit was filed against the Company and certain of its officers in the U.S. District Court for the Northern District of California. The complaint, captioned Bursick v. Omnicell, Inc. et al., Case No. 3:19-cv-04150, alleges that the defendants violated federal securities laws by making materially false and misleading statements beginning in October 2018 regarding revenue recognition, customer concerns about implementation issues, and a purported need to write off inventory. The plaintiff seeks unspecified monetary damages and other relief. On October 24, 2019, Frank Bursick was appointed Lead Plaintiff. The Court ordered Lead Plaintiff to file an amended complaint by November 28, 2019 and the Company to respond to the amended complaint by January 2, 2020. The Company intends to defend the lawsuit vigorously.

In August 2019, the Company received a letter from the Denver office of the SEC seeking information related to the Company’s accounting processes and procedures. The Company responded and is fully cooperating with the SEC.

Note ~~11.~~12. Income Taxes

On December 22, 2017, the Tax Act was signed into law, most provisions of which became effective starting in 2018, including the reduction of the statutory corporate income tax rate from 35% to 21%. As of September 30, 2018, the Company has not completed the accounting for the tax effects of enactment of the Tax Act; however, in the fourth quarter of 2017, the Company made a reasonable estimate of the effects on the existing deferred tax balances and the one-time transition tax. No adjustments to the provisional amounts recorded in the fourth quarter of 2017 were made during the three and nine months ended September 30, 2018, respectively. For the nine months ended September 30, 2018, the Company assessed the effect of certain international provisions of the Tax Act that became effective January 1, 2018, and determined that these provisions had an immaterial impact; therefore, the Company did not record any impact as a result of the assessment. The Company will continue to analyze the provision for income taxes under the Tax Act as future guidance is issued. Any revisions will be treated in accordance with the measurement period guidance outlined in SEC Staff Accounting Bulletin No. 118.

The Company generally provides for income taxes in interim periods based on the estimated annual effective tax rate for the year, adjusting for discrete items in the quarter in which they arise. The annual effective tax rate before discrete items was ~~19.0%~~24.6% and ~~34.4%~~19.0% for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

As a result of global operational centralization activities during the nine months ended September 30, 2018, the Company recognized $4.2 million of a discrete tax benefit associated with making a check-the-box election to treat Aesynt

Holding Coöperatief U.A. (Netherlands) as a U.S. disregarded entity beginning in the first quarter of 2018. Due to continuing global operational centralization activities during the first quarter of 2019, the Company recognized gain on the sale of certain intellectual property rights by Aesynt Holding Coöperatief U.A. to Omnicell, Inc., which resulted in a discrete tax expense in the amount of $9.6 million during the nine months ended September 30, 2019. The Company also recognized a discrete tax benefit related to equity compensation in the amount of $8.1 million and $4.8 million for the nine months ended September 30, 2019 and September 30, 2018, respectively.

The 2019 annual effective tax rate differed from the statutory rate of 21% primarily due to the unfavorable impact of the state income taxes, non-deductible equity charges, and non-deductible expenses, partially offset by the favorable impact of the research and development credits, foreign rate differential, and foreign derived intangible income (“FDII”) benefit deduction. The 2018 annual effective tax rate differed from the statutory rate of 21% primarily due to the favorable impact of the research and development credits and foreign rate differential, which were partially offset by the unfavorable impact of state income taxes, non-deductible expenses, and non-deductible equity charges. The 2017 annual effective tax rate differed from the statutory rate of 35% primarily due to the favorable impact of the research and development credits, which were partially offset by the unfavorable impact of state income taxes, foreign rate differential, and non-deductible equity charges.

As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had gross unrecognized tax benefits of ~~$10.2~~$14.0 million and ~~$10.7~~$10.0 million, respectively. It is the Company’s policy to classify accrued interest and penalties as part of the unrecognized tax benefits, but to record ~~the~~ interest and penalties in ~~operating expense.~~Interest and other income (expense), net in the Condensed Consolidated Statements of Operations. As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the amount of accrued interest and penalties was ~~$1.8~~$1.7 million and $1.4 million, respectively.

The Company 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 September 30, ~~2018,~~2019, the Company is no longer subject to ~~U.S.,~~United States, state, and foreign examination for years before 2015, ~~2013,~~2014, and 2014, 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

For a detailed explanation of the Company's stock plans, ~~and subsequent changes,~~ please refer to Note 11, Employee Benefits and Share-Based Compensation, of the Company's annual report on Form 10-K for the year ended December 31, ~~2017~~2018 filed with the SEC on February 27, ~~2018.~~2019.

Share-Based Compensation Expense

The following table sets forth the total share-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Operations for the three and nine months ended September 30, ~~2018~~2019 and ~~2017:~~2018:



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
	(In thousands)
Cost of product and service revenues	$	1,316	$	1,150	$	4,194	$	3,346
Research and development	1,652		1,397		4,938		4,068
Selling, general, and administrative	5,537		4,538		16,043		13,437
Total share-based compensation expense	$	8,505	$	7,085	$	25,175	$	20,851

Three months ended Nine months ended
September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
(In thousands)
Cost of product and service revenues $ 1,150
$ 882
$ 3,346
$ 2,727
Research and development 1,397
915
4,068
2,651
Selling, general, and administrative 4,538
3,462
13,437
10,937
Total share-based compensation expense $ 7,085
$ 5,259
$ 20,851
$ 16,315
In the first quarter of 2019, the Company modified the terms of its stock options by extending the post-employment exercise period for certain employees. The Company recorded share-based compensation expense related to this modification of approximately $0.2 million on the stock options modification date. As of September 30, 2019, share-based compensation expense related to unvested stock options impacted by the modification was approximately $0.7 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.9 years.

Stock Options and ESPP Shares

The following assumptions were used to value ~~share~~stock options and Employee Stock Purchase Plan (“ESPP”) shares granted pursuant to the Company’s equity incentive plans for the three and nine months ended September 30, ~~2018~~2019 and ~~2017:~~2018:



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Stock options
Expected life, years	4.3		4.8		4.4		4.8
Expected volatility, %	34.7	%	30.4	%	33.7	%	31.1	%
Risk-free interest rate, %	1.6	%	2.8	%	2.1	%	2.7	%
Estimated forfeiture rate, %	7.2	%	6.9	%	7.2	%	6.9	%
Dividend yield, %	—	%	—	%	—	%	—	%

Three months ended Nine months ended
September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
Stock option plans
Expected life, years 4.8
4.7
4.8
4.7
Expected volatility, % 30.4 % 28.1 % 31.1 % 29.2 %
Risk free interest rate, % 2.8 % 1.8 % 2.7 % 1.8 %
Estimated forfeiture rate, % 6.9 % 7.7 % 6.9 % 7.7 %
Dividend yield, % — % — % — % — %



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
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, %	28.9% - 39.9%		28.1% - 33.8%		28.2% - 39.9%		27.7% - 33.8%
Risk-free interest rate, %	1.4% - 2.7%		0.8% - 2.7%		1.3% - 2.7%		0.7% - 2.7%
Dividend yield, %	—	%	—	%	—	%	—	%



	~~Three months ended~~				~~Nine months ended~~
	~~September 30, 2018~~		~~September 30, 2017~~		~~September 30, 2018~~		~~September 30, 2017~~
~~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, %~~	~~28.1-33.8%~~		~~26.7-32.1%~~		~~27.7-33.8%~~		~~25.8-32.8%~~
~~Risk free interest rate, %~~	~~0.8-2.7%~~		~~0.6-1.4%~~		~~0.7-2.7%~~		~~0.5-1.4%~~
~~Dividend yield, %~~	—	%	—	%	—	%	—	%

Stock Options Activity

The following table summarizes the share option activity under the Company’s equity incentive plans during the nine months ended September 30, ~~2018:~~2019:



	Number of Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Years	Aggregate Intrinsic Value
	(In thousands, except per share data)
Outstanding at December 31, 2018	3,748		$	41.27	7.6	$	78,365
Granted	687		75.49
Exercised	(597	)	32.66
Expired	(9	)	37.08
Forfeited	(234	)	47.23
Outstanding at September 30, 2019	3,595		$	48.86	7.7	$	87,453
Exercisable at September 30, 2019	1,470		$	33.91	6.3	$	56,377
Vested and expected to vest at September 30, 2019 and thereafter	3,401		$	48.07	7.7	$	85,235

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, 2017 3,323
$ 32.72
7.6 $ 53,953
Granted 937
47.36

Exercised (584 ) 24.63

Expired (12 ) 23.38

Forfeited (228 ) 38.85

Outstanding at September 30, 2018 3,436
$ 37.71
7.7 $ 117,493
Exercisable at September 30, 2018 1,247
$ 27.44
5.7 $ 55,462
Vested and expected to vest at September 30, 2018 and thereafter 3,240
$ 37.24
7.6 $ 112,292

The weighted-average fair value per share of options granted during the three months ended September 30, 2019 and 2018 ~~and 2017~~ was ~~$17.45~~$21.59 and $12.49, respectively, and the weighted-average fair value per share of options granted during the nine months ended September 30, 2019 and 2018 was $23.41 and ~~2017 was~~ $15.02, ~~and $11.22,~~ respectively. The intrinsic value of options exercised during the three months ended September 30, 2019 and 2018 ~~and 2017~~ was ~~$8.2~~$2.7 million and ~~$6.8~~$8.2 million, respectively, and the intrinsic value of options exercised during the nine months ended September 30, 2019 and 2018 ~~and 2017~~ was ~~$16.7~~$27.0 million and ~~$14.6~~$16.7 million, respectively.

As of September 30, ~~2018,~~2019, total unrecognized compensation cost related to unvested stock options was ~~$24.5~~$33.5 million, which is expected to be recognized over a weighted-average vesting period of ~~2.9~~2.7 years.

Employee Stock Purchase Plan Activity

For the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, employees purchased approximately ~~452,038~~374,000 and ~~465,696~~452,038 shares of common stock, respectively, under the ESPP at weighted average prices of ~~$29.69~~$41.44 and ~~$25.78,~~$29.69, respectively. As of September 30, ~~2018,~~2019, the unrecognized compensation cost related to the shares to be purchased under the ESPP was approximately ~~$5.6~~$2.6 million and is expected to be recognized over a weighted-average period of 1.5 years.

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

Summaries of the restricted stock activity under the Company’s 2009 Equity Incentive Plan, as amended (the “2009 Plan”) are presented below for the nine months ended September 30, ~~2018:~~2019:



	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, 2018	538		$	51.52	1.6	$	32,935
Granted (Awarded)	77		77.48
Vested (Released)	(120	)	40.87
Forfeited	(49	)	47.21
Outstanding and unvested at September 30, 2019	446		$	59.39	1.3	$	32,199

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, 2017 501
$ 38.90
1.5 $ 24,293
Granted 138
46.04

Vested (131 ) 34.34

Forfeited (58 ) 38.55

Outstanding and unvested at September 30, 2018 450
$ 42.45
1.3 $ 32,339

As of September 30, ~~2018,~~2019, total unrecognized compensation ~~expense~~cost related to RSUs was ~~$16.0~~$21.0 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.6 years.



	Number of Shares		Weighted-Average Grant Date Fair Value
	(In thousands, except per share data)
Restricted stock awards
Outstanding at December 31, 2018	21		$	46.60
Granted (Awarded)	17		81.86
Vested (Released)	(21	)	46.96
Forfeited	—		—
Outstanding and unvested at September 30, 2019	17		$	81.92

Number of
Shares

Weighted-Average
Grant Date Fair Value
(In thousands, except per share data)
Restricted stock awards (“RSAs”)
Outstanding at December 31, 2017 23
$ 41.07
Granted 21
46.60
Vested (23 ) 41.07
Forfeited —
—
Outstanding and unvested at September 30, 2018 21
$ 46.60

As of September 30, ~~2018,~~2019, total unrecognized compensation cost related to RSAs was ~~$0.6~~$0.8 million, which is expected to be recognized over the remaining weighted-average vesting period of 0.6 years.

Performance-Based Restricted Stock Units

A summary of the performance-based restricted stock activity under the 2009 Plan ~~during~~is presented below for the nine months ended September 30, ~~2018 is presented below:~~2019:



	Number of Shares		Weighted-Average Grant Date Fair Value Per Unit
	(In thousands, except per share data)
Outstanding at December 31, 2018	197		$	34.83
Granted	71		73.38
Vested	(68	)	35.74
Forfeited	(33	)	33.84
Outstanding and unvested at September 30, 2019	167		$	51.07

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, 2017 225
$ 31.18
Granted 110
38.03
Vested (67 ) 30.46
Forfeited (32 ) 34.47
Outstanding and unvested at September 30, 2018 236
$ 34.13

As of September 30, ~~2018,~~2019, total unrecognized compensation cost related to PSUs was ~~$3.4~~approximately $4.0 million, which is expected to be recognized over the remaining weighted-average vesting period of ~~1.2~~1.3 years.

Summary of Shares Reserved for Future Issuance under Equity Incentive Plans

The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of September 30, ~~2018:~~2019:



	Number of Shares
	(In thousands)
Share options outstanding	~~3,436~~3,595
Non-vested restricted share awards	~~707~~630
Shares authorized for future issuance	~~3,118~~3,672
ESPP shares available for future issuance	~~1,913~~1,539
Total shares reserved for future issuance	~~9,174~~9,436

Stock Repurchase Program

On August 2, 2016, the Company's Board of Directors (the “Board”) authorized a stock repurchase program providing for the repurchase of up to $50.0 million of the Company’s common stock (the “2016 Repurchase Program”). The 2016 Repurchase Program is in addition to the stock repurchase program approved by the Board on November 4, 2014 (the “2014 Repurchase Program”). As of September 30, ~~2018,~~2019, 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 months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company did not repurchase any of its outstanding common stock.

Note ~~13.~~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 HSBC Securities (USA) Inc., as its sales agents, pursuant to which the Company may offer and sell from time to time through the sales agents up to $125.0 million maximum aggregate offering price of the Company’s common stock. Sales of the common stock pursuant to the Distribution Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, ~~as amended (the “Securities Act”),~~ including sales made directly on the Nasdaq Stock Market, or sales made to or through a market maker other than on an exchange.

~~During~~For the three months ended September 30, 2019, the Company did not sell any of its common stock under the Distribution Agreement.

For the nine months ended September 30, 2019, the Company received gross proceeds of $38.5 million from sales of its common stock under the Distribution Agreement and 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.

For the three and nine months ended September 30, 2018, the Company did not sell any of its common stock under the Distribution Agreement.

As of September 30, ~~2018,~~2019, the Company had an aggregate of ~~$110.3~~$31.5 million available to be offered under the Distribution Agreement.

~~Note 14. Segment and Geographical Information~~

The CODM is its Chief Executive Officer. The CODM allocates resources and evaluates the performance of the Company’s segments using information about its revenues, gross profit, and income from operations. Such evaluation excludes general corporate-level costs that are not specific to either of the reportable segments and are managed separately at the corporate level. Corporate-level costs include expenses related 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:~~

~~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. The financial results of InPharmics acquired in the second quarter of 2017 are included in the Automation and Analytics segment.

~~Medication Adherence.~~ The Medication Adherence segment includes solutions to assist patients to remain adherent to their medication regimens. These solutions are comprised of a variety of tools and aids that may be directly used by a pharmacist or a healthcare provider in their direct care for a patient, or the patient themselves, and include software-based systems and medication adherence packaging. Software solutions primarily operate on the Omnicell Patient Engagement platform, a subscription-based software system which provides an environment for patient engagement by clinicians. Services running on this platform include medication synchronization, immunization management, medication therapy management, and a number of tools used by clinicians to manage patient engagement workflows. Medication Adherence packaging is designed either for patient use in care environments where there is a caregiver present or for environments where the patient cares for him or herself and includes the manufacturing and selling of consumable medication blister cards, packaging equipment, and ancillary products and services.

~~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,
2018 2017
Automation and
Analytics Medication
Adherence Total Automation and
Analytics Medication
Adherence Total
(In thousands)
Revenues:
Product revenues $ 120,248
$ 29,461
$ 149,709
$ 110,368
$ 26,470
$ 136,838
Services and other revenues 48,055
6,503
54,558
44,249
5,661
49,910
Total revenues 168,303
35,964
204,267
154,617
32,131
186,748
Cost of revenues:
Cost of product revenues 54,958
24,191
79,149
59,811
19,914
79,725
Cost of services and other revenues 22,214
3,995
26,209
19,929
2,275
22,204
Total cost of revenues 77,172
28,186
105,358
79,740
22,189
101,929
Gross profit 91,131
7,778
98,909
74,877
9,942
84,819
Operating expenses 46,015
10,624
56,639
44,332
9,901
54,233
Income from operations $ 45,116
$ (2,846 ) $ 42,270
$ 30,545
$ 41
$ 30,586
Corporate costs 24,775
18,389
Income from operations $ 17,495
$ 12,197

Nine months ended September 30,
2018 2017

Automation and
Analytics

Medication
Adherence
Total
Automation and
Analytics

Medication
Adherence

Total
(In thousands)
Revenues:
Product revenues $ 335,441
$ 79,563
$ 415,004
$ 292,463
$ 73,371
$ 365,834
Services and other revenues 142,633
17,922
160,555
132,908
17,601
150,509
Total revenues 478,074
97,485
575,559
425,371
90,972
516,343
Cost of revenues:
Cost of product revenues 168,506
61,136
229,642
170,974
54,077
225,051
Cost of services and other revenues 65,594
10,176
75,770
58,243
7,907
66,150
Total cost of revenues 234,100
71,312
305,412
229,217
61,984
291,201
Gross profit 243,974
26,173
270,147
196,154
28,988
225,142
Operating expenses 142,572
31,119
173,691
139,902
31,196
171,098
Income (loss) from segment operations $ 101,402
$ (4,946 ) $ 96,456
$ 56,252
$ (2,208 ) $ 54,044
Corporate costs 70,994
59,100
Income (loss) from operations $ 25,462
$ (5,056 )

~~Significant Customers~~

There were no customers that accounted for more than 10% of the Company’s total revenues for the three and nine months ended September 30, 2018 and 2017. Also, there were no customers that accounted for more than 10% of the Company’s accounts receivable as of September 30, 2018 and December 31, 2017.

~~Geographical Information~~

~~Revenues~~

Three months ended September 30,
2018 2017
(In thousands)
United States $ 180,635
$ 164,156
Rest of world ⁽¹⁾
23,632
22,592
Total revenues $ 204,267
$ 186,748

Nine months ended September 30,
2018 2017
(In thousands)
United States $ 502,481
$ 447,877
Rest of world ⁽¹⁾
73,078
68,466
Total revenues $ 575,559
$ 516,343

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

~~Property and Equipment, Net~~

September 30,
2018 December 31,
2017
(In thousands)
United States $ 43,511
$ 34,899
Rest of world ⁽¹⁾
6,973
7,696
Total property and equipment, net $ 50,484
$ 42,595


⁽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 15. Restructuring Expenses

In the fourth quarter of 2018, the Company announced a company-wide organizational realignment initiative in order to align its organizational infrastructure for future expected growth. During the year ended December 31, 2018, the Company incurred and accrued for $1.3 million of restructuring expenses, which includes severance and consulting-related expenses. As of September 30, 2019, there was no unpaid balance related to this restructuring plan.

On March 2, 2018, the Company initiated the realignment of its Automation and Analytics commercial group in North America and France. During the nine months ended September 30, 2018, the Company accrued and paid out $3.0 million of employee severance cost and related expenses.

~~On February 15, 2017, the Company announced its plan~~ As of December 31, 2018, there was no unpaid balance related to reduce its workforce by approximately 100 full-time employees and close the Company’s Nashville, Tennessee and Slovenia facilities. The plan was completed in fiscal year 2017. During the nine months ended September 30, 2017, the Company accrued $3.8 million of employee severance cost and related expenses, and paid out $3.2 million. 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.this restructuring program.

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

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This quarterly report on Form 10-Q contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Risk Factors” and ~~“Management’s~~“Management's Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include, but are not limited to, statements about:

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

our continued investment in, and ability to deliver on, our key business strategies of developing differentiated solutions, increasing penetration of new markets, and expanding our solutions through acquisitions and ~~partnerships;~~

partnerships, as well as our ~~ability to deliver on our goals~~goal of advancing our platform with new product introductions ~~annually~~annually;

our ability to deliver on our vision of the Autonomous Pharmacy, as well as our plans to integrate our current offerings and ~~producing solutions that support fully digitized~~technologies on cloud infrastructure and ~~automated central pharmacy operations;~~invest in certain key areas as we execute on this vision;

continued investment in our vision of the Autonomous Pharmacy, 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 continued investment in our key business strategies will continue to generate our ~~revenues~~revenue and earnings growth ~~as well as~~while supporting our ~~expectations about~~customers’ initiatives and needs;

our belief that our solutions and our vision for the future of medication management automation are strongly aligned with long-term trends in the healthcare market and ~~other factors we believe will be critical~~well-positioned to address the ~~success~~evolving needs of ~~our strategies;~~the healthcare institutions;

the bookings, revenue, and margin opportunity 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;

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;

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

~~the impacts of the U.S. Tax Cuts and Jobs Act of 2017;~~ 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,"anticipates," "believes," "could," "estimates," "expects," "intends," "seeks," "may," "plans," "potential," "predicts," "projects," "should," "will," "would," “vision,” and variations of these terms and similar expressions. Forward-looking statements are based on our current expectations and assumptions and are subject to known and unknown risks and uncertainties, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied in the forward-looking statements.

Such risks and uncertainties include those described throughout this quarterly report, particularly in Part II - Item 1A. “Risk Factors” below. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. You should carefully read this quarterly report and the documents that we reference in this quarterly report and have filed as exhibits, as well as other documents we file from time to time with the Securities and Exchange Commission, with the understanding that our actual future results may be materially different from what we expect. All references in this report to ~~“Omnicell,” “our,” “us,” “we,”~~"Omnicell," "our," "us," "we," or the ~~“Company”~~"Company" collectively refer to Omnicell, Inc., a Delaware corporation, and its subsidiaries. The term ~~“Omnicell,~~"Omnicell, Inc.”," refers only to Omnicell, Inc., excluding its subsidiaries. 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.

We own various trademarks and service marks used in our business, including the following registered and unregistered marks which appear in this report: ~~Omnicell~~^®Omnicell®, the Omnicell logo, ~~SureMed~~Ateb^®, ~~Ateb~~InPharmics^®, Aesynt^®~~, AcuDose-Rx~~^®~~, Connect-Rx~~^®~~, MACH4~~^®~~, Anesthesia Workstation™~~, and Performance ~~Center™~~Center^TM. This report also includes the trademarks and service marks of other companies. All other trademarks and service marks used in this report are the marks of their respective holders.

OVERVIEW

Our Business

We are a leading provider of comprehensive automation and business analytics software solutions for patient-centric medication and supply management across the entire healthcare continuum, from the acute care hospital setting to post-acute skilled nursing and long-term care facilities to the home.

~~Operating Segments~~

~~We manage our business as two operating segments, Automation and Analytics and Medication Adherence:~~

~~Automation and Analytics.~~ ~~The Automation and Analytics segment is organized around the design, manufacturing, selling, and servicing of~~ medication and supply dispensing ~~systems;~~automation, central pharmacy ~~inventory~~automation, analytics software, and medication adherence solutions. As we build on our vision of the Autonomous Pharmacy - a more fully automated and digitized system of medication management ~~systems;~~- we believe we will further help enable healthcare providers to improve patient safety, increase efficiency, lower costs, tighten regulatory compliance, and ~~related software. Our Automation~~address population health challenges.

Over 5,500 facilities worldwide use our automation and ~~Analytics products are~~analytics solutions to help increase operational efficiency, reduce medication errors, deliver actionable intelligence, and improve patient safety. More than 40,000 institutional and retail pharmacies across North America and the United Kingdom leverage our innovative medication adherence solutions designed to ~~enable our customers~~improve patient engagement and adherence 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, our systems can be tailoredprescriptions, helping to ~~specific customer needs.~~

~~Medication Adherence.~~ The Medication Adherence segment primarily includes the development, manufacturing, and selling of solutions to assist patients to remain adherent to their medication regimens. These solutions are comprised of a variety of tools and aids that may be directly used by a pharmacist or a healthcare provider in their direct care for a patient, or the patient themselves, and include software-based systems, medication adherence packaging, packaging equipment, and ancillary products and services. These products are used to manage medication administration outside of thereduce costly hospital ~~setting and include medication adherence products sold under the brand names MTS, SureMed, Ateb, and Omnicell.~~

For further description of our operating segments, please refer to Note 14, Segment and Geographical Information, of the Notes to the Condensed Consolidated Financial Statements in this quarterly report.readmissions.

We sell our product and consumable solutions together with related service offerings. Revenues generated in the United States represented 90% and 88% of our total revenues for ~~both~~ the three months ended September 30, 2019 and 2018, respectively, and ~~2017,~~90% and 87% of our total revenues for ~~both~~ the nine months ended September 30, 2019 and 2018, ~~and 2017.~~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

Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer. The CODM allocates resources and evaluates Omnicell’s performance using information about our revenues, gross profit, income from operations, and other key financial data. We previously operated and reported our business in two segments: Automation and Analytics, and Medication Adherence. In the fourth quarter of 2018, we introduced our vision of the Autonomous Pharmacy in order to address changes in the healthcare industry as we execute on our plan to deliver end-to-end solutions with a greater emphasis on automating manual processes for our customers. These industry changes include the continuing consolidation of healthcare systems, rising pharmaceutical costs, and increased scrutiny on controlled substances. In an effort to deliver on our strategic vision, we initiated a company-wide organizational realignment in the fourth quarter of 2018 to centrally manage our business operations, including the development and marketing of all of our products, sales and distribution, supply chain and inventory management, as well as regulatory and quality functions. As a result of this organizational realignment, all significant operating decisions are based upon an analysis of Omnicell as one operating segment. Therefore, effective January 1, 2019, we started reporting as only one operating segment, which is the same as the reporting segment. Accordingly, prior period information has been revised to conform with current period presentation.

Strategy

The healthcare market is experiencing a period of substantive change. ~~The~~In recent years, healthcare providers and facilities have faced increased spending on medication management, rising pharmaceutical costs, and substantial increases in healthcare administration. These factors, combined with continuing consolidation in the healthcare industry, have increased the need for the efficient delivery of healthcare in order to control costs and improve patient safety, and have elevated the strategic

importance of medication management across the continuum of care. Furthermore, the adoption of electronic healthcare records, new regulatory constraints, and changes in ~~the~~ reimbursement ~~structure~~arrangements have caused healthcare institutions to re-examine their operating structures, re-prioritize their investments, and seek efficiencies. We believe ~~our customers’~~the evolving operating ~~environment creates~~environments of our customers create challenges for any supplier, but also ~~affords~~afford opportunities for suppliers that are able to partner with customers to help them meet the changing demands. We have invested, and intend to continue to invest in the strategies ~~which~~that we believe have generated, and will continue to generate, our revenue and earnings growth, while supporting ~~our customers’~~ initiatives and ~~needs.~~needs of our customers. These strategies include:

~~Development of a differentiated platform.~~ 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 acquisitions 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 announced 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 and Canada who use AcuDose-Rx~~^® cabinets can take advantage of the new 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. The new design enables more medications to be stocked within the same footprint, enabling the XT cabinets to offer up to 50% more capacity as compared with similar units on the market. In November 2017, we introduced our new IVX Workflow Solution. This new solution powered by IVX Cloud services helps enable pharmacies to safely and efficiently compound and prepare IV treatments. In December 2017, we announced our XR2 Central Pharmacy Automated System, allowing customers to more fully automate their central pharmacies.

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 two markets: 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 Aesynt in January 2016, our acquisition of Ateb in December 2016, and most recently, our acquisition of InPharmics in April 2017. Aesynt is a provider of automated medication management systems, including dispensing robots with storage solutions, medication storage, and dispensing carts and cabinets, as well as 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 retail pharmacies. InPharmics is a provider of 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.~~

•

Development of a differentiated platform. We intend to continue our focus on further penetrating existing markets through technological leadership and our differentiated platform by consistently innovating our product and service offerings and maintaining our customer-oriented product installation process. We have developed numerous technologies that solve significant challenges for our customers. For example, our XR2 Automated Central Pharmacy System is designed to allow pharmacies to more fully automate medication dispensing, and help to reduce labor cost, decrease medication waste, and improve patient safety; our IVX Workflow solution is designed to reduce medication compounding errors compared to manual compounding methods; and our Performance Center offering leverages predictive analytics to help pharmacies be more proactive in addressing drug shortages.

•

Delivery of our solutions to new markets. We seek to increase penetration of new markets, such as non-acute care and international markets by: launching new products and technologies that are specific to the needs of those markets; building and establishing direct sales, distribution or other capabilities when and where it is appropriate; partnering with companies that have sales, distribution, or other capabilities that we do not possess; and increasing customer awareness of safety issues in the administration of medications. Consistent with this strategy, we have made investments in expanding our sales team and marketing to new customers. Our international efforts have focused primarily on two markets: Western Europe and the Middle East. We have also expanded our sales efforts to medication adherence customers in the United States.

•

Expansion of our solutions through acquisitions and partnerships. We believe that expansion of our product lines through acquisitions and partnerships to meet our customers’ changing and evolving expectations is a key component to our historical and future success. Building on the successful acquisitions of the past few years, we intend to continue to explore acquisition and partnership opportunities that are a strategic fit for our business, including in support of our Autonomous Pharmacy vision. 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.

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 generally by a ~~non-cancellable~~non-cancelable contract and purchase order for equipment and software, and by a purchase order for consumables. Equipment and software bookings are generally installable within twelve months and, other than sales based on subscription services, generally recorded as revenue upon customer receipt of goods or 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. We provide installation planning and consulting as part of ~~every~~most product ~~sale~~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 have also grown.

The growth in Medication Adherence revenues was primarily driven by further market penetration and adoption of our automated and semi-automated packaging equipment within the United States and Europe, Middle East and Africa (“EMEA”), as well as modest price increases across the product lines.

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 outcomes for healthcare ~~with solutions that help change the practices in ways that improve patient~~providers and ~~provider outcomes.~~patients. We expect our investment in differentiated products, new markets, and acquisitions and partnerships to continue.

In fiscal year 2017, we created 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 in the first half of 2017 by approximately 100 full-time employees, or about 4% of the total headcount, and closed our Nashville, Tennessee and Slovenia facilities.

Our full-time headcount was approximately ~~2,430~~2,630 and ~~2,350~~2,480 on September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

~~2017 Acquisitions~~

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 are 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 United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. We regularly

review our estimates and assumptions, which are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions.

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

Revenue recognition;

Allowance for doubtful accounts and notes receivable from investment in sales-type leases;

Leases;

Inventory;

Software development costs;

~~Business combinations;~~

Valuation and impairment of goodwill, intangible assets, and other long-lived assets;

Share-based compensation; and

Accounting for income taxes.

There were no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the nine months ended September 30, ~~2018~~2019 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, ~~2017,~~2018, except as discussed in “Recently Adopted Authoritative Guidance” in Note 1, ~~to the Condensed Consolidated Financial Statements 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 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 issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial position, and cash flows.

RESULTS OF OPERATIONS

Total Revenues


	Three months ended September 30,										Three months ended September 30,
							Change in								Change in
	2018			2017			$		%		2019		2018		$		%
	(Dollars in thousands)										(Dollars in thousands)
Product revenues	$	149,709		$	136,838		$	12,871	9	%	$	168,488	$	149,709	$	18,779	13%
Percentage of total revenues	73		%	73		%					74%		73%
Services and other revenues	54,558			49,910			4,648		9	%	60,317		54,558		5,759		11%
Percentage of total revenues	27		%	27		%					26%		27%
Total revenues	$	204,267		$	186,748		$	17,519	9	%	$	228,805	$	204,267	$	24,538	12%

Product revenues represented 74% and 73% of total revenues for ~~both~~ the three months ended September 30, 2019 and 2018, ~~and 2017.~~respectively. Product revenues increased by ~~$12.9~~$18.8 million, primarily due to ~~increased sales for the Automation and Analytics segment of $9.9 million and increased sales for the Medication Adherence segment of $3.0 million. The~~an increase in our Automated Dispensing Cabinet business, driven primarily by the ~~Automation and Analytics segment was primarily attributed to an increase~~growth of XT series products, partially offset by a decrease in sales of Performance Center, primarily due to a large installation during the three months ended September 30, ~~2018~~2018.

Services and ~~an increase in sales~~other revenues represented 26% and 27% of ~~other product mixes. The increase in the Medication Adherence segment was primarily attributed to growth of consumables and increase in core machine sales compared to~~total revenues for the three months ended September 30, ~~2017.~~

~~Services~~2019 and ~~other revenues represented 27% of total revenues for both the three months ended September 30,~~ 2018, ~~and 2017.~~respectively. Services and other revenues include revenues from service and maintenance contracts, and rentals of automation systems. Services and other revenues increased by ~~$4.6~~$5.8 million, primarily due to ~~an increase from our Automation and Analytics segment of $3.8 million attributed to~~higher service renewal fees, driven mainly by an increase in our installed customer ~~base.~~base, as well as an increase in revenues from Population Health Solutions.

Our international sales represented 10% and 12% of total revenues for ~~both~~ the three months ended September 30, 2019 and 2018, ~~and 2017,~~respectively, and are expected to be affected by foreign currency exchange rate fluctuations. We are unable to predict the extent to which revenues in future periods will be impacted by changes in foreign currency exchange rates.



	Nine months ended September 30,										Nine months ended September 30,
							Change in								Change in
	2018			2017			$		%		2019		2018		$		%
	(Dollars in thousands)										(Dollars in thousands)
Product revenues	$	415,004		$	365,834		$	49,170	13	%	$	472,477	$	415,004	$	57,473	14%
Percentage of total revenues	72		%	71		%					73%		72%
Services and other revenues	160,555			150,509			10,046		7	%	176,258		160,555		15,703		10%
Percentage of total revenues	28		%	29		%					27%		28%
Total revenues	$	575,559		$	516,343		$	59,216	11	%	$	648,735	$	575,559	$	73,176	13%

~~Financial Information by Segment~~

Three months ended September 30,
Change in
2018 2017 $ %
(Dollars in thousands)
Revenues:
Automation and Analytics $ 168,303
$ 154,617
$ 13,686
9 %
Percentage of total revenues 82 % 83 %
Medication Adherence 35,964
32,131
3,833
12 %
Percentage of total revenues 18 % 17 %
Total revenues $ 204,267
$ 186,748
$ 17,519
9 %

The $13.7 million increase in Automation and Analytics revenues for the three months ended September 30, 2018 in comparison to the three months ended September 30, 2017 was due to an increase in product revenues of $9.9 million and an increase in services and other revenues of $3.8 million. The increase in product revenues in the Automation and Analytics segment was primarily attributed to an increase in sales of Performance Center, primarily due to a large installation during the three months ended September 30, 2018 and an increase in sales of other product mixes. The increase in services and other revenues of $3.8 million was primarily attributed to an increase in our installed customer base.

Medication Adherence revenues increased by $3.8 million for the three months ended September 30, 2018 in comparison to the three months ended September 30, 2017. The increase in revenues was primarily due to an increase in product revenues of $3.0 million. This increase was primarily attributed to growth of consumables and increase in core machine sales compared to the three months ended September 30, 2017.

Nine months ended September 30,
Change in
2018 2017 $ %
(Dollars in thousands)
Revenues:
Automation and Analytics $ 478,074
$ 425,371
$ 52,703
12 %
Percentage of total revenues 83 % 82 %
Medication Adherence 97,485
90,972
6,513
7 %
Percentage of total revenues 17 % 18 %
Total revenues $ 575,559
$ 516,343
$ 59,216
11 %

The $52.7 million increase in Automation and Analytics revenues for the nine months ended September 30, 2018 in comparison to the nine months ended September 30, 2017 was due to an increase in product revenues of $43.0 million and an increase in services and other revenues of $9.7 million. The increase in product revenues was attributed to an increase in sales of XT series products as the sales for the nine months ended September 30, 2017 had a slower conversion of bookings and backlog into revenues due to the introduction of the new XT series of products in the fourth quarter of 2016, an increase in sales of Performance Center and an increase in sales of other product mixes. The increase in services and other revenues of $9.7 million was primarily attributed to an increase in our installed customer base.

Medication Adherence revenues increased by $6.5 million for the nine months ended September 30, 2018 in comparison to the nine months ended September 30, 2017. The increase in revenues was due to an increase in product revenues of $6.2 million. The increase in product revenues was primarily attributed to higher completed installations of our VBM products compared to the nine months ended September 30, 2017.

Cost of Revenues and Gross Profit

Three months ended September 30,
Change in
2018 2017 $ %
(Dollars in thousands)
Cost of revenues:
Automation and Analytics $ 77,172
$ 79,740
$ (2,568 ) (3 )%
As a percentage of related revenues 46 % 52 %
Medication Adherence 28,186
22,189
5,997
27 %
As a percentage of related revenues 78 % 69 %
Total cost of revenues $ 105,358
$ 101,929
$ 3,429
3 %
As a percentage of total revenues 52 % 55 %

Gross profit:
Automation and Analytics $ 91,131
$ 74,877
$ 16,254
22 %
Automation and Analytics gross margin 54 % 48 %
Medication Adherence 7,778
9,942
(2,164 ) (22 )%
Medication Adherence gross margin 22 % 31 %
Total gross profit $ 98,909
$ 84,819
$ 14,090
17 %
Total gross margin 48 % 45 %

Nine months ended September 30,
Change in
2018 2017 $ %
(Dollars in thousands)
Cost of revenues:
Automation and Analytics $ 234,100
$ 229,217
$ 4,883
2 %
As a percentage of related revenues 49 % 54 %
Medication Adherence 71,312
61,984
9,328
15 %
As a percentage of related revenues 73 % 68 %
Total cost of revenues $ 305,412
$ 291,201
$ 14,211
5 %
As a percentage of total revenues 53 % 56 %

Gross profit:
Automation and Analytics $ 243,974
$ 196,154
$ 47,820
24 %
Automation and Analytics gross margin 51 % 46 %
Medication Adherence 26,173
28,988
(2,815 ) (10 )%
Medication Adherence gross margin 27 % 32 %
Total gross profit $ 270,147
$ 225,142
$ 45,005
20 %
Total gross margin 47 % 44 %



	Three months ended September 30,
					Change in
	2019		2018		$		%
	(Dollars in thousands)
Cost of revenues:
Cost of product revenues	$	86,695	$	79,149	$	7,546	10%
As a percentage of related revenues	51%		53%
Cost of services and other revenues	29,963		26,209		3,754		14%
As a percentage of related revenues	50%		48%
Total cost of revenues	$	116,658	$	105,358	$	11,300	11%
As a percentage of total revenues	51%		52%

Gross profit	$	112,147	$	98,909	$	13,238	13%
Gross margin	49%		48%

~~Cost of revenues for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 increased by $14.2 million, of which $4.9~~ million was attributed to the increase in cost of ~~revenues in our Automation~~services and ~~Analytics segment and $9.3 million was attributed to the increase in cost of revenues in our Medication Adherence segment.~~other revenues. The increase in cost of product revenues ~~in the Automation and Analytics segment was due to~~is primarily driven by the increase in product revenues of ~~$52.7~~$18.8 million ~~in the Automation and Analytics segment~~ for the ~~nine~~three months ended September 30, 2019 compared to the three months ended September 30, 2018, ~~compared to the nine months ended September 30, 2017,~~ partially offset by ~~the efficiencies, economies of scale and cost savings on XT series~~sales of product ~~as we are ramping up from the introduction in the fourth quarter of 2016 as well as increase in sales for Performance Center, which have~~portfolios with higher gross margins. The increase in cost of revenues in the Medication Adherence segment was due to the increase in revenues of $6.5 million in the Medication Adherence segment for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 and $2.1 million of excess and obsolete reserve for slower moving inventory.

~~Overall changes to gross margin primarily relate to product mix from sales for the periods presented, higher average selling prices~~margins as well as lower costs associated with the XT series manufacturing ramp ~~up.~~up and economies of scale. The increase in cost of services and other revenues is primarily driven by increase in services and other revenues of $5.8 million for the three months ended September 30, 2019 compared to the three months ended September 30, 2018, as well as product mix with lower margins.



	Nine months ended September 30,
					Change in
	2019		2018		$		%
	(Dollars in thousands)
Cost of revenues:
Cost of product revenues	$	250,089	$	229,642	$	20,447	9%
As a percentage of related revenues	53%		55%
Cost of services and other revenues	85,337		75,770		9,567		13%
As a percentage of related revenues	48%		47%
Total cost of revenues	$	335,426	$	305,412	$	30,014	10%
As a percentage of total revenues	52%		53%

Gross profit	$	313,309	$	270,147	$	43,162	16%
Gross margin	48%		47%

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

2018, primarily driven by a $0.7 million increase in other income and a $1.0 million decrease in other expenses. The increase in other income is primarily attributable to higher interest income received due to higher cash balances. The decrease in other expenses is primarily due to lower interest expense as a result of significant debt repayments during the year ended December 31, 2018 and nine months ended September 30, 2019, as well as favorable foreign currency fluctuations during the period.

Provision for (Benefit from) Income Taxes

Three months ended September 30,
Change in
2018 2017 $ %
(Dollars in thousands)
Provision for (benefit from) income taxes $ 1,030
$ 1,717
$ (687 ) (40 )%



	Three months ended September 30,
					Change in
	2019		2018		$		%
	(Dollars in thousands)
Provision for (benefit from) income taxes	$	3,495	$	1,030	$	2,465	239%

Nine months ended September 30,
Change in
2018 2017 $ %
(Dollars in thousands)
Provision for (benefit from) income taxes $ (3,936 ) $ (9,341 ) $ 5,405
(58 )%



	Nine months ended September 30,
						Change in
	2019		2018			$		%
	(Dollars in thousands)
Provision for (benefit from) income taxes	$	12,720	$	(3,936	)	$	16,656	(423)%

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of ~~$44.2~~$137.3 million at September 30, ~~2018~~2019 compared to ~~$32.4~~$67.2 million at December 31, ~~2017.~~2018. All of our cash and cash equivalents are invested in ~~demand deposits.~~bank accounts with major financial institutions.

Our cash position and working capital at September 30, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows:

Our ratio of current assets to current liabilities was ~~1.8:~~2.1:1 at September 30, ~~2018~~2019 and ~~1.7:~~1.9:1 at December 31, ~~2017.~~2018.

On January 5, 2016, we entered into a $400.0 million secured credit facility pursuant to a credit agreement with certain lenders, Wells Fargo Securities, LLC as sole lead arranger, and Wells Fargo Bank, National Association as administrative agent (the “Credit Agreement”). The Credit Agreement provides for a $200.0 million term loan facility (the “Term Loan Facility”), and prior to the amendment discussed below, a $200.0 million revolving credit facility (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Facilities”). In addition, the Credit Agreement includes 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 December 26, 2017 and April 11, 2017, we entered into amendments to the Credit Agreement. Under these amendments, the Revolving Credit Facility was increased from $200.0 million to $315.0 million and certain other modifications were made. Refer to Note 8, Debt and Credit Agreements, of the Notes to ~~the~~ Condensed Consolidated Financial Statements included in this quarterly report. We expect to use future loans under the Revolving Credit Facility, if any, for general corporate purposes, including acquisitions.

As of September 30, ~~2018,~~2019, the outstanding balance from the Facilities was ~~$190.0~~$80.0 million and we were in compliance with all covenants.

Distribution Agreement

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 sales agents, pursuant to which we may offer and sell from time to time 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 defined in Rule 415 under the Securities Act of 1933, including sales made directly on the 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 offering for general corporate purposes, which may include, without limitation, the acquisition of complementary businesses, the repayment of outstanding indebtedness, capital expenditures, and working capital.

For the three months ended September 30, 2019, we did not sell any of our common stock under the Distribution Agreement.

~~During~~For the nine months ended September 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 common stock at an average price of approximately $83.81 per share.

For the three and nine months ended September 30, 2018, we did not sell any of our common stock under the Distribution Agreement.

As of September 30, ~~2018,~~2019, we had an aggregate of ~~$110.3~~$31.5 million available to be offered under the Distribution Agreement.

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.

Our stock repurchase programs have a total of $54.9 million remaining for future repurchases as of September 30, ~~2018,~~2019, which may result in additional use of cash. See “Stock Repurchase 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 nine months ended September 30, ~~2018~~2019 and ~~2017.~~2018.

~~For the quarterly period ended September 30, 2018~~
OR
o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to



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



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	OMCL	NASDAQ Global Select Market



		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, ~~2018~~2019 and September 30, ~~2017~~2018	4
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three and nine months ended September 30, ~~2018~~2019 and September 30, ~~2017~~2018	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2019 and September 30, 2018	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2018~~2019 and September 30, ~~2017~~2018	68
	Notes to Condensed Consolidated Financial Statements	79
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2729
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4140
Item 4.	Controls and Procedures	4140

PART II	OTHER INFORMATION	4341
Item 1.	Legal Proceedings	4341
Item 1A.	Risk Factors	4341
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5957
Item 3.	Defaults Upon Senior Securities	5958
Item 4.	Mine Safety Disclosures	5958
Item 5.	Other Information	5958
Item 6.	Exhibits	6059

Signature		6160


	September 30, 2018			December 31, 2017			September 30, 2019		December 31, 2018
	(In thousands)						(In thousands)
Inventories:
Raw materials	$	32,529		$	31,275		$	31,780	$	32,511
Work in process	9,929			8,718			8,720		8,726
Finished goods	56,773			56,144			65,313		59,631
Total inventories	$	99,231		$	96,137		$	105,813	$	100,868

Property and equipment:
Equipment	$	77,837		$	69,550
Furniture and fixtures	7,961			6,534
Leasehold improvements	16,209			10,976
Software	39,611			37,168
Construction in progress	11,428			9,813
Property and equipment, gross	153,046			134,041
Accumulated depreciation and amortization	(102,562		)	(91,446		)
Total property and equipment, net	$	50,484		$	42,595

Other long term assets:
Other long-term assets:
Capitalized software, net	$	52,088		$	38,599		$	78,409	$	56,819
Unbilled receivables	15,573			9,475			12,794		16,481
Other assets	1,287			1,242			1,056		1,313
Total other long term assets, net	$	68,948		$	49,316
Total other long-term assets, net							$	92,259	$	74,613

Accrued liabilities:
Operating lease liabilities, current portion							$	10,281	$	—
Advance payments from customers	$	4,850		$	7,779		4,865		8,993
Rebates and lease buyouts	8,273			5,428			17,551		11,076
Group purchasing organization fees	4,023			3,449			5,423		4,455
Taxes payable	5,770			9,183			3,556		5,885
Other accrued liabilities	12,861			9,854			16,341		12,638
Total accrued liabilities	$	35,777		$	35,693		$	58,017	$	43,047



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



	Three months ended September 30, 2017
	As reported		Adjustment			As adjusted
	(In thousands)
Revenues
Automation and Analytics	$	154,651	$	(34	)	$	154,617
Medication Adherence	32,131		—			32,131
Gross profit
Automation and Analytics	74,911		(34		)	74,877
Medication Adherence	9,942		—			9,942
Selling, general, and administrative expenses	58,725		(2,517		)	56,208
Provision for income taxes	751		966			1,717
Net income	$	6,231	$	1,517		$	7,748
Net income per share - basic	$	0.17	$	0.04		$	0.21
Net income per share - diluted	$	0.16	$	0.04		$	0.20



	Nine months ended September 30, 2017
	As reported			Adjustment			As adjusted
	(In thousands)
Revenues
Automation and Analytics	$	427,249		$	(1,878	)	$	425,371
Medication Adherence	90,972			—			90,972
Gross profit
Automation and Analytics	198,032			(1,878		)	196,154
Medication Adherence	28,988			—			28,988
Selling, general, and administrative expenses	186,818			(6,748		)	180,070
Provision for (benefit from) income taxes	(11,232		)	1,891			(9,341		)
Net income (loss)	$	(3,686	)	$	2,979		$	(707	)
Net income (loss) per share - basic	$	(0.10	)	$	0.08		$	(0.02	)
Net income (loss) per share - diluted	$	(0.10	)	$	0.08		$	(0.02	)



	December 31, 2017
	As reported		Adjustment			As adjusted
	(In thousands)
Accounts receivable and unbilled receivables, net	$	189,227	$	819		$	190,046
Prepaid expenses	36,060		(15,668		)	20,392
Prepaid commissions	—		41,432			41,432
Other long-term assets	39,841		9,475			49,316
Deferred revenues, net	86,104		(7,330		)	78,774
Long-term, deferred revenues	17,244		(6,621		)	10,623
Long-term, deferred tax liabilities	28,579		12,867			41,446
Stockholders’ equity	517,199		37,142			554,341


⁽¹⁾	Adjustment represents the current portion of the operating lease liabilities of $10.3 million, and reclassification of exit cost obligations and deferred rent of $0.1 million and $0.1 million, respectively, to reduce the operating lease right-of-use assets.


⁽²⁾	Adjustment represents the reclassification of deferred rent to reduce the operating lease right-of-use assets.


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


⁽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.~~respective totals.



	September 30, 2018
	(In thousands)
Remaining three months of 2018	$	3,043
2019	8,328
2020	6,462
2021	4,613
2022	3,930
Thereafter	1,930
Total	$	28,306



	Automation and Analytics			Medication Adherence			Total
	(In thousands)
Net balance as of December 31, 2017	$	220,851		$	116,900		$	337,751
Foreign currency exchange rate fluctuations	(882		)	(352		)	(1,234		)
Net balance as of September 30, 2018	$	219,969		$	116,548		$	336,517



	December 31, 2017
	Gross carrying amount		Accumulated amortization			Foreign currency exchange rate fluctuations			Net carrying amount		Useful life (years)
	(In thousands, except for years)
Customer relationships	$	135,234	$	(33,988	)	$	(787	)	$	100,459	1 - 30
Acquired technology	74,222		(21,345		)	221			53,098		3 - 20
Backlog	21,350		(17,182		)	—			4,168		1 - 4
Trade names	7,650		(3,688		)	40			4,002		1 - 12
Patents	3,239		(1,369		)	10			1,880		2 - 20
Non-compete agreements	1,900		(1,300		)	—			600		3
In-process technology	3,900		—			—			3,900		—
Total intangibles assets, net	$	247,495	$	(78,872	)	$	(516	)	$	168,107



	(In thousands)
Remaining three months of 2018	$	3,392
2019	13,329
2020	11,416
2021	10,458
2022	8,655
Thereafter	26,634
Total minimum future lease payments	$	73,884



	Three months ended				Nine months ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
	(In thousands)
Cost of product and service revenues	$	1,150	$	882	$	3,346	$	2,727
Research and development	1,397		915		4,068		2,651
Selling, general, and administrative	4,538		3,462		13,437		10,937
Total share-based compensation expense	$	7,085	$	5,259	$	20,851	$	16,315


	Payments due by period										Payments due by period
	Total		Remainder of 2018		2019 and 2020		2021 and 2022		Thereafter		Total		Remainder of 2019		2020 - 2021		2022 - 2023		2024 and thereafter
	(In thousands)										(In thousands)
Operating leases ⁽¹⁾	$	73,884	$	3,392	$	24,745	$	19,113	$	26,634	$	78,023	$	3,655	$	26,542	$	20,241	$	27,585
Purchase obligations ⁽²⁾	75,864		57,890		10,418		5,571		1,985		75,289		57,104		17,633		331		221
Term loan facility ⁽³⁾	170,000		5,000		47,500		117,500		—		80,000		—		80,000		—		—
Revolving credit facility ⁽³⁾	20,000		—		—		20,000		—
Total ^{(4) (5)}	$	339,748	$	66,282	$	82,663	$	162,184	$	28,619	$	233,312	$	60,759	$	124,175	$	20,572	$	27,806


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


⁽³⁾	~~Amounts~~ Amount shown for term loan ~~and revolving credit facility are~~is 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 and Credit Agreements, of the Notes to ~~the~~ Condensed Consolidated Financial Statements included in this quarterly report.


⁽⁵⁾	Refer to Note ~~10,~~ 11, Commitments and Contingencies, of the Notes to ~~the~~ Condensed Consolidated Financial Statements included in this quarterly report.



		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

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⁺⁽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⁺	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


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



		OMNICELL, INC.
Date:	November ~~2, 2018~~1, 2019	By:	/s/ Peter J. Kuipers
			Peter J. Kuipers, Executive Vice President & Chief Financial Officer