Omnicell, Inc 10-Q for FY2023 Q2
Omnicell, Inc. (OMCL)
10-Q
2023-08-04
For: 2023-06-30
View Original
Added on
April 04, 2026
About this 10-Q
Omnicell, Inc filed this 10-Q on August 4, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $298.97M
- down 9.8% from $331.39M a year earlier
- Net income
- $3.45M
- down 61.9% from net income of $9.07M a year earlier
- Diluted EPS
- $0.08
- down 60.0% from $0.20 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________________________
FORM 10-Q
| (Mark One) | |||||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2023
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
| For the transition period from to | |||||
Commission File No. 000-33043
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | ||||
(Address of registrant’s principal executive offices, including zip code)
(877 ) 415-9990
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company | |||||||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | ||||||||||||||||||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
As of July 28, 2023, there were 45,212,042 shares of the registrant’s common stock, $0.001 par value, outstanding.
OMNICELL, INC.
TABLE OF CONTENTS
| Page | ||||||||
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OMNICELL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| June 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands, except par value) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable and unbilled receivables, net of allowances of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Long-term investment in sales-type leases, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Long-term deferred tax assets | |||||||||||
| Prepaid commissions | |||||||||||
| Other long-term assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued compensation | |||||||||||
| Accrued liabilities | |||||||||||
| Deferred revenues, net | |||||||||||
| Total current liabilities | |||||||||||
| Long-term deferred revenues | |||||||||||
| Long-term deferred tax liabilities | |||||||||||
| Long-term operating lease liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Convertible senior notes, net | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 13) | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Treasury stock at cost, | ( | ( | |||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
3
OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Product revenues | $ | $ | $ | $ | |||||||||||||||||||
| Services and other revenues | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||
| Cost of product revenues | |||||||||||||||||||||||
| Cost of services and other revenues | |||||||||||||||||||||||
| Total cost of revenues | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general, and administrative | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Income (loss) from operations | ( | ||||||||||||||||||||||
| Interest and other income (expense), net | ( | ( | |||||||||||||||||||||
| Income (loss) before income taxes | ( | ||||||||||||||||||||||
| Provision for (benefit from) income taxes | ( | ||||||||||||||||||||||
| Net income (loss) | $ | $ | $ | ( | $ | ||||||||||||||||||
| Net income (loss) per share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | ( | $ | ||||||||||||||||||
| Diluted | $ | $ | $ | ( | $ | ||||||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
4
OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Net income (loss) | $ | $ | $ | ( | $ | ||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | |||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Comprehensive income (loss) | $ | $ | $ | ( | $ | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
5
OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
| Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2022 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock plans | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Tax payments related to restricted stock units | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balances as of March 31, 2023 | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock plans | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Tax payments related to restricted stock units | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balances as of June 30, 2023 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
6
OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) - CONTINUED
| Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2021 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock plans | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Tax payments related to restricted stock units | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock repurchases | — | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Cumulative effect of a change in accounting principle related to convertible debt | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Balances as of March 31, 2022 | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock plans | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Tax payments related to restricted stock units | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balances as of June 30, 2022 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
7
OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| (In thousands) | |||||||||||
| Operating Activities | |||||||||||
| Net income (loss) | $ | ( | $ | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Loss on disposal of property and equipment | |||||||||||
| Share-based compensation expense | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Amortization of operating lease right-of-use assets | |||||||||||
| Impairment and abandonment of operating lease right-of-use assets related to facilities | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable and unbilled receivables | ( | ||||||||||
| Inventories | ( | ||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | ( | ||||||||||
| Investment in sales-type leases | ( | ( | |||||||||
| Prepaid commissions | |||||||||||
| Other long-term assets | |||||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued compensation | ( | ( | |||||||||
| Accrued liabilities | ( | ||||||||||
| Deferred revenues | |||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Other long-term liabilities | ( | ||||||||||
| Net cash provided by (used in) operating activities | ( | ||||||||||
| Investing Activities | |||||||||||
| External-use software development costs | ( | ( | |||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Business acquisition, net of cash acquired | ( | ||||||||||
Purchase price adjustments from business acquisitions | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing Activities | |||||||||||
| Proceeds from issuances under stock-based compensation plans | |||||||||||
| Employees’ taxes paid related to restricted stock units | ( | ( | |||||||||
| Change in customer funds, net | ( | ||||||||||
| Stock repurchases | ( | ||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | ( | ||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | |||||||||
| Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash included in other current assets | |||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | |||||||||
| Supplemental disclosure of non-cash investing activities | |||||||||||
| Unpaid purchases of property and equipment | $ | $ | |||||||||
| Transfers between inventory and property and equipment, net | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
8
OMNICELL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Organization and Summary of Significant Accounting Policies
Business
Omnicell, Inc. was incorporated in California in 1992 under the name Omnicell Technologies, Inc. and reincorporated in Delaware in 2001 as Omnicell, Inc. The Company’s major products and related services are medication management solutions and adherence tools for healthcare systems and pharmacies, which are sold in its principal market, the healthcare industry. The Company’s market is primarily located in the United States and Europe. “Omnicell” or the “Company” refer to Omnicell, Inc. and its subsidiaries, collectively.
Basis of Presentation
Principles of Consolidation
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s Condensed Consolidated Financial Statements and accompanying Notes. These estimates are based on historical experience and various other assumptions that management believes to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results may be different from the estimates.
The Company’s critical accounting policies are those that affect its financial statements materially and involve difficult, subjective, or complex judgments by management. As of June 30, 2023, the Company is not aware of any events or circumstances that would require an update to its estimates, judgments, or revisions to the carrying value of its assets or liabilities.
Segment Reporting
Recently Adopted Authoritative Guidance
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The update addresses diversity in practice by requiring that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company adopted ASU 2021-08 beginning January 1, 2023 and will apply the guidance prospectively to acquisitions occurring on or after the adoption date.
9
Recently Issued Authoritative Guidance
There was no 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. Revenues
Revenue Recognition
The Company earns revenues from sales of its products and related services, which are sold in the healthcare industry, its principal market. The Company’s customer arrangements typically include one or more of the following revenue categories:
Connected devices, software licenses, and other. Software-enabled connected devices and software licenses that manage and regulate the storage and dispensing of pharmaceuticals, consumables blister cards, and packaging equipment and other supplies. This revenue category is often sold through long-term, sole-source agreements. Solutions in this category include, but are not limited to, XT Series automated dispensing systems and products related to the Central Pharmacy Dispensing Service and IV Compounding Service.
Consumables. Medication adherence packaging, labeling, and other one-time use packaging including multimed adherence packaging and single dose blister cards, which are used by retail, community, and outpatient pharmacies, as well as by institutional pharmacies serving long-term care and other sites outside the acute care hospital, are designed to improve patient engagement and adherence to prescriptions.
Technical services. Post-installation technical support and other related services, including phone support, on-site service, parts, and access to unspecified software updates and enhancements, if and when available. This revenue category is often supported by multi-year or annual contractual agreements.
Advanced Services. Emerging software and service solutions which are offered on a subscription basis with fees typically based either on transaction volume or a fee over a specified period of time. Solutions in this category include, but are not limited to, EnlivenHealth®, Specialty Pharmacy Services, 340B solutions, Inventory Optimization Service, other software solutions, and services related to the Central Pharmacy Dispensing Service and IV Compounding Service.
The following table summarizes revenue recognition for each revenue category:
Revenue Category | Timing of Revenue Recognition | Income Statement Classification | ||||||||||||||||||
| Connected devices, software licenses, and other | Point in time, as transfer of control occurs, generally upon installation and acceptance by the customer | Product | ||||||||||||||||||
| Consumables | Point in time, as transfer of control occurs, generally upon shipment to or receipt by customer | Product | ||||||||||||||||||
| Technical services | Over time, as services are provided, typically ratably over the service term | Service | ||||||||||||||||||
| Advanced Services | Over time, as services are provided | Service | ||||||||||||||||||
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Disaggregation of Revenues
The following table summarizes the Company’s revenues disaggregated by revenue type for the three and six months ended June 30, 2023 and 2022:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Connected devices, software licenses, and other | $ | $ | $ | $ | |||||||||||||||||||
| Consumables | |||||||||||||||||||||||
| Technical services | |||||||||||||||||||||||
| Advanced Services | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
The following table summarizes the Company’s revenues disaggregated by geographic region, which is determined based on customer location, for the three and six months ended June 30, 2023 and 2022:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
Rest of world (1) | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
_________________________________________________
(1) No individual country represented more than 10% of total revenues.
Contract Assets and Contract Liabilities
The following table reflects the Company’s contract assets and contract liabilities:
| June 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | |||||||||||
Short-term unbilled receivables, net (1) | $ | $ | |||||||||
Long-term unbilled receivables, net (2) | |||||||||||
| Total contract assets | $ | $ | |||||||||
| Short-term deferred revenues, net | $ | $ | |||||||||
| Long-term deferred revenues | |||||||||||
| Total contract liabilities | $ | $ | |||||||||
_________________________________________________
(1) Included in accounts receivable and unbilled receivables in the Condensed Consolidated Balance Sheets.
The portion of the transaction price allocated to the Company’s unsatisfied performance obligations for which invoicing has occurred is recorded as deferred revenues.
Short-term deferred revenues of $124.6 million and $118.9 million include deferred revenues from product sales and service contracts, net of deferred cost of sales of $13.6 million and $15.8 million, as of June 30, 2023 and December 31, 2022, respectively. During the three and six months ended June 30, 2023, the Company recognized revenues of $30.6 million and $86.1 million, respectively, that were included in the corresponding gross short-term deferred revenues balance of $134.7 million as of December 31, 2022. Long-term deferred revenues include deferred revenues from product sales and service contracts of $48.8 million and $37.4 million as of June 30, 2023 and December 31, 2022, respectively. Deferred revenues from product sales primarily relate to delivered and invoiced products, pending installation and acceptance. Deferred revenues from service contracts primarily relate to services that have been invoiced, where services have not yet been provided. Short-term
11
deferred revenues are expected to be recognized within the next twelve months. Long-term deferred revenues substantially consist of deferred revenues on long-term service contracts which have been invoiced and are expected to be recognized as revenue beyond twelve months, generally not more than ten years . The Company generally invoices customers for products upon shipment. Invoicing associated with the service portion of agreements is generally periodic and is billed on a monthly, quarterly, or annual basis, and in certain circumstances, multiple years are billed at one time.
In addition, the Company has remaining performance obligations associated with contracts for which the associated products have been accepted or associated services have started, but where invoicing has not yet occurred and therefore are not reflected in deferred revenue. These remaining performance obligations are comprised of the non-variable portions of technical services and Advanced Services provided under non-cancellable contracts with minimum commitments. Remaining performance obligations which are not included in deferred revenues are $288.7 million as of June 30, 2023. Remaining performance obligations are expected to be recognized ratably over the remaining term of the contract, which is generally not more than ten years . Remaining performance obligations do not include product obligations, services where the associated product has not been accepted, services which have not yet started, variable portions of services, and certain other obligations.
Significant Customers
There were no customers that accounted for more than 10% of the Company’s total revenues for the three and six months ended June 30, 2023 and 2022. Also, there were no customers that accounted for more than 10% of the Company’s accounts receivable balance as of June 30, 2023 and December 31, 2022.
Note 3. Net Income (Loss) Per Share
The basic and diluted net income (loss) per share calculations for the three and six months ended June 30, 2023 and 2022 were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Net income (loss) | $ | $ | $ | ( | $ | ||||||||||||||||||
| Weighted-average shares outstanding – basic | |||||||||||||||||||||||
| Effect of dilutive securities from stock award plans | |||||||||||||||||||||||
| Effect of convertible senior notes | |||||||||||||||||||||||
| Weighted-average shares outstanding – diluted | |||||||||||||||||||||||
| Net income (loss) per share – basic | $ | $ | $ | ( | $ | ||||||||||||||||||
| Net income (loss) per share – diluted | $ | $ | $ | ( | $ | ||||||||||||||||||
| Anti-dilutive weighted-average shares related to stock award plans | |||||||||||||||||||||||
| Anti-dilutive weighted-average shares related to convertible senior notes and warrants | |||||||||||||||||||||||
Note 4. Cash and Cash Equivalents and Fair Value of Financial Instruments
Cash and cash equivalents of $399.5 million and $330.4 million as of June 30, 2023 and December 31, 2022, respectively, consisted of bank accounts and highly-liquid U.S. Government money market funds held in sweep and asset management accounts with financial institutions of high credit quality. As of June 30, 2023 and December 31, 2022, cash equivalents were $382.1 million and $301.0 million, respectively, which consisted of money market funds held in sweep and asset management accounts.
Fair Value Hierarchy
12
Note 5. Balance Sheet Components
Balance sheet details as of June 30, 2023 and December 31, 2022 are presented in the tables below:
| June 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | |||||||||||
| Inventories: | |||||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Total inventories | $ | $ | |||||||||
| Other current assets: | |||||||||||
| $ | $ | ||||||||||
| Net investment in sales-type leases, current portion | |||||||||||
| Prepaid income taxes | |||||||||||
| Other current assets | |||||||||||
| Total other current assets | $ | $ | |||||||||
| Other long-term assets: | |||||||||||
| External-use software development costs, net | $ | $ | |||||||||
| Unbilled receivables, net | |||||||||||
| Deferred debt issuance costs | |||||||||||
| Other long-term assets | |||||||||||
| Total other long-term assets | $ | $ | |||||||||
| Accrued liabilities: | |||||||||||
| $ | $ | ||||||||||
| Customer fund liabilities | |||||||||||
| Advance payments from customers | |||||||||||
| Rebate liabilities | |||||||||||
| Group purchasing organization fees | |||||||||||
| Taxes payable | |||||||||||
| Other accrued liabilities | |||||||||||
| Total accrued liabilities | $ | $ | |||||||||
_________________________________________________
(1) Includes restricted cash of $18.2 million and $22.5 million as of June 30, 2023 and December 31, 2022, respectively.
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The following table summarizes the changes in accumulated balances of other comprehensive income (loss), which consisted of foreign currency translation adjustments, for the three and six months ended June 30, 2023 and 2022:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Beginning balance | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Ending balance | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Note 6. Property and Equipment
The following table represents the property and equipment balances as of June 30, 2023 and December 31, 2022:
| June 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | |||||||||||
| Equipment | $ | $ | |||||||||
| Furniture and fixtures | |||||||||||
| Leasehold improvements | |||||||||||
| Purchased software and internal-use software development costs | |||||||||||
| Construction in progress | |||||||||||
| Property and equipment, gross | |||||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||
| Total property and equipment, net | $ | $ | |||||||||
Depreciation and amortization expense of property and equipment was $6.6 million and $5.6 million for the three months ended June 30, 2023 and 2022, respectively, and $12.9 million and $10.9 million for the six months ended June 30, 2023 and 2022, 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 June 30, 2023 and December 31, 2022:
| June 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | |||||||||||
| United States | $ | $ | |||||||||
Rest of world (1) | |||||||||||
| Total property and equipment, net | $ | $ | |||||||||
_________________________________________________
(1) No individual country represented more than 10% of total property and equipment, net.
14
Note 7. External-Use Software Development Costs
The carrying amounts of external-use software development costs as of June 30, 2023 and December 31, 2022 were as follows:
| June 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | |||||||||||
| Gross carrying amount | $ | $ | |||||||||
| Accumulated amortization | ( | ( | |||||||||
External-use software development costs, net (1) | $ | $ | |||||||||
_________________________________________________
(1) Included in other long-term assets in the Condensed Consolidated Balance Sheets.
The Company recorded $7.4 million and $7.5 million to cost of revenues for amortization of external-use software development costs for the three months ended June 30, 2023 and 2022, respectively, and $14.8 million and $14.2 million for the six months ended June 30, 2023 and 2022, respectively.
The estimated future amortization expenses for external-use software development costs were as follows:
| June 30, 2023 | |||||
| (In thousands) | |||||
| Remaining six months of 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total | $ | ||||
Note 8. Goodwill and Intangible Assets
Goodwill
The following table represents changes in the carrying amount of goodwill:
| (In thousands) | |||||||||||||||||
| Balance as of December 31, 2022 | $ | ||||||||||||||||
| Foreign currency exchange rate fluctuations | |||||||||||||||||
| Balance as of June 30, 2023 | $ | ||||||||||||||||
15
Intangible Assets, Net
The carrying amounts and useful lives of intangible assets as of June 30, 2023 and December 31, 2022 were as follows:
| June 30, 2023 | |||||||||||||||||||||||||||||
| Gross carrying amount | Accumulated amortization | Foreign currency exchange rate fluctuations | Net carrying amount | Useful life (years) | |||||||||||||||||||||||||
| (In thousands, except for years) | |||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
| Acquired technology | ( | ||||||||||||||||||||||||||||
| Backlog | ( | ||||||||||||||||||||||||||||
| Trade names | ( | ||||||||||||||||||||||||||||
| Patents | ( | ||||||||||||||||||||||||||||
| Non-compete agreements | ( | ||||||||||||||||||||||||||||
| Total intangibles assets, net | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||||||||
| Gross carrying amount | Accumulated amortization | Foreign currency exchange rate fluctuations | Net carrying amount | Useful life (years) | |||||||||||||||||||||||||
| (In thousands, except for years) | |||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
| Acquired technology | ( | ||||||||||||||||||||||||||||
| Backlog | ( | ||||||||||||||||||||||||||||
| Trade names | ( | ||||||||||||||||||||||||||||
| Patents | ( | ||||||||||||||||||||||||||||
| Non-compete agreements | ( | ||||||||||||||||||||||||||||
| Total intangibles assets, net | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
Amortization expense of intangible assets was $8.1 million and $8.9 million for the three months ended June 30, 2023 and 2022, respectively, and $16.4 million and $18.0 million for the six months ended June 30, 2023 and 2022, respectively.
The estimated future amortization expenses for amortizable intangible assets were as follows:
| June 30, 2023 | |||||
| (In thousands) | |||||
| Remaining six months of 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total | $ | ||||
Note 9. Debt and Credit Agreement
2019 Revolving Credit Facility
On November 15, 2019, the Company entered into an Amended and Restated Credit Agreement (as subsequently amended as discussed below, the “A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo
16
Securities, LLC, Citizens Bank, N.A., and JPMorgan Chase Bank, N.A., as joint lead arrangers, and Wells Fargo Bank, National Association, as administrative agent. The A&R Credit Agreement superseded the Company’s 2016 secured credit facility and provides for (a) a five-year revolving credit facility of $500.0 million (the “Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million (the “Incremental Facility”). In addition, the A&R Credit Agreement includes a letter of credit sub-limit of up to $15.0 million and a swing line loan sub-limit of up to $25.0 million. The A&R Credit Agreement has an expiration date of November 15, 2024, upon which date all remaining outstanding borrowings will be due and payable.
On September 22, 2020, the parties entered into a first amendment to the A&R Credit Agreement to, among other changes, permit the issuance of the convertible senior notes and the purchase of the convertible note hedge transactions, as described in Note 10, Convertible Senior Notes, expand the Company’s flexibility to repurchase its common stock and make other restricted payments, and replace the total net leverage covenant with a new secured net leverage covenant that requires the Company to maintain a consolidated secured net leverage ratio not to exceed 3.50 :1 for the calendar quarters ending September 30, 2020, December 31, 2020, and March 31, 2021 and 3.00 :1 for the calendar quarters ending thereafter. The availability of funds under the Revolving Credit Facility may be subject to reduction in order to maintain compliance with the financial covenants under the A&R Credit Agreement.
On March 29, 2023, the parties entered into a second amendment to the A&R Credit Agreement to remove and replace the interest rate benchmark based on the London interbank offered rate (“LIBOR”) and related LIBOR-based mechanics applicable to borrowings under the A&R Credit Agreement with an interest rate benchmark based on the secured overnight financing rate (“SOFR”) as administered by the Federal Reserve Bank of New York (including a customary credit spread adjustment of 0.10 % per annum) and related SOFR-based mechanics. The replacement of LIBOR did not, and the Company does not anticipate that it will, materially impact its liquidity or financial position.
Following the second amendment to the A&R Credit Agreement, loans under the Revolving Credit Facility bear interest, at the Company’s option, at a rate equal to either (a) the Adjusted Term SOFR (as defined in the A&R Credit Agreement), plus an applicable margin ranging from 1.25 % to 2.00 % per annum based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the A&R Credit Agreement), or (b) an alternate base rate equal to the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50 %, and (iii) Adjusted Term SOFR for a one month tenor plus 1.00 %, plus an applicable margin ranging from 0.25 % to 1.00 % per annum based on the Company’s Consolidated Total Net Leverage Ratio. Undrawn commitments under the Revolving Credit Facility are subject to a commitment fee ranging from 0.15 % to 0.30 % per annum based on the Company’s Consolidated Total Net Leverage Ratio on the average daily unused portion of the Revolving Credit Facility. The applicable margin for, and certain other terms of, any term loans under the Incremental Facility will be determined prior to the incurrence of such loans. The Company is permitted to make voluntary prepayments at any time without payment of a premium or penalty.
The A&R Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, dividends, and other distributions. The A&R Credit Agreement contains financial covenants that require the Company and its subsidiaries to not exceed a maximum total secured net leverage ratio (as described above) and maintain a minimum interest coverage ratio. In addition, the A&R Credit Agreement contains certain customary events of default including, but not limited to, failure to pay interest, principal, and fees, or other amounts when due, material misrepresentations or misstatements in any representation or warranty, covenant defaults, certain cross defaults to other material indebtedness, certain judgment defaults, and events of bankruptcy. The Company’s obligations under the A&R Credit Agreement and any swap obligations and banking services obligations owing to a lender (or an affiliate of a lender) are guaranteed by certain of its domestic subsidiaries and secured by substantially all of its and such subsidiary guarantors’ assets. In connection with entering into the A&R Credit Agreement, and as a condition precedent to borrowing loans thereunder, the Company and certain of the Company’s other direct and indirect subsidiaries have entered into certain ancillary agreements, including, but not limited to, a reaffirmation agreement, which amends certain terms of the existing collateral agreement and reaffirms their obligations under the existing guaranty agreement. The Company was in compliance with all covenants as of June 30, 2023.
As of June 30, 2023 and December 31, 2022, the Company had $417.7 million and $500.0 million of funds available under the Revolving Credit Facility, respectively. As of June 30, 2023 and December 31, 2022, the Company had no
17
Note 10. Convertible Senior Notes
On September 25, 2020, the Company completed a private offering of $575.0 million aggregate principal amount of 0.25 % convertible senior notes (the “Notes”), including the exercise in full of the initial purchasers’ option to purchase up to an additional $75.0 million principal amount of the Notes. The Company received proceeds from the issuance of the Notes of $559.7 million, net of $15.3 million of transaction fees and other debt issuance costs. The Notes bear interest at a rate of 0.25 % per year, payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2021. The Notes were issued pursuant to an indenture, dated September 25, 2020 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The Notes are general senior, unsecured obligations of the Company and will mature on September 15, 2025, unless earlier redeemed, repurchased, or converted.
The Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding May 15, 2025, only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ended on December 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price for the Notes on each applicable trading day; (ii) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Notes on each such trading day; (iii) if the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; and (iv) upon the occurrence of specified corporate events, as specified in the Indenture. On or after May 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time, regardless of the foregoing conditions.
During the three months ended June 30, 2023 and December 31, 2022, none of the conditional conversion features of the Notes were triggered, and therefore, the Notes are not convertible during the third quarter of 2023, commencing on July 1, 2023, and were not convertible during the first quarter of 2023, commencing on January 1, 2023, respectively. Accordingly, the Company classified the Notes as a long-term liability in its Condensed Consolidated Financial Statements as of both June 30, 2023 and December 31, 2022. Whether the Notes will be convertible following the third fiscal quarter of 2023 will depend on the satisfaction of the conversion conditions in the future.
Under the original terms of the Indenture, upon conversion, the Company could satisfy its conversion obligation by paying or delivering cash, shares of its common stock, or a combination thereof, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. On December 13, 2021, the Company irrevocably elected to fix its settlement method to a combination of cash and shares of the Company’s common stock with the specified cash amount per $1,000 principal amount of Notes of at least $1,000 . As a result, for Notes converted on or after December 13, 2021, a converting noteholder will receive (i) up to $1,000 in cash per $1,000 principal amount of Notes and (ii) cash and/or shares of the Company’s common stock, at the Company’s option for any conversion consideration in excess of $1,000 . In addition, the Company continues to have the ability to set the specified cash amount per $1,000 principal amount of Notes above $1,000 . The initial conversion rate for the Notes is 10.2751 shares of the Company’s common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $97.32 per share of the Company’s common stock, subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following certain corporate events that could occur prior to the maturity date of the Notes or if the Company delivers a notice of redemption in respect of the Notes, the Company will, under certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes (or any portion thereof) in connection with such a corporate event or convert its Notes called (or deemed called) for redemption during the related redemption period (as defined in the Indenture), as the case may be.
If the Company undergoes a fundamental change, holders may require, subject to certain exceptions, the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. As of June 30, 2023, none of the criteria for a fundamental change or a conversion rate adjustment had been met.
The Company may not redeem the Notes prior to September 20, 2023. The Company may redeem for cash all or any portion of the Notes, at its option, on or after September 20, 2023, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a
18
redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company redeems less than all of the outstanding Notes, at least $150.0 million aggregate principal amount of Notes must be outstanding and not subject to redemption as of the date of the relevant notice of redemption. No sinking fund is provided for in the Notes.
The debt issuance costs associated with the Notes are being amortized to interest expense over the term of the Notes using an effective interest rate of 0.80 %. As of June 30, 2023, the remaining life of the Notes and the related issuance cost accretion is approximately 2.2 years.
The maximum number of shares issuable upon conversion, including the effect of a fundamental change and subject to other conversion rate adjustments, would be 5.9 million shares. As of June 30, 2023, the if-converted value of the Notes did not exceed the principal amount.
The Notes consisted of the following balances reported in the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022:
| June 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | |||||||||||
| Principal amount | $ | $ | |||||||||
| Unamortized debt issuance costs | ( | ( | |||||||||
| Convertible senior notes, net | $ | $ | |||||||||
The following table summarizes the components of interest expense resulting from the Notes recognized in interest and other income (expense), net in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Contractual coupon interest | $ | $ | $ | $ | |||||||||||||||||||
| Amortization of debt issuance costs | $ | $ | $ | $ | |||||||||||||||||||
Convertible Note Hedge and Warrant Transactions
In connection with the issuance of the Notes in September 2020, the Company entered into convertible note hedge and warrant transactions with an affiliate of one of the initial purchasers of the Notes and certain other financial institutions (the “option counterparties”) with respect to the Company’s common stock.
The convertible note hedge consists of an option for the Company to purchase up to approximately 5.9 million shares of the Company’s common stock, which is equal to the number of shares of the Company’s common stock underlying the Notes, at an initial strike price of approximately $97.32 per share. The convertible note hedge will expire upon the maturity of the Notes, if not earlier exercised or terminated. The cost of the convertible note hedge was approximately $100.6 million and was accounted for as an equity instrument, which was recorded in additional paid-in capital in the Condensed Consolidated Balance Sheets. The Company recorded a deferred tax asset of $25.8 million at issuance related to the convertible note hedge transaction. The convertible note hedge is expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes.
Separately from the convertible note hedge, the Company entered into warrant transactions to sell to the option counterparties warrants to acquire, subject to customary anti-dilution adjustments, up to approximately 5.9 million shares of its common stock in the aggregate at an initial strike price of $141.56 per share. The warrants require net share or net cash settlement upon the Company’s election. The Company received aggregate proceeds of approximately $51.3 million for the issuance of the warrants, which was recorded in additional paid-in capital at issuance in the Condensed Consolidated Balance Sheets. The warrants could separately have a dilutive effect to the Company’s common stock to the extent that the market price per share of its common stock exceeds the strike price of the warrants.
19
Note 11. Lessor Leases
Sales-Type Leases
The Company enters into multi-year, sales-type lease agreements, with the leases varying in length from to ten years . The Company optimizes cash flows by selling a majority of its non-U.S. government sales-type leases, other than Advanced Services 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 comprised approximately 26 % of the lease receivable balance as of June 30, 2023, and those associated with financed service contracts related to certain Advanced Services products, including Central Pharmacy Dispensing Service and IV Compounding Service, are retained in-house by the Company.
The following table presents the Company’s income recognized from sales-type leases for the three and six months ended June 30, 2023 and 2022:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Sales-type lease revenues | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales-type lease revenues | ( | ( | ( | ( | |||||||||||||||||||
| Selling profit on sales-type lease revenues | $ | $ | $ | $ | |||||||||||||||||||
The receivables as a result of these types of transactions are collateralized by the underlying equipment leased and consist of the following components at June 30, 2023 and December 31, 2022:
| June 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | |||||||||||
| Net minimum lease payments to be received | $ | $ | |||||||||
| Less: Unearned interest income portion | ( | ( | |||||||||
| Net investment in sales-type leases | |||||||||||
Less: Current portion (1) | ( | ( | |||||||||
| Long-term investment in sales-type leases, net | $ | $ | |||||||||
_________________________________________________
(1) The current portion of the net investment in sales-type leases is included in other current assets in the Condensed Consolidated Balance Sheets.
The carrying amount of the Company’s sales-type lease receivables is a reasonable estimate of fair value.
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:
| June 30, 2023 | |||||
| (In thousands) | |||||
| Remaining six months of 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total future minimum sales-type lease payments | |||||
| Present value adjustment | ( | ||||
| Total net investment in sales-type leases | $ | ||||
20
Operating Leases
The following table represents the Company’s income recognized from operating leases for the three and six months ended June 30, 2023 and 2022:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Rental income | $ | $ | $ | $ | |||||||||||||||||||
Note 12. Lessee Leases
The Company has operating leases for office buildings, data centers, office equipment, and vehicles. The Company’s leases have initial terms of to twelve years . As of June 30, 2023, 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:
| June 30, 2023 | |||||
| (In thousands) | |||||
| Remaining six months of 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total operating lease payments | |||||
| Present value adjustment | ( | ||||
Total operating lease liabilities (1) | $ | ||||
_________________________________________________
(1) Amount consists of a current and long-term portion of operating lease liabilities of $11.0 million and $35.5 million, respectively. The current portion of the operating lease liabilities is included in in the Condensed Consolidated Balance Sheets.
Operating lease costs were $2.6 million and $4.7 million for the three months ended June 30, 2023 and 2022, respectively, and $5.6 million and $8.8 million for the six months ended June 30, 2023 and 2022, respectively. Short-term lease costs and variable lease costs were not material for the three and six months ended June 30, 2023 and 2022. The Company recorded impairment and abandonment charges to operating lease right-of-use assets of $7.8 million during the six months ended June 30, 2023, and $3.3 million and $5.1 million during the three and six months ended June 30, 2022, respectively, in connection with restructuring activities to reduce its real estate footprint and for optimization of certain leased facilities. The impairment and abandonment charges were recorded to selling, general, and administrative expenses on the Company’s Condensed Consolidated Statements of Operations. Refer to Note 16, Restructuring Expenses, for additional information regarding the Company’s restructuring activities.
The following table summarizes supplemental cash flow information related to the Company’s operating leases for the six months ended June 30, 2023 and 2022:
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| (In thousands) | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for new lease liabilities | $ | $ | |||||||||
21
The following table summarizes the weighted-average remaining lease term and weighted-average discount rate related to the Company’s operating leases as of June 30, 2023 and December 31, 2022:
| June 30, 2023 | December 31, 2022 | ||||||||||
| Weighted-average remaining lease term, years | |||||||||||
| Weighted-average discount rate, % | % | % | |||||||||
Note 13. Commitments and Contingencies
Purchase Obligations
In the ordinary course of business, the Company issues purchase orders based on its current manufacturing needs. As of June 30, 2023, the Company had non-cancelable purchase commitments of $127.1 million, of which $106.9 million are expected to be paid within the year ending December 31, 2023.
Ransomware Incident
During the six months ended June 30, 2023, the Company did not incur any material expenses related to the previously disclosed ransomware incident. During the three months ended June 30, 2022, the Company incurred $12.5 million of expenses related to the ransomware incident, partially offset by $11.1 million of expected insurance recoveries. Expenses include costs to investigate and remediate the ransomware incident, as well as legal and other professional services, all of which were expensed as incurred. For the three months ended June 30, 2022, the Company included net expenses of $0.2 million in cost of revenues and $1.2 million in selling, general, and administrative expenses in the Company’s Condensed Consolidated Statements of Operations.
As of June 30, 2023, the Company has incurred $13.6 million of cumulative expenses related to the ransomware incident since it was detected, partially offset by $11.1 million of insurance recoveries, of which $10.9 million have been received as of June 30, 2023.
Legal Proceedings
The Company is currently involved in various legal proceedings.
A class action lawsuit was filed against the Company, on June 5, 2019, in the Circuit Court of Cook County, Illinois, Chancery Division, captioned Corey Heard, individually and on behalf of all others similarly situated v. Omnicell, Inc., Case No. 2019-CH-06817 (the “Heard Action”). The complaint seeks class certification, monetary damages in the form of statutory damages for willful and/or reckless or, in the alternative, negligent violation of the Illinois Biometric Information Privacy Act (“BIPA”), and certain declaratory, injunctive, and other relief based on causes of action directed to allegations of violation of BIPA by the Company. The complaint was served on the Company on June 13, 2019. On July 31, 2019, the Company filed a motion to stay or consolidate the case with the action Yana Mazya, et al. v. Northwestern Lake Forest Hospital, et al., Case No. 2018-CH-07161, pending in the Circuit Court of Cook County, Illinois, Chancery Division (the “Mazya Action”). The Court subsequently, on October 10, 2019, denied the motion, without prejudice, as being moot in view of the dismissal of the claims against the Company in the Mazya Action. The Company filed a motion to dismiss the complaint in the Heard Action on October 31, 2019. The hearing on the Company’s motion to dismiss was held on September 2, 2020. The Court ruled from the bench and dismissed the complaint without prejudice giving plaintiff leave to file an amended complaint by September 30, 2020. Plaintiff filed an amended complaint on September 30, 2020 and the Company subsequently filed a motion to dismiss the amended complaint on October 28, 2020, which was fully briefed, but the Court had not heard oral argument on the motion. The parties entered into a settlement agreement on January 25, 2022, (the “Settlement Agreement”). On February 1, 2022, the Court granted preliminary approval of the settlement. Following preliminary approval, plaintiff conducted discovery to identify class members and to determine the class size. Pursuant to the terms of the Settlement Agreement, and following class size discovery, the parties participated in non-binding mediation on November 21, 2022. A settlement was reached at the mediation and the parties executed an addendum to the Settlement Agreement (the “Addendum”) reflecting the changes to the original settlement terms. On November 30, 2022, the Court granted preliminary approval of the settlement contemplated by the Settlement Agreement, as amended by the Addendum. The Addendum required Omnicell to make a total settlement payment of $4.3 million. On April 6, 2023, the Court granted final approval of the settlement, including the Addendum, and entered judgment in the matter dismissing all claims against Omnicell with prejudice. The Company made its final required settlement payment installment on or before the April 21, 2023 due date.
As required under ASC 450, Contingencies, the Company accrues for contingencies when it believes that a loss is probable and that it can reasonably estimate the amount of any such loss. The Company has not recorded any material accrual for contingent liabilities associated with its current legal proceedings based on its belief that any potential material loss, while
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reasonably possible, is not probable. Furthermore, 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 legal proceedings or because of the diversion of management’s attention and the creation of significant expenses, regardless of outcome.
The Company is not a party to any legal proceedings that management believes may have a material impact on the Company’s financial position or results of operations.
Note 14. Income Taxes
The Company generally provides for income taxes in interim periods based on the estimated annual effective tax rate for the year, adjusting for discrete items in the quarter in which they arise. For the six months ended June 30, 2023, the Company recorded a provision for income taxes of $2.6 million by applying its estimated annual effective tax rate of 1.7 % to its year-to-date measure of ordinary income and adjusted for $2.7 million of discrete income tax expense primarily from equity compensation. Benefit from income taxes for the six months ended June 30, 2022 was $1.5 million by applying its estimated annual effective tax rate of 24.1 % to its year-to-date measure of ordinary income and included a net discrete income tax benefit of $5.3 million, primarily due to a tax benefit from equity compensation.
The 2023 annual effective tax rate before discrete items differed from the statutory rate of 21% primarily due to the favorable benefit of the research and development credits and a foreign-derived intangible income (“FDII”) benefit deduction, partially offset by unfavorable impact of the non-deductible compensation and equity charges and Global Intangible Low-Taxed Income (“GILTI”) tax inclusion. The 2022 annual effective tax rate before discrete items differed from the statutory rate of 21% primarily due to the unfavorable impact of state income taxes, non-deductible compensation and equity charges, and GILTI tax inclusion, partially offset by the favorable impact of research and development credits and an FDII deduction.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law and introduced a 15% corporate alternative minimum tax for tax years beginning after December 31, 2022 and levies a 1% excise tax on net stock repurchases after December 31, 2022. These provisions did not have an impact on the Company’s provision for income taxes for the six months ended June 30, 2023.
As of June 30, 2023 and December 31, 2022, the Company had gross unrecognized tax benefits of $10.0 million and $9.3 million, respectively. The Company recognizes interest and penalties related to uncertain tax positions in interest and other income (expense), net in the Condensed Consolidated Statements of Operations. Accrued interest and penalties are included within other long-term liabilities on the Condensed Consolidated Balance Sheets. As of June 30, 2023 and December 31, 2022, the amount of accrued interest and penalties was $0.3 million and $0.2 million, respectively.
The Company files income tax returns in the United States and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examinations by taxing authorities, including major jurisdictions such as the United States, Germany, Italy, France, and the United Kingdom. With few exceptions, as of June 30, 2023, the Company was no longer subject to U.S., state, and foreign tax examinations for years before 2019, 2018, and 2018, respectively.
Although the Company believes it has adequately provided for unrecognized tax benefits, 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 15. Employee Benefits and Share-Based Compensation
Share-Based Compensation Expense
The following table sets forth the total share-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Cost of product and service revenues | $ | $ | $ | $ | |||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general, and administrative | |||||||||||||||||||||||
| Total share-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
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During the three and six months ended June 30, 2023, the Company capitalized approximately $1.1 million and $2.2 million, respectively, of non-cash share-based compensation expense to internal-use and external-use software development costs related to internal labor. The Company did not capitalize any material non-cash share-based compensation expense to inventory during the three and six months ended June 30, 2023 and 2022, or any material non-cash share-based compensation expense to internal-use and external-use software development costs during the three and six months ended June 30, 2022.
Employee Stock Purchase Plan (“ESPP”)
The following assumptions were used to value shares under the ESPP for the three and six months ended June 30, 2023 and 2022:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Expected life, years | |||||||||||||||||||||||
| Expected volatility, % | |||||||||||||||||||||||
| Risk-free interest rate, % | |||||||||||||||||||||||
| Dividend yield, % | % | % | % | % | |||||||||||||||||||
For the six months ended June 30, 2023 and 2022, employees purchased approximately 209,000 and 175,000 shares of common stock, respectively, under the ESPP at a weighted-average price of $46.96 and $66.81 , respectively. As of June 30, 2023, the unrecognized compensation cost related to the shares to be purchased under the ESPP was approximately $2.6 million and is expected to be recognized over a weighted-average period of 1.4 years.
Stock Options
The following assumptions were used to value stock options granted pursuant to the Company’s 2009 Equity Incentive Plan, as amended, (the “2009 Plan”) for the six months ended June 30, 2023. There were no
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||
| Expected life, years | |||||||||||||||||||||||
| Expected volatility, % | % | ||||||||||||||||||||||
| Risk-free interest rate, % | % | ||||||||||||||||||||||
| Estimated forfeiture rate, % | % | ||||||||||||||||||||||
| Dividend yield, % | % | ||||||||||||||||||||||
The following table summarizes the stock option activity under the 2009 Plan during the six months ended June 30, 2023:
| Number of Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Years | Aggregate Intrinsic Value | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Outstanding at December 31, 2022 | $ | $ | |||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Expired | ( | ||||||||||||||||||||||
| Forfeited | ( | ||||||||||||||||||||||
| Outstanding at June 30, 2023 | $ | $ | |||||||||||||||||||||
| Exercisable at June 30, 2023 | $ | $ | |||||||||||||||||||||
| Vested and expected to vest at June 30, 2023 and thereafter | $ | $ | |||||||||||||||||||||
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The weighted-average fair value per share of options granted during the six months ended June 30, 2023 was $19.48 . The intrinsic value of options exercised during the three months ended June 30, 2023 and 2022 was $1.3 million and $2.8 million, respectively, and during the six months ended June 30, 2023 and 2022 was $2.6 million and $15.5 million, respectively.
As of June 30, 2023, total unrecognized compensation cost related to unvested stock options was $12.6 million, which is expected to be recognized over a weighted-average vesting period of 1.1 years.
Restricted Stock Units (“RSUs”)
The following table summarizes the RSU activity under the 2009 Plan during the six months ended June 30, 2023:
| Number of Shares | Weighted-Average Grant Date Fair Value | Weighted-Average Remaining Years | Aggregate Intrinsic Value | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Outstanding at December 31, 2022 | $ | $ | |||||||||||||||||||||
| Granted (Awarded) | |||||||||||||||||||||||
| Vested (Released) | ( | ||||||||||||||||||||||
| Forfeited | ( | ||||||||||||||||||||||
| Outstanding and unvested at June 30, 2023 | $ | $ | |||||||||||||||||||||
As of June 30, 2023, total unrecognized compensation cost related to RSUs was $95.4 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.9 years.
Restricted Stock Awards (“RSAs”)
The following table summarizes the RSA activity under the 2009 Plan during the six months ended June 30, 2023:
| Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||
| (In thousands, except per share data) | |||||||||||
| Outstanding at December 31, 2022 | $ | ||||||||||
| Granted (Awarded) | |||||||||||
| Vested (Released) | ( | ||||||||||
| Outstanding and unvested at June 30, 2023 | $ | ||||||||||
As of June 30, 2023, total unrecognized compensation cost related to RSAs was $1.2 million, which is expected to be recognized over the remaining weighted-average vesting period of 0.9 years.
Performance-Based Stock Unit Awards (“PSUs”)
The following table summarizes the PSU activity under the 2009 Plan during the six months ended June 30, 2023:
| Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||
| (In thousands, except per share data) | |||||||||||
| Outstanding at December 31, 2022 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Outstanding and unvested at June 30, 2023 | $ | ||||||||||
As of June 30, 2023, total unrecognized compensation cost related to PSUs was approximately $8.7 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.6 years.
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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 June 30, 2023:
| Number of Shares | |||||
| (In thousands) | |||||
| Stock options outstanding | |||||
| Non-vested restricted stock awards | |||||
| Shares authorized for future issuance | |||||
| ESPP shares available for future issuance | |||||
| Total shares reserved for future issuance | |||||
Stock Repurchase Programs
On August 2, 2016, the Company’s Board of Directors (the “Board”) authorized a stock repurchase program providing for the repurchase of up to $50.0 million of the Company’s common stock (the “2016 Repurchase Program”). The 2016 Repurchase Program is in addition to the stock repurchase program approved by the Board on November 4, 2014 providing for the repurchase of up to $50.0 million of the Company’s common stock (the “2014 Repurchase Program”). During the first quarter of 2022, the 2014 Repurchase Program was completed, and as of June 30, 2023, the maximum dollar value of shares that may yet be purchased under the 2016 Repurchase Program was $2.7 million. The 2016 Repurchase Program does not obligate the Company to repurchase any specific number of shares, and the Company may terminate or suspend the 2016 Repurchase Program at any time.
During the six months ended June 30, 2022, the Company repurchased approximately 389,300 shares of its common stock under the repurchase programs at an average price of $134.11 per share for an aggregate purchase price of approximately $52.2 million. During the three and six months ended June 30, 2023 and the three months ended June 30, 2022, the Company did no
Note 16. Restructuring Expenses
During the first quarter of 2022, the Company initiated certain domestic and international restructuring initiatives, in order to enhance and streamline certain engineering functions for its domestic operations, and to realign its international sales organization to better serve its customers in various international markets. During the six months ended June 30, 2022, the Company incurred $3.5 million of employee severance costs and related expenses in connection with this restructuring plan. As of June 30, 2023, there was no material unpaid balance related to this restructuring plan.
On November 23, 2022, the Company committed to a plan to reduce the Company’s headcount (the “Plan”), as part of the Company’s expense containment efforts being implemented due to ongoing macroeconomic headwinds. During the first quarter of 2023, as a result of continued exploration of expense containment measures, the Company committed to further reduce its headcount across many of its functions, and also committed to reduce its real estate footprint to align with its broader hybrid work strategy and in an effort to further reduce costs. During the three and six months ended June 30, 2023, the Company incurred $0.7 million and $6.0 million, respectively, of employee severance costs and related expenses in connection with the Plan. As of June 30, 2023, the Company has incurred $23.5 million of cumulative restructuring expense related to employee severance costs and related expenses since the inception of the Plan. As of June 30, 2023 and December 31, 2022, the unpaid balance related to the Plan was $2.8 million and $18.2 million, respectively.
Refer to Note 12, Lessee Leases, for information regarding the Company’s restructuring activities for the reduction of its real estate footprint and optimization of certain leased facilities.
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The following table summarizes the total employee-related restructuring expense recognized in the Company’s Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Cost of product and service revenues | $ | $ | $ | $ | |||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general, and administrative | |||||||||||||||||||||||
| Total restructuring expense | $ | $ | $ | $ | |||||||||||||||||||
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements are contained throughout this Quarterly Report including in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include, but are not limited to, statements about:
•our expectations regarding our future sales pipeline and bookings;
•the extent and timing of future revenues, including the amounts of our current backlog;
•the size or growth of our market or market share;
•our beliefs about drivers of demand for our products, services, and solutions, opportunities in certain market categories, and continued expansion in these market categories, as well as our belief that our technology, services, and solutions within these market categories position us well to address the needs of retail, acute, post-acute, and specialty pharmacy providers;
•continued investment in the industry vision of the Autonomous Pharmacy, our beliefs about the anticipated benefits of such investments, and our expectations regarding continued growth in current and future subscription and cloud-based offerings as we execute on this vision;
•our goal of advancing our platform with the development of new products, services, or solutions or the enhancement of existing products, services, or solutions;
•growth opportunities presented by new products, services, solutions, and markets;
•our projected target revenues, operating costs, and cash flows;
•our ability to align our intelligent infrastructure development and global workforce headcount with our current business expectations;
•our goal to deliver on the industry vision of the Autonomous Pharmacy, as well as our plan to migrate our customers from an on-premise infrastructure to our cloud-based platform;
•our belief that our solutions that support the industry vision of the Autonomous Pharmacy, are strongly aligned with trends in the healthcare market, and are well-positioned to address the evolving needs of healthcare institutions;
•our expectation to continue to acquire companies, businesses, products, services, or technologies and to effectively integrate or manage these acquired companies, businesses, products, services, or technologies;
•our ability to secure adequate supplies of raw materials and components utilized in the manufacture of our products of a quality that we require, on a timely basis, and at acceptable prices;
•our containment of the impacts of the ransomware incident we experienced in May 2022, and any further impacts on the Company, including its business, operating results, cash flow, or financial condition;
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•our expected future uses of cash and the sufficiency of our sources of funding;
•our ability to generate cash from operations and our estimates regarding the sufficiency of our cash resources; and
•our expectations about the impact of epidemics, pandemics, or other major public health crises, such as the COVID-19 pandemic, and the associated containment measures, on our workforce and operations as well as those of our customers and suppliers, and the effect on our business, operating results, cash flow, or financial condition.
In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goals,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “target,” “will,” “would,” and variations of these terms and similar expressions.
Forward-looking statements are based on our current expectations and assumptions, and are subject to known and unknown risks and uncertainties, many of which are beyond our control, 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 on Form 10-Q, including Part I - Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 1, 2023. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements should be considered in light of these risks and uncertainties. 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 with, or furnish to, the SEC from time to time, with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements in this Quarterly Report represent our current estimates and assumptions and speak 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, whether as a result of changed circumstances, future events, even if new information becomes available in the future, or otherwise.
Other Information
All references in this Quarterly Report on Form 10-Q to “Omnicell,” “our,” “us,” “we,” or “the Company” collectively refer to Omnicell, Inc., a Delaware corporation, and its subsidiaries. The term “Omnicell, Inc.” refers only to Omnicell, Inc., excluding its subsidiaries.
We own various registered and unregistered trademarks and service marks used in our business, some of which appear in this Quarterly Report on Form 10-Q, including Omnicell®. This Quarterly Report on Form 10-Q may also include the trademarks and service marks of other companies. Such trademarks and service marks are the marks of their respective owners.
OVERVIEW
Our Business
Omnicell, a leader in transforming the pharmacy care delivery model, is committed to solving the critical challenges inherent in medication management and elevating the role of clinicians within healthcare as an essential component of care delivery. Omnicell is focused on not only helping its customers optimize medication management in each setting of care, but also placing the patient at the center and helping its customers optimize medication management across all care settings from inpatient to outpatient. We are doing so with an industry-leading medication management intelligent infrastructure to equip and empower pharmacists and pharmacies with the ability to focus on clinical care rather than administrative tasks. This intelligent infrastructure provides the critical foundation for customers to realize the industry vision of the Autonomous Pharmacy, a vision defined by pharmacy leaders for improving operational efficiencies and ultimately targeting zero-error medication management.
Facilities worldwide use our automation and analytics solutions to increase operational efficiency, reduce medication errors, deliver actionable intelligence, and improve patient safety. Institutional and retail pharmacies across North America and the United Kingdom leverage our innovative medication adherence and population health solutions to improve patient engagement and adherence to prescriptions, helping to reduce costly hospital readmissions. We sell our product and consumable solutions together with related service offerings. Revenues generated in the United States represented 86% and
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89% of our total revenues for the three months ended June 30, 2023 and 2022, respectively, and 87% and 90% for the six months ended June 30, 2023 and 2022, respectively.
Over the past several years, our business has expanded from a single-point solution to a platform of products and services that will help to further advance the industry vision of the Autonomous Pharmacy. This expansion has resulted in larger deal sizes across multiple products, services, and implementations for customers and, we believe, more comprehensive, valuable, and enduring relationships. As our business evolves, we continue to evaluate the metrics and methods we use to measure the success of our business.
We utilize bookings as an indicator of the success of our business. We define bookings generally as: (i) the value of non-cancelable contracts for our connected devices, software products, and Advanced Services (although, for those Advanced Services contracts without a minimum commitment, bookings only include the amount of revenue that has been recognized once the services have been provided); and (ii) for our consumables, the value of orders placed through our Omnicell Storefront online platform or through written or telephonic orders. We typically exclude technical services and other less significant items ancillary to our products and services, such as freight revenue from bookings. As noted, the portfolio of products, solutions and services we offer has evolved. As a result, the ordering process for certain of our solutions has also evolved. For example, orders for certain of our solutions may not include a purchase order. Connected devices and software license bookings are recorded as revenue upon customer acceptance of the installation or receipt of goods. Revenues from Advanced Services bookings are recorded over the contractual term.
We generally provide installation planning and consulting as part of most connected device product sales, which is typically included in the initial price of the solution. To help ensure the maximum availability of our systems, our customers typically purchase technical services contracts (maintenance and support) in increments of one to five years. In addition to connected device product sales, we provide a range of services to our customers. We also provide Advanced Services such as Central Pharmacy Dispensing Service (service portion), IV Compounding Service (service portion), EnlivenHealth, Specialty Pharmacy Services, 340B solutions, Inventory Optimization Service, and other software solutions, which typically are provided over 2-7 years.
The following table summarizes each revenue category:
Revenue Category | Revenue Type | Income Statement Classification | Included in Bookings | |||||||||||||||||
Connected devices, software licenses, and other | Nonrecurring | Product | Yes (1) | |||||||||||||||||
Consumables | Recurring | Product | Yes | |||||||||||||||||
Technical services | Recurring | Service | No | |||||||||||||||||
Advanced Services (2) (3) | Recurring | Service | Yes | |||||||||||||||||
_________________________________________________
(1) Certain other insignificant revenue streams ancillary to our products and services, such as freight revenue, are not included in bookings.
(2) Includes Central Pharmacy Dispensing Service (service portion), IV Compounding Service (service portion), EnlivenHealth, Specialty Pharmacy Services, 340B solutions, Inventory Optimization Service, and other software solutions.
(3) For those Advanced Services contracts without a minimum commitment, bookings only include the amount of revenue that has been recognized once the services have been provided.
Our full-time employee headcount was approximately 3,780 and 4,230 on June 30, 2023 and December 31, 2022, respectively. The decrease in employee headcount reflects the impact of the restructuring plan announced in November 2022.
Operating Segments
We manage our operations as a single segment for the purposes of assessing performance and making operating decisions. Our Chief Operating Decision Maker (“CODM”) is our Chief Executive Officer. The CODM allocates resources and evaluates the performance of Omnicell at the consolidated level using information about our revenues, gross profit, income from operations, and other key financial data. All significant operating decisions are based upon an analysis of Omnicell as one operating segment, which is the same as our reporting segment.
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Business Strategy
The U.S. spent a total of $577 billion on prescription drugs that accounted for 14% of National Health Expenditures in 2021, and prescription drugs impact the vast majority of patients in virtually all settings of care. We believe there are significant challenges facing the practice of pharmacy today including, but not limited to, labor shortages, medication errors, drug shortages, medication loss due to drug diversion, significant medication waste and expiration costs, a high level of manual processes, complexity around compliance requirements, high healthcare worker turnover rates affecting tenure and expertise, hospitalizations from adverse drug events in outpatient settings, high variability in outcomes, and limited inventory visibility. Each of these challenges can translate into a major economic impact for hospitals and health systems. We believe that these significant challenges to the practice of pharmacy drive demand for increased digitization, visibility, and insights that our solutions enable, and that our solutions therefore present large opportunities.
In an effort to address these challenges and deliver solutions to help drive positive medication management outcomes, we believe a combination of technology, expertise and intelligence is needed in each care setting and across the entire continuum of care. We are focused on delivering solutions to help drive these medication management outcomes with outstanding customer experience through a mature channel in four market categories:
•Point of Care. As a market leader, we expect to continue expansion into this product market as customers increase use of our dispensing systems in more areas within their hospitals. Should labor shortages continue to challenge the delivery of healthcare services, we believe that deploying solutions and workflows that are intended to save nursing time is essential. We are more than halfway through the replacement, upgrade, and expansion cycle of older models of automated dispensing systems with our XT Series within our customer base, which we believe remains a significant market opportunity. We have been successful in market expansion through competitive conversions and we expect this success to continue. We also believe there is an opportunity for us to expand the offering and define a new standard for dispensing systems in perioperative settings. We believe our current solutions within the Point of Care market and new innovation and services will continue to help customers drive improved outcomes.
•Central Pharmacy and IV Compounding. This market represents the beginning of the medication management process in acute care settings, and, we believe, it is a significant automation opportunity for high volumes of manual, repetitive, and error-prone processes that are often common in pharmacies today. Manual medication dispensing processes are usually labor intensive, error-prone, and may lead to excess medication waste and expirations for our healthcare partners. Automating the central pharmacy dispensing process should enable customers to reallocate pharmacy labor, enhance dispensing accuracy and patient safety, and reduce medication waste and expirations. Likewise, the manual compounding of sterile IV preparations can be error-prone and create significant patient safety risks, and outsourcing sterile IV compounding could lead to increased medication costs. As a result, we believe IV automation provides a significant opportunity to enhance patient safety and reduce costs. Because adoption of our Central Pharmacy and IV automation solution is still nascent, we believe that the implementation of new solutions (as well as upgrading older technology) will be accelerated by combining technology, expertise, and intelligence into a comprehensive offering that is designed to deliver improved outcomes. We anticipate that these bundled solutions will become more critical as health systems continue to face labor shortages, increased financial pressure, and supply chain disruptions.
•Specialty Pharmacy and 340B Program. We believe that health systems will invest in more revenue-generating activities that are intended to improve patient outcomes by utilizing specialty pharmacies and the 340B Drug Pricing Program, which allow hospitals and health systems to stretch federal resources and expand patient access to healthcare by requiring manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to healthcare organizations. Specialty drugs are used for treatment of complex conditions and often require intensive patient management and specialized workflows for dispensing and care coordination. Specialty medications are projected to account for 60% of U.S. total spending on medications, with total spending projected to be approximately $420 billion in 2025. Specialty pharmacies serve as the connection between patients, prescribing physicians, and payers and work to streamline access and adherence to these specialty drugs. We believe a solution that addresses start-up and managed services for health systems that is designed to optimize their specialty pharmacy programs and the related pharmaceutical aspects of patient care will help ensure continuity of care and should contribute to the revenue and profitability of those organizations. We believe that a fully optimized specialty pharmacy operation represents one of the largest economic opportunities for hospitals and health systems.
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•Retail, Institutional, and Payer. We believe the Retail, Institutional, and Payer market represents a significant opportunity as healthcare evolves. A majority of all prescription drugs are distributed in the non-acute sector. The COVID-19 pandemic accelerated the shift of certain primary care from hospitals and physician offices to other, more convenient settings, such as retail pharmacies and the home (including through telehealth technologies). New technologies and updated state board regulations appear to be spurring innovation by retail pharmacies, which, combined with the move to value-based care, we believe will drive the adoption of solutions that are intended to help providers and payers engage patients in new ways that improve patient care, reduce the total cost of care, and lead to more profitable operations. Because of the complexity of relationships between payers and providers, as well as the large number of retail pharmacies, including a significant number of independent pharmacies, we believe a network of established relationships between payers, providers and pharmacies will also be important.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. We regularly review our estimates and assumptions, which are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions.
We believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our Condensed Consolidated Financial Statements:
•Revenue recognition;
•Lessor leases;
•Allowance for credit losses;
•Inventory;
•Internal-use and external-use software development costs;
•Lessee leases;
•Valuation and impairment of goodwill and intangible assets;
•Business combinations;
•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 six months ended June 30, 2023 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, 2022, except as discussed in “Recently Adopted Authoritative Guidance” in Note 1, Organization and Summary of Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Recently Issued Authoritative Guidance
Refer to “Recently Issued Authoritative Guidance” in Note 1, Organization and Summary of Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial position, and cash flows.
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RESULTS OF OPERATIONS
Total Revenues
| Three Months Ended June 30, | |||||||||||||||||||||||
| Change in | |||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Product revenues | $ | 188,436 | $ | 233,806 | $ | (45,370) | (19)% | ||||||||||||||||
| Percentage of total revenues | 63% | 71% | |||||||||||||||||||||
| Services and other revenues | 110,537 | 97,580 | 12,957 | 13% | |||||||||||||||||||
| Percentage of total revenues | 37% | 29% | |||||||||||||||||||||
| Total revenues | $ | 298,973 | $ | 331,386 | $ | (32,413) | (10)% | ||||||||||||||||
Product revenues represented 63% and 71% of total revenues for the three months ended June 30, 2023 and 2022, respectively. Product revenues decreased by $45.4 million, primarily due to lower revenues from our automated dispensing systems business primarily as a result of ongoing health systems capital budget and labor constraints.
Services and other revenues represented 37% and 29% of total revenues for the three months ended June 30, 2023 and 2022, respectively. Services and other revenues include revenues from technical services and Advanced Services offerings. Services and other revenues increased by $13.0 million, primarily due to increased customer demand for our Advanced Services and continued growth in our installed customer base as well as the impact of pricing actions.
Our international sales represented 14% and 11% of total revenues for the three months ended June 30, 2023 and 2022, 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.
| Six Months Ended June 30, | |||||||||||||||||||||||
| Change in | |||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Product revenues | $ | 374,151 | $ | 459,681 | $ | (85,530) | (19)% | ||||||||||||||||
| Percentage of total revenues | 63% | 71% | |||||||||||||||||||||
| Services and other revenues | 215,451 | 190,533 | 24,918 | 13% | |||||||||||||||||||
| Percentage of total revenues | 37% | 29% | |||||||||||||||||||||
| Total revenues | $ | 589,602 | $ | 650,214 | $ | (60,612) | (9)% | ||||||||||||||||
Product revenues represented 63% and 71% of total revenues for the six months ended June 30, 2023 and 2022, respectively. Product revenues decreased by $85.5 million, primarily due to lower revenues from our automated dispensing systems business primarily as a result of ongoing health systems capital budget and labor constraints, partially offset by an increase of $5.6 million in revenues from consumables.
Services and other revenues represented 37% and 29% of total revenues for the six months ended June 30, 2023 and 2022, respectively. Services and other revenues include revenues from technical services and Advanced Services offerings. Services and other revenues increased by $24.9 million, primarily due to increased customer demand for our Advanced Services and continued growth in our installed customer base as well as the impact of pricing actions.
Our international sales represented 13% and 10% of total revenues for the six months ended June 30, 2023 and 2022, respectively, and are expected to be affected by foreign currency exchange rate fluctuations. We are unable to predict the extent to which revenues in future periods will be impacted by changes in foreign currency exchange rates.
Our ability to grow revenues is dependent on our ability to continue to obtain orders from customers, which may be dependent upon customers’ capital equipment budgets and/or capital equipment approval cycles, our ability to produce quality products and consumables to fulfill customer demand, the volume of installations we are able to complete, our ability to meet customer needs by providing a quality installation experience, our ability to develop new or enhance existing solutions, and our
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flexibility in workforce allocations among customers to complete installations on a timely basis. The timing of our product revenues for equipment is primarily dependent on when our customers’ schedules and/or staffing levels allow for installations.
Cost of Revenues and Gross Profit
Cost of revenues is primarily comprised of three general categories: (i) standard product costs which account for the majority of the product cost of revenues that are provided to customers, and are inclusive of purchased material, labor to build the product, and overhead costs associated with production; (ii) costs of providing services and installation costs, including costs of personnel and other expenses; and (iii) other costs, including variances in standard costs and overhead, scrap costs, rework, provisions for excess and obsolete inventory, and amortization of software development costs and intangibles.
| Three Months Ended June 30, | |||||||||||||||||||||||
| Change in | |||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||
| Cost of product revenues | $ | 107,962 | $ | 121,814 | $ | (13,852) | (11)% | ||||||||||||||||
| As a percentage of related revenues | 57% | 52% | |||||||||||||||||||||
| Cost of services and other revenues | 56,568 | 51,480 | 5,088 | 10% | |||||||||||||||||||
| As a percentage of related revenues | 51% | 53% | |||||||||||||||||||||
| Total cost of revenues | $ | 164,530 | $ | 173,294 | $ | (8,764) | (5)% | ||||||||||||||||
| As a percentage of total revenues | 55% | 52% | |||||||||||||||||||||
| Gross profit | $ | 134,443 | $ | 158,092 | $ | (23,649) | (15)% | ||||||||||||||||
| Gross margin | 45% | 48% | |||||||||||||||||||||
Cost of revenues for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 decreased by $8.8 million, primarily driven by a $13.9 million decrease in cost of product revenues, partially offset by a $5.1 million increase in cost of services and other revenues.
The decrease in cost of product revenues was primarily driven by the decrease in product revenues of $45.4 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues for the three months ended June 30, 2023, primarily due to certain fixed costs, such as labor and overhead. In addition, the decrease in cost of product revenues was also driven by lower inventory-related costs as pricing for semiconductors, steel, freight, and other costs has decreased from the prior period. The increase in cost of services and other revenues was primarily driven by the increase in services and other revenues of $13.0 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.
The overall decrease in gross margin primarily relates to lower product revenues for the three months ended June 30, 2023 whereas the decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues, primarily due to certain fixed costs, such as labor and overhead. The decrease is partially offset by continued growth in our services and other revenues, as well as lower inventory-related costs. Our gross profit for the three months ended June 30, 2023 was $134.4 million, as compared to $158.1 million for the three months ended June 30, 2022.
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| Six Months Ended June 30, | |||||||||||||||||||||||
| Change in | |||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||
| Cost of product revenues | $ | 217,489 | $ | 240,152 | $ | (22,663) | (9)% | ||||||||||||||||
| As a percentage of related revenues | 58% | 52% | |||||||||||||||||||||
| Cost of services and other revenues | 112,641 | 101,923 | 10,718 | 11% | |||||||||||||||||||
| As a percentage of related revenues | 52% | 53% | |||||||||||||||||||||
| Total cost of revenues | $ | 330,130 | $ | 342,075 | $ | (11,945) | (3)% | ||||||||||||||||
| As a percentage of total revenues | 56% | 53% | |||||||||||||||||||||
| Gross profit | $ | 259,472 | $ | 308,139 | $ | (48,667) | (16)% | ||||||||||||||||
| Gross margin | 44% | 47% | |||||||||||||||||||||
Cost of revenues for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 decreased by $11.9 million, primarily driven by a $22.7 million decrease in cost of product revenues, partially offset by a $10.7 million increase in cost of services and other revenues.
The decrease in cost of product revenues was primarily driven by the decrease in product revenues of $85.5 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues for the six months ended June 30, 2023, primarily due to certain fixed costs, such as labor and overhead. The increase in cost of services and other revenues was primarily driven by the increase in services and other revenues of $24.9 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
The overall decrease in gross margin primarily relates to lower product revenues for the six months ended June 30, 2023 whereas the decrease in cost of product revenues has not decreased proportionally with the decrease in product revenues, primarily due to certain fixed costs, such as labor and overhead. The decrease is partially offset by continued growth in our services and other revenues. Our gross profit for the six months ended June 30, 2023 was $259.5 million, as compared to $308.1 million for the six months ended June 30, 2022.
Operating Expenses and Interest and Other Income (Expense), Net
| Three Months Ended June 30, | |||||||||||||||||||||||
| Change in | |||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | $ | 23,137 | $ | 26,355 | $ | (3,218) | (12)% | ||||||||||||||||
| As a percentage of total revenues | 8% | 8% | |||||||||||||||||||||
| Selling, general, and administrative | 103,558 | 119,252 | (15,694) | (13)% | |||||||||||||||||||
| As a percentage of total revenues | 35% | 36% | |||||||||||||||||||||
| Total operating expenses | $ | 126,695 | $ | 145,607 | $ | (18,912) | (13)% | ||||||||||||||||
| As a percentage of total revenues | 42% | 44% | |||||||||||||||||||||
| Interest and other income (expense), net | $ | 4,461 | $ | (1,711) | $ | 6,172 | (361)% | ||||||||||||||||
Research and Development. Research and development expenses decreased by $3.2 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The decrease was primarily driven by a decrease in consulting expenses of $2.0 million.
Selling, General, and Administrative. Selling, general, and administrative expenses decreased by $15.7 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The decrease was primarily due to a
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decrease of $5.8 million in employee-related expenses due to lower headcount, as well as decreases in commission expenses of $1.7 million and consulting expenses of $1.7 million. The decrease is also driven by $3.3 million for impairment and abandonment charges of operating lease right-of-use and other assets in connection with restructuring activities of certain leased facilities and $1.2 million of ransomware-related expenses, net of insurance recoveries, incurred during the three months ended June 30, 2022.
Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by $6.2 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily driven by a $5.7 million increase in other income and a $0.5 million decrease in other expense. The increase in other income during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 is primarily attributable to higher interest income received due to higher interest rates and higher cash balances.
| Six Months Ended June 30, | |||||||||||||||||||||||
| Change in | |||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | $ | 46,015 | $ | 51,385 | $ | (5,370) | (10)% | ||||||||||||||||
| As a percentage of total revenues | 8% | 8% | |||||||||||||||||||||
| Selling, general, and administrative | 228,672 | 239,185 | (10,513) | (4)% | |||||||||||||||||||
| As a percentage of total revenues | 39% | 37% | |||||||||||||||||||||
| Total operating expenses | $ | 274,687 | $ | 290,570 | $ | (15,883) | (5)% | ||||||||||||||||
| As a percentage of total revenues | 47% | 45% | |||||||||||||||||||||
| Interest and other income (expense), net | $ | 6,242 | $ | (1,825) | $ | 8,067 | (442)% | ||||||||||||||||
Research and Development. Research and development expenses decreased by $5.4 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease was primarily attributed to a decrease of $1.1 million in employee-related expenses for restructuring initiatives and a decrease in consulting expenses of $3.1 million.
Selling, General, and Administrative. Selling, general, and administrative expenses decreased by $10.5 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease was primarily due to a decrease of $6.5 million in employee-related expenses due to lower headcount, as well as decreases in commission expenses of $3.1 million, consulting expenses of $1.7 million, and travel expenses of $2.4 million. The decrease is also driven by $1.2 million of ransomware-related expenses, net of insurance recoveries, incurred during the six months ended June 30, 2022. The decrease is partially offset by an increase of $3.4 million in employee-related expenses for restructuring initiatives, as well as an increase of $2.7 million for impairment and abandonment charges of operating lease right-of-use and other assets in connection with restructuring activities of certain leased facilities.
Interest and Other Income (Expense), Net. Interest and other income (expense), net changed by $8.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily driven by a $7.6 million increase in other income and a $0.5 million decrease in other expense. The increase in other income during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 is primarily attributable to higher interest income received due to higher interest rates and higher cash balances.
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Provision for (Benefit from) Income Taxes
| Three Months Ended June 30, | |||||||||||||||||||||||
| Change in | |||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Benefit from income taxes | $ | 8,758 | $ | 1,705 | $ | 7,053 | 414% | ||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||||||||
| Change in | |||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Provision for (benefit from) income taxes | $ | 2,576 | $ | (1,538) | $ | 4,114 | (267)% | ||||||||||||||||
For the six months ended June 30, 2023, we recorded a provision for income taxes of $2.6 million by applying our estimated annual effective tax rate to our year-to-date measure of ordinary income and adjusted for $2.7 million of discrete income tax expense primarily from equity compensation. Benefit from income taxes for the six months ended June 30, 2022 was $1.5 million and included a net discrete income tax benefit of $5.3 million, primarily due to a $5.1 million tax benefit from equity compensation. The change in the provision for income taxes for the six months ended June 30, 2023 compared to the benefit from income taxes for the same period in 2022 was primarily due to a decrease in excess tax benefit from equity compensation.
Refer to Note 14, Income Taxes, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.
LIQUIDITY AND CAPITAL RESOURCES
We had cash and cash equivalents of $399.5 million at June 30, 2023 compared to $330.4 million at December 31, 2022. All of our cash and cash equivalents are invested in bank accounts and money market funds held in sweep and asset management accounts with major financial institutions of high credit quality.
Our cash position and working capital at June 30, 2023 and December 31, 2022 were as follows:
| June 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | |||||||||||
| Cash and cash equivalents | $ | 399,464 | $ | 330,362 | |||||||
| Working capital | $ | 511,204 | $ | 453,366 | |||||||
Our ratio of current assets to current liabilities was 2.4:1 and 2.1:1 at June 30, 2023 and December 31, 2022, respectively.
Sources of Cash
Revolving Credit Facility
On November 15, 2019, we entered into an Amended and Restated Credit Agreement (as subsequently amended, as discussed below, the “A&R Credit Agreement”) with the lenders from time to time party thereto, Wells Fargo Securities, LLC, Citizens Bank, N.A., and JPMorgan Chase Bank, N.A., as joint lead arrangers, and Wells Fargo Bank, National Association, as administrative agent. The A&R Credit Agreement superseded our 2016 senior secured credit facility and provides for (a) a five-year revolving credit facility of $500.0 million (the “Revolving Credit Facility”) and (b) an uncommitted incremental loan facility of up to $250.0 million. In addition, the A&R Credit Agreement includes a letter of credit sub-limit of up to $15.0 million and a swing line loan sub-limit of up to $25.0 million.
On September 22, 2020, the parties entered into a first amendment to the A&R Credit Agreement to, among other changes, permit the issuance of the convertible senior notes and the purchase of the convertible note hedge transactions described below, expand our flexibility to repurchase our common stock and make other restricted payments, and replace the total net leverage covenant with a new secured net leverage covenant that required us to maintain a consolidated secured net leverage ratio not to exceed 3.50:1 for the calendar quarters ending September 30, 2020, December 31, 2020, and March 31, 2021 and requires us to maintain a consolidated secured net leverage ratio not to exceed 3.00:1 for the calendar quarters ending
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thereafter. The availability of funds under the Revolving Credit Facility may be subject to reduction in order to maintain compliance with the financial covenants under the A&R Credit Agreement.
On March 29, 2023, the parties entered into a second amendment to the A&R Credit Agreement to remove and replace the interest rate benchmark based on the London interbank offered rate (“LIBOR”) and related LIBOR-based mechanics applicable to borrowings under the A&R Credit Agreement with an interest rate benchmark based on the secured overnight financing rate (“SOFR”) as administered by the Federal Reserve Bank of New York (including a customary credit spread adjustment of 0.10% per annum) and related SOFR-based mechanics. The replacement of LIBOR did not, and we do not anticipate that it will, materially impact our liquidity or financial position.
As of June 30, 2023, we had $417.7 million of funds available and no outstanding balance under the Revolving Credit Facility. As of June 30, 2023, we were in compliance with all covenants under the A&R Credit Agreement. Refer to Note 9, Debt and Credit Agreement, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information. We expect to use future loans under the Revolving Credit Facility, if any, for working capital, potential acquisitions, and other general corporate purposes.
Uses of Cash
Our future uses of cash are expected to be primarily for working capital, capital expenditures, and other contractual obligations. We also expect a continued use of cash for potential acquisitions and acquisition-related activities, as well as repurchases of our common stock.
The 2016 Repurchase Program has a total of $2.7 million remaining for future repurchases as of June 30, 2023, which may result in additional use of cash. There were no stock repurchases during the six months ended June 30, 2023. Refer to “Stock Repurchase Programs” under Note 15, Employee Benefits and Share-Based Compensation, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.
Based on our current business plan and backlog, we believe that our existing cash and cash equivalents, our anticipated cash flows from operations, cash generated from the exercise of employee stock options and purchases under our Employee Stock Purchase Plan (“ESPP”), along with the availability of funds under the Revolving Credit Facility will be sufficient to meet our cash needs for working capital, capital expenditures, potential acquisitions, and other contractual obligations for at least the next twelve months. For periods beyond the next twelve months, we also anticipate that our net operating cash flows plus existing balances of cash and cash equivalents will suffice to fund the continued growth of our business.
Cash Flows
The following table summarizes, for the periods indicated, selected items in our Condensed Consolidated Statements of Cash Flows:
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| (In thousands) | |||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 85,673 | $ | (25,547) | |||||||
| Investing activities | (28,457) | (25,550) | |||||||||
| Financing activities | 7,465 | (33,571) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 148 | (2,123) | |||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 64,829 | $ | (86,791) | |||||||
Operating Activities
We expect cash from our operating activities to fluctuate in future periods as a result of a number of factors, including the timing of our billings and collections, our operating results, and the timing of other liability payments.
Net cash provided by operating activities was $85.7 million for the six months ended June 30, 2023, primarily consisting of a net loss of $11.5 million adjusted for non-cash items of $76.3 million and changes in assets and liabilities of $20.9 million. The non-cash items primarily consisted of depreciation and amortization expense of $44.1 million, share-based compensation expense of $28.1 million, impairment and abandonment of operating lease right-of-use assets related to facilities of $7.8 million, amortization of operating lease right-of-use assets of $4.2 million, amortization of debt issuance costs of $2.1 million, and a change in deferred income taxes of $11.0 million. Changes in assets and liabilities include cash inflows
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primarily from (i) a decrease in accounts receivable and unbilled receivables of $26.5 million primarily due to the timing of billings, shipments, and collections, (ii) a decrease in inventories of $17.8 million primarily due to management of inventory levels to align with the current forecasted demand, (iii) an increase in deferred revenues of $16.5 million primarily due to an increase in billings for certain service and subscription offerings, (iv) a decrease in prepaid commissions of $4.7 million, and (v) a decrease in prepaid expenses of $3.6 million. These cash inflows were partially offset by (i) a decrease in accrued compensation of $21.0 million primarily due to a decrease in the accrual for restructuring initiatives, lower commissions, as well as timing of payroll and ESPP purchases, (ii) a decrease in accounts payable of $15.8 million primarily due to an overall decrease in spending, as well as timing of payments, (iii) a decrease in operating lease liabilities of $5.4 million, (iv) a decrease in accrued liabilities of $4.6 million, and (v) an increase in investment in sales-type leases of $1.7 million.
Net cash used in operating activities was $25.5 million for the six months ended June 30, 2022, primarily consisting of net income of $17.3 million adjusted for non-cash items of $80.9 million, offset by changes in assets and liabilities of $123.7 million. The non-cash items primarily consisted of depreciation and amortization expense of $43.0 million, share-based compensation expense of $33.4 million, amortization of operating lease right-of-use assets of $6.8 million, impairment and abandonment of operating lease right-of-use assets of $5.1 million, amortization of debt issuance costs of $2.1 million, and a change in deferred income taxes of $9.5 million. Changes in assets and liabilities include cash outflows from (i) an increase in accounts receivable and unbilled receivables of $71.4 million primarily due to an increase in billings driven by overall business growth and the timing of shipments and collections, as well as the timing of invoicing due to the previously disclosed ransomware incident, (ii) an increase in inventories of $32.6 million primarily to support forecasted sales, including advanced purchases of certain components, such as semiconductors, as well as higher costs of inventory and timing of shipments, (iii) an increase in investment in sales-type leases of $12.5 million primarily due to the increase in sales-type lease revenues associated with Advanced Services products, (iv) a decrease in accrued compensation of $11.1 million primarily due to a decrease in accrued commissions and bonuses, (v) a decrease in operating lease liabilities of $7.2 million, (vi) a decrease in accounts payable of $3.1 million, and (vii) an increase in other current assets, net of funds held for customers, of $2.0 million. These cash outflows were partially offset by (i) a decrease in prepaid commissions of $6.0 million, (ii) an increase in accrued liabilities of $4.7 million, (iii) a decrease in prepaid expenses of $1.7 million, (iv) a decrease in other long-term assets of $1.5 million, (v) an increase in deferred revenues of $1.4 million, and (vi) an increase in other long-term liabilities of $1.0 million.
Investing Activities
Net cash used in investing activities was $28.5 million for the six months ended June 30, 2023, which consisted of capital expenditures of $21.8 million for property and equipment, and $6.7 million for external-use software development costs.
Net cash used in investing activities was $25.6 million for the six months ended June 30, 2022, which consisted of $3.4 million consideration paid for the acquisition of Hub and Spoke Innovations, net of cash acquired, capital expenditures of $21.1 million for property and equipment, and $6.5 million for costs of software development for external use, partially offset by working capital adjustments from acquisitions of $5.5 million.
Financing Activities
Net cash provided by financing activities was $7.5 million for the six months ended June 30, 2023, primarily due to $15.2 million in proceeds from employee stock option exercises and ESPP purchases, partially offset by $3.5 million in employees’ taxes paid related to restricted stock unit vesting and a net change in the customer funds balances of $4.3 million.
Net cash used in financing activities was $33.6 million for the six months ended June 30, 2022, primarily due to $52.2 million for repurchases of our stock and $8.5 million in employees’ taxes paid related to restricted stock unit vesting, partially offset by $21.1 million in proceeds from employee stock option exercises and ESPP purchases, and a net change in the customer funds balances of $6.0 million.
Contractual Obligations
There have been no significant changes during the six months ended June 30, 2023 to the contractual obligations disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” set forth in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2022.
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Contractual obligations as of June 30, 2023 were as follows:
| Payments Due By Period | |||||||||||||||||||||||||||||
| Total | Remainder of 2023 | 2024 - 2025 | 2026 - 2027 | 2028 and thereafter | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
Operating leases (1) | $ | 53,193 | $ | 6,721 | $ | 22,052 | $ | 16,336 | $ | 8,084 | |||||||||||||||||||
Purchase obligations (2) | 127,138 | 106,935 | 19,893 | 310 | — | ||||||||||||||||||||||||
Convertible senior notes (3) | 578,594 | 719 | 577,875 | — | — | ||||||||||||||||||||||||
Total (4) | $ | 758,925 | $ | 114,375 | $ | 619,820 | $ | 16,646 | $ | 8,084 | |||||||||||||||||||
_________________________________________________
(1)Commitments under operating leases relate primarily to leased office buildings, data centers, office equipment, and vehicles. Refer to Note 12, Lessee Leases, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.
(2)We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates. These amounts are associated with agreements that are enforceable and legally binding. The amounts under such contracts are included in the table above because we believe that cancellation of these contracts is unlikely and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.
(3)We issued convertible senior notes in September 2020 that are due in September 2025. The obligations presented above include both principal and interest for these notes. Although these notes mature in 2025, they may be converted into cash and shares of our common stock prior to maturity if certain conditions are met. Any conversion prior to maturity can result in repayment of the principal amounts sooner than the scheduled repayment as indicated in the table above. Refer to Note 10, Convertible Senior Notes, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.
(4)Refer to Note 13, Commitments and Contingencies, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks related to fluctuations in foreign currency exchange rates and interest rates.
Foreign Currency Exchange Risk
We operate in foreign countries which expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies, the most significant of which are the British Pound and the Euro. In order to manage foreign currency risk, at times we enter into foreign exchange forward contracts to mitigate risks associated with changes in spot exchange rates of mainly non-functional currency denominated assets or liabilities of our foreign subsidiaries. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. By working only with major banks and closely monitoring current market conditions, we seek to limit the risk that counterparties to these contracts may be unable to perform. We do not enter into derivative contracts for trading purposes. As of June 30, 2023, we did not have any outstanding foreign exchange forward contracts.
Interest Rate Fluctuation Risk
We are exposed to interest rate risk through our borrowing activities. As of June 30, 2023, there was no outstanding balance under the A&R Credit Agreement, and the net carrying amount under our convertible senior notes was $568.1 million. Although our convertible senior notes are based on a fixed rate, changes in interest rates could impact the fair value of such notes. As of June 30, 2023, the fair market value of our convertible senior notes was $581.6 million. Refer to Note 4, Cash and Cash Equivalents and Fair Value of Financial Instruments, and Note 10, Convertible Senior Notes, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.
We have used, and in the future we may use, interest rate swap agreements to protect against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows relating to interest payments on a portion of our outstanding debt. We do not hold or issue any derivative financial instruments for speculative trading purposes. As of June 30, 2023, we did not have any outstanding interest rate swap agreements.
There were no significant changes in our market risk exposures during the six months ended June 30, 2023 as compared to the market risk exposures disclosed in “Quantitative and Qualitative Disclosures About Market Risk,” set forth in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. These disclosure controls and procedures are designed to ensure that the information required to be disclosed by us in this Quarterly Report was (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Based on such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.
Limitations on Effectiveness of Controls
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements for external purposes in accordance with GAAP. All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that the objectives of the internal control system are met.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the three months ended June 30, 2023.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth under “Legal Proceedings” in Note 13, Commitments and Contingencies, of the Notes accompanying the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q is incorporated herein by reference.
ITEM 1A. RISK FACTORS
There are no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the U.S. Securities and Exchange Commission on March 1, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
During the three months ended June 30, 2023, we did not repurchase any shares of our common stock under our repurchase program. Refer to “Stock Repurchase Programs” under Note 15, Employee Benefits and Share-Based Compensation, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Securities Trading Plans of Directors and Officers
During the three months ended June 30, 2023, none
Remaining Performance Obligations
During the preparation of the condensed consolidated financial statements for the three and six months ended June 30, 2023, the Company identified approximately $87.6 million in remaining performance obligations that were inadvertently excluded from the remaining performance obligations previously reported as of March 31, 2023, which would have increased the balance as of March 31, 2023 to $286.8 million.
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ITEM 6. EXHIBITS
| Incorporated By Reference | ||||||||||||||||||||||||||||||||
| Exhibit Number | Exhibit Description | Form | Exhibit | Filing Date | ||||||||||||||||||||||||||||
| 10.1* | S-8 | 99.1 | 5/26/2023 | |||||||||||||||||||||||||||||
| 10.2* | S-8 | 99.2 | 5/26/2023 | |||||||||||||||||||||||||||||
10.3+* | ||||||||||||||||||||||||||||||||
10.4+* | ||||||||||||||||||||||||||||||||
10.5+* | ||||||||||||||||||||||||||||||||
31.1+ | ||||||||||||||||||||||||||||||||
31.2+ | ||||||||||||||||||||||||||||||||
32.1+ | ||||||||||||||||||||||||||||||||
101.INS+ | Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||||||||||||||||||||||||||
101.SCH+ | Inline XBRL Taxonomy Extension Schema Document | |||||||||||||||||||||||||||||||
101.CAL+ | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||||||||||||||||||||||||
101.DEF+ | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||||||||||||||||||||||||||
101.LAB+ | Inline XBRL Taxonomy Extension Labels Linkbase Document | |||||||||||||||||||||||||||||||
101.PRE+ | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||||||||||||||||||||||||
104+ | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). | |||||||||||||||||||||||||||||||
_________________________________________________
* Indicates a management contract, compensation plan, or arrangement.
+ Filed herewith.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| OMNICELL, INC. | ||||||||||||||
| Date: | August 4, 2023 | By: | /s/ Nchacha E. Etta | |||||||||||
Nchacha E. Etta, Executive Vice President & Chief Financial Officer (principal financial officer and duly authorized officer) | ||||||||||||||
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Exhibit 10.3
April 30, 2023
Mr. Nchacha Etta
Dear Nchacha,
On behalf of Randall Lipps, and Omnicell’s Board of Directors, Omnicell, Inc. (the “Company”) is pleased to offer you the role of Executive Vice President and Chief Financial Officer reporting directly to Randall Lipps as our Chairman, President, CEO and Founder. Your target start date for employment is tentatively planned for May 15th, which we will finalize by mutual agreement upon your acceptance of our offer.
Compensation & Annual Incentive Opportunity
Your bi-weekly salary will be $18,269.24 (less applicable taxes and other standard payroll deductions), which is an annual equivalent of $475,000.
You will also be eligible to receive a discretionary bonus under Omnicell’s MBO Bonus Plan (the MBO Plan), where your MBO Bonus Target will be 90% of your annual base salary (or $427,500 annually), where your actual payout “earned” (between 0% to 90% of your base salary paid to you during each quarter) will be determined based on your individual and company performance to be established each quarter, where if earned, will be paid out on a quarterly basis under the terms of the MBO Plan. Given that you will start in the middle of the second calendar quarter, your first opportunity to participate in the MBO Plan for 2023 will commence July 1, 2023, for MBO goals established and achieved for the third calendar quarter of 2023 under the terms of the MBO Plan.
You will also be eligible to participate in Omnicell’s Overachievement Bonus Plan (the Overachievement Plan) on a pro-rated basis for 2023, where the payout “earned” will be determined between 0% to 80% of your MBO Bonus Target outlined above (or up to $342,000 annually) based on Omnicell exceeding/overachieving certain “key” annual performance goals established by the Compensation Committee (the “Committee”) each year. Please note that any payout from Omnicell bonus plans is earned and paid solely at the discretion of Omnicell under the terms of each bonus plan.
One-Time Sign-on Awards (Cash & LTI)
We are also pleased to offer you a one-time, Cash Sign-on Bonus in the gross amount of $50,000.00 (less applicable taxes and other standard payroll deductions) payable to you within 30 days following your start date with the Company. In the unlikely event that you terminate your employment with Omnicell for any reason prior to being employed by the Company for a period of one year, you will be required to repay a prorated portion of your Cash Sign-on Bonus.
Omnicell Employment Offer for Nchacha Etta
April 30, 2023
Page 2
Upon joining Omnicell, you will be awarded a one-time, New Hire LTI Equity Award that will be delivered to you in the form of 24,000 Omnicell Restricted Stock Units (or RSUs) that will be granted to you under the Company’s 2009 Equity Incentive Plan, as amended (the “Plan”) subject to approval by the Committee. So long as you join Omnicell on or before July 1, 2023, your New Hire LTI Equity Award will be granted to you upon approval by the Committee at their next meeting scheduled for July 26, 2023 (the “Grant Date”).
Once granted, 25% of your RSUs will vest on August 15, 2024 (following the one-year anniversary of your Grant Date). The remaining 75% of your RSUs will vest in equal amounts (approximately 6.25% of your RSU Award per quarter) over the subsequent 12 quarters (on each of November 15, February 15, May 15, and August 15 respectively) over the remaining 3 years.
Annual LTI Awards (50% Restricted Stock Units & 50% Performance Stock Units)
Also, so long as you join Omnicell on or before July 1, 2023, you are eligible to participate in Omnicell’s discretionary Annual LTI Equity Award program in effect for 2023. Your target Annual LTI Equity Award for 2023 will be delivered to you in the form of: (a) 15,000 Omnicell Restricted Stock Units (or RSUs), and (b) 15,000 Omnicell Performance Stock Units (or PSUs), where each award will be granted to you under the Company’s 2009 Equity Incentive Plan, as amended (the “Plan”) subject to approval by the Committee. Your 2023 Annual LTI Equity Award(s) will be granted to you upon approval by the Committee at their next meeting scheduled for July 26, 2023 (the “Grant Date”).
Regarding your 2023 Annual LTI Equity Award to be delivered in the form of 15,000 RSUs, once granted 25% of your RSUs will vest on August 15, 2024 (following the one-year anniversary of your Grant Date). The remaining 75% of your RSUs will vest in equal amounts (approximately 6.25% of your RSU Award per quarter) over the subsequent 12 quarters (on each of November 15, February 15, May 15, and August 15 respectively) over the remaining 3 years.
Regarding your 2023 Annual LTI Equity Award to be delivered in the form of 15,000 PSUs (your “Target PSU Award”) where you have an opportunity to “earn” between 0% to 200% of your Target PSU Award depending upon Omnicell’s results against the PSU performance metric (typically Omnicell’s Relative TSR percentile ranking performance vs. the NASDAQ Health Care Index measured over a one-year period) to be approved by the Committee. Once the 2023 PSU performance achieved is determined by the Committee, 25% of your PSUs “earned” will vest on your first vesting date (typically following the one-year anniversary of your Grant Date, as determined by the Committee). The remaining 75% of your PSUs “earned” will vest in equal amounts (approximately 6.25% of your PSUs “earned” per quarter) over the subsequent 12 quarters (on each of November 15, February 15, May 15, and August 15 respectively) over the remaining 3 years.
Please note that any Omnicell LTI Equity Award and its associated vesting is subject to your continued employment with the Company, the terms and conditions of the Plan, your underlying grant notices and Omnicell’s standard form of RSU/PSU Award Agreement for similarly situated employees of Omnicell.
Omnicell, Inc. – 4220 North Freeway, Fort Worth, TX 76137
Omnicell Employment Offer for Nchacha Etta
April 30, 2023
Page 3
General & Executive Benefit Programs
We offer competitive medical, dental and vision plans as well as term life, long- and short-term disability insurance coverage, and 401(k) plan. Details about these benefit programs are provided in our Employee Handbook and Summary Plan Descriptions, which are available for your review at www.omnicellbenefits.com. Omnicell reserves the right to change, modify or discontinue our compensation and benefit programs from time to time at its discretion, with or without notice.
As an Executive Officer of the Company, you will also be eligible to participate in the following Executive Benefit Programs: (1) a comprehensive Annual Executive Financial Planning program provided through AYCO, (2) a comprehensive Annual Executive Physical Program to be provided through a Medical Network of your choice, where the cost incurred will be reimbursed up to $6,000 per year, and (3) reimbursement for your legal fees incurred from the preparation of your various wills, trust and estate documents to be reimbursed up to $6,000 once every three years.
You are also eligible to participate in Omnicell’s Amended and Restated Severance Benefit Plan which provides certain benefits in the event of your involuntary termination without “Cause.” As an EVP and Section 16 Executive Officer, under the current plan you will be eligible to receive 12 months’ base salary as your cash severance benefit (plus two additional months’ cash severance benefit for each 5 years of service with the Company) plus a COBRA premium subsidy equal to your total months of cash severance and executive level outplacement services to be provided for a period of one year, where such benefits are subject to the terms and conditions of the plan.
Further, you will also be eligible to participate in Omnicell’s change of control severance benefits as set forth in our Change of Control Agreement. You are also eligible to receive Executive Officer Indemnity Protection under the terms of Omnicell’s Indemnity Agreement, each of which will be provided to you separately.
Employment Terms & Conditions
As an Executive Vice President you will be an “Exempt” employee eligible to take reasonable time off with pay under the Company’s flexible vacation policy. Generally, you will have no set guideline as to how much time off you will be permitted to take. However, with flexible vacation, there is no “unused” vacation time that will be carried over from one year to the next or be paid out upon termination. Our flexible vacation policy can be found at www.omnicellbenefits.com.
Employment at Omnicell is at-will employment, which means it may be terminated by you or by Omnicell at any time without liability and is acknowledged by you upon signing this offer letter. In addition, Omnicell may transition your position, duties, compensation, benefits, and work location from time to time at its discretion depending upon the growth needs and strategic direction of the Company.
This offer is contingent upon successful completion of background and reference checks, even where a start date of employment has been determined. Certain positions include a credit check as part of the background screening process. Please keep in mind the contingent nature of this offer when making any decisions regarding the timing of any notice of termination of any employment and/or other relationship, as applicable.
Omnicell, Inc. – 4220 North Freeway, Fort Worth, TX 76137
Omnicell Employment Offer for Nchacha Etta
April 30, 2023
Page 4
As a condition of employment and required by law, you must show proof of citizenship, permanent residency in the United States or authorization to work in the United States. To complete the federally required verification form (I-9), we ask that you be prepared to provide your original document(s) within your first three days of employment. If you are not office based, you will be contacted via email regarding completion of your I-9. Documents may include a US Passport, birth certificate, Social Security Card, driver’s license, or Alien Registration Receipt Card.
As an Omnicell employee, you will be expected to abide by company policies and procedures and acknowledge in writing that you have read and will comply with the company’s Employee Handbook. As a condition of employment, you must read, sign, and comply with the Employee Proprietary Information and Inventions Agreement which prohibits unauthorized use or disclosure of Company proprietary information.
In addition, as part of your duties for Omnicell, you may be assigned to work onsite with an Omnicell customer or otherwise to provide services to or interact with an Omnicell customer. Some of these customers have additional requirements that they impose upon individuals who work onsite at their facilities or who have access to patient health information, including, but not limited to, drug-testing, testing for various infectious diseases, attestation of various vaccinations and/or additional background/screening checks. If you are assigned to work with such a customer, you will be given notice of the customer’s additional requirements and will be expected to fulfill these requirements as a condition of your continuing employment with Omnicell.
If you have any questions, please call me or Max Rocha, Vice President of Human Resources. Please note the above offer is good for a period of five (5) business days from the date of issue.
* * * * * * * * * * *
Again, we are very pleased to confirm your offer of employment to join Omnicell. We look forward to working with you in this exciting stage of our company’s development. We believe you will make significant contributions to Omnicell’s future success.
Sincerely,
Christine Mellon
EVP, Chief Administrative & People Officer Omnicell, Inc.
Omnicell, Inc. – 4220 North Freeway, Fort Worth, TX 76137
Omnicell Employment Offer for Nchacha Etta
April 30, 2023
Page 5
To indicate your acceptance of the company’s offer, please e-sign and date this letter. You may keep the original copy of this letter. This letter, along with the Employee Proprietary Information and Inventions Agreement, Policy Against Trading on the Basis of Inside Information and the Code of Ethics between you and the Company, Omnicell, set forth the terms of your employment with Omnicell and supersede any prior representations or agreements, whether written or oral. The documents listed above will be sent electronically through our onboarding system for your review. Should you want hard copies prior to signing your offer letter please let us know. This letter may not be modified or amended except by a written agreement, signed by Omnicell and by you. The above offer is good for a period of five (5) business days from the date of issue.
I have read understood and agree to the terms and conditions of Omnicell’s employment offer:
/s/ Nchacha Etta | 05/05/23 | |||||||
Nchacha Etta | Date | |||||||
Omnicell, Inc. – 4220 North Freeway, Fort Worth, TX 76137
Exhibit 10.4
Global Stock Option Award | Omnicell, Inc. | ||||
Grant Notice | 4220 North Freeway | ||||
Fort Worth, Texas 76137 | |||||
| Name | Employee ID: | ||||
You have been granted an option to purchase Omnicell, Inc. Common Stock as follows:
Type of Option: | Non-Qualified Stock Option | ||||
Grant No.: | |||||
Stock Option Plan: | 2009 Equity Incentive Plan | ||||
Date of Grant: | |||||
Grant Expiration Date: | |||||
Total Number of Option Shares: | |||||
Option Price per Share: | |||||
Total Exercise Price of Option Shares: | |||||
Early Exercise Allowed | |||||
Vesting Date | Number of Shares Vesting on Vesting Date | Vesting Schedule | ||||||||||||
By your acceptance of this Option Grant, you agree that this option is granted under and governed by the terms and conditions of this Grant Notice, Omnicell, Inc.’s 2009 Equity Incentive Plan (as amended from time to time) (the “Plan”) and by the terms and conditions of the 2009 Equity Incentive Plan, Global Stock Option Award Agreement (“Option Agreement”) which is attached hereto.
You understand and agree that as of the Date of Grant, this Option Grant Notice, the Option Agreement and the Plan set forth the entire understanding between you and Omnicell, Inc. regarding the Options set forth herein, and the underlying Common Stock, and supersede all prior oral and written agreements on that subject.
Chief Financial Officer
Attachment: Global Stock Option Award Agreement
Omnicell, Inc.
2009 Equity Incentive Plan
GLOBAL STOCK OPTION AWARD AGREEMENT
AMENDED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS EFFECTIVE MAY 9, 2023
Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Global Stock Option Award Agreement, including any country-specific appendix thereto (the “Appendix” and collectively, the “Agreement”), Omnicell, Inc. (the “Company”) has granted you an option under its 2009 Equity Incentive Plan, as amended (the “Plan”), to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.
The details of your option are as follows:
1.VESTING. Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service. For the avoidance of doubt, service during any portion of the vesting period shall not entitle you to vest in a pro rata portion of the option.
For purposes of your option, a termination of your Continuous Service will be deemed to have occurred as of the date you are no longer actively providing services to the Company or an Affiliate (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or otherwise rendering services, or the terms of your employment or other service agreement, if any). Your employment or service relationship will not be extended by any notice period (e.g., your period of service will not be extended by any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are employed or otherwise rendering services, or the terms of your employment or service agreement, if any). Unless otherwise expressly provided in the Plan or this Agreement or determined by the Company, (i) your right to vest in the option, if any, will terminate as of the date of termination of your Continuous Service, and (ii) the period (if any) during which you may exercise the option after a termination of your Continuous Service, will commence on such date. The Committee shall have the exclusive discretion to determine when you are no longer providing Continuous Services for purposes of your option (including whether you may still be considered to be providing services while on a leave of absence).
2.NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments.
3.EXERCISE RESTRICTION FOR NON-EXEMPT EMPLOYEES. If you are a U.S.
taxpayer, in the event that you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (i.e., a “Non-Exempt Employee”), and except as otherwise provided in the Plan, you may not exercise your option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant specified in your Grant Notice, notwithstanding any other provision of your option.
4.EXERCISE PRIOR TO VESTING (“EARLY EXERCISE”). If permitted in your Grant Notice (i.e., the exercise schedule indicates that early exercise is permitted) and subject to the provisions of your option, you may elect at any time that is both (i) during the period of your
1
Continuous Service and (ii) during the term of your option, to exercise all or part of your option, including the unvested portion of your option; provided, however, that:
(a)a partial exercise of your option shall be deemed to cover first vested shares of Common Stock and then the earliest vesting installment of unvested shares of Common Stock;
(b)any shares of Common Stock so purchased from installments that have not vested as of the date of exercise shall be subject to the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement;
(c)you shall enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will result in the same vesting as if no early exercise had occurred; and
(d)If you are a U.S. taxpayer and your option is an Incentive Stock Option, then, to the extent that the aggregate Fair Market Value (determined at the time of grant) of the shares of Common Stock with respect to which your option plus all other Incentive Stock Options you hold are exercisable for the first time by you during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), your option(s) or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options.
5.METHOD OF PAYMENT. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any one or more of the following manners unless otherwise provided in your Grant Notice:
(a)Provided that at the time of exercise the Common Stock is publicly traded, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.
(b)Provided that at the time of exercise the Common Stock is publicly traded, and to the extent permitted by applicable laws and regulations, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company.
2
Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.
(c)If the Option is a Nonstatutory Stock Option, subject to the consent of the Company at the time of exercise, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise of your option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from you to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided further, however, that shares of Common Stock will no longer be outstanding under your option and will not be exercisable thereafter to the extent that (1) shares are used to pay the exercise price pursuant to the “net exercise,” (2) shares are delivered to you as a result of such exercise, and (3) shares are withheld to satisfy tax withholding obligations.
6.WHOLE SHARES. You may exercise your option only for whole shares of Common Stock.
7.COMPLIANCE WITH LAW. Notwithstanding anything to the contrary contained
herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option also must comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations. You understand that the Company is under no obligation to register or qualify the shares of Common Stock with the U.S. Securities and Exchange Commission (“SEC”) or any state or non-U.S. securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the shares of Common Stock. Further, you agree that the Company shall have unilateral authority to amend this Agreement without your consent, to the extent necessary to comply with securities or other laws applicable to the issuance of shares of Common Stock.
8.TERM. You may not exercise your option before the commencement or after the expiration of its term. The term of your option commences on the Date of Grant and expires, subject to the provisions of Section 5(h) of the Plan, upon the earliest of the following:
(a)immediately upon the termination of your Continuous Service for Cause;
(b)three (3) months after the termination of your Continuous Service for any reason other than Cause, Disability, or death; provided, however, that if during any part of such three (3) month period your option is not exercisable solely because of the condition set forth in the section above relating to “Securities Law Compliance,” your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service; and if (i) you are a Non-Exempt Employee, (ii) your Continuous Service terminates within six (6) months after the Date of Grant specified in your Grant Notice, and (iii) you have vested in a portion of your option at the time of your termination of Continuous Service, your option shall not expire until the earlier of (x) the later of (A) the date that is seven (7) months after the Date of Grant specified in your Grant Notice or (B) the date that is three (3) months after the termination of your Continuous Service, or (y) the Expiration Date;
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(c)twelve (12) months after the termination of your Continuous Service due to your Disability;
(d)eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;
(e)the Expiration Date indicated in your Grant Notice;
(f)the day before the tenth (10th) anniversary of the Date of Grant.
Notwithstanding the foregoing provisions in this section, in the event that you were an Employee of the Company or a Subsidiary of the Company at the time of grant, your Continuous Service terminates for any reason other than due to a termination by the Company (or by a Subsidiary of the Company) for Cause, you reside in the United States, and you have attained age 55 with ten or more Years of Continuous Service at any time during your Continuous Service, then, the portion of the Option vested on the date of such termination may be exercised by you (or your estate, if applicable) at any time during the period ending on the earlier of the Expiration Date indicated in your Grant Notice and the day before the 10th anniversary of the Date of Grant. For these purposes, the term “Year of Continuous Service” means each 12-month period of your Continuous Service since your most recent hire/re-hire date, but does not include service provided by you to an acquired company prior to its acquisition by the Company.
If you are a U.S. taxpayer and your option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the date of grant of your option and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment with the Company or an Affiliate terminates.
9.EXERCISE.
(a)You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, together with such additional documents as the Company may then require.
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(b)By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (iii) the disposition of shares of Common Stock acquired upon such exercise.
(c)If you are a U.S. taxpayer and your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option.
(d)TRANSFERABILITY.
(i)For U.S. taxpayers, if your option is an Incentive Stock Option, your option is generally not transferable, except (1) by will or by the applicable laws of descent and distribution or (2) pursuant to a domestic relations order (provided that such Incentive Stock Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer) and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option. In addition, you may transfer your option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust, provided that you and the trustee enter into transfer and other agreements required by the Company.
(ii)If your option is a Nonstatutory Stock Option, your option is not transferable, except (1) by will or by the applicable laws of descent and distribution, (2) pursuant to a domestic relations order (if you are a U.S. taxpayer), (3) with the prior written approval of the Company, by instrument to an inter vivos or testamentary trust, in a form accepted by the Company, in which the option is to be passed to beneficiaries upon the death of the trustor (settlor) and (4) with the prior written approval of the Company, by gift, in a form accepted by the Company, to a permitted transferee under Rule 701 of the Securities Act.
10.OPTION NOT A SERVICE CONTRACT. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ or service of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment or service relationship. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
11.WITHHOLDING OBLIGATIONS.
(a)You acknowledge that, regardless of any action taken by the Company or, if different, the Affiliate employing or otherwise retaining your services (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), is and remains your responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer. You further acknowledge that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the option, including, but not limited to, the grant, vesting or exercise of the option, the subsequent sale of shares of
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Common Stock acquired pursuant to such exercise and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the option to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. Further, if you are subject to Tax-Related Items in more than one jurisdiction, you acknowledge that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b)At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any Tax- Related Items which arise in connection with your option.
(c)Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes). If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.
(d)The Company or your Employer may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates in your jurisdiction(s). In the event of over-withholding, you may receive a refund of any over-withheld amount in cash from the Company or the Employer (with no entitlement to the equivalent in shares of Common Stock) or, if not refunded, you may be able to seek a refund from the applicable tax authorities. In the event of under-withholding, you may be required to pay additional Tax-Related Items directly to the applicable tax authorities. If the obligation for Tax-Related Items is satisfied by withholding in
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shares of Common Stock, for tax purposes, you will be deemed to have been issued the full number of shares of Common Stock for which your option was exercised, notwithstanding that a number of shares of Common Stock are held back solely for the purpose of paying the Tax-Related Items.
(e)You may not exercise your option unless the Tax-Related Items withholding obligations of the Company and/or the Employer are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.
12.NATURE OF GRANT. In accepting your option, you acknowledge, understand and agree that:
(a)the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b)the grant of your option is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
(c)all decisions with respect to future option grants, if any, will be at the sole discretion of the Company;
(d)you are voluntarily participating in the Plan;
(e)your option and the shares of Common Stock subject to the option, and the income from and value of same, are not intended to replace any pension rights or compensation;
(f)your option and the shares of Common Stock subject to the option, and the income from and value of same, are not part of normal or expected compensation for purposes of, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, pension or retirement or welfare benefits or similar mandatory payments;
(g)the future value of the underlying shares of Common Stock is unknown, indeterminable and cannot be predicted with certainty;
(h)if the underlying shares of Common Stock do not increase in value, your option will have no value;
(i)if you exercise your option and acquire shares of Common Stock, the value of such shares of Common Stock may increase or decrease, even below the exercise price;
(j)unless otherwise agreed with the Company, your option and the shares of Common Stock acquired under the Plan, and the income from and value of same, are not granted as consideration for, or in connection with, any service you may provide as a director of any parent company or Affiliate;
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(k)unless otherwise provided in the Plan or by the Company in its direction, the options and the benefits evidenced by this Agreement, do not create any entitlement to have the options or any such benefits transferred to or assumed by another company, nor to be exchanged, cashed out or substituted for in connection with any corporate transaction affecting the Common Stock; and
(l)neither the Company, the Employer nor any Subsidiary or Affiliate of the Company shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the option or of any amounts due to you pursuant to the exercise of the option or the subsequent sale of any shares of Common Stock acquired upon exercise.
13.NO ADVICE REGARDING GRANT. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying shares of Common Stock. You should consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.
14.DATA PRIVACY. If you would like to participate in the Plan, you will need to review the information provided in this Section 14 and, where applicable, declare consent to the processing and/or transfer of personal data as described below.
Data Collection and Usage. The Company collects, processes and uses personal data about you, including but not limited to, your name, home address, email address and telephone number, date of birth, social insurance number, passport number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares awarded, canceled, exercised, vested, unvested or outstanding in your favor, which the Company receives from you or your Employer (“Personal Data”). In order you to participate in the Plan, the Company will collect Personal Data for purposes of allocating shares of Common Stock and implementing, administering and managing the Plan. The Company’s legal basis for the processing of Personal Data is your consent, as further described below.
(a)Stock Plan Administration and Service Providers. The Company may transfer Personal Data to Morgan Stanley/E*TRADE (“Service Provider”), an independent service provider based in the U.S., which is assisting the Company with the implementation, administration and management of the Plan. Service Provider may open an account for you to receive and trade shares of Common Stock. You may be asked to acknowledge, or agree to, separate terms and data processing practices with Service Provider, with such agreement being a condition to the ability to participate in the Plan.
International Data Transfers. Personal Data will be transferred from your country to the U.S., where the Company and its service providers are based. You understand and acknowledge that the U.S. might have enacted data privacy laws
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that are less protective or otherwise different from those applicable in your country of residence. The Company’s legal basis, where required, for the transfer of Personal Data is your consent.
(b)Data Retention. The Company will use Personal Data only as long as necessary to implement, administer and manage your participation in the Plan or as required to comply with legal or regulatory obligations, including, without limitation, under tax and securities laws. When the Company no longer needs Personal Data for any of the above purposes, the Company will cease to use Personal Data for this purpose. If the Company keeps Personal Data longer, it would be to satisfy legal or regulatory obligations and the Company’s legal basis is your consent.
(c)Data Subject Rights. You understand that you may have a number of rights under data privacy laws in your jurisdiction. Subject to the conditions set out in the applicable law and depending on where you are based, such rights may include the right to (i) request access to, or copies of, Personal Data processed by the Company, (ii) rectification of incorrect Personal Data, (iii) deletion of Personal Data, (iv) restrictions on the processing of Personal Data, (v) object to the processing of Personal Data for legitimate interests, (vi) portability of Personal Data, (vii) lodge complaints with competent authorities in your jurisdiction, and/or to (viii) receive a list with the names and addresses of any potential recipients of Personal Data. To receive clarification regarding these rights or to exercise these rights, you can contact GDPR@omnicell.com or our EU Data Protection Officer as follows:
2B Advice GmbH
Joseph-Schumpeter-Allee 25, 53227 Bonn, Germany
Telephone: +49 228 926165 120
E-Mail: omnicell@2b-advice.com
(d)Voluntariness and Consequences of Consent Denial or Withdrawal. You hereby unambiguously consent to the collection, use and transfer, in electronic or other form, of your Personal Data, as described above and in any other grant materials, by and among, as applicable, your Employer, the Company and any Affiliate for the exclusive purpose of implementing, administering and managing your participation in the Plan. You understand that you may, at any time, refuse or withdraw the consents herein, in any case without cost, by contacting in writing your human resources representative. If you do not consent or later seek to revoke your consent, your employment status or service with your Employer will not be affected; the only consequence of refusing or withdrawing consent is that the Company would not be able to grant the options or other equity awards to you or administer or maintain such awards. Therefore, you understand that refusing or withdrawing consent may affect your ability to participate in the Plan. For more information on the consequences of refusal to consent or withdrawal of consent, you should contact your local human resources representative.
Declaration of Consent. By accepting the options and indicating consent by signing the Grant Notice or through the Company’s online acceptance procedure, you explicitly declare your consent to the entirety of the Personal Data processing operations described above including, without limitation, the onward transfer of Data by the Company to the Service Provider or, as the case may be, a different service provider of the Company in the U.S. | ||
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15.NOTICES. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
16.LANGUAGE. You acknowledge that you are sufficiently proficient in English or have consulted with an advisor who is sufficiently proficient in English, so as to allow you to understand the terms and conditions of this Agreement. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
17.GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.
18.SEVERABILITY. If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
19.CHOICE OF LAW; VENUE. The interpretation, performance and enforcement of this Agreement will be governed by the law of the state of California without regard to such state’s conflicts of laws rules. For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.
20.AMENDMENT. This Agreement may not be modified, amended or terminated except by an instrument in writing, signed or otherwise accepted by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that no such amendment adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board reserves the right, by written notice to you, to impose new provisions or to change the existing provisions of this Agreement in any way it may deem necessary or advisable for legal or administrative reasons to carry out the purpose of the grant.
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21.INSIDER TRADING RESTRICTIONS/MARKET ABUSE LAWS. You acknowledge that you may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including but not limited to the United States, your country, the broker’s country and the country or countries in which the Common Stock is listed, which may affect your ability, directly or indirectly, to purchase or sell, or attempt to sell or otherwise dispose of shares of Common Stock, rights to shares of Common Stock (e.g., options), or rights linked to the value of shares of Common Stock, during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdiction(s)). Local insider trading laws and regulations prohibit the cancellation or amendment of orders you placed before possessing the inside information. Furthermore, you understand that you may be prohibited from (i) disclosing the inside information to any third party, including fellow employees and (ii) “tipping” third parties by sharing with them Company insider information, or otherwise causing third parties to buy or sell Company securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may apply to you under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you should speak to your personal advisor on this matter.
22.FOREIGN ASSET/ACCOUNT REPORTING REQUIREMENTS. If you reside in a country outside the United States, there may be certain foreign asset and/or account reporting requirements which may affect your ability to acquire or hold shares of Common Stock or cash received from participating in the Plan (including from any dividends paid on shares of Common Stock) in a brokerage account or bank outside of your country. You may be required to report such accounts, assets or related transactions to the tax or other authorities in your country. You may also be required to repatriate sale proceeds or other funds received as a result of participating in the Plan to your country within a certain time after receipt. It is your responsibility to comply with such regulations and you should speak to your personal legal advisor on this matter.
23.APPENDIX. Notwithstanding any provisions in this Agreement, the option grant shall be subject to any special terms and conditions set forth in any Appendix to this Agreement for your country. Moreover, if you relocate to one of the countries included in the Appendix, the special terms and conditions for such country, if any, will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.
24.IMPOSITION OF OTHER REQUIREMENTS. The Company reserves the right to impose other requirements on your participation in the Plan, on your options and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
25.WAIVER. You acknowledge that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by you or any other Participant.
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26.ELECTRONIC DELIVERY AND ACCEPTANCE. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
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Appendix
Omnicell, Inc.
2009 Equity Incentive Plan
Global Option Agreement
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Global Option Agreement (the “Agreement”) or the Plan.
Terms and Conditions
This Appendix includes additional terms and conditions that govern the options granted to you under the Plan if you work and/or reside in one of the countries listed below. This Appendix forms part of the Agreement.
If you are a citizen or resident of a country other than the one in which you are currently residing and/or working, transfer employment and/or residency to another country after the Date of Grant, or are considered a resident of another country for local law purposes, the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall be applicable to you.
Notifications
This Appendix also includes information regarding exchange control and certain other issues of which you should be aware with respect to participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of March 2023. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix as the only source of information relating to the consequences of participation in the Plan because the information may be out of date at the time you exercise your option and acquire shares of Common Stock or sell shares of Common Stock acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to your particular situation and the Company is not in a position to assure you of any particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.
Finally, if you are a citizen or resident of a country other than the one in which you are currently residing and/or working, transfer employment and/or residency to another country after the Date of Grant, or are considered a resident of another country for local law purposes, the information contained herein may not be applicable to you in the same manner.
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Australia
Notifications
Securities Law Information. If you acquire shares of Common Stock upon exercise of your options and you offer the shares of Common Stock for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. You should obtain legal advice on disclosure obligations prior to making any such offer.
Tax Information. The Plan is a plan to which Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) applies (subject to the conditions in the Act).
France
Terms and Conditions
Options Not Tax-Qualified. The options granted under this Agreement are not intended to qualify for special tax and social security treatment pursuant to Sections L. 225-177 to L. 225- 186 and Sections L. 22-10-56 to L. 22-10-58 of the French Commercial Code, as amended.
Language Consent. By accepting your option, you confirm having read and understood the documents relating to this grant (the Plan, the Agreement and this Appendix) which were provided in English language. You accept the terms of these documents accordingly.
En acceptant l’attribution, vous confirmez ainsi avoir lu et compris les documents relatifs à cette attribution (le Plan, le contrat et cette Annexe) qui ont été communiqués en langue anglaise.
Vous acceptez les termes en connaissance de cause.
Notifications
Foreign Asset/Account Reporting Information. French residents holding cash or securities (including shares of Common Stock) outside of France or maintaining a foreign bank or brokerage account (including accounts opened or closed during the tax year) must declare such assets and accounts to the French tax authorities when filing an annual tax return. Failure to comply could trigger significant penalties.
United Arab Emirates
Notifications
Securities Law Information. Participation in the Plan is being offered only to eligible employees and is in the nature of providing equity incentives to employees in the United Arab Emirates. The Plan and the Agreement are intended for distribution only to such employees and must not be delivered to, or relied on by, any other person. Prospective purchasers of the
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securities offered should conduct their own due diligence on the securities. The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any documents in connection with the Plan. Neither the Ministry of Economy nor the Dubai Department of Economic Development has approved the Plan or the Agreement nor taken steps to verify the information set out therein, and has no responsibility for such documents.
United Kingdom
Terms and Conditions
Responsibility for Taxes. This provision supplements Section 11 of the Agreement:
Without limitation to Section 11 of the Agreement, you hereby agree that you are liable for any Tax-Related Items related to your participation in the Plan and hereby covenant to pay such Tax- Related Items, as and when requested by the Company or (if different) the Employer or by HM Revenue & Customs (“HMRC”) (or any other tax or relevant authority). You also hereby agree to indemnify and keep indemnified the Company and (if different) the Employer against any Tax- Related Items that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax or relevant authority) on your behalf.
Notwithstanding the foregoing, if you are a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), you understand that the foregoing provision will not apply. Instead, any Tax-Related Items not collected or paid may constitute a benefit to you on which additional income tax and National Insurance Contributions (“NICs”) may be payable. You understand that you will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for paying to the Company and/or the Employer (as appropriate) the amount of any employee NICs due on this additional benefit, which can be recovered by any means set out in the Agreement.
National Insurance Contributions Acknowledgment. As a condition of participation in the Plan and the exercise of the options, you agree to accept any liability for secondary Class 1 NICs which may be payable by the Company and/or the Employer in connection with the options and any event giving rise to Tax-Related Items (the “Employer NICs”). Without limitation to the foregoing, you agree to execute a joint election with the Company, the form of such joint election being formally approved by HMRC (the “Joint Election”), and any other required consent or election. You further agree to execute such other joint elections as may be required between you and any successor to the Company and/or the Employer. You further agree that the Company and/or the Employer may collect the Employer NICs from you by any of the means set forth in Section 10 of the Agreement. You must enter into the Joint Election attached as Exhibit A hereto concurrent with the execution of the Agreement.
If you do not enter into a Joint Election prior to the exercise of the options or if approval of the Joint Election has been withdrawn by HMRC, the options shall become null and void without any liability to the Company and/or the Employer.
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EXHIBIT A
NICs JOINT ELECTION FOR U.K. PARTICIPANTS
Important Note on the Election to Transfer Employer NICs
If you are liable for National Insurance contributions (“NICs”) in the UK in connection with your participation in the Omnicell, Inc. 2009 Equity Incentive Plan, you are required to enter into an Election to transfer to you any liability for employer’s NICs that may arise in connection with your participation in the Plan.
By accepting the Award (whether by signing the Award Agreement or by clicking on the "ACCEPT") box as part of the Company's online acceptance procedures) or by separately accepting the Election (whether in hard copy or by clicking on the “ACCEPT” box) indicates your acceptance to transfer Employer NICs. You should read this important note and the Election in their entirety before accepting the Award Agreement and the Election. Please print and keep a copy of the Election for your records.
By entering into the Election:
•you agree that any employer’s NICs liability that may arise in connection with your participation in the Plan will be transferred to you;
•you authorise your employer to recover an amount sufficient to cover this liability by such methods including, but not limited to, deductions from your salary or other payments due or the sale of sufficient shares acquired pursuant to your awards; and
•you acknowledge that the Company or your employer may require you to sign a paper copy of this Election (or a substantially similar form) if the Company determines such is necessary to give effect to the Election even if you have accepted the Award Agreement or the Election through the Company's electronic acceptance procedure.
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OMNICELL, INC.
2009 EQUITY INCENTIVE PLAN
Election to Transfer the Employer’s National Insurance Liability to the Employee
This Election is between:
A.The individual who has obtained authorised access to this Election (the “Employee”) who is employed by one of the employing companies listed in the attached schedule (the "Employer") and who is eligible to receive options or restricted share units (the "Awards") pursuant to the terms and conditions of the Omnicell, Inc. 2009 Equity Incentive Plan (the “Plan”),
and
B.Omnicell, Inc., 590 East Middlefield Road, Mountain View, CA 94043, United States of America (the “Company”), which may grant Awards under the Plan and is entering into this Election on behalf of the Employer.
1.Purpose of Election
1.1This Election relates to all Awards granted to the Employee under the Plan up to the termination date of the Plan.
1.2In this Election, the following words and phrases have the following meanings:
(a)“ITEPA” means the Income Tax (Earnings and Pensions) Act 2003.
(b)“Relevant Employment Income” from Awards on which employer’s National Insurance Contributions become due is defined as:
(i)an amount that counts as employment income of the earner under section 426 ITEPA (restricted securities: charge on certain post-acquisition events);
(ii)an amount that counts as employment income of the earner under section 438 of ITEPA (convertible securities: charge on certain post-acquisition events); or
(iii)any gain that is treated as remuneration derived from the earner’s employment by virtue of section 4(4)(a) SSCBA, including without limitation:
(A)the acquisition of securities pursuant to Awards (within the meaning of section 477(3)(a) of ITEPA);
(B)the assignment (if applicable) or release of the Awards in return for consideration (within the meaning of section 477(3)(b) of ITEPA);
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(C)the receipt of a benefit in connection with the Awards other than a benefit within (A) or (B) above (within section 477(3)(c) of ITEPA).
(c)“SSCBA” means the Social Security Contributions and Benefits Act 1992.
(d)“Taxable Event” means any event giving rise to Relevant Employment Income.
1.3This Election relates to the employer’s secondary Class 1 National Insurance Contributions (the “Employer’s Liability”) which may arise in respect of Relevant Employment Income in respect of the Awards pursuant to section 4(4)(a) and/or paragraph 3B(1A) of Schedule 1 of the SSCBA.
1.4This Election does not apply in relation to any liability, or any part of any liability, arising as a result of regulations being given retrospective effect by virtue of section 4B(2) of either the SSCBA or the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
1.5This Election does not apply to the extent that it relates to relevant employment income which is employment income of the earner by virtue of Chapter 3A of Part VII of ITEPA (employment income: securities with artificially depressed market value).
2.The Election
The Employee and the Company jointly elect that the entire liability of the Employer to pay the Employer’s Liability that arises on any Relevant Employment Income is hereby transferred to the Employee. The Employee understands that, by electronically accepting the Award or by separately signing or electronically accepting this Election, as applicable, he or she will become personally liable for the Employer’s Liability covered by this Election. This Election is made in accordance with paragraph 3B(1) of Schedule 1 to the SSCBA.
3.Payment of the Employer’s Liability
3.1The Employee hereby authorises the Company and/or the Employer to collect the Employer’s Liability in respect of any Relevant Employment Income from the Employee at any time after the Taxable Event:
(i)by deduction from salary or any other payment payable to the Employee at any time on or after the date of the Taxable Event; and/or
(ii)directly from the Employee by payment in cash or cleared funds; and/or
(iii)by arranging, on behalf of the Employee, for the sale of some of the securities which the Employee is entitled to receive in respect of the Awards; and/or
(iv)by any other means specified in the applicable award agreement.
3.2The Company hereby reserves for itself and the Employer the right to withhold the transfer of any securities to the Employee in respect of the Awards until full payment of the Employer’s Liability is received.
3.3The Company agrees to procure the remittance by the Employer of the Employer’s Liability to HM Revenue & Customs on behalf of the Employee within 14 days after the end of the UK tax month during which the Taxable Event occurs (or within 17 days after
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the end of the UK tax month during which the Taxable Event occurs, if payments are made electronically).
4.Duration of Election
4.1The Employee and the Company agree to be bound by the terms of this Election regardless of whether the Employee is transferred abroad or is not employed by the Employer on the date on which the Employer’s Liability becomes due.
4.2Any reference to the Company and/or the Employer shall include that entity’s successors in title and assigns as permitted in accordance with the terms of the Plan and relevant award agreement. This Election will continue in effect in respect of any awards which replace the Awards in circumstances where section 483 of ITEPA applies.
4.3This Election will continue in effect until the earliest of the following:
(i)the Employee and the Company agree in writing that it should cease to have effect;
(ii)on the date the Company serves written notice on the Employee terminating its effect;
(iii)on the date HM Revenue & Customs withdraws approval of this Election; or
(iv)after due payment of the Employer’s Liability in respect of the entirety of the Awards to which this Election relates or could relate, such that the Election ceases to have effect in accordance with its terms.
4.4This Election will continue in force regardless of whether the Employee ceases to be an employee of the Employer.
[Electronic Acceptance/Signature page follows]
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Acceptance by the Employee
The Employee acknowledges that, by signing this Election (including by electronic signature process) or by accepting the Awards (including by electronic signature process if made available by the Company), the Employee agrees to be bound by the terms of this Election.
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Acceptance by the Company
The Company acknowledges that, by signing this Election (including by electronic signature process) or arranging for the scanned signature of an authorised representative to appear on this Election, the Company agrees to be bound by the terms of this Election.
| Signature for and on | ||||||||
| behalf of the Company | ||||||||
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Date | ||||||||
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SCHEDULE OF EMPLOYER COMPANIES
The following are employer companies to which this Election may apply:
Name of Company: | Omnicell Limited | ||||
Registered Office: | Two Omega Drive River Bend Technology Centre, Irlam, Manchester, M44 5GR | ||||
Company Registration Number: | 04562981 | ||||
Corporation Tax Reference: | 11415 18283 | ||||
PAYE Reference: | 065/VZ39359 | ||||
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Exhibit 10.5
Global Restricted Stock Unit Award | Omnicell, Inc. | ||||
Grant Notice | 4220 North Freeway | ||||
Fort Worth, Texas 76137 | |||||
| Name: | Employee ID: | ||||
You have been granted a Restricted Stock Unit Award in Omnicell, Inc. Common Stock as follows:
Type of Award: | Restricted Stock Unit (RSU) | ||||
Grant No.: | |||||
| Equity Incentive Plan: | 2009 Equity Incentive Plan | ||||
Date of Grant: | |||||
Shares Subject to Award: | |||||
| Fair Market Value per Unit: | |||||
Total Price of Stock Unit: | |||||
Vesting Date | Number of Shares Vesting on Vesting Date | |||||||
Delivery Schedule: Pursuant to Section 6 of the 2009 Equity Incentive Plan Global Restricted Stock Unit Award Agreement (the “Global Restricted Stock Unit Award Agreement”), the Company shall deliver on each vesting date one share of Common Stock for each Stock Unit which vests on such date, less any shares to be withheld pursuant to Section 10 of such Global Restricted Stock Unit Award Agreement.
By your acceptance of this Restricted Stock Unit Grant, you agree that this award is granted under and governed by the terms and conditions of this Grant Notice, Omnicell, Inc.’s 2009 Equity Incentive Plan (as amended from time to time) (the “Plan”) and by the terms and conditions of the Global Restricted Stock Unit Award Agreement which is attached hereto.
You understand and agree that as of the Date of Grant, this Grant Notice, the Global Restricted Stock Unit Award Agreement and the Plan set forth the entire understanding between you and Omnicell, Inc. regarding the grant set forth herein, and the underlying Common Stock, and supersede all prior oral and written agreements on that subject.
Chief Financial Officer
Attachment: Global Restricted Stock Unit Award Agreement
Omnicell, Inc.
2009 Equity Incentive Plan
Global Restricted Stock Unit Award Agreement Amended by the Compensation Committee
of the Board of Directors Effective May 9, 2023
Pursuant to the Restricted Stock Unit Grant Notice (“Grant Notice”) and this Global Restricted Stock Unit Award Agreement, including any country-specific appendix thereto (the “Appendix” and collectively, the “Agreement”) and in consideration of your services, Omnicell, Inc. (the “Company”) has awarded you a Restricted Stock Unit Award (the “Award”) under its 2009 Equity Incentive Plan (the “Plan”). Your Award is granted to you effective as of the Date of Grant set forth in the Grant Notice for this Award. This Agreement shall be deemed to be agreed to by the Company and you upon the acceptance by you of the Grant Notice to which it is attached. Defined terms not explicitly defined in this Agreement shall have the same meanings given to them in the Plan. In the event of any conflict between the terms in this Agreement and the Plan, the terms of the Plan shall control. The details of your Award, in addition to those set forth in the Grant Notice and the Plan, are as follows.
1.GRANT OF THE AWARD. This Award represents the right to be issued on a future date the number of shares of the Company’s Common Stock as indicated in the Grant Notice. As of the Date of Grant, the Company will credit to a bookkeeping account maintained by the Company for your benefit (the “Account”) the number of shares of Common Stock subject to the Award. This Award was granted in consideration of your future services to the Company or an Affiliate. Except as otherwise provided herein, you will not be required to make any payment to the Company (other than services to the Company or an Affiliate) with respect to your receipt of the Award, the vesting of the shares or the delivery of the underlying Common Stock.
2.VESTING. Subject to the limitations contained herein, your Award will vest, if at all, in accordance with the vesting schedule provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service. For purposes of your Award, a termination of your Continuous Service will be deemed to have occurred as of the date you are no longer actively providing services to the Company or an Affiliate (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or otherwise rendering services, or the terms of your employment or other service agreement, if any). Your employment or service relationship will not be extended by any notice period (e.g., your period of service will not be extended by any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are employed or otherwise rendering services, or the terms of your employment or service agreement, if any). The Committee shall have the exclusive discretion to determine when you are no longer providing Continuous Services for purposes of your Award (including whether you may still be considered to be providing services while on a leave of absence). Upon such termination of your Continuous Service, the shares credited to the Account that were not vested on the date of such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in or to such
underlying shares of Common Stock. For the avoidance of doubt, service during any portion of the vesting period shall not entitle you to vest in a pro rata portion of the Award.
3.NUMBER OF SHARES.
(a)The number of shares subject to your Award may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.
(b)Any shares, cash or other property that becomes subject to the Award pursuant to this Section 3, if any, shall be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other shares covered by your Award.
(c)Notwithstanding the provisions of this Section 3, no fractional shares or rights for fractional shares of Common Stock shall be created pursuant to this Section 3. The Board shall, in its discretion, determine an equivalent benefit for any fractional shares or fractional shares that might be created by the adjustments referred to in this Section 3.
4.COMPLIANCE WITH LAW. You may not be issued any shares under your Award unless either (i) the shares are registered under the Securities Act; or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your Award also must comply with other applicable securities and exchange control laws and regulations relevant to the Company and the offer of the RSUs and the underlying shares of Common Stock, and you will not receive such shares if the Company determines that such receipt would not be in material compliance with such laws and regulations. You understand that the Company is under no obligation to register or qualify the shares of Common Stock with the SEC or any state or non-U.S. securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the shares of Common Stock. Further, you agree that the Company shall have unilateral authority to amend this Agreement without your consent, to the extent necessary to comply with securities or other laws applicable to the issuance of shares of Common Stock.
5.LIMITATIONS ON TRANSFER. Your Award is not transferable, except by will or by applicable laws of descent and distribution. In addition to any other limitation on transfer created by applicable securities laws, you agree not to assign, hypothecate, donate, encumber or otherwise dispose of any interest in any of the shares of Common Stock subject to the Award until the shares are issued to you in accordance with Section 6 of this Agreement. After the shares have been issued to you, you are free to assign, hypothecate, donate, encumber or otherwise dispose of any interest in such shares provided that any such actions are in compliance with the provisions herein and applicable securities laws. Notwithstanding the foregoing and to the extent permitted by applicable laws, (i) by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to receive any distribution of Common Stock to which you were entitled at the time of your death pursuant to this Agreement or (ii) upon receiving written permission from the Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you
may transfer your right to receive the distribution of Common Stock or other consideration hereunder, pursuant to a domestic relations order or marital settlement agreement that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss the proposed terms of any division of this Award with the Company General Counsel prior to finalizing the domestic relations order or marital settlement agreement to verify that you may make such transfer, and if so, to help ensure the required information is contained within the domestic relations order or marital settlement agreement.
6.DATE OF ISSUANCE. The Company will deliver to you a number of shares of the Company’s Common Stock equal to the number of vested shares subject to your Award, including any additional shares received pursuant to Section 3 above that relate to those vested shares on the applicable vesting date(s). However, if a scheduled delivery date falls on a date that is not a U.S. business day, such delivery date shall instead fall on the next following U.S. business day. The form of such delivery (e.g., a stock certificate or electronic entry evidencing such shares) shall be determined by the Company.
7.DIVIDENDS. You shall receive no benefit or adjustment to your Award with respect to any cash dividend, stock dividend or other distribution that does not result from a Capitalization Adjustment as provided in Section 9(a) of the Plan; provided, however, that this sentence shall not apply with respect to any shares of Common Stock that are delivered to you in connection with your Award after such shares have been delivered to you.
8.RESTRICTIVE LEGENDS. The shares issued under your Award shall be endorsed with appropriate legends determined by the Company.
9.AWARD NOT A SERVICE CONTRACT.
(a)Your Continuous Service with the Company or an Affiliate is not for any specified term and may be terminated by you or by the Company or an Affiliate at any time, for any reason. Nothing in this Agreement (including, but not limited to, the vesting of your Award pursuant to the schedule set forth in Section 2 herein or the issuance of the shares subject to your Award), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Agreement or the Plan shall: (i) confer upon you any right to continue in the employ of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Agreement or Plan; or (iv) deprive the Company or an Affiliate of the right to terminate you and without regard to any future vesting opportunity that you may have.
(b)By accepting this Award, you acknowledge and agree that the right to continue vesting in the Award pursuant to the schedule set forth in Section 2 is earned only by continuing to provide Continuous Service (not through the act of being hired, being granted this Award or any other award or benefit) and that the
Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a “reorganization”). You further acknowledge and agree that such a reorganization could result in the termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under this Agreement, including but not limited to, the termination of the right to continue vesting in the Award. You further acknowledge and agree that this Agreement, the Plan, the transactions contemplated hereunder and the vesting schedule set forth herein or any covenant of good faith and fair dealing that may be found implicit in any of them do not constitute an express or implied promise of continued engagement for the term of this Agreement, for any period, or at all, and shall not interfere in any way with your right or the Company’s right to terminate your Continuous Service at any time.
(c)No claim or entitlement to compensation or damages shall arise from forfeiture of the Awards resulting from the termination of your Continuous Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any).
10.RESPONSIBILITY FOR TAXES.
(a)You acknowledge that, regardless of any action taken by the Company or, if different, the Affiliate employing or otherwise retaining your services (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), is and remains your responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer. You further acknowledge that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including, but not limited to, the grant, vesting or settlement of the Award, the subsequent sale of shares of Common Stock acquired pursuant to such settlement and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. Further, if you are subject to Tax-Related Items in more than one jurisdiction, you acknowledge that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
On or before the time you receive a distribution of the shares in respect of your Award, or at any time thereafter as requested by the Company and/or the Employer, you hereby authorize any required withholding from the Common Stock issuable to you and/or otherwise agree to make adequate provision in cash for any sums required to satisfy the Tax-Related Items. Except as provided below, the Company shall withhold from the shares of Common Stock issuable to
you to satisfy the Tax-Related Items. By your acceptance of the Award, you agree that: (i) in the event that such withholding from the shares of Common Stock is problematic under applicable tax or securities law or has materially adverse accounting consequences, the Company shall instead withhold from any other compensation paid to you by the Company or the Employer in partial or full satisfaction of the Tax-Related Items, and (ii) the Company may determine in its sole discretion to instead withhold from any other compensation paid to you by the Company or the Employer in partial or full satisfaction of the Tax-Related Items, provided that if you are subject to reporting obligations under Section 16 of the Exchange Act, exercise of such discretion is subject to the prior approval and direction of the Committee. In no way limiting the foregoing, the Company is hereby authorized to withhold shares of Common Stock that are otherwise to be issued and delivered to you under this Award in partial or full satisfaction of the Tax-Related Items; provided, however, that no shares of Common Stock shall be withheld with a value exceeding the minimum amount of tax required to be withheld by law. If the obligation for Tax-Related Items is satisfied by withholding in shares of Common Stock, for tax purposes, you are deemed to have been issued the full number of shares of Common Stock subject to the vested Award, notwithstanding that a number of the shares of Common Stock are held back solely for the purpose of paying the Tax-Related Items.
(b)You agree to pay the Company or the Employer any amount of Tax- Related Items that the Company or the Employer may be required to withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described. Unless the obligation for Tax-Related Items is satisfied, the Company shall have no obligation to deliver to you any Common Stock.
(c)In the event the obligation of the Company and/or any Affiliate to withhold arises prior to the delivery to you of Common Stock or it is determined after the delivery of Common Stock to you that the amount of the withholding obligation was greater than the amount, if any, withheld by the Company and/or any Affiliate, you agree to indemnify and hold the Company and its Affiliates harmless from any failure by the Company and/or any Affiliate to withhold the proper amount.
11.UNSECURED OBLIGATION. Your Award is unfunded, and as a holder of a vested Award, you shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares pursuant to this Agreement. You shall not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Agreement until such shares are issued to you pursuant to Section 6 of this Agreement. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.
12.NOTICES. Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address provided to the Company. Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
13.NATURE OF GRANT. In accepting the grant, you acknowledge, understand and agree that:
(a)the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b)the grant of the Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Awards, or benefits in lieu of Awards, even if Awards have been granted in the past;
(c)all decisions with respect to future Awards or other grants, if any, will be at the sole discretion of the Company;
(d)you are voluntarily participating in the Plan;
(e)the Awards and the shares of Common Stock subject to the Awards, and the income from and value of same, are not intended to replace any pension rights or compensation;
(f)the Awards and the shares of Common Stock subject to the Awards, and the income from and value of same, are not part of normal or expected compensation for purposes of, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, pension or retirement or welfare benefits or similar mandatory payments;
(g)the future value of the underlying shares of Common Stock is unknown, indeterminable and cannot be predicted with certainty;
(h)unless otherwise agreed with the Company, the Awards and the shares of Common Stock acquired under the Plan, and the income from and value of same, are not granted as consideration for, or in connection with, any service you may provider as a director of any parent company or Affiliate;
(i)unless otherwise provided in the Plan or by the Company in its discretion, the Awards and the benefits evidenced by this Agreement, do not create any entitlement to have the Awards or any such benefits transferred to or assumed by
another company, nor to be exchanged, cashed out or substituted for in connection with any corporate transaction affecting the Common Stock; and
(j)neither the Company, the Employer nor any Subsidiary or Affiliate of the Company shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the Awards or of any amounts due to you pursuant to the settlement of the Awards or the subsequent sale of any shares of Common Stock acquired upon settlement.
14.NO ADVICE REGARDING GRANT. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying shares of Common Stock. You should consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.
15.DATA PRIVACY. If you would like to participate in the Plan, you will need to review the information provided in this Section 15 and, where applicable, declare consent to the processing and/or transfer of personal data as described below.
(a)Data Collection and Usage. The Company collects, processes and uses personal data about you, including but not limited to, your name, home address, email address and telephone number, date of birth, social insurance number, passport number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Awards or any other entitlement to shares awarded, canceled, exercised, vested, unvested or outstanding in your favor, which the Company receives from you or your Employer (“Personal Data”). In order you to participate in the Plan, the Company will collect Personal Data for purposes of allocating shares of Common Stock and implementing, administering and managing the Plan.
(b)Stock Plan Administration and Service Providers. The Company may transfer Personal Data to Morgan Stanley/E*TRADE (“Service Provider”), an independent service provider based in the U.S., which is assisting the Company with the implementation, administration and management of the Plan. Service Provider may open an account for you to receive and trade shares of Common Stock. You may be asked to acknowledge, or agree to, separate terms and data processing practices with Service Provider, with such agreement being a condition to the ability to participate in the Plan.
(c)International Data Transfers. Personal Data will be transferred from your country to the U.S., where the Company and its service providers are based. You understand and acknowledge that the U.S. might have enacted data privacy laws that are less protective or otherwise different from those applicable in your country of residence. The Company’s legal basis, where required, for the transfer of Data is your consent.
(d)Data Retention. The Company will use Personal Data only as long as necessary to implement, administer and manage your participation in the Plan or as required to comply with legal or regulatory obligations, including, without limitation, under tax and securities laws. When the Company no longer needs Personal Data for any of the above purposes, the Company will cease to use Personal Data for this purpose. If the Company keeps Personal Data longer, it would be to satisfy legal or regulatory obligations and the Company’s legal basis is your consent.
(e)Data Subject Rights. You understand that you may have a number of rights under data privacy laws in your jurisdiction. Subject to the conditions set out in the applicable law and depending on where you are based, such rights may include the right to (i) request access to, or copies of, Personal Data processed by the Company, (ii) rectification of incorrect Personal Data, (iii) deletion of Personal Data, (iv) restrictions on the processing of Personal Data,
(v) object to the processing of Personal Data for legitimate interests, (vi) portability of Personal Data, (vii) lodge complaints with competent authorities in your jurisdiction, and/or to (viii) receive a list with the names and addresses of any potential recipients of Personal Data. To receive clarification regarding these rights or to exercise these rights, you can contact GDPR@omnicell.com or our EU Data Protection Officer as follows:
2B Advice GmbH
Joseph-Schumpeter-Allee 25, 53227 Bonn, Germany
Telephone: +49 228 926165 120
E-Mail: omnicell@2b-advice.com
(f)Voluntariness and Consequences of Consent Denial or Withdrawal. You hereby unambiguously consent to the collection, use and transfer, in electronic or other form, of your Personal Data, as described above and in any other grant materials, by and among, as applicable, your Employer, the Company and any Affiliate for the exclusive purpose of implementing, administering and managing your participation in the Plan. You understand that you may, at any time, refuse or withdraw the consents herein, in any case without cost, by contacting in writing your human resources representative. If you do not consent or later seek to revoke your consent, your employment status or service with your Employer will not be affected; the only consequence of refusing or withdrawing consent is that the Company would not be able to grant the Awards or other equity awards to you or administer or maintain such awards. Therefore, you understand that refusing or withdrawing consent may affect your ability to participate in the Plan. For more information on the consequences of refusal to consent or withdrawal of consent, you should contact your local human resources representative.
Declaration of Consent. By accepting the Awards and indicating consent by signing the Grant Notice or through the Company’s online acceptance procedure, you explicitly declare your consent to the entirety of the Personal Data processing operations described above including, without limitation, the onward transfer of Personal Data by the Company to the Service Provider or, as the case may be, a different service provider of the Company in the U.S. | ||
16.MISCELLANEOUS.
(a)The rights and obligations of the Company under your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. Your rights and obligations under your Award may only be assigned with the prior written consent of the Company.
(b)You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(c)You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award, and fully understand all provisions of your Award.
(d)This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(e)All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
17.GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Except as expressly provided herein, in the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.
18.LANGUAGE. You acknowledge that you are sufficiently proficient in English or have consulted with an advisor who is sufficiently proficient in English, so as to allow you to understand the terms and conditions of this Agreement. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
19.SEVERABILITY. If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid.
Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
20.CHOICE OF LAW; VENUE. The interpretation, performance and enforcement of this Agreement will be governed by the law of the state of California without regard to such state’s conflicts of laws rules. For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.
21.AMENDMENT. This Agreement may not be modified, amended or terminated except by an instrument in writing, signed or otherwise accepted by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that no such amendment adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board reserves the right, by written notice to you, to impose new provisions or to change the existing provisions of this Agreement in any way it may deem necessary or advisable for legal or administrative reasons to carry out the purpose of the grant.
22.INSIDER TRADING RESTRICTIONS/MARKET ABUSE LAWS. You acknowledge that
you may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including but not limited to the United States, your country, the broker’s country and the country or countries in which the Common Stock is listed, which may affect your ability, directly or indirectly, to purchase or sell, or attempt to sell or otherwise dispose of shares of Common Stock, rights to shares of Common Stock (e.g., Awards), or rights linked to the value of shares of Common Stock, during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdiction(s)). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you placed before possessing the inside information. Furthermore, you understand that you may be prohibited from (i) disclosing the inside information to any third party, including fellow employees and (ii) “tipping” third parties by sharing with them Company insider information, or otherwise causing third parties to buy or sell Company securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may apply to you under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you should speak to your personal advisor on this matter.
23.FOREIGN ASSET/ACCOUNT REPORTING REQUIREMENTS. If you reside in a
country outside the United States, there may be certain foreign asset and/or account reporting requirements which may affect your ability to acquire or hold shares of Common Stock or cash received from participating in the Plan (including from any dividends paid on shares of Common Stock) in a brokerage account or bank outside of your country. You may be required to report such accounts, assets or related transactions to the tax or other authorities in your country. You may also be required to repatriate sale proceeds or other funds received as a result of
participating in the Plan to your country within a certain time after receipt. It is your responsibility to comply with such regulations and you should speak to your personal legal advisor on this matter.
24.APPENDIX. Notwithstanding any provisions in this Agreement, the Award grant shall be subject to any special terms and conditions set forth in any Appendix to this Agreement for your country. Moreover, if you relocate to one of the countries included in the Appendix, the special terms and conditions for such country, if any, will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.
25.IMPOSITION OF OTHER REQUIREMENTS. The Company reserves the right to impose other requirements on your participation in the Plan, on the Awards and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
26.WAIVER. You acknowledge that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by you or any other Participant.
27.ELECTRONIC DELIVERY AND ACCEPTANCE. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
* * * * *
Appendix
Omnicell, Inc.
2009 Equity Incentive Plan
Global Restricted Stock Unit Award Agreement
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Global Restricted Stock Unit Agreement (the “Agreement”) or the Plan.
Terms and Conditions
This Appendix includes additional terms and conditions that govern the Restricted Stock Unit Award (“RSUs”) granted to you under the Plan if you work and/or reside in one of the countries listed below. This Appendix forms part of the Agreement.
If you are a citizen or resident of a country other than the one in which you are currently residing and/or working, transfer employment and/or residency to another country after the Date of Grant, or are considered a resident of another country for local law purposes, the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall be applicable to you.
Notifications
This Appendix also includes information regarding exchange control and certain other issues of which you should be aware with respect to participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of April 2023. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix as the only source of information relating to the consequences of participation in the Plan because the information may be out of date at the time you vest in the RSUs and acquire shares of Common Stock or sell shares of Common Stock acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to your particular situation and the Company is not in a position to assure you of any particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.
Finally, if you are a citizen or resident of a country other than the one in which you are currently residing and/or working, transfer employment and/or residency to another country after the Date of Grant, or are considered a resident of another country for local law purposes, the information contained herein may not apply to you in the same manner.
Australia
Notifications
Securities Law Information. This offer of RSUs is being made under Division 1A, Part 7.12 of the Corporations Act 2001 (Cth). Please note that if you offer shares of Common Stock for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. You should obtain legal advice on your disclosure obligations prior to making any such offer.
Tax Information. The Plan is a plan to which Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) applies (subject to the conditions in the Act).
Canada
Terms and Conditions
Settlement of RSUs. Notwithstanding any discretion in the Plan or anything to the contrary in the Agreement, the RSUs do not provide any right for you, as a resident of Canada, to receive a cash payment and the RSUs shall be paid in shares of Common Stock only.
Nature of Grant. The following provision replaces Section 2 of the Agreement:
Subject to the limitations contained herein, your Award will vest, if at all, in accordance with the vesting schedule provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.
For purposes of the Award, a termination of your Continuous Service will be deemed to occur as of the date that is the earlier of (i) the date of your termination, (ii) the date you receive notice of termination, or (iii) the date you are no longer actively providing services and will not be extended by any notice period (e.g., active service would not include any contractual notice period or any period of “garden leave” or similar period mandated under Canadian laws or the terms of your employment or service agreement, if any), regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or providing services or the terms of your employment or service agreement, if any; unless otherwise expressly provided in this Agreement or determined by the Company, your right to vest in the Awards under the Plan, if any, will terminate as of such date; in the event that the date you are no longer actively providing services cannot be reasonably determined under the terms of this Agreement and the Plan, the Committee shall have the exclusive discretion to determine when you are no longer actively providing services for purposes of your Award (including whether you may still be considered to be providing services while on a leave of absence). Notwithstanding the foregoing, if applicable employment legislation explicitly requires continued vesting during a statutory notice period, your right to vest in the Awards, if any, will terminate effective as of the last date of the minimum statutory notice period but you will not earn or be entitled to pro-rated vesting if the vesting date falls after
the end of your statutory notice period, nor will you be entitled to any compensation for lost vesting.
Notifications
Securities Law Information. The sale of shares of Common Stock acquired under the Plan may not take place in Canada. This requirement will be satisfied where the shares of Common Stock are sold by the designated broker under the Plan through the facilities of the U.S. stock exchange on which the shares of Common Stock are currently listed (i.e., the Nasdaq stock market).
Foreign Asset/Account Reporting Information. Canadian residents are required to report their foreign specified property (e.g., shares of Common Stock) on form T1135 (Foreign Income Verification Statement) if the total cost of the foreign specified property exceeds C$100,000 at any time in the year. The RSUs must be reported—generally at a nil cost—if the C$100,000 threshold is exceeded because of other foreign specific property held by you. The shares of Common Stock acquired under the Plan must be reported and their cost generally is the adjusted cost base (“ACB”) of the shares of Common Stock. The ACB ordinarily would equal the fair market value of the shares of Common Stock at the time of acquisition, but if such Canadian resident owns other shares of Common Stock, this ACB may have to be averaged with the ACB of the other shares. The form T1135 generally must be filed by April 30 of the following year. Canadian residents should consult with a personal advisor to ensure compliance with the applicable reporting requirements.
France
Terms and Conditions
RSUs Not Tax-Qualified. The RSUs granted under this Agreement are not intended to qualify for special tax and social security treatment pursuant to Sections L. 225-197-1 to L. 225-197-5 and Sections L. 22-10-59 to L. 22-10-60 of the French Commercial Code, as amended.
Language Consent. By accepting the RSUs, you confirm having read and understood the Plan and Agreement, including all terms and conditions included therein, which were provided in the English language. You accept the terms of those documents accordingly.
En acceptant les droits sur des actions assujettis à restrictions (« restricted stock units » ou « RSUs »), vous confirmez avoir lu et compris le Plan et le Contrat, en ce compris tous les termes et conditions de ces documents, qui ont été fournis en langue anglaise. Vous acceptez les dispositions de ces documents en connaissance de cause.
Notifications
Foreign Asset/Account Reporting Information. French residents holding cash or securities (including shares of Common Stock) outside of France or maintaining a foreign bank or brokerage account (including accounts opened or closed during the tax year) must declare such
assets and accounts to the French tax authorities when filing an annual tax return. Failure to comply could trigger significant penalties.
Germany
Notifications
Exchange Control Information. Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). If you make or receive a payment in excess of this amount (including if you acquire shares of Common Stock with a value in excess of this amount under the Plan or sell shares of Common Stock via a foreign broker, bank, or service provider and receive proceeds in excess of this amount), you must report the payment to Bundesbank either electronically using the “General Statistics Reporting Portal” (“Allgemeines Meldeportal Statistik”) available at the Bundesbank’s website (www.bundesbank.de) or via such other method (e.g., by email or telephone) as is permitted by Bundesbank. The report must be submitted monthly or within other such timing as is permitted or required by Bundesbank.
Foreign Asset/Account Reporting Information. If your acquisition of shares acquired under the Plan leads to a so-called qualified participation at any point during the calendar year, you may need to report the acquisition when you file your tax return for the relevant year. A qualified participation is attained if (i) you own at least 1% of the Company and the value of the shares of Common Stock acquired exceeds €150,000 or (ii) you hold shares of Common Stock exceeding 10% of the Company’s total Common Stock.
India
Notifications
Exchange Control Information. You understand that you must repatriate any cash dividends paid on shares of Common Stock acquired under the Plan and any proceeds from the sale of such shares of Common Stock to India within a certain period of time after receipt of the proceeds. You will receive a foreign inward remittance certificate (“FIRC”) from the bank where you deposit the foreign currency. You should maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Employer requests proof of repatriation. It is your responsibility to comply with the applicable exchange control laws in India.
Foreign Asset/Account Reporting Information. You are required to declare any foreign bank accounts and any foreign financial assets (including shares of Common Stock held outside India) in your annual tax return. You acknowledge that you are responsible for complying with this reporting obligation and you should confer with your personal tax advisor in this regard.
United Arab Emirates
Notifications
Securities Law Information. Participation in the Plan is being offered only to eligible employees and is in the nature of providing equity incentives to employees in the United Arab Emirates. The Plan and the Agreement are intended for distribution only to such employees and must not be delivered to, or relied on by, any other person. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any documents in connection with the Plan. Neither the Ministry of Economy nor the Dubai Department of Economic Development has approved the Plan or the Agreement nor taken steps to verify the information set out therein, and has no responsibility for such documents.
United Kingdom
Terms and Conditions
Settlement. The following provision supplements Section 3 of the Agreement:
Notwithstanding any discretion contained in the Plan or the Agreement, the RSUs will not be settled in cash or a combination of cash and shares of Common Stock. The RSUs will be settled only in shares of Common Stock.
Responsibility for Taxes. This provision supplements Section 10 of the Agreement:
Without limitation to Section 10 of the Agreement, you hereby agree that you are liable for any Tax-Related Items related to your participation in the Plan and hereby covenant to pay such Tax- Related Items, as and when requested by the Company or (if different) the Employer or by HM Revenue & Customs (“HMRC”) (or any other tax or relevant authority). You also hereby agree to indemnify and keep indemnified the Company and (if different) the Employer against any Tax-Related Items that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax or relevant authority) on your behalf.
Notwithstanding the foregoing, if you are an executive officer or director (as within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. Instead, any Tax-Related Items not collected or paid may constitute a benefit to you on which additional income tax and National Insurance Contributions (“NICs”) may be payable. You understand that you will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for paying to the Company and/or the Employer (as appropriate) the amount of any employee NICs due on this additional benefit, which can be recovered by any means set out in the Agreement.
National Insurance Contributions Acknowledgment. As a condition of participation in the Plan and the vesting of the RSUs, you agree to accept any liability for secondary Class 1 NICs which may be payable by the Company and/or the Employer in connection with the RSUs and any event giving rise to Tax-Related Items (the “Employer NICs”). Without limitation to the
foregoing, you agree to execute a joint election with the Company, the form of such joint election being formally approved by HMRC (the “Joint Election”), and any other required consent or election. You further agree to execute such other joint elections as may be required between you and any successor to the Company and/or the Employer. You further agree that the Company and/or the Employer may collect the Employer NICs from you by any of the means set forth in Section 10 of the Agreement. You must enter into the Joint Election concurrent with the execution of the Agreement.
If you do not enter into a Joint Election prior to the vesting of the RSUs or if approval of the Joint Election has been withdrawn by HMRC, the RSUs shall become null and void without any liability to the Company and/or the Employer.
Exhibit 31.1
CERTIFICATION
I, Randall A. Lipps, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Omnicell, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| August 4, 2023 | /s/ Randall A. Lipps | ||||
| Randall A. Lipps | |||||
| President and Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
Exhibit 31.2
CERTIFICATION
I, Nchacha E. Etta, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Omnicell, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| August 4, 2023 | /s/ Nchacha E. Etta | ||||
| Nchacha E. Etta | |||||
| Executive Vice President & Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||
Exhibit 32.1
CERTIFICATION
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Randall A. Lipps, the President and Chief Executive Officer of Omnicell, Inc. (the “Company”), and Nchacha E. Etta, the Executive Vice President & Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:
1.The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2023 (the “Quarterly Report”), to which this Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
2.The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
In witness whereof, the undersigned have set their hands hereto as of the 4th day of August, 2023.
| /s/ Randall A. Lipps | /s/ Nchacha E. Etta | |||||||
| Randall A. Lipps | Nchacha E. Etta | |||||||
| President and Chief Executive Officer | Executive Vice President & Chief Financial Officer | |||||||
| (Principal Executive Officer) | (Principal Financial Officer) | |||||||
“This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Omnicell, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.”