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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________________________
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                
Commission File No. 000-33043
OMNICELL, INC.
(Exact name of registrant as specified in its charter)
Delaware94-3166458
(State or other jurisdiction of
incorporation or organization)		(IRS Employer
Identification No.)
4220 North Freeway
Fort Worth, TX 76137
(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 classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par valueOMCLNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically 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.
Large Accelerated Filer☒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 April 28, 2023, there were 45,080,618 shares of the registrant’s common stock, $0.001 par value, outstanding.

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OMNICELL, INC.
TABLE OF CONTENTS
Page

2
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OMNICELL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31,
2023		December 31,
2022
(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents$340,413 $330,362 
Accounts receivable and unbilled receivables, net of allowances of $5,373 and $5,153, respectively
322,073 299,469 
Inventories141,156 147,549 
Prepaid expenses27,963 27,070 
Other current assets103,364 77,362 
Total current assets934,969 881,812 
Property and equipment, net98,373 93,961 
Long-term investment in sales-type leases, net32,744 32,924 
Operating lease right-of-use assets28,228 38,052 
Goodwill734,895 734,274 
Intangible assets, net234,689 242,906 
Long-term deferred tax assets29,562 22,329 
Prepaid commissions56,909 59,483 
Other long-term assets100,469 105,017 
Total assets$2,250,838 $2,210,758 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$63,407 $63,389 
Accrued compensation48,284 73,455 
Accrued liabilities198,979 172,655 
Deferred revenues, net143,298 118,947 
Total current liabilities453,968 428,446 
Long-term deferred revenues42,438 37,385 
Long-term deferred tax liabilities1,558 2,095 
Long-term operating lease liabilities36,855 39,405 
Other long-term liabilities6,136 6,719 
Convertible senior notes, net567,342 566,571 
Total liabilities1,108,297 1,080,621 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued
— — 
Common stock, $0.001 par value, 100,000 shares authorized; 55,352 and 55,030 shares issued; 45,069 and 44,747 shares outstanding, respectively
55 55 
Treasury stock at cost, 10,283 shares outstanding, respectively
(290,319)(290,319)
Additional paid-in capital1,072,685 1,046,760 
Retained earnings375,728 390,728 
Accumulated other comprehensive loss(15,608)(17,087)
Total stockholders’ equity1,142,541 1,130,137 
Total liabilities and stockholders’ equity$2,250,838 $2,210,758 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
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OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31,
20232022
(In thousands, except per share data)
Revenues:
Product revenues$185,715 $225,875 
Services and other revenues104,914 92,953 
Total revenues290,629 318,828 
Cost of revenues:
Cost of product revenues109,527 118,338 
Cost of services and other revenues56,073 50,443 
Total cost of revenues165,600 168,781 
Gross profit125,029 150,047 
Operating expenses:
Research and development22,878 25,030 
Selling, general, and administrative125,114 119,933 
Total operating expenses147,992 144,963 
Income (loss) from operations(22,963)5,084 
Interest and other income (expense), net1,781 (114)
Income (loss) before benefit from income taxes(21,182)4,970 
Benefit from income taxes(6,182)(3,243)
Net income (loss)$(15,000)$8,213 
Net income (loss) per share:
Basic $(0.33)$0.19 
Diluted$(0.33)$0.17 
Weighted-average shares outstanding:
Basic44,887 44,249 
Diluted44,887 47,918 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

4
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OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended March 31,
20232022
(In thousands)
Net income (loss)$(15,000)$8,213 
Other comprehensive income (loss):
Foreign currency translation adjustments1,479 (2,555)
Other comprehensive income (loss)1,479 (2,555)
Comprehensive income (loss)$(13,521)$5,658 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
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OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
Common StockTreasury StockAdditional
Paid-In Capital		Retained
Earnings		Accumulated Other
Comprehensive Income (Loss)		Stockholders’
Equity
SharesAmountSharesAmount
(In thousands)
Balances as of December 31, 202255,030 $55 (10,283)$(290,319)$1,046,760 $390,728 $(17,087)$1,130,137 
Net loss— — — — — (15,000)— (15,000)
Other comprehensive income — — — — — — 1,479 1,479 
Share-based compensation— — — — 15,180 — — 15,180 
Issuance of common stock under employee stock plans322 — — — 12,114 — — 12,114 
Tax payments related to restricted stock units— — — — (1,369)— — (1,369)
Balances as of March 31, 202355,352 $55 (10,283)$(290,319)$1,072,685 $375,728 $(15,608)$1,142,541 
Common StockTreasury StockAdditional
Paid-In Capital		Retained
Earnings		Accumulated Other
Comprehensive Income (Loss)		Stockholders’
Equity
SharesAmountSharesAmount
(In thousands)
Balances as of December 31, 202154,073 $54 (9,894)$(238,109)$1,024,580 $368,571 $(8,407)$1,146,689 
Net income— — — — — 8,213 — 8,213 
Other comprehensive loss— — — — — — (2,555)(2,555)
Share-based compensation— — — — 16,208 — — 16,208 
Issuance of common stock under employee stock plans384 — — — 18,951 — — 18,951 
Tax payments related to restricted stock units— — — — (4,322)— — (4,322)
Stock repurchases— — (389)(52,210)— — — (52,210)
Cumulative effect of a change in accounting principle related to convertible debt— — — — (72,742)16,509 — (56,233)
Balances as of March 31, 202254,457 $54 (10,283)$(290,319)$982,675 $393,293 $(10,962)$1,074,741 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
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OMNICELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31,
20232022
(In thousands)
Operating Activities
Net income (loss)$(15,000)$8,213 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization21,974 21,124 
Loss on disposal of property and equipment802 — 
Share-based compensation expense14,042 16,208 
Deferred income taxes(7,770)(4,858)
Amortization of operating lease right-of-use assets2,248 3,307 
Impairment and abandonment of operating lease right-of-use assets related to facilities7,815 1,753 
Amortization of debt issuance costs1,045 1,038 
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables(22,156)(49,994)
Inventories6,760 (17,320)
Prepaid expenses(873)(1,712)
Other current assets34 7,950 
Investment in sales-type leases613 (1,097)
Prepaid commissions2,574 4,152 
Other long-term assets628 2,240 
Accounts payable20 312 
Accrued compensation(25,171)(23,859)
Accrued liabilities(689)769 
Deferred revenues29,135 19,786 
Operating lease liabilities(2,678)(3,521)
Other long-term liabilities(583)(487)
Net cash provided by (used in) operating activities12,770 (15,996)
Investing Activities
External-use software development costs(3,499)(3,852)
Purchases of property and equipment(10,141)(11,489)
Business acquisition, net of cash acquired— (3,392)
Net cash used in investing activities(13,640)(18,733)
Financing Activities
Proceeds from issuances under stock-based compensation plans12,114 18,951 
Employees’ taxes paid related to restricted stock units(1,369)(4,322)
Change in customer funds, net(6,883)5,462 
Stock repurchases— (52,210)
Net cash provided by (used in) financing activities3,862 (32,119)
Effect of exchange rate changes on cash and cash equivalents176 (411)
Net increase (decrease) in cash, cash equivalents, and restricted cash3,168 (67,259)
Cash, cash equivalents, and restricted cash at beginning of period352,835 355,620 
Cash, cash equivalents, and restricted cash at end of period$356,003 $288,361 
Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets:
Cash and cash equivalents$340,413 $265,008 
Restricted cash included in other current assets15,590 23,353 
Cash, cash equivalents, and restricted cash at end of period$356,003 $288,361 
Supplemental disclosure of non-cash investing activities
Unpaid purchases of property and equipment$1,321 $703 
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
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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
The accompanying unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the financial position of the Company as of March 31, 2023 and December 31, 2022, and the results of operations, comprehensive income (loss), and cash flows for the three months ended March 31, 2023 and 2022. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) have been condensed or omitted in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023, except as discussed in the section entitled “Recently Adopted Authoritative Guidance” below. The Company’s results of operations, comprehensive income (loss), and cash flows for the three months ended March 31, 2023 are not necessarily indicative of results that may be expected for the year ending December 31, 2023, or for any future period.
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
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 March 31, 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
The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The CODM allocates resources and evaluates the performance of the Company at the consolidated level using information about its revenues, gross profit, income from operations, and other key financial data. All significant operating decisions are based upon an analysis of the Company as one operating segment, which is the same as its reporting segment.
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.
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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 otherPoint in time, as transfer of control occurs, generally upon installation and acceptance by the customerProduct
ConsumablesPoint in time, as transfer of control occurs, generally upon shipment to or receipt by customerProduct
Technical servicesOver time, as services are provided, typically ratably over the service termService
Advanced ServicesOver time, as services are providedService
A portion of the Company’s sales are made to customers who are members of Group Purchasing Organizations (“GPOs”) and Federal agencies that purchase under a Federal Supply Schedule Contract with the Department of Veterans Affairs (the “GSA Contract”). GPOs are often fully or partially owned by the Company’s customers, and the Company pays fees to the GPO on completed contracts. The Company also pays the Industrial Funding Fee (“IFF”) to the Department of Veterans Affairs under the GSA Contract. The Company considers these fees consideration paid to customers and records them as reductions to revenue. Fees to GPOs and the IFF were $3.1 million and $4.5 million for the three months ended March 31, 2023 and 2022, respectively.
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Disaggregation of Revenues
The following table summarizes the Company’s revenues disaggregated by revenue type for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022
(In thousands)
Connected devices, software licenses, and other$165,147 $208,078 
Consumables20,568 17,797 
Technical services53,357 49,169 
Advanced Services51,557 43,784 
Total revenues$290,629 $318,828 
The following table summarizes the Company’s revenues disaggregated by geographic region, which is determined based on customer location, for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022
(In thousands)
United States$255,943 $287,577 
Rest of world (1)
34,686 31,251 
Total revenues$290,629 $318,828 
_________________________________________________
(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:
March 31,
2023		December 31,
2022
(In thousands)
Short-term unbilled receivables, net (1)
$23,258 $25,763 
Long-term unbilled receivables, net (2)
13,491 14,744 
Total contract assets$36,749 $40,507 
Short-term deferred revenues, net$143,298 $118,947 
Long-term deferred revenues42,438 37,385 
Total contract liabilities$185,736 $156,332 
_________________________________________________
(1)    Included in accounts receivable and unbilled receivables in the Condensed Consolidated Balance Sheets.
(2)    Included in other long-term assets in the Condensed Consolidated Balance Sheets.
The portion of the 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 $143.3 million and $118.9 million include deferred revenues from product sales and service contracts, net of deferred cost of sales of $15.6 million and $15.8 million, as of March 31, 2023 and December 31, 2022, respectively. During the three months ended March 31, 2023, the Company recognized revenues of $55.5 million 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 $42.4 million and $37.4 million as of March 31, 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 deferred revenues are expected to be
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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, 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 $199.2 million as of March 31, 2023. Remaining performance obligations are expected to be recognized ratably over the remaining term of the contract, which is generally not more than ten years. Remaining performance obligations do not include product obligations, services where the associated product has not been accepted, services which have not yet started, variable portions of services, and certain other obligations.
Significant Customers
There were no customers that accounted for more than 10% of the Company’s total revenues for the three months ended March 31, 2023 and 2022. Also, there were no customers that accounted for more than 10% of the Company’s accounts receivable balance as of March 31, 2023 and December 31, 2022.
Note 3. Net Income (Loss) Per Share
The basic and diluted net income (loss) per share calculations for the three months ended March 31, 2023 and 2022 were as follows:
Three Months Ended March 31,
20232022
(In thousands, except per share data)
Net income (loss)$(15,000)$8,213 
Weighted-average shares outstanding – basic44,887 44,249 
Effect of dilutive securities from stock award plans— 1,646 
Effect of convertible senior notes— 1,918 
Effect of warrants— 105 
Weighted-average shares outstanding – diluted44,887 47,918 
Net income (loss) per share – basic$(0.33)$0.19 
Net income (loss) per share – diluted$(0.33)$0.17 
Anti-dilutive weighted-average shares related to stock award plans3,634 336 
Anti-dilutive weighted-average shares related to convertible senior notes and warrants11,816 — 
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Note 4. Cash, Cash Equivalents, and Restricted Cash and Fair Value of Financial Instruments
Cash and cash equivalents of $340.4 million and $330.4 million, and restricted cash (inclusive of cash equivalents) of $15.6 million and $22.5 million, as of March 31, 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.
The following table reflects the Company’s cash equivalents and restricted cash equivalents, which consisted of money market funds held in sweep and asset management accounts:
March 31,
2023		December 31,
2022
(In thousands)
Cash equivalents (1)
$321,230 $300,969 
Restricted cash equivalents (2)
13,873 — 
Total cash equivalents and restricted cash equivalents$335,103 $300,969 
_________________________________________________
(1)    Included in cash and cash equivalents in the Condensed Consolidated Balance Sheets.
(2)    Included in other current assets in the Condensed Consolidated Balance Sheets.
Fair Value Hierarchy
The Company measures its financial instruments at fair value. The Company’s cash, cash equivalents, and restricted cash are classified within Level 1 of the fair value hierarchy as they are valued primarily using quoted market prices utilizing market observable inputs. The Company’s credit facility is classified within Level 2 as the valuation inputs are based on quoted prices or market observable data of similar instruments. The Company’s convertible senior notes are classified within Level 2 as the valuation inputs are based on quoted prices in an inactive market on the last day in the reporting period. As of March 31, 2023 and December 31, 2022, the fair value of the convertible senior notes was $528.4 million and $501.4 million, respectively, compared to their carrying values of $567.3 million and $566.6 million, respectively, which are net of unamortized debt issuance costs. Refer to Note 9, Debt and Credit Agreement, for further information regarding the Company’s credit facility and Note 10, Convertible Senior Notes, for further information regarding the Company’s convertible senior notes.
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Note 5. Balance Sheet Components
Balance sheet details as of March 31, 2023 and December 31, 2022 are presented in the tables below:
March 31,
2023		December 31,
2022
(In thousands)
Inventories:
Raw materials$67,154 $75,854 
Work in process10,772 9,280 
Finished goods63,230 62,415 
Total inventories$141,156 $147,549 
Other current assets:
Funds held for customers, including restricted cash (1)
$83,172 $56,703 
Net investment in sales-type leases, current portion11,053 11,486 
Prepaid income taxes112 1,702 
Other current assets9,027 7,471 
Total other current assets$103,364 $77,362 
Other long-term assets:
External-use software development costs, net$77,114 $80,760 
Unbilled receivables, net13,491 14,744 
Deferred debt issuance costs1,784 2,058 
Other long-term assets8,080 7,455 
Total other long-term assets$100,469 $105,017 
Accrued liabilities:
Operating lease liabilities, current portion$10,875 $10,761 
Customer fund liabilities83,172 56,703 
Advance payments from customers11,753 11,556 
Rebate liabilities47,432 42,802 
Group purchasing organization fees5,790 7,723 
Taxes payable9,549 9,642 
Other accrued liabilities30,408 33,468 
Total accrued liabilities$198,979 $172,655 
_________________________________________________
(1)    Includes restricted cash of $15.6 million and $22.5 million as of March 31, 2023 and December 31, 2022, respectively.
The following table summarizes the changes in accumulated balances of other comprehensive income (loss), which consisted of foreign currency translation adjustments, for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022
(In thousands)
Beginning balance$(17,087)$(8,407)
Other comprehensive income (loss)1,479 (2,555)
Ending balance$(15,608)$(10,962)
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Note 6. Property and Equipment
The following table represents the property and equipment balances as of March 31, 2023 and December 31, 2022:
March 31,
2023		December 31,
2022
(In thousands)
Equipment$94,546 $91,391 
Furniture and fixtures4,989 5,154 
Leasehold improvements18,828 19,510 
Purchased software and internal-use software development costs85,283 76,327 
Construction in progress26,861 28,223 
Property and equipment, gross230,507 220,605 
Accumulated depreciation and amortization(132,134)(126,644)
Total property and equipment, net$98,373 $93,961 
Depreciation and amortization expense of property and equipment was $6.3 million and $5.3 million for the three months ended March 31, 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 March 31, 2023 and December 31, 2022:
March 31,
2023		December 31,
2022
(In thousands)
United States$94,472 $89,989 
Rest of world (1)
3,901 3,972 
Total property and equipment, net$98,373 $93,961 
_________________________________________________
(1)    No individual country represented more than 10% of total property and equipment, net.
Note 7. External-Use Software Development Costs
The carrying amounts of external-use software development costs as of March 31, 2023 and December 31, 2022 were as follows:
March 31,
2023		December 31,
2022
(In thousands)
Gross carrying amount$228,766 $225,004 
Accumulated amortization(151,652)(144,244)
External-use software development costs, net (1)
$77,114 $80,760 
_________________________________________________
(1)     Included in other long-term assets in the Condensed Consolidated Balance Sheets.
The Company recorded $7.4 million and $6.7 million to cost of revenues for amortization of external-use software development costs for the three months ended March 31, 2023 and 2022, respectively.
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The estimated future amortization expenses for external-use software development costs were as follows:
March 31,
2023
(In thousands)
Remaining nine months of 2023$21,435 
202423,544 
202516,156 
202610,617 
20274,662 
Thereafter700 
Total$77,114
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$734,274 
Foreign currency exchange rate fluctuations621 
Balance as of March 31, 2023$734,895 
Intangible Assets, Net
The carrying amounts and useful lives of intangible assets as of March 31, 2023 and December 31, 2022 were as follows:
March 31, 2023
Gross carrying
amount		Accumulated
amortization		Foreign currency exchange
rate fluctuations		Net carrying
amount		Useful life
(years)
(In thousands, except for years)
Customer relationships$311,089 $(104,149)$(1,432)$205,508 
4 - 30
Acquired technology92,066 (67,033)— 25,033 
4 - 20
Backlog1,800 (1,125)— 675 2
Trade names9,200 (6,895)— 2,305 
5 - 12
Patents2,430 (1,362)— 1,068 
2 - 20
Non-compete agreements600 (500)— 100 3
Total intangibles assets, net$417,185 $(181,064)$(1,432)$234,689 
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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$311,089 $(99,177)$(1,514)$210,398 
4 - 30
Acquired technology92,066 (64,299)— 27,767 
4 - 20
Backlog1,800 (900)— 900 2
Trade names9,200 (6,633)— 2,567 
5 - 12
Patents2,430 (1,306)— 1,124 
2 - 20
Non-compete agreements600 (450)— 150 3
Total intangibles assets, net$417,185 $(172,765)$(1,514)$242,906 
Amortization expense of intangible assets was $8.3 million and $9.1 million for the three months ended March 31, 2023 and 2022, respectively.
The estimated future amortization expenses for amortizable intangible assets were as follows:
March 31,
2023
(In thousands)
Remaining nine months of 2023$23,238 
202423,059 
202521,043 
202618,065 
202716,796 
Thereafter132,488 
Total$234,689 
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 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 can 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
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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 March 31, 2023.
As of March 31, 2023 and December 31, 2022, there was no outstanding balance for the Revolving Credit Facility.
Note 10. Convertible Senior Notes
0.25% Convertible Senior Notes due 2025
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.
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During the three months ended March 31, 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 second quarter of 2023, commencing on April 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 March 31, 2023 and December 31, 2022. Whether the Notes will be convertible following the second 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 March 31, 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 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 March 31, 2023, the remaining life of the Notes and the related issuance cost accretion is approximately 2.5 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 March 31, 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 March 31, 2023 and December 31, 2022:
March 31,
2023		December 31,
2022
(In thousands)
Principal amount$575,000 $575,000 
Unamortized debt issuance costs(7,658)(8,429)
Convertible senior notes, net$567,342 $566,571 
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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 months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022
(In thousands)
Contractual coupon interest$359 $359 
Amortization of debt issuance costs$771 $764 
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.
Note 11. Lessor Leases
Sales-Type Leases
The Company enters into multi-year, sales-type lease agreements, with the majority of such leases varying in length from one to five years. The Company optimizes cash flows by selling a majority of its non-U.S. government sales-type leases, 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 31% of the lease receivable balance as of March 31, 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 months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022
(In thousands)
Sales-type lease revenues$5,716 $6,505 
Cost of sales-type lease revenues(2,662)(3,078)
Selling profit on sales-type lease revenues$3,054 $3,427 
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The receivables as a result of these types of transactions are collateralized by the underlying equipment leased and consist of the following components at March 31, 2023 and December 31, 2022:
March 31,
2023		December 31,
2022
(In thousands)
Net minimum lease payments to be received$50,356 $50,755 
Less: Unearned interest income portion(6,559)(6,345)
Net investment in sales-type leases43,797 44,410 
Less: Current portion (1)
(11,053)(11,486)
Long-term investment in sales-type leases, net<