ITEM 1A. RISK FACTORS
Summary of Risk Factors
An investment in our company involves various risks. The following is a summary of these risks, but does not address all of the risks that we face. Additional discussion of the risks that we face can be found following this summary and should be carefully considered together with all of the other information appearing in this Annual Report on Form 10-K.
Risk Factors Related to our Business and Industry
• Economic Conditions and Demand Risks. Weak or uncertain economic conditions may adversely impact our business, as well as any reduction in demand for, or adoption or installation of Omnicell’s medication management solutions, medication packaging systems, or related services. In addition, as we offer lease financing options to our customers, customer creditworthiness, payment timing, and collections may adversely impact our financial results.
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• Strategic Risks. Our investments in new business strategies or initiatives, including our transition to selling more products and services on a subscription basis, are inherently risky and may not be successful or we may be unable to maintain our SaaS and Expert Services customers. In addition, we may be unable to realize the potential benefits of our acquired businesses, including RxInnovation Inc., operating as FDS Amplicare ® (“FDS Amplicare”), Omnicell Specialty Pharmacy Services, Inc. (“Omnicell Specialty Pharmacy Services”), MarkeTouch Media, LLC (subsequently merged into EnlivenHealth, Inc.), and Hub and Spoke Innovations, and risks related to investments in new business strategies and initiatives could disrupt ongoing business and present risks not originally contemplated.
• Market Risks. We are subject to continued and increased competition from current and future competitors in the hospital and health system solutions and outpatient pharmacy solutions markets, including price competition, industry and competitor consolidation, competitor brand recognition, and in relationships with our suppliers and current and potential customers .
• Technology Risks. We may be unable to develop new solutions or enhance existing solutions to react to changes in technology and customer requirements in a timely and cost-effective manner. Our products and services now in development, or that we may seek to develop in the future, may not achieve technological or economic feasibility, obtain regulatory approval or gain market acceptance and we may determine to stop the development of, or the continued offering of, a product or service. Furthermore, we may experience errors in the provision of our SaaS and Expert Services that could expose us to liability. In addition, we may incorporate artificial intelligence technologies into certain of our products, services, and processes or our vendors may incorporate artificial intelligence tools into their offerings that may result in enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical, confidentiality, or security concerns.
• Data Security Risks. A significant disruption in our information technology systems, breaches of data security, or cyber-attacks on our systems or solutions could adversely impact our business and operating results.
• Institutional, Retail, and Specialty Pharmacy Risks. We may fail to meet the demands of, or maintain relationships with, our institutional and retail pharmacy customers and we may be unable to secure or maintain access to existing and future specialty drugs.
• Debt Risks. We have substantial debt, which could impair our financial flexibility and access to capital, and are subject to covenants in our Second A&R Credit Agreement (as defined below) that restrict our business and operations.
• Legal, Regulatory, and Healthcare Industry Risks. Government regulations, legislative changes, fraud and anti-kickback statutes, product liability claims, the outcome of legal proceedings, and other legal obligations related to healthcare, privacy, data protection, and information security, and the costs of compliance with, and potential liability associated with, our actual or perceived failure to comply with such obligations could adversely impact our business and operating results.
• International Operations Risks. Our operations in foreign countries expose us to additional risks, including distribution, management, and systems integration issues, reduced intellectual property protections, adverse changes in international laws, fluctuations in currency exchange rates, political unrest, foreign conflicts, and pandemics or other major public health crises.
• Workforce Risks. We may be unable to recruit and retain skilled and motivated personnel.
• Intellectual Property Risks. Any failure to protect our intellectual property rights could negatively affect our ability to compete.
• Materials Risks. We use raw materials and components that may be subject to price fluctuations, shortages, or interruptions of supply.
• Suppliers/Third-Party Vendors Risks . We may be unable to obtain an adequate supply of components, equipment, and raw materials on a timely basis. We depend on technologies provided by third-party vendors.
Risks Related to Ownership of Our Common Stock
• The market price of our common stock may be volatile and the anti-takeover provisions of Delaware law and in our governing documents may make a change in control of our Company more difficult, even if a change in control would be beneficial to our stockholders.
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Risks Related to Our Notes
• Any conversion of our 2029 Notes may dilute the ownership interest of our stockholders, depress the price of our common stock or, if the conditional conversion feature of the 2029 Notes is triggered, adversely affect our business, operating results, cash flow, or financial condition. Also, our convertible note hedge and warrant transactions may affect the value of our common stock.
General Risks
• We may be subject to adverse consequences related to tax rates and changes in tax legislation, and any failure to maintain effective internal control over financial reporting.
Risk Factors
We have identified the following risks and uncertainties that may have a material adverse effect on our business, operating results, cash flow, or financial condition. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are not material may also significantly impair our business operations. If any of these risks occur, our business, operating results, cash flow, or financial condition could suffer and the market price of our common stock could decline.
In assessing these risks, you should also refer to other information contained in this Annual Report on Form 10-K, including the section entitled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and our Consolidated Financial Statements and related Notes to Consolidated Financial Statements.
Risk Factors Related to our Business and Industry
Unfavorable economic and market conditions and a decreased demand in the capital equipment market could adversely affect our business, operating results, cash flow, or financial condition.
Customer demand for our products is significantly linked to the strength of the economy. From time to time, the U.S. and global economy has experienced cyclical downturns impacting economic activity, the results of which include decreased demand for goods and services, reduced government spending, rising inflation, increasing interest rates, liquidity or credit constraints, declines in corporate profitability, credit, equity, or foreign exchange market volatility, increased bankruptcies, and general economic uncertainty. If decreases in demand for capital equipment caused by weak or uncertain economic conditions and decreased corporate and government spending, any effects of fiscal budget balancing at the federal level or proposed legislative or regulatory changes, or generally reduced expenditures for capital solutions occur, we will experience decreased revenues and lower revenue growth rates, and our business, operating results, cash flow, or financial condition could be materially and adversely affected. In addition, we have seen some customers defer or delay implementation of capital equipment projects, along with longer timeframes both for capital equipment purchasing decisions and for entering into agreements for our products or solutions due to customer capital budget constraints or customers seeking to stagger or elongate the timeframes between the adoption of new or updated technologies, which has resulted in moderated demand, and may lead to decreased revenues and could result in our business, operating results, cash flow, or financial condition being materially and adversely affected. Furthermore, the foregoing factors may also impact the willingness or ability of our customers to pay their existing obligations or honor their contractual commitments, which could result in decreased revenue and negatively impact our business, operating results, cash flow, or financial condition.
The broader U.S. and global economy has continued to experience elevated inflationary pressures as well as continued supply chain disruptions, labor shortages and geopolitical instability. We are unable to predict future changes in the state of the U.S. or global economy or whether inflationary pressures will continue to intensify or subside. If the current inflationary trends remain elevated, or fail to improve, it could adversely affect our profits, margins or operating results as a result of increasing costs. In addition, we may take actions in response to existing or future economic, market or business conditions that may result in charges and costs related to those actions, unforeseen obstacles or operating inefficiencies, or we may fail to realize the expected benefits, which could have a material adverse effect on our business, operating results, cash flows and financial condition.
We may fail to develop new solutions or enhance existing solutions to react to changes in technology and customer requirements in a timely and cost-effective manner, or our new or enhanced solutions may not achieve market acceptance.
We must develop new products and services or enhance existing products to react to evolving technologies and industry standards and regulatory requirements, and meet changing demands of our customers. This process can be time-consuming, costly, and complex, and usually requires us to accurately anticipate technological innovations and market trends. Our ability to fund product development and enhancements partially depends on our ability to generate revenues from our existing products. If we inaccurately anticipate technological innovations or market trends or fail to generate sufficient revenue
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to develop new products, enhance existing products to meet customer needs or technological or regulatory change, or are unable to fund investment in, or achieve expected return on investment from, future product development, our ability to generate future revenues or revenue growth may be negatively impacted, which could have a material adverse effect on our business, operating results, cash flow, or financial condition.
New product and service developments or enhancements may be delayed, have technical problems (including software defects or errors), fail to meet customer or market specifications, regulatory requirements, or industry standards, which could result in increased or unexpected expenses related to further developments or modifications. In addition, products and services now in development or that we may seek to develop in the future may not achieve technological or economic feasibility, obtain regulatory approval or gain market acceptance, which may result in a decision to cease development of, or the continued offering of, a product or service. Furthermore, our products and services also may not be competitive with, or rendered obsolete by, other products using new or alternative technologies that offer comparable performance and functionality, such as AI, machine-learning, and generative AI capabilities, may not be accepted in new or existing markets, or may not achieve expected return on investment. Competitors may have greater financial and marketing resources to more rapidly respond to changing product requirements, develop competitive products, or implement new features. Any of the foregoing could make our existing and future solutions obsolete and unmarketable, or result in loss of market share or a determination to optimize our portfolio or exit a particular business or product line, damage our reputation or otherwise harm our business, operating results, cash flow, or financial condition.
Our ability to execute successfully on the industry-defined vision of the Autonomous Pharmacy depends on our ability to continue to develop and introduce new products and services or product and service enhancements, and integrate new products and services with existing offerings, in furtherance of this vision in a timely manner and on a cost-effective basis. If we fail to do so, we may be unable to achieve the industry-defined vision of the Autonomous Pharmacy or we may not realize the anticipated benefits of our investments in support of this vision, either of which could have a material adverse effect on our business, operating results, cash flow, or financial condition.
Failure to generate new sales and any reduction in the demand for, or adoption of, our medication management solutions, medication packaging systems, or related services would reduce our revenues.
A significant portion of domestic and international healthcare facilities still use traditional approaches to medication and/or supply management in some form that do not include fully automated methods of medication management. As a result, we must continuously educate existing and prospective customers about the potential advantages of our medication management solutions and medication packaging systems, which requires significant sales efforts and can cause longer sales cycles. Despite our significant efforts and extensive time commitments targeting sales to healthcare facilities, we cannot be assured that our efforts will result in sales to these customers.
In addition, our medication management solutions and our more complex automated packaging systems typically represent a sizable initial capital expenditure and potential time and labor commitment to implement for healthcare organizations. Changes in the budgets of these organizations and the timing of spending under these budgets, as well as customer labor shortages, can have a significant effect on the demand for our medication management solutions, medication packaging systems, and related services. Customer budgets are often supported by cash flows that can be negatively affected by declining investment income and influenced by limited resources, increased operational and financing costs, macroeconomic conditions, and conflicting spending priorities among different departments. Furthermore, in the current fluid tariff environment, the imposition of tariffs may raise the operating costs for healthcare organizations, which in turn could put increased pressure on their budgets or capital spending as well as impact the timing of their spending. Any decrease in expenditures or change in spending priorities by healthcare facilities or increased financing costs, including as a result of the impacts of public health crises, including pandemics, could decrease demand for our medication management solutions, medication packaging systems, and related services, and reduce our revenues.
Also, the continuing gradual transition to a value-based care healthcare delivery model could shift more of the burden of financial risk onto healthcare provider organizations and could decrease utilization of healthcare per patient. Value-based care could also cause a shift in sites of care from traditional venues, such as hospitals and clinics, to the home, and could impact our revenues.
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If we fail to achieve anticipated growth targets or market adoption, our business could be adversely affected.
Evolving customer preferences, competitive offerings, regulatory and legal hurdles, technical issues, implementation delays, and inadequate allocation of technological and support resources may delay or limit the commercial success of products or services, which could result in lower-than-anticipated sales or lower customer satisfaction, that may result in an adverse effect upon our business, operating results and could harm our business, cash flow, or financial condition.
Failure to achieve long-term growth objectives may also result from our inability to sustain innovation, effectively allocate resources, or respond to changing market dynamics. If we do not realize the anticipated benefits from investments in developing products or services, or if our products or services are rendered obsolete by our inaction or competitor actions, our business, financial condition, and results of operations could be materially and adversely affected.
Delays in installations of our medication management solutions, including our central pharmacy automation solutions, could harm our competitive position, operating results, and financial condition.
The purchase of our medication management solutions, including our central pharmacy automation solutions, is often part of a customer’s larger initiative to re-engineer its pharmacy and distribution and materials management systems. The purchase of our systems often entails larger strategic purchases by customers that generally require more complex and stringent contractual requirements, involve a significant commitment of management attention and resources by prospective customers, and require the input and approval of many decision-makers. In addition, new product announcements, such as our recently announced Titan XT automated dispensing cabinet, may cause a delay in our customers’ decisions to purchase our products or convert pending orders for our older products to those of our newer products. For these and other reasons, the sales cycle associated with sales of our systems is often lengthy, unpredictable, and subject to a number of delays over some of which we have little or no control. A delay in, or loss of, sales of these systems (including as a result of the impacts of public health crises or due to customer labor shortages , increased healthcare worker turnover, or customer budgetary constraints) could have an adverse effect upon our business, operating results and could harm our business, cash flow, or financial condition.
In addition, and in part as a result of the complexities inherent in larger transactions, the time between the purchase and installation of our systems can generally range up to 24 months. Delays in installation can occur for reasons that are often outside of our control, such as customer labor shortages or increased healthcare worker turnover, as well as customers seeking to stagger or elongate the timeframes between the adoption of new or updated technologies. We have also experienced fluctuations in our customer and transaction size mix, which has made our ability to forecast our bookings and may make our ability to forecast our product bookings more difficult. Because we recognize revenues for our medication management solutions and our more complex medication packaging systems only upon installation at a customer’s site, any delay in installation (including as a result of the impacts of public health crises or due to customer labor shortages or healthcare worker turnover) will also cause a delay in the recognition of the revenues for those systems.
Periods of significant volatility due to geopolitical developments could adversely impact our business, operating results, cash flow, or financial condition.
In recent years, the U.S. and global economies have experienced periods of significant volatility due to political unrest, civil unrest, terrorism, and other hostilities (such as the ongoing conflicts between Russia and Ukraine or Israel and Hamas), as well as threats of terrorism or potential hostilities (such as conflict between China and Taiwan), around the globe. The severity or duration of this volatility may be further affected by policy changes made by governments or quasi-governmental organizations. These geopolitical risks have led, and may in the future lead, to increased short-term market volatility and may have adverse long-term effects on U.S. and world economies and markets generally. It is impossible to predict the effects of these or similar events in the future, which could adversely impact our business, operating results, cash flow, or financial condition.
We may face increased credit, collection, and operational risks associated with providing lease financing options to our customers.
A portion of our customers may choose to acquire our products or solutions through lease financing arrangements, which may expose us to heightened risks related to customer creditworthiness, payment timing, and collection. Many healthcare providers operate under constrained budgets, fluctuating reimbursement rates, labor shortages, and shifting capital-allocation priorities. These financial pressures may impair their ability to meet lease obligations, potentially resulting in delayed payments, defaults, or requests for modified terms. Any increase in credit losses or extended collection cycles could adversely affect our business, cash flows, and financial results. Additionally, where we retain ownership of leased equipment, we may face risks related to recovering, redeploying, or remarketing such equipment in the event of early termination or customer default. If this were to occur, our financial performance and our ability to support customer purchasing needs could be adversely affected.
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Significant disruptions in our information technology systems, breaches of data security, or cyber-attacks on our systems or solutions, could adversely impact our business.
We rely on information technology (“IT”) systems to keep financial records and corporate records, communicate with staff and external parties, and operate other critical functions, including sales and manufacturing processes. As our business needs change, we may need to expand or update our IT systems. We also utilize third-party cloud services in connection with our operations, which also may need to be expanded or updated as our business needs change. Our IT systems and third-party cloud services are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses, public health crises, other catastrophic events or environmental impact, as well as due to system upgrades and/or new system implementations. Our systems may also experience vulnerabilities from third-party or open-source software code that may be incorporated into our own or our vendors’ systems. Any prolonged system disruption in our IT systems or third-party services could negatively impact the coordination of our sales, planning, and manufacturing activities, which could harm our business. In addition, in order to maximize our information technology efficiency, we have physically consolidated our primary corporate data and computer operations. This concentration, however, exposes us to a greater risk of disruption to our internal IT systems. Although we maintain offsite back-ups of our data, a disruption of operations at our facilities could materially disrupt our business if we are not capable of restoring function within an acceptable time frame.
Our IT systems and third-party cloud services are potentially vulnerable to cyber-attacks, including ransomware, or other data security incidents, by employees or others, which may expose sensitive data to unauthorized persons. In addition, we have a large number of employees working remotely, which number may continue to grow, and such arrangements may involve increased use of office equipment off premises, which may make our systems more susceptible to security breaches or breach attempts.
We may also be subject to various cybersecurity laws in the EU and the UK, including the UK Network and Information Systems Regulation 2018 (“NIS Regulations”) and the EU Network and Information Systems Security 2 Directive (“NISD2”) which apply to certain operators of “essential services” and digital service providers, such as cloud providers, and medical device manufacturers.
Future d ata security incidents could lead to the loss of trade secrets or other intellectual property, or to the public exposure of sensitive and confidential information of our employees, customers, suppliers, and others, any of which could have a material adverse effect on our business, operating results, cash flow, or financial condition. Moreover, the current and/or a future security breach or privacy violation that leads to disclosure or modification of, or prevents access to, patient information, including personally identifiable information or protected health information, could harm our reputation, result in litigation, compel us to comply with federal and/or state breach notification laws, subject us to mandatory corrective action, require us to verify the correctness of database contents, and otherwise subject us to liability under laws and regulations that protect personal information, resulting in increased costs or loss of revenues. For additional information, see the risk factor captioned “ We are subject to laws, regulations, and other legal obligations related to privacy, data protection, and information security, and the costs of compliance with, and potential liability associated with, our actual or perceived failure to comply with such obligations could harm our business ” below for additional information.
We sell certain solutions that receive, store, and process our customers’ data, including our OmniSphere offering. In addition, our Inventory Optimization Service solution combines a cloud-based predictive intelligence platform with expert services designed to monitor pharmacy operations and recommend opportunities to help improve efficiency, regulatory compliance, and patient outcomes. As another example, our EnlivenHealth patient engagement platform is a private cloud-based solution that supports improving patient adherence goals through a single web-based platform that hosts functionality to guide and track patient notes, interventions, and appointments.
These solutions require that we maintain an information technology infrastructure that is robust and reliable within competitive and regulatory constraints that continue to evolve. Operational malfunctions, including loss of customer data or power or telecommunications infrastructure outages, or an effective attack on our solutions could disrupt the proper functioning of our solutions, allow unauthorized access to sensitive and confidential information of our customers (including protected health information), and disrupt our customers’ operations, which could result in reduced quality of services and contract liability or claims by customers and other third parties. In addition to the risks and impacts noted above, any of these events could damage our reputation or cause our solutions to be perceived as having security vulnerabilities and reduce demand, which could have a material adverse effect on our business, operating results, cash flow, or financial condition. These risks are likely to increase as we continue to grow our cloud-based offerings, including in support of the industry-defined vision of the Autonomous Pharmacy, and as we receive, store, and process more of our customers’ data.
While we have implemented a number of security measures designed to protect our systems and data, including firewalls, antivirus and malware detection tools, patches, log monitors, routine back-ups, system audits, routine password modifications, employee training, and disaster recovery procedures, and have designed certain security features into our
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solutions, we and our third party service providers regularly defend against and respond to data security incidents and such measures may not be adequate or implemented properly to prevent or fully address the adverse effect of such events. In some cases, we may be unaware of an incident or its magnitude, duration, and impact. In addition, while we possess insurance that currently includes coverage for cyber-attacks, we have seen a trend where the amount of coverage being offered by insurance providers for such cyber-attacks is decreasing while the cost of obtaining such coverage is increasing. If this trend continues, the insurance coverage we possess may not be adequate or the cost to obtain such coverage may become prohibitive.
We use third-party cloud providers in connection with certain of our cloud-based offerings or third-party providers to host our own data, in which case we rely on the processes, controls, and security such third parties have in place to protect the infrastructure. We also may acquire companies, products, services, and technologies and inherit such risks when we integrate these acquisitions within Omnicell.
Any failure to prevent such security breaches or privacy violations, or implement satisfactory remedial measures, could require us to expend significant resources to investigate security breaches and notify affected individuals, regulators, and other third parties (e.g., the media), remediate any damage, disrupt our operations or the operations of our customers, damage our reputation or cause us to incur costs to manage public relations issues, damage our relationships with our customers, or expose us to a risk of financial loss, litigation, regulatory penalties, contractual indemnification obligations, or other liability.
We may incorporate artificial intelligence technologies into certain of our products, services and processes or our vendors may incorporate artificial intelligence tools into their offerings. These technologies are new and developing and may present operational, financial, compliance, and reputational risks, as well as other adverse consequences to our business.
Our competitive position and financial condition may suffer if we fail to keep pace with rapidly evolving technological developments related to advancements in artificial intelligence (“AI”), machine-learning, generative AI or agentic AI technologies. The potential introduction of these technologies into new and existing offerings may result in new or expanded risks and liabilities, including enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality, or security risks, as well as other factors that could adversely affect our business, reputation, and financial results. In addition, our vendors may incorporate AI tools into their offerings, and these tools may not meet existing or rapidly evolving regulatory or industry standards and may inhibit our or our vendors’ ability to maintain an adequate level of service and experience. The use of AI can lead to unintended consequences, including generating factually inaccurate content, misleading or otherwise flawed information, or unintended biases and skewed outcomes, which could expose us to risks related to inaccuracies or errors in the output of such technologies, as well as the unintended exposure of internal or confidential information or an inability to preserve our trademarks, copyrights, and trade secrets due to such exposure. We also face risks of competitive disadvantage if our competitors more effectively use AI to create new or enhanced products or services that we are unable to compete against. Malicious actors may also use generative AI to strengthen social engineering capabilities or create more targeted phishing narratives or otherwise, which may increase the threat of a cybersecurity incident. If we, or our vendors, experience an actual or perceived breach or privacy or security incident because of the use of generative AI, we may lose valuable intellectual property and confidential information and our reputation and the public perception of the effectiveness of our security measures could be harmed. In addition, many U.S. and international governmental bodies and regulators have proposed, or are in the process of developing, new regulations related to the use of AI and machine-learning technologies. The final form of these regulations may impose obligations related to our development, offering, and use of AI technologies and expose us to increased risk of regulatory enforcement and litigation.
If errors occur during the provision of certain of our SaaS and Expert Services, or if we fail to maintain expected service levels, we may be liable to our customers or third parties which may result in a decline in our SaaS and Expert Services offerings revenue.
Certain of our SaaS and Expert Services offerings are highly complex and may be susceptible to errors, including human or technological error. We may be required to bear the cost of correcting any errors and the cost of such corrections may be significant, which could adversely affect our business, operating results, cash flow, or financial condition. In addition, our customers, or third parties such as our customers’ patients, may assert claims that they suffered damages due to our errors. These claims could result in litigation and substantial costs, including legal defense costs. Although we believe our aggregate insurance policy limits are sufficient to cover reasonably expected claims, there can be no assurance that any liability insurance we purchase will be adequate to cover claims asserted against us. We could also be subject to adverse publicity as a result of such claims, regardless of the merits or eventual outcome, which may negatively impact our ability to attract and retain customers.
Furthermore, if we cannot maintain the expected level of service or if our customers fail to achieve agreed upon milestone improvements in financial or operating metrics, payments to us from such customers may be delayed, disputed, or lower than anticipated.
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We may not be able to retain our SaaS and Expert Services customers.
An increasing percentage of our revenue is derived from our subscription-based SaaS and Expert Services offerings. In connection with those offerings, our customers, generally, have no obligation to renew their subscriptions. If our SaaS and Expert Services customers decline to renew their subscriptions we would not derive the expected financial benefits from that customer, which could have a material adverse effect on our business, operating results, cash flow, or financial condition.
In addition, some of our SaaS and Expert Services agreements require us to adhere to additional data, security, network access, and other institutional procedures and requirements of our customers, and in certain cases may obligate us to agreed upon services levels. If we do not meet our obligations under any such SaaS and Expert Services agreement, we could be liable for damages.
In addition, should a customer undergo a change in control or ownership, it may cause us or the customer to seek to modify or terminate an SaaS and Expert Services agreement.
If we are unable to maintain our relationships with group purchasing organizations (“GPOs”) or other similar organizations, we may have difficulty selling our products and services to customers represented by these organizations.
A number of GPOs have negotiated standard contracts for our products on behalf of their member healthcare organizations. Members of these GPOs may purchase under the terms of these contracts, which obligate us to pay the GPO a fee. We also have a Federal Supply Schedule contract with the Department of Veterans Affairs, allowing the Department of Veterans Affairs, the Department of Defense, and other federal government customers to purchase our products. These contracts enable us to sell our products and services more readily to customers represented by these organizations. Some of our contracts with these organizations are terminable at the convenience of the applicable customer. The loss of any of these relationships could impact the breadth of our customer base and could impair our ability to meet our revenue or revenue growth targets or our ability to increase our revenues. The GPOs may increase the fees we pay or these organizations may not renew our contracts on similar terms, if at all, and they may choose to terminate our contracts before they expire, any of which could cause our revenues to decline.
If we are unable to meet the demands of, or maintain our relationships with, our institutional and retail pharmacy customers, our revenue from sales of medication packages, other consumables, or our SaaS and Expert Services may decline .
Approximately 8% of our revenues during the year ended December 31, 2025 was generated from the sale of consumable medication packages, most of which are produced in our St. Petersburg, Florida facility on a continuous basis and are shipped out to fulfill the demands of our institutional and retail pharmacy customers domestically and abroad. The demands placed on institutional and retail pharmacies by their customers represent real time requirements of those customers. Our customer agreements for the sale of consumable medication packages are typically short-term in nature and typically do not impose volume commitments on the customer. If we are unable to supply quality packaging to our customers in a timely manner, they may use alternative methods of distributing medications to their customers, including consumable medication packaging sold by our competitors, and our revenues will decline. Any disruption in the production capabilities of our St. Petersburg facility, including as a result of extreme weather conditions or natural disasters will adversely affect our ability to ship our consumable medication packages globally and would reduce our revenues.
In addition, the institutional pharmacy market consists of significant national suppliers of medications to non-acute care facilities, smaller regional suppliers, and very small local suppliers. If we are unable to maintain our relationships with the major institutional pharmacies we do business with, they may purchase consumable blister card components from alternative sources, or choose to use alternatives to blister cards for medication control, and our revenues would decline.
Similarly, our EnlivenHealth brand extends beyond the inpatient setting and into ambulatory care. This brand offers a portfolio of products designed to digitally enable retail and community pharmacies with connected patient engagement and clinical and financial workflows. The success of these offerings depends on the trust our customers place in us and our reputation and ability to provide high-quality service. If we are unable to maintain the satisfaction or meet the expectations of our customers, our reputation with current and potential customers could be harmed, which could have a material adverse effect on our business, operating results, cash flow, or financial condition. In addition, if we fail to maintain our relationships with existing customers or are unable to create new relationships with other pharmacies, this could have an adverse effect on our business, operating results, cash flow, or financial condition.
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Our inability to secure or maintain access to existing and future specialty drugs or pharmacy provider networks for our specialty pharmacy customers could have a material adverse effect on our business.
We provide Specialty Pharmacy Services to provider groups, federally qualified health centers, and health systems, including payer contracting and providing access to limited distribution drugs (“LDDs”). We have historically been able to obtain most of the payer and LDD products through our current network. However, if we are unable to obtain access to new LDDs or maintain access to current LDDs for our customers, it could have a material adverse effect on our business, profitability, and operating results. In addition, if we are not able to secure participation in the networks of pharmacy providers for our customers at acceptable reimbursement rates or if we lose access to current pharmacy networks, this could result in loss of customers, which could adversely affect our business, operating results, cash flow, or financial condition. We endeavor to demonstrate continued value and growth for each of our customers during the term of their respective contracts with us. However, if any of our customers elect to manage their own specialty pharmacy business, such customers could reduce or cease doing business with us upon the expiration of such customer’s contract term, which could have a material adverse effect on our business, operating results, cash flow, or financial condition.
We operate in highly competitive markets, and we may be unable to compete successfully.
The markets in which we operate are intensely competitive. We expect continued and increased competition from current and future competitors, in the hospital and health system solutions and outpatient pharmacy solutions markets, many of which have significantly greater financial, technical, marketing, and other resources than we do.
The competitive challenges we face in the markets in which we operate include, but are not limited to, the following:
• current or future competitors may offer or have the ability to offer a broader range of solutions than us, develop alternative solutions that provide a better customer outcome or lower cost of operation, develop new features or capabilities for their products, including AI, machine-learning, and generative AI capabilities, which are part of an intensely competitive and rapidly evolving market, that could compete with our solutions, respond more quickly and efficiently to new or changing technologies, standards, or regulations, or devote greater resources to the development, promotion, and sale of their products than we do;
• competitive pressures could result in increased price competition for our products and services, fewer customer orders, and reduced gross margins;
• current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties, including larger, more established healthcare supply companies, thereby increasing their ability to develop and offer a broader suite of products and services;
• our industry has recently experienced a significant degree of consolidation which could lead to competitors developing new business models that require us to adapt how we market, sell, or distribute our products or could also lead to competitors with greater economies of scale that have lower cost of operations allowing them to sell their products and services at a lower cost;
• certain competitors have greater brand name recognition and a more extensive installed base than we do, and such advantages could be used to increase their market share;
• certain competitors may have existing business relationships with our current and potential customers, which may cause these customers to purchase competing products and services from these competitors; and
• our competitors may secure products and services from suppliers on more favorable terms or secure exclusive arrangements with suppliers or buyers that may impede the sales of our products and services.
If we fail to compete successfully against current or future competitors, it could materially adversely affect our business, operating results, cash flow, or financial condition.
The transition to selling more SaaS and Expert Services, which include a software as a service or solution as a service subscription, presents a number of risks.
We currently offer SaaS and Expert Services, which often contain a combination of smart devices and robotics, software workflows, and analytics, all optimized by expert services. As we continue to execute on the industry-defined vision of the Autonomous Pharmacy and grow subscription and cloud-based offerings, we may offer additional products and services on a subscription basis. If adoption of subscription solutions takes place faster than anticipated, the shift to subscription revenues may change the timing of revenue recognition and we may experience a temporary reduction of revenues and revenue growth rate. In addition, our cash flows may be impacted by the timing of invoicing of our subscription solutions. Customers
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may elect not to renew their subscriptions upon expiration, or they may attempt to renegotiate pricing or other contractual terms at or prior to renewal to terms that are less favorable to us. In addition, since revenues are generally recognized over the term of the subscription, any decrease in customer purchases of our subscription-based products and services will not be fully reflected in our operating results until future periods, which may result in inflated revenue growth rates that do not reflect such decreases initially. Similarly, any additional subscription sales would not be fully reflected in our operating results until future periods.
We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position.
Our debt may limit our ability to borrow additional funds or use our existing cash flow for working capital, capital expenditures, acquisitions, or other general business purposes or may require us to use a substantial portion of our cash flow for debt service payments; limit our flexibility to plan for, or react to, changes in our business and industry; place us at a competitive disadvantage compared to our less leveraged competitors; and increase our vulnerability to the impact of adverse economic and industry conditions.
Our ability to make payments of the principal, to pay interest, or to refinance our indebtedness, including the 2029 Notes, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not continue to, and we cannot provide assurance that our business will, generate cash flow from operations in the future sufficient to fund our cash requirements, service our debt or make necessary capital expenditures. Our failure to generate sufficient cash flow to pay our debts could have a material adverse effect on our business. In addition, if we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as borrowing more money, selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. Any of these actions still may not be sufficient to allow us to service our debt obligations, could increase the risks related to our business or our ability to service or repay our indebtedness or may otherwise have an adverse effect on our business.
Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at the time of any such refinancing. We may not be able to engage in any of these activities or to do so on desirable terms, which could result in a default on our debt obligations. In addition, as more fully described below in the risk factor captioned “ Covenants in our Second A&R Credit Agreement restrict our business and operations in many ways, and if we do not effectively manage our compliance with these covenants, our financial conditions and operating results could be adversely affected, ” our second amended and restated agreement, as amended, with certain lenders, and Wells Fargo Bank, National Association, as administrative agent (the “Second A&R Credit Agreement”) includes customary restrictive covenants that impose operating and financial restrictions on us.
We are subject to laws, regulations, and other legal obligations related to privacy, data protection, and information security, and the costs of compliance with, and potential liability associated with, our actual or perceived failure to comply with such obligations could harm our business.
We receive, store, and process personal information and other data from and about customers, in addition to our employees and services providers. In addition, our customers use our solutions to obtain and store personal information, including health information. For example, our customers use our EnlivenHealth platform to guide and track patient notes, interventions, and appointments, which involves the collection of personal health information of patients. Our handling of data is subject to a variety of laws and regulations by federal, state, local, and foreign agencies, as well as contractual obligations and industry standards. Regulatory focus on data privacy and security concerns continues to increase globally, and laws and regulations concerning the collection, use, and disclosure of personal information are expanding and becoming more complex. In the United States, these include federal health information privacy laws (such as the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), discussed below), and state laws addressing privacy, security, and breach notification (such as the California Consumer Privacy Act of 2018 (“CCPA”), as amended by the California Privacy Rights Act of 2020 (collectively, the “CPRA”)).
While HIPAA does not create a private right of action, its standards have been used as the basis for civil suits and HIPAA is enforced by the U.S. Department of Health and Human Services (“HHS”) Office for Civil Rights (“OCR”), which can bring actions against entities for noncompliance, including for failures to implement security measures sufficient to reduce risks to electronic protected health information or to conduct an accurate and thorough risk analysis, among other violations. HIPAA enforcement actions may lead to monetary penalties and costly and burdensome corrective action plans. We are also required to report known breaches of protected health information consistent with applicable breach reporting requirements set forth in applicable laws and regulations. Additionally, on January 6, 2025, HHS OCR issued a Notice of Proposed Rulemaking (“NPRM”) aiming to strengthen cybersecurity protections and better defend against cyber threats targeting the U.S. health care system by bolstering the security safeguards required under the HIPAA Security Rule. While a final rule has not yet been issued (as the NPRM was open for public comment until March 7, 2025 and HHS is currently reviewing those comments), if adopted, these proposed changes would potentially require significant operational adjustments and potential cost increases to comply,
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and are expected to become final in approximately 180 days from publication of any final rule. Moreover, compliance with state laws related to health privacy may result in additional compliance costs.
We may encounter vendors that engage in information blocking practices that may inhibit our ability to access the relevant data on behalf of patients or impose new or additional costs. Specifically, the information blocking rules were implemented as part of the 21st Century Cures Act, and are primarily designed to facilitate technology interoperability and enable the free flow of healthcare information for healthcare treatment, payment or operation purposes.
Furthermore, new health information standards, whether implemented pursuant to HIPAA, Health Information Technology for Economic and Clinical Health (“HITECH”) Act, congressional action or otherwise could have a significant effect on the manner in which we handle health-related information, and the cost of complying with these standards could be significant. If we do not comply with existing or new laws and regulations related to patient health information, we could be subject to criminal or civil sanctions.
The CPRA provides for civil penalties for violations, as well as a private right of action for data breaches which is expected to increase data breach litigation. Additionally, the CPRA, which came into effect in January 2023, imposed additional data protection obligations on companies doing business in California, created a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. In addition to California, at least twenty (20) other states in the U.S. have enacted comprehensive consumer privacy laws similar to the CPRA including, but not limited to, Virginia, Colorado, Connecticut, Oregon, Texas, and Utah (among many others). We expect other states to consider adopting similar laws in the future.
Some of these new or existing laws may apply to our business activities, so additional compliance investment and potential business process changes may be required. Similar consumer privacy and data protection legislation has been introduced at the federal level that may ultimately have conflicting requirements and, if enacted, would further complicate compliance.
Additionally, the Federal Trade Commission (“FTC”) and many state attorneys general are interpreting existing federal and state consumer protection laws to impose evolving standards for the collection, use, dissemination and security of health-related and other personal information. Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security and access. Consumer protection laws require us to publish statements that describe how we handle personal information and the choices individuals may have about the way we handle their personal information.
If such information that we publish is considered untrue, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences. Furthermore, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in, or affecting, commerce in violation of Section 5 of the FTC Act.
Additionally, data and digital services regulation continues to expand, particularly with respect to AI and automated decision making, which may further impact our business and regulatory compliance strategies.
Furthermore, the U.S. Department of Justice (“DOJ”) recently implemented the Data Security Program Rule (or “DSP Rule”), which imposes restrictions on certain data-related transactions involving U.S. persons and entities, particularly those that may result in access to U.S. government-related data or bulk sensitive personal data of U.S. persons by foreign adversaries or entities under their control. The DSP Rule effectively imposes export control-like restrictions on the transfer, sale, or sharing of (i) U.S. Government-related data (e.g., any geolocation data involving, for example, worksites of government employees in national security positions; military installations; or sensitive personal data linkable to employees, contractors, senior officials, etc.), and (ii) bulk U.S. sensitive personal data (e.g., genomic, geolocation, biometric, health, financial, and other personal data) - to or with entities in countries of concern, as well as entities and persons associated with those countries. Failure to comply with the DSP Rule could result in civil or criminal penalties and/or restrictions on our ability to engage in certain business activities. Additionally, the scope and interpretation of the DSP Rule may evolve, and future guidance or enforcement actions could impose further obligations or restrictions.
Internationally, various jurisdictions outside of the United States in which we operate have established, or are currently developing, their own data privacy and security legal frameworks with which we or our customers must comply. In certain cases, these international laws and regulations are more restrictive than many regulations in the United States. For example, within the European Union (“EU”), the General Data Protection Regulation 2016/679 (“EU GDPR”) went into effect on May 25, 2018, and introduced strict requirements for the processing of personal data of individuals. The EU GDPR governs the collection, use, disclosure, transfer, and other processing of personal data (i.e., data which identifies an individual or from which an individual is identifiable). The UK has implemented the EU GDPR as the UK GDPR which sits alongside the UK Data Protection Act 2018 (the UK GDPR, together with the EU GDPR, the “GDPR”). The GDPR has direct effect where an
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entity is established in the European Economic Area (“EEA”) or the UK (as applicable) and has extraterritorial effect, including where an organization outside of the EEA or the UK processes personal data in relation to the offering of goods or services to those individuals or the monitoring of their behavior while those individuals are in the EEA or UK.
The GDPR imposes stringent obligations on companies that fall within its scope, including inter alia: (i) accountability and transparency requirements, requiring controllers to demonstrate and record compliance with the GDPR and to provide more detailed information to data subjects regarding processing of their personal data; (ii) obligations to comply with data protection rights of data subjects including a right: (x) of access to, erasure of, or rectification of personal data; (y) to restriction of processing or to withdraw consent to processing; and (z) to object to processing or to ask for a copy of personal data to be provided to a third party; (iii) obligations to consider data protection as any new products or services are developed and designed (including e.g., to limit the amount of personal data processed); (iv) requirements to process personal data lawfully including specific requirements for obtaining valid consent where consent is the lawful basis for processing; (v) an obligation to report personal data breaches to: (x) the applicable supervisory authority without undue delay (and no later than 72 hours after discovering the personal data breach, where feasible), unless the personal data breach is unlikely to result in a risk to the data subjects’ rights and freedoms; and (y) affected data subjects, where the personal data breach is likely to result in a high risk to their rights and freedoms. The EU GDPR also provides that EU Member States may introduce further laws and regulations limiting the processing of genetic, biometric, or health data, which could limit our ability to collect, use, and share EU personal data, cause our compliance costs to increase, require us to change our practices, adversely impact our business, and harm our financial condition.
In addition, the EU GDPR prohibits the international transfer of personal data from the EEA to the United States and other jurisdictions that the European Commission does not recognize as having “adequate” data protection laws unless a data transfer mechanism has been put in place or a derogation under the EU GDPR can be relied upon. In July 2020, the Court of Justice of the EU (“CJEU”) in its Schrems II judgement limited how organizations could lawfully transfer personal data from the EEA to the US by invalidating the EU-US Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“EU SCCs”), which Omnicell utilizes such standard contractual clauses for cross-border transfers of personal data from the EEA to the U.S. The Schrems II judgement also includes a requirement for companies to carry out a transfer privacy impact assessment (“TIAs”). A TIA, among other things, assesses laws governing access to personal data in the recipient country and considers whether supplementary measures that provide privacy protections additional to those provided under EU SCCs will need to be implemented to ensure an “essentially equivalent” level of data protection to that afforded in the EEA.
The UK GDPR imposes similar restrictions on transfers of personal data from the UK to jurisdictions that the UK Government does not consider adequate, including the United States. The UK Government has published its own form of the EU SCCs, known as the International Data Transfer Agreement and an International Data Transfer Addendum to the new EU SCCs, which Omnicell utilizes for cross-border transfers of personal data from the UK (and, in certain cases, also the EEA).
The UK Information Commissioner’s Office has also published its version of the TIA and guidance on international transfers, although entities may choose to adopt either the EU or UK style TIA.
The GDPR imposes fines for serious breaches of up to the higher of 4% of the organization’s annual worldwide turnover or €20m (under the EU GDPR) or £17.5m (under the UK GDPR). The GDPR identifies a list of points to consider when determining the level of fines for data supervisory authorities to impose (including the nature, gravity and duration of the infringement). Data subjects also have a right to compensation, as a result of an organization’s breach of the GDPR which has affected them, for financial or non-financial losses (e.g., distress).
In the EU a number of new laws related to digital data and AI have recently entered into force, or are expected to enter into force in the foreseeable future. We are still assessing the scope of application, impact, and risk of these recent EU laws on our business, and will continue to assess this moving forward, including for example the European Health Data Space Regulation which was adopted by the European Parliament in the second quarter of 2024 and seeks to, among other things, provide individuals with more control over their electronic health data (“EHD”), enable cross-border sharing of EHD between national EU healthcare systems and facilitate the sharing of EHD for secondary research purposes. In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may legally or contractually apply to us, and other regulatory protections may lose their applicability to our business as regulations and legal proceedings continue to evolve globally. We also expect that there will continue to be new proposed laws, regulations, and industry standards relating to privacy, data protection, and information security, including in the UK (see above), where we have business operations. We cannot predict the scope of any such future laws, regulations, and standards that may be applicable to us, or how courts, agencies, or data protection authorities might interpret current ones. It is possible that these laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the functionality of our solutions.
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In addition to European data protection law, we or our customers may be subject to, or may become subject to, various other data privacy and security laws and regulations of other jurisdictions, including those in Canada, China, India, and Saudi Arabia. Due to increasing data collection and data flows, as well as the use of emerging technologies (such as AI), regulations in this area are constantly evolving with regulatory and legislative authorities in numerous parts of the world adopting proposals to regulate data and protect information. In addition, the interpretation and application of these privacy and data protection laws are often uncertain and in a state of flux, thus requiring constant monitoring for compliance. Compliance with privacy, data protection, and information security laws, regulations, and other obligations is costly, and we may encounter difficulties, delays, or significant expenses in connection with our compliance, or because of our customers’ need to comply or our customers’ interpretation of their own legal requirements.
In addition, any future event that results in the failure or perceived failure by us to comply with laws, regulations, policies, legal or contractual obligations, industry standards, or regulatory guidance relating to privacy or data security could result in governmental investigations and enforcement actions, litigation, fines and penalties, exposure to indemnification obligations or other liabilities, and adverse publicity, all of which could have an adverse effect on our reputation, as well as our business, financial condition, and operating results.
We may fail to realize the potential benefits of acquired businesses, which could negatively affect our business, operating results, cash flow, or financial condition.
We have in the past acquired businesses, and expect to continue to seek to acquire businesses, technologies, or products in the future. We cannot provide assurance that any acquisition or future transaction we complete will result in long-term benefits to us or our stockholders, or that we will be able to effectively integrate or manage the acquired businesses.
These transactions may involve significant challenges, uncertainties, and risks, including:
• difficulties in combining previously separate businesses into a single unit and the complexity of managing a more dispersed organization as sites are acquired;
• difficulties in right-sizing organizations and gaining synergies across acquired operations;
• complying with regulatory requirements, such as those of the U.S. Food and Drug Administration (“FDA”), the U.S. Drug Enforcement Administration (“DEA”), or state boards of pharmacy, that we were not previously subject to;
• failure to understand and compete effectively in markets in which we have limited previous experience;
• substantial costs and diversion of management’s attention when evaluating and negotiating such transactions and then integrating an acquired business, including any unforeseen delays and expenditures that may result;
• incurring additional debt in connection with the financing of an acquisition;
• discovery, after completion of the acquisition, of liabilities assumed or internal control, regulatory or compliance issues in acquisitions that are broader in scope and magnitude or are more difficult to manage than originally assumed or identified;
• difficulties assimilating and retaining key personnel of an acquired business;
• failure to achieve anticipated benefits such as revenue enhancements and operational and cost efficiencies;
• difficulties in integrating newly acquired products and solutions in our offerings, or inability or failure to provide high quality service, expand bookings and sales, or effectively coordinate sales and marketing efforts after the acquisition;
• inability to maintain business relationships with customers and suppliers of newly acquired companies due to post-acquisition disruption;
• inability or failure to successfully integrate financial reporting and information technology systems; and
• other additional risks relating to legal, regulatory or tax matters.
If we are not able to successfully integrate or manage the acquired businesses and their operations, or if there are delays in combining the businesses, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected and our business, operating results, cash flow, or financial condition may be negatively impacted.
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If goodwill or other intangible assets that we recorded in connection with our prior acquisitions become impaired, we could be required to take significant charges against earnings.
In connection with the accounting for prior acquisitions, we recorded a significant amount of goodwill and other intangible assets. Under GAAP, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other indefinite-lived intangible assets has been impaired. Intangible assets subject to amortization will be assessed for impairment in the event of an impairment indicator. As of December 31, 2025, we had recorded approximately $907.4 million, net of accumulated amortization, in goodwill and intangible assets, in connection with past acquisitions. Any future reduction or impairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could materially adversely affect our operating results and shareholders’ equity in future periods.
The healthcare industry is subject to legislative and regulatory changes, as well as financial constraints and consolidation, which could adversely affect the demand for our products and services.
The healthcare industry has faced, and will likely continue to face, significant financial constraints. U.S. government legislation and program rulemaking may cause customers to postpone purchases of our products due to reductions in federal healthcare program reimbursement rates and/or needed changes to their operations in order to meet the requirements of legislation or in anticipation of future rulemaking. For example, the American Taxpayer Relief Act of 2012, among other things, reduced Centers for Medicare & Medicaid Services (“CMS”) payments to several types of providers, including hospitals, and increased the statute of limitations period for the government to recover Medicare overpayments to providers from three to five years. Our automation solutions often involve a significant financial commitment from our customers and, as a result, our ability to grow our business is largely dependent on our customers’ capital and operating budgets. To the extent current or proposed legislation and program rules promote spending on other initiatives or healthcare providers’ spending declines or increases more slowly than we anticipate, demand for our products and services could decline.
In addition, certain healthcare legislation and regulations may be challenged from time to time, in an effort to modify or repeal that legislation or those regulations. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), which was passed in March 2010 and substantially changed the way healthcare is financed by both governmental and private insurers, has been subject to numerous judicial, legislative, and regulatory efforts to replace it or to alter its interpretation or implementation. The One Big Beautiful Bill Act (“OBBBA”), which was passed in 2025, reverses ACA expansions by scaling back certain ACA subsidies, introducing work requirements and other eligibility requirements for participating in Medicaid, as well as other requirements for marketplace access and is expected to result in a $910 billion Medicaid spending reduction across states. As a result of these changes, our customers’ budgets or spending decisions may be impacted, which in turn could negatively impact our business, operating results, cash flow, or financial condition. It is unclear how the OBBBA or future efforts to challenge, repeal, replace, or otherwise modify, or alter the implementation or interpretation of the ACA will affect our business, operating results, cash flow, or financial condition.
We cannot predict the success of our business with respect to any such challenges or the effect that subsequent changes or new resulting legislation or regulations would have on our business or the healthcare industry in general. Furthermore, many existing healthcare laws and regulations, when enacted, did not anticipate the services we may provide. Any future actions or developments could adversely impact the healthcare industry, including with respect to the cost of prescription drugs, regulation of pharmacy services, the administration of the federal 340B Program, changes to pharmacy reimbursement rates, or could challenge or change the way we do business, which could have an adverse impact on our business.
Healthcare providers have consolidated to create larger healthcare delivery organizations in order to achieve economies of scale and/or greater market power. If this consolidation continues, it would increase the size of certain target customers, which could increase the cost, effort, and difficulty in selling our products to such customers, or could cause our existing or potential customers to begin utilizing our competitors’ products if such customers are acquired by healthcare providers that prefer our competitors’ products to ours. In addition, the resulting organizations could have greater bargaining power, which may lead to price erosion. This consolidation could also result in new entrants in the markets in which we operate, which presents additional risk and could result in adverse impacts on our business. See “ We operate in highly competitive markets, and we may be unable to compete successfully ” above for additional information.
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Government regulation of the healthcare industry could reduce demand for our products or services, or substantially increase the cost to produce our products or deliver our services.
The manufacture and sale of most of our current medication management solutions are not directly regulated by the FDA or the DEA, although such products and services are used by other persons (our customers) whose pharmacy, dispensing, and compounding activities may be subject to regulation by those agencies and by state boards of pharmacy. However, we manufacture and develop specifications for products classified as Class I and Class II medical devices, which are subject to FDA regulation and require compliance with the FDA Quality System Regulation as well as medical device reporting, including a sterile disposable product that required FDA 510(k) review and clearance prior to marketing and distribution. Medical devices are also subject to various other regulatory requirements, including as applicable, premarket clearance or approval, establishment registration and device listing, complaint handling, notification and repair, replace, refund, mandatory recalls, unique device identifier (“UDI”) requirements, reports of removals and corrections, cybersecurity requirements and post-marketing surveillance. Additional products and services may require us to observe HHS regulations for credentialing of providers (pharmacists) or be subject to DEA regulations concerning the management, storing, dispensing, and disposal of, and accounting for, controlled substances, and may be regulated in the future by the FDA, DEA, or other federal agencies due to future legislative and regulatory initiatives or reforms. In addition, certain provisions of the Federal Food, Drug and Cosmetic Act (“FDCA”) related to the handling, distribution and compounding of pharmaceuticals, govern all parts of the drug distribution chain, which our customers may be required to comply with and which may influence customer demand for our products. Direct regulation of our business and products by the FDA, DEA, CMS, or other federal agencies could substantially increase the cost to produce our products or deliver our services and increase the time required to bring those products and services to market, reduce the demand for our products and services, and reduce our revenues. In addition, our customers include healthcare providers and facilities subject to regulation by the DEA, pharmacies subject to regulation by the FDA and individual state boards of pharmacy and hospitals subject to accreditation by accrediting organizations approved by CMS, such as the Joint Commission, and the rules, regulations, and standards of such regulators and accrediting organizations. Any failure of our customers to comply with the applicable rules, regulations, and standards could reduce demand for our products or services and harm our business, competitive position, operating results, cash flow, or financial condition. Given our customers, products, services, and industry relationships, we may also be subject to rules, regulations, standards, and civil or criminal enforcement imposed by HHS, the U.S. Department of Justice, the HHS Office of Inspector General, CMS, the Health Resources and Services Administration, and state attorneys general, including with respect to state and federal False Claims Act statutes, federal Anti-Kickback Statute, and federal Physician Payments Sunshine Act, among others. As such, from time to time, we may be subject to various state or federal governmental inspections, reviews, audits and investigations to verify our compliance with governmental rules and regulations to the extent governing our products and services. The costs to respond to or defend any such reviews, audits and investigations can be significant and are likely to increase in the current enforcement environment. These cases may, from time to time, originate from whistleblowers, which have separate indemnity and reimbursement rights under state and federal laws. These cases, audits and investigations may result in other adverse consequences, particularly if the underlying conduct is found to be pervasive or systemic. These consequences may include, but are not limited to: (1) refunding or retroactively adjusting amounts that have been paid under the relevant government program or from other payors; (2) state or federal agencies imposing significant fines, penalties and other sanctions on us; (3) losing our right to participate in certain governmental programs; and (4) damaging our reputation in various markets, which could adversely affect our ability to attract customers and employees. As previously disclosed, on May 5, 2025, Omnicell entered into a settlement agreement with the U.S. Attorney’s Office for the Eastern District of Washington to resolve certain potential non-compliances with our previous Federal Supply Schedule contract and associated potential violations of the False Claims Act, which required us to pay $4.6 million to cover damages and other statutorily provided amounts under the False Claims Act, which settled the matter without admission of liability. If such events were to occur in the future, the consequences could have a material adverse effect on our business, operating results, cash flow, or financial condition.
While we have implemented policies, procedures, practices and controls appropriate to our processing of regulated patient health information (as well as the known risks associated with such processing), and adhere to established privacy principles, use of customer information guidelines, and related federal and state statutes, we cannot assure you that we will be in compliance with all international, federal and state healthcare information privacy and security laws that we are directly or indirectly subject to. Under HIPAA, we are considered a “business associate” in relation to many of our customers that are covered entities, and, as such, most of these customers have required that we enter into written agreements governing the way we handle and safeguard certain patient health information we may encounter in providing our products and services, and may impose liability on us for failure to meet our contractual obligations. Furthermore, pursuant to changes in HIPAA under the American Recovery and Reinvestment Act of 2009 and the 2013 Omnibus Final Rule, we are covered under HIPAA similar to other covered entities and, in some cases, subject to the same civil and criminal penalties as a covered entity. A number of states and countries have also enacted privacy and security statutes and regulations that, in some cases, are more stringent than HIPAA and may also apply directly to us. If our past or present operations are found to violate any of these laws, we may be subject to fines, penalties, and other sanctions.
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In addition, we cannot predict the potential impact of future privacy standards and other federal, state, and international privacy and security laws that may be enacted at any time on our customers or on Omnicell. These laws could restrict the ability of Omnicell and/or our customers to obtain, use, or disseminate patient information, which could reduce the demand for our products or services or force us to redesign our products or services in order to meet regulatory requirements. For more information, you should also refer to the risk factor above captioned “ We are subject to laws, regulations, and other legal obligations related to privacy, data protection, and information security, and the costs of compliance with, and potential liability associated with, our actual or perceived failure to comply with such obligations could harm our business ”.
Changes to the 340B Program could negatively impact our business.
Any changes to the 340B Drug Pricing Program, such as changes to the scope of, or requirements for participation in, the 340B Program, could negatively impact our 340B Program-related services. Current litigation brought by multiple manufacturers is challenging the Health Resources and Services Administration (“HRSA”) requirement to offer the 340B ceiling price on drugs dispensed at contract pharmacies. The decisions that have been issued to date have been narrowly tailored and appeals have been filed in some of the cases. While the litigation is ongoing, a number of manufacturers have restricted access to the 340B ceiling price for drugs dispensed at contract pharmacies. Furthermore, on August 1, 2025, the U.S. federal government announced a pilot program for a limited 340B rebate model, available solely for drugs that are subject to “negotiated pricing” under Medicare beginning in 2026, and HRSA subsequently announced that it had approved pilot 340B rebate programs for nine of the ten drugs subject to negotiated prices. Subsequently on December 29, 2025, U.S. District Court for the District of Maine issued an injunction against the implementation of the pilot program 340B rebate model and on December 31, 2025 HRSA paused its implementation.
It is not yet clear how the litigation will resolve. If 340B ceiling prices are not required to be offered for drugs dispensed at contract pharmacies, the rebate model described above is implemented and limits access to 340B pricing for covered entities, or the requirements for participation by 340B covered entities make participation in the program less beneficial to our customers, our 340B Program-related or specialty pharmacy offerings may become less useful or attractive to 340B covered entities or our specialty pharmacy customers. Furthermore, any legislative or regulatory changes to the 340B Program could adversely impact our customers and reduce the demand for our customers to establish specialty pharmacies. As a result, our 340B Program-related and specialty pharmacy businesses could decline, which could materially adversely affect our business, operating results, cash flow, or financial condition.
Furthermore, uncertainty around the 340B Program could lead to lower levels of participation by 340B covered entities, which could reduce demand for our 340B Program-related businesses and could adversely affect our business. In addition, Congress has considered legislative changes to the 340B Program. Any legislative changes to the 340B Program could also affect our 340B Program-related services.
We must comply with anti-kickback, fraud and abuse, false claims, transparency, and other healthcare laws and regulations.
Our current and future operations are subject to various federal and state healthcare laws and regulations that affect our sales, marketing, and other promotional activities by limiting the kinds of financial arrangements we can enter into with respect to our products and services and/or requiring disclosure of certain of our financial arrangements to government agencies. They also impose additional administrative and compliance burdens on us. These laws include, but are not limited to, the healthcare fraud and abuse laws described in the section titled “Business - Government Regulation” above.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, and it is possible that some of our business activities could be subject to challenge under one or more of such laws or that such laws could be applied to our business in ways we did not anticipate. Ensuring that our business arrangements with third parties comply with applicable healthcare laws, as well as responding to investigations by government authorities (which have increased in recent years as the healthcare industry has come under greater scrutiny) can be time and resource consuming and can divert management’s attention from the business. As previously disclosed, on May 5, 2025, Omnicell entered into a settlement agreement with the U.S. Attorney’s Office for the Eastern District of Washington to resolve certain potential non-compliances with our previous Federal Supply Schedule contract and associated potential violations of the False Claims Act, which required us to pay $4.6 million to cover damages and other statutorily provided amounts under the False Claims Act, which settled the matter without admission of liability. If our operations are found in the future to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to significant financial penalties and possible exclusion from participation in federal and state funded healthcare programs, and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. This could harm our ability to operate our business and our financial results.
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Our international operations and international supply chain may subject us to additional risks that can adversely affect our business, operating results, cash flow, or financial condition.
We currently have operations outside of the United States, including sales efforts centered in Canada, Europe, the Middle East, and the Asia-Pacific regions, and supply chain efforts in Asia and the Americas. We intend to continue to expand our international operations, particularly in certain markets that we view as strategic, including the Middle East. Our international operations subject us to a variety of risks, including:
• our reliance on distributors for the sale of our medication management solutions in certain countries;
• the difficulty of managing an organization operating in various countries;
• reduced protection for intellectual property rights in certain jurisdictions;
• the imposition of, or adverse changes in, international laws and regulations, including privacy and security, labor, import, export, trade (including tariffs), environmental standards, product compliance, tax, anti-bribery, and employment laws;
• fluctuations in currency exchange rates and difficulties in repatriating funds from certain countries;
• additional investment, coordination, and lead-time necessary to successfully interface our automation solutions with the existing information systems of our customers or potential customers outside of the United States;
• political unrest, terrorism, and other potential hostilities (such as the ongoing conflicts between Russia and Ukraine or Israel and Hamas, or future conflict between the United States and Iran), or threats of terrorism or potential hostilities (such as conflict between China and Taiwan), including in areas in which we have facilities or operations; and
• epidemics, pandemics, or other major public health crises.
If we are unable to anticipate and address these risks properly our business, operating results, cash flow, or financial condition could be harmed.
Furthermore, in recent years, the U.S. government has advocated for greater restrictions on trade generally. For example, in 2025, the U.S. imposed tariffs on a wide variety of products manufactured in multiple foreign jurisdictions, including China, Mexico, and Malaysia. In response to the ongoing changes in tariffs, several foreign countries have imposed reciprocal tariffs on goods manufactured in the United States. These tariff rates have fluctuated and may continue to fluctuate going forward. On February 20, 2026, the U.S. Supreme Court struck down certain tariffs imposed under the International Emergency Powers Act. It is unclear at this time what impact this decision will have on our business or future operating results, including whether we will be able to obtain refunds of amounts previously collected for such tariffs or the level of replacement tariffs the current U.S. Administration may impose through other means. Although we continue to work to mitigate the impact of current or potential tariffs, we may incorrectly anticipate outcomes, forgo or pass up business opportunities, or fail to appropriately adapt or manage our business strategies in response to these changes.
We cannot predict what additional actions may ultimately be taken with respect to tariffs or trade relations between the United States and other countries (including China), what products may be subject to such actions, or what other actions may be taken by the other countries in retaliation, including implementing new or increasing reciprocal tariffs. These actions may change without warning, further exacerbating our inability to anticipate or react to such actions or to accurately forecast the resulting impacts. Changes in export or import regulation and other trade barriers (such as tariffs) and related uncertainties may have an adverse effect on our business, including cost increases for our raw materials or components (some which we have already seen), greater uncertainty and risk in our supply chain, or an inability to accurately forecast our margins.
The adoption and expansion of trade restrictions, the occurrence of a trade war, other governmental action related to tariffs or trade agreements or policies, or the related uncertainties, has the potential to adversely impact our ability to do business outside of the United States as well as to adversely impact demand for our products or our supply chain and costs, which could, in turn, adversely affect our business, operating results, cash flow, or financial condition. In addition, certain of our competitors may be better positioned than us to withstand or react to tariffs or other restrictions on global trade and as a result, we may lose market share to such competitors.
Covenants in our Second A&R Credit Agreement restrict our business and operations in many ways, and if we do not effectively manage our compliance with these covenants, our financial conditions and operating results could be adversely affected.
The Second A&R Credit Agreement contains various customary covenants that require us to provide financial and other information reporting as well as notice upon certain events and limit or restrict our ability and/or our subsidiaries’ ability
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to, among other things, incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons; issue redeemable preferred stock; pay dividends or distributions or redeem or repurchase capital stock; prepay, redeem, or repurchase certain debt; make loans, investments, acquisitions, and capital expenditures; enter into agreements that restrict distributions from our subsidiaries; sell assets and capital stock of our subsidiaries; enter into certain transactions with affiliates; and consolidate or merge with or into, or sell substantially all of our assets to, another person.
The Second A&R Credit Agreement also includes financial covenants requiring us (i) not to exceed a maximum consolidated secured net leverage ratio of 3.00:1 and (ii) to maintain a minimum consolidated interest coverage ratio of 3.00:1. Our ability to comply with these financial covenants may be affected by events beyond our control. Our failure to comply with any of the covenants under the Second A&R Credit Agreement could result in a default under the terms of the Second A&R Credit Agreement, which could permit the administrative agent or the lenders to declare all or part of any outstanding borrowings to be immediately due and payable or foreclose on our assets, or to refuse to permit additional borrowings under the revolving credit facility, which could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us. In addition, if we are unable to repay those amounts, the administrative agent and the lenders under the Second A&R Credit Agreement could proceed against the collateral granted to them to secure that debt and foreclose on our assets, which would seriously harm our business.
The concentration of our cash and cash equivalents with a limited number of financial institutions may expose us to liquidity and counterparty risk.
A substantial portion of our cash and cash equivalents is maintained in deposit accounts and money market funds with a limited number of financial institutions. In many instances, the balances in these accounts exceed applicable federal deposit insurance limits. As a result, our cash balances may be subject to the risk of loss, delay in access, or impairment in the event of the failure, insolvency, or other adverse financial condition of any of these institutions.
Any inability to access our cash and cash equivalents when needed could adversely affect our liquidity, our ability to meet our operating and contractual obligations, and our financial condition and results of operations.
Climate change, legal, regulatory or market measures to address climate change and a focus on environmental, social and corporate governance (“ESG”) matters by various stakeholders may negatively affect our business and operating results.
Climate changes, such as extreme weather conditions and natural disasters or the occurrence of extreme weather conditions and natural disasters with increased frequency and severity, resulting from increased concentrations of greenhouse gases in the atmosphere, could present risks to our operations by decreasing the availability or increasing cost of materials needed for manufacturing, or increasing insurance and other operating costs. Natural disasters and extreme weather conditions, such as hurricanes, tornadoes, earthquakes, wildfires, or flooding, may also pose physical risks to our facilities and disrupt the operation of our supply chain.
In addition, increased awareness and concern over climate change may result in new or additional regional and/or federal legal or regulatory requirements designed to reduce greenhouse gas emissions and/or mitigate the effects of climate change on the environment. Currently, there continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. If such laws or regulations are more stringent than current legal or regulatory obligations, we may experience disruption in, or an increase in the costs associated with sourcing, manufacturing and distribution of our products, which may adversely affect our business, operating results, cash flow, or financial condition.
Furthermore, regulators’, customers’, investors’, and employees’ expectations for ESG matters have been rapidly evolving. The heightened stakeholder focus on these issues requires continuous monitoring of various and evolving standards and the associated reporting requirements.
A failure to adequately meet stakeholder ESG expectations or if our ESG initiatives are viewed as being overemphasized, combined with inconsistent and shifting standards by which to measure ESG performance, may result in the loss of business, being subject to legal proceedings, including investigations or litigation, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent.
Catastrophic events may disrupt our business and harm our operating results.
We rely on our corporate facilities, production facilities, network infrastructure, data centers, enterprise applications, and technology systems for the research and development, marketing, support, assembly and manufacture, and sales of our products, and for the internal operation of our business. These facilities and systems may be susceptible to disruption or failure in the event of earthquake, fire, flood, ice and snowstorms, other natural disasters or extreme weather conditions, as well as cyber-attack, terrorist attack, telecommunications failure, health emergencies, including epidemics or pandemics, or other
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catastrophic events. Many of these facilities or systems are located or supported in or around Northern California, near major earthquake faults and which may be vulnerable to climate change effects, and where a significant portion of our research and development activities and other critical business operations take place. Other critical systems are housed in communities that have been subject to significant tropical storms, such St. Petersburg, Florida, which is the location of our manufacturing facilities for our consumable medication packages. In the future, tropical storms may be intensified or occur with increasing frequency. Disruptions to these facilities, or the failure of any of these systems, and the resulting loss of critical data, which is not quickly recoverable by the effective execution of disaster recovery plans designed to reduce such disruption, could cause delays in our product development, prevent us from fulfilling our customers’ orders, and could severely affect our ability to conduct normal business operations, the result of which would adversely affect our operating results.
Our success is dependent on our ability to recruit and retain skilled and motivated personnel.
Our success is highly dependent upon the continuing contributions of our key management, sales, technical, and engineering staff, and on our ability to attract, train, and retain highly skilled and motivated personnel. As more of our products are installed in increasingly complex environments, greater technical expertise will be required. As our installed base of customers increases, we will require additional resources to meet increased demands on our customer service and support personnel. Furthermore, as we execute on the industry-defined vision of the Autonomous Pharmacy and grow and develop our cloud-based software as a service and solution as a service offerings, more specialized expertise will be required. This growth and shift in products and offerings could lead to increased labor costs, and thereby increased costs of our products and offerings, which could result in reduced customer demand and our business, operating results, cash flow, or financial condition could be materially and adversely affected. Additionally, competition for specialized and technical personnel can be intense, and the pool of suitable candidates may be limited. We may not be successful in attracting and retaining qualified personnel. If we lose the services of one or more of our key personnel, we may not be able to find a suitable replacement and our business could be materially adversely affected. We also strive to maintain employee well-being, recognizing the continued burdens and pressures employees may be experiencing due to macroeconomic uncertainties, including geopolitical unrest and continued inflation, which may impact employee performance, engagement, and retention. Furthermore, external and internal (such as our continued growth or internal restructuring initiatives) factors may result in greater workloads for our employees compared to those at companies with which we compete for personnel, which may lead to higher levels of employee burnout and turnover.
Competitors have in the past attempted, and may in the future attempt, to recruit our employees. In addition, since equity compensation is a key component of our employee compensation program, any further decrease in our stock price or failure to receive stockholder approval for future proposed increases to the number of shares reserved for issuance under our equity incentive plans could prevent us from granting equity compensation at competitive levels and make it more difficult to attract, retain, and motivate employees, including key employees of acquired businesses. Failure to attract and retain key personnel could harm our competitive position, operating results, and financial condition.
Our failure to protect our intellectual property rights could negatively affect our ability to compete.
Our success depends in part on our ability to obtain patent protection for technology and processes, as well as our ability to preserve our trademarks, copyrights, and trade secrets. We have pursued patent protection in the United States and foreign jurisdictions for technology that we believe to be proprietary and for technology that we find offers us a potential competitive advantage for our products. We intend to continue to pursue such protection in the future. Our issued patents relate to various features of our medication management solutions and medication packaging systems. We cannot assure you that we will file any patent applications in the future and that any of our patent applications will result in issued patents, or that, if issued, such patents will provide significant protection for our technology and processes or a competitive advantage. Furthermore, we cannot assure you that such patents will not be challenged or invalidated or that others will not design around the patents we own. All of our system software is copyrighted and subject to the protection of applicable copyright laws; however, the laws of certain foreign countries do not protect our proprietary rights as effectively as they do in the U.S. Despite our efforts to protect our proprietary rights, there can be no assurance that our efforts to protect our proprietary rights are or will be adequate, that competitors will not independently develop similar technology, and that unauthorized parties will not attempt to copy aspects of our products or obtain and use information that we regard as proprietary, which could harm our competitive position.
Our products use raw materials and components that may be subject to price fluctuations, shortages, or interruptions of supply, and if we are unable to maintain supply sources for such raw materials and components, or if such sources fail to satisfy our supply requirements, in particular with regard to semiconductor chips, we may experience a loss of sales, increased component costs, and reduced profitability.
Factors that are largely beyond our control, such as the imposition of new, or increase of existing, tariffs, cost (including as a result of an inflationary economic environment), quality, and availability of the raw materials and components utilized in the manufacture of our products, may affect the cost of such products, and we may not be able to pass those costs on
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to our customers, including an inability to offset such increased costs through potential price increases. Our products use raw materials and components that may be subject to price fluctuations, shortages, or other disruptions of supply for many reasons outside of our control. In addition, we may be dependent upon a limited number of suppliers for certain components which may be unduly affected by supply chain disruptions. The cost, quality, and availability of these raw materials and components are essential to the successful manufacture and sale of our products. If we are unable to maintain supply sources of these raw materials and components, or if such sources fail to satisfy our supply requirements, we may lose sales and experience increased component costs.
We have developed and implemented strategies in an effort to mitigate the impact of tariffs, price fluctuations, shortages, or other disruptions of supply, but these strategies, particularly in the event of a trade war or a prolonged inflationary environment or in an uncertain geopolitical climate, may only offset a portion of the adverse impact. We carry some inventory of critical components and are otherwise working to secure supplies necessary to ensure fulfillment of customer demand, but global shortages could result in our need to secure supplies at higher costs as well as manufacturing delays. Supply interruptions may result in increased component delivery lead times and increased costs to obtain components and as a result, the production of our products may be impacted. If we or our suppliers are unable to obtain components from third parties in the quantities and of the quality that we require, on a timely basis and at acceptable prices, we may not be able to deliver our products on a timely or cost-effective basis to our customers, or it may lead to us delivering products that are of a lower quality that may result in increased repair and replacement costs, which could harm our business and reputation, operating results, cash flow, and financial condition. We have also seen a period of sustained price increases for commodities used in the manufacture of our products that may continue as demand increases, supply remains constrained or trade restrictions are adopted or expanded, which has resulted in, and may continue to result in, increased costs for Omnicell and thereby potentially lower profit margins. If the costs of these commodities increase or remain elevated, it could adversely affect our business, operating results, cash flow, or financial condition.
We depend on a limited number of suppliers for our products, and our business may suffer if we were required to change suppliers to obtain an adequate supply of components, equipment, and raw materials on a timely basis.
Although we generally use parts and components for our products with a high degree of modularity, certain components are presently available only from a single source or limited sources. We rely on a limited number of suppliers for the raw materials necessary to produce our consumable medication packages. While we have generally been able to obtain adequate supplies of all components and raw materials in a timely manner from existing sources, or where necessary, from alternative sources, we entered into relationships with certain suppliers for components for our XT Series and Titan XT products. We engage multiple single source third-party manufacturers to build several of our sub-assemblies. The risks associated with changing to alternative vendors, if necessary, for any of the numerous components used to manufacture our products could limit our ability to manufacture our products or result in the use of substitute components in our products that could lead to additional complexity or cost in maintaining our products and thereby harm our business. Due to our reliance on a few single source partners to build our hardware sub-assemblies and on a limited number of suppliers for the raw materials that are necessary in the production of our consumable medication packages, a reduction or interruption in supply from our partners or suppliers, or a significant increase in the price of one or more components could have an adverse impact on our business, operating results, cash flow, or financial condition. In certain circumstances, the failure of any of our suppliers or us to perform adequately could result in quality control issues affecting end users’ acceptance of our products, which could damage customer relationships and harm our business.
Our U.S. government lease agreements are subject to annual budget funding cycles and mandated changes, which may affect our ability to recognize revenues and sell receivables based on such leases.
Prior to September 2021, U.S. government customers that leased our equipment typically signed contracts with five-year payment terms that are subject to one-year government budget funding cycles. Effective September 2021, the government mandated changes in its Federal Supply Services contract that resulted in our determination not to enter into future leases with U.S. government customers. As a result, our volume of U.S. government customer leases has declined and will continue to decline over time and cease in the future. In addition, under the terms of the Federal Supply Schedule contract, certain of our U.S. government customer contracts are terminable at the convenience of the applicable U.S. government customer. Furthermore, there are uncertainties surrounding the U.S. federal government’s budget and budgetary priorities, reduced staffing at government agencies, as well as pressures on government expenditures, which could adversely affect the funding for, and delay purchasing decisions by, our U.S. government customers. If any of our g overnment-owned or government-run hospital customers decide to terminate their agreements early for any reason, we would not derive the expected financial benefits from any such customer, which could result in lower than expected revenue and adversely affect our business, operating results, cash flow, or financial condition. In addition, the failure of any of our U.S. government customers to receive their annual funding, or the government mandating changes to the Federal Supply Services contract, could impair our ability to sell equipment to these customers.
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If we fail to manage our inventory properly, our revenue, gross margin, and profitability could suffer.
Managing our inventory of components and finished products is a complex task. A number of factors, including, but not limited to, the need to maintain a significant inventory of certain components that are in short supply or that must be purchased in bulk to obtain favorable pricing, the general unpredictability of demand for specific products and customer requests for quick delivery schedules, may result in us maintaining large amounts of inventory. Other factors, including changes in market demand, customer requirements, and technology, may cause our inventory to become obsolete. Any excess or obsolete inventory could result in inventory write-downs, which in turn could harm our business, operating results, cash flow, or financial condition.
Intellectual property claims against us could harm our competitive position, operating results, and financial condition.
We expect that developers of medication management solutions and medication packaging systems will be increasingly subject to infringement claims as the number of products and competitors in our industry grows and the functionality of products in different industry segments overlaps. In the future, third parties may claim that we have infringed upon, misappropriated, or otherwise violated their intellectual property rights with respect to current or future products. We do not carry special insurance that covers intellectual property infringement claims, however, such claims may be covered under our traditional insurance policies. These policies contain terms, conditions, and exclusions that make recovery for intellectual property infringement claims difficult to guarantee. Any infringement claims, with or without merit, could be time-consuming to defend, result in costly litigation, divert management’s attention and resources, cause product shipment delays, or require us to enter into royalty or licensing agreements. These royalty or licensing agreements, if required, may not be available on terms acceptable to us, or at all, which could harm our competitive position, operating results, and financial condition.
Product liability claims against us could harm our competitive position, operating results, and financial condition.
Our products include medication management solutions and medication adherence products and services for healthcare systems and pharmacies. Despite the presence of healthcare and pharmacy professionals as intermediaries between our products and patients, if our products fail to provide accurate and timely information or operate as designed, customers, patients, or their family members could assert claims against us for product liability. Moreover, failure of health care facility and pharmacy employees to use our products properly or for their intended purposes could result in product liability claims against us. Litigation with respect to product liability claims, regardless of any outcome, could result in substantial cost to us, divert management’s attention from operations, and decrease market acceptance of our products. We possess a variety of insurance policies that include coverage for general commercial liability and technology errors and omissions liability. We attempt to mitigate these risks through contractual terms negotiated with our customers. However, these policies and protective contractual terms may not be adequate against product liability claims and in the past we have been subject to certain lawsuits asserting, among other allegations, claims of product liability. A successful claim brought against us, or any claim or product recall that results in negative publicity about us, could harm our competitive position, operating results, and financial condition. Also, in the event that any of our products is defective, we may be required to recall or redesign those products, which could result in increased costs and have an adverse impact on our business.
We are dependent on technologies provided by third-party vendors, the loss of which could negatively and materially affect our ability to market, sell, or distribute our products.
Some of our products incorporate technologies owned by third parties that are licensed to us for use, modification, and distribution. If we lose access to third-party technologies or we lose the ongoing rights to modify and distribute these technologies with our products, we will have to devote resources to independently develop, maintain, and support the technologies ourselves, pay increased license costs, or transition to another vendor. Any independent development, maintenance, or support of these technologies by us or the transition to alternative technologies could be costly, time consuming, and could delay our product releases and upgrade schedules. These factors could negatively and materially affect our ability to market, sell, or distribute our products.
Investment in new business strategies, initiatives, products or solutions could disrupt ongoing business and present risks not originally contemplated.
We have invested, and in the future may invest, in new business strategies, initiatives, products, or solutions, whether in existing or new markets, including with respect to our software as a service or solution as a service subscription products and services or other subscription and cloud-based offerings. Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, lack of expertise to effectively execute such strategies or initiatives or to develop such products or solutions, delays, technical problems (including software defects or errors) or unexpected expenses related to the entry into new business strategies or initiatives or development of new products or solutions, insufficient revenue to offset liabilities assumed and expenses associated with a strategy, initiative, product or solution, inadequate return of capital or return on investment, and unidentified issues not discovered in our due diligence. These new
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ventures may be inherently risky and may not be successful. Even if successful, they may not have the projected or actual impact that we initially expected or that recoups our initial investment and we may make a determination to optimize our portfolio or to exit a particular business strategy, initiative, product line or solution. As a result, such initiatives may materially adversely affect our business, operating results, cash flow, or financial condition.
Risks Related to Ownership of Our Common Stock
The market price of our common stock may continue to be highly volatile.
Our common stock traded between $22.66 and $47.69 per share during the year ended December 31, 2025. The market price of our common stock has been and may continue to be highly volatile in response to various factors discussed in this “Risk Factors” section, many of which are beyond our control, including:
• actual or anticipated changes in our operating results or forecasts, and whether our operating results meet our publicly announced guidance or expectations of securities analysts or investors;
• changes in the ratings of our common stock by securities analysts or changes in their earnings estimates;
• changes in our business model and initiatives, such as our ongoing transition to focus on a subscription-based business model or a decision to optimize our portfolio or to exit a particular business or product line, and our ongoing restructuring initiatives to contain costs;
• developments in our customer relationships;
• changes in our Board of Directors, senior management, or key personnel;
• announcements by us or our competitors of technological innovations or new products;
• mergers, acquisitions, combinations, and other significant transactions involving us or our competitors;
• our sale of our common stock or other securities;
• level of demand for our common stock, and actions by stockholders or short sellers of our common stock;
• changes in laws or regulations applicable to our products or services;
• our involvement in any litigation or investigations by government authorities, including litigation judgments, settlements, or other litigation-related costs;
• cyber events, such as breaches of data security or cyber-attacks on our systems or solutions;
• epidemics, pandemics, or other major public health crises; or
• general economic, regulatory, political and market conditions.
Furthermore, the stock market in general, and the market for technology companies in particular, have experienced extreme price and volume fluctuations. These broad market fluctuations may cause the market price of our common stock to decline irrespective of our performance. In addition, sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could lower the market price of our common stock.
In addition, stockholders have initiated class action lawsuits against companies following periods of volatility in the market prices of these companies’ stock. For example, in July 2019, a putative class action lawsuit was filed against Omnicell and certain of our officers alleging that the defendants violated federal securities laws by making certain materially false and misleading statements. While this action was concluded in December 2019 following the lead plaintiff’s voluntary dismissal as to all defendants, we may in the future be subject to other class action lawsuits, especially following periods of volatility in our stock price.
Our quarterly and annual operating results may fluctuate, which makes our future operating results difficult to predict, and may cause our stock price to decline.
Our quarterly and annual operating results have varied and may vary in the future. In addition to other factors discussed in this “Risk Factors” section, factors, many of which are outside of our control and are difficult to predict, that may cause our quarterly or annual operating results to fluctuate include, but are not limited to, the following:
• the size, product mix, and timing of orders for our products, and their installation and integration and whether our estimates for the same were proper;
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• our ability to successfully install our products on a timely basis and meet other contractual obligations necessary to recognize revenue;
• fluctuations in customer demand for our products, including due to changes in our customers’ budgets, healthcare worker turnover rates and labor shortages and whether customer demand was properly estimated;
• our ability to control costs, including operating expenses, and continue cost reduction efforts, such as our restructuring initiative;
• changes in pricing policies by us or our competitors;
• the number, timing, and significance of product enhancements and new product announcements by us or our competitors;
• the timing and significance of any acquisition or business development transactions that we may consider or negotiate and the revenues, costs, and earnings that may be associated with these transactions;
• the relative proportions of revenues we derive from products and services;
• our ability to generate cash from our accounts receivable on a timely basis;
• changes in, and our ability to successfully execute on, our business strategy; and
• macroeconomic and political conditions, including inflationary pressures, fluctuations in interest rates, exchange rates, tax increases, availability of credit markets, and trade and tariff actions.
Due to all of these factors, our quarterly or annual revenues and operating results are difficult to predict and may fluctuate, which in turn may cause the market price of our stock to decline.
If financial or industry analysts have difficulty understanding changes to our business model, or we fail to meet (or significantly exceed) our publicly announced financial guidance, our stock price and trading volume could decline.
As we continue to offer flexible payment models, such as leasing, subscriptions, and “as-a-service” structures to help our customers navigate the current economic environment, industry or financial analysts that publish reports about our business may not have historically reflected, or in the future may not accurately reflect, this approach. As a result, analysts’ ability to accurately forecast our results may be negatively impacted and it may be more likely that we fail to meet their estimates. As a result, if our financial results fail to meet (or significantly exceed) our publicly announced financial guidance or the expectations of analysts or investors, analysts could downgrade our common stock or publish unfavorable research that could cause our stock price or trading volume to decline, potentially significantly.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or harm our business, operating results, cash flow, or financial condition.
We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, or the refinancing of our existing convertible notes, the ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures, entering into licensing arrangements, or declaring dividends. If we raise additional funds from third parties, we may have to relinquish valuable rights to our technologies, or grant licenses on terms that are not favorable to us.
If we are unable to raise additional funds through equity or debt financing when needed, our ability to market, sell, or distribute our solutions and/or fund our operations may be negatively impacted and could harm our business, operating results, cash flow, or financial condition.
Certain provisions in our charter documents and under Delaware law may discourage, delay, or prevent an acquisition of us and limit our stockholders’ ability to obtain a favorable judicial forum for certain disputes.
Certain anti-takeover provisions of Delaware law and our charter documents may make a change in control of our Company more difficult, even if a change in control would be beneficial to the stockholders. Our certificate of incorporation provides that stockholders’ meetings may only be called by our Board of Directors. Our bylaws provide that stockholders may not take action by written consent, and require that stockholders comply with advance notice procedures to nominate director candidates for election or to propose matters to be acted upon at a meeting of our stockholders. Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder
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has held the stock for three years unless, among other possibilities, our Board of Directors approves the transaction. Our Board of Directors may use these provisions to prevent changes in the management and control of our Company. Also, under applicable Delaware law, our Board of Directors may adopt additional anti-takeover measures in the future including, without limitation, a stockholder rights plan.
In addition, our bylaws also establish the Delaware Court of Chancery as the exclusive forum for certain legal actions, including certain stockholder disputes, and establish the federal district courts of the United States of America as the exclusive forum for any action asserting a cause of action arising under the Securities Act of 1933, as amended, which exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers, or other employees.
Risk Factors Related to Our Notes
Conversion of the 2029 Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock.
The conversion of some or all of the 1.00% Convertible Senior Notes due 2029 (the “2029 Notes”) may dilute the ownership interests of our stockholders. Upon conversion of the 2029 Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the 2029 Notes being converted. If we elect to settle the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the 2029 Notes being converted in shares of our common stock or a combination of cash and shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the 2029 Notes may encourage short selling by market participants because the conversion of the 2029 Notes could be used to satisfy short positions, or anticipated conversion of the 2029 Notes into shares of our common stock could depress the price of our common stock .
The conditional conversion feature of the 2029 Notes, if triggered, may adversely affect our financial condition and operating results.
The 2029 Notes are convertible on or after August 1, 2029 and, in the event the conditional conversion features are triggered, prior to August 1, 2029. If one or more holders elect to convert the 2029 Notes, we would be required to settle any converted principal amount of such 2029 Notes through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert the 2029 Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2029 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
The convertible note hedge and warrant transactions may affect the value of our common stock.
In connection with the offering of the 2029 Notes, we entered into convertible note hedge transactions with an affiliate of one of the initial purchasers of the 2029 Notes and certain other financial institutions (the “option counterparties”). We also entered into warrant transactions with the option counterparties. The convertible note hedge transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of 2029 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2029 Notes, as the case may be. However, the warrant transactions separately have, and could continue to have, a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the warrants. In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2029 Notes (and are likely to do so in connection with any conversion of the 2029 Notes or redemption or repurchase of the 2029 Notes), which could cause or avoid an increase or a decrease in the market price of our common stock.
Changes in the credit quality of the option counterparties may affect the efficacy of our hedge and warrant transactions. By entering into the hedge and warrant transactions, we are subject to the risk that the option counterparties may incur significant financial hardships, potentially resulting in their default under the convertible note hedge transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the convertible note hedge transactions with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances that the hedge or warrant transactions will have the intended effects or as to the financial stability or viability of the option counterparties.
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General Risk Factors
Changes in our tax rates, exposure to additional tax liabilities, or the adoption of new tax legislation could adversely affect our business, operating results, cash flow, or financial condition.
We are subject to taxes in the United States and foreign jurisdictions in which we operate. Our future effective tax rates could be affected by several factors, many of which are outside of our control, including: changes in the mix of earnings with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in federal, state, and international tax laws or their interpretation, adjustments to income tax expense upon the finalization of tax returns, changes in tax attributes, or changes in accounting principles. We regularly assess the likelihood of adverse outcomes to determine the adequacy of our provision for taxes. We are also subject to examination of our income tax returns by the Internal Revenue Service and other tax authorities. There can be no assurance that the outcomes from these examinations will not materially adversely affect our business, operating results, cash flow, or financial condition. Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be a material difference between the forecasted and the accrued effective tax rates. Any increase in our effective tax rate would reduce our profitability.
On December 15, 2022, the EU Member States formally adopted the EU's Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (“OECD”) Pillar Two Framework that was supported by over 130 countries worldwide. A significant number of countries are also implementing similar local legislation. The United States previously signaled an unwillingness to participate in the Pillar Two directive, and the U.S. Treasury Department and the OECD announced on January 5, 2026 that U.S.-headquartered companies would be exempt from the Pillar Two minimum tax framework. We are continuing to evaluate the potential impact of the Pillar Two Framework on future periods, pending legislative adoption by additional individual countries where we do business. In addition in fiscal year 2025, the OBBBA was enacted and includes a broad range of tax reforms. The ultimate impact and interpretation of this legislation remains uncertain as we continue to evaluate its potential impacts.
Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could cause our stock price to decline.
Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the United States Securities and Exchange Commission (“SEC”) require annual management assessments of the effectiveness of our internal control over financial reporting, and a report by our independent registered public accounting firm attesting to the effectiveness of internal control. If we fail to maintain effective internal control over financial reporting, as such standards are modified, supplemented, or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting. Should that occur, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price. In addition, our failure to timely file our periodic reports could eventually result in the delisting of our common stock, regulatory sanctions from the SEC, and/or the breach of the terms contained in our credit facility, or any preferred equity or debt securities we may issue in the future, any of which could have a material adverse impact on our operations and investment in our common stock.
