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Business Combinations | 9 Months Ended
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Sep. 30, 2021
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business Combinations FDS Amplicare Acquisition On September 9, 2021, the Company completed its acquisition of all of the outstanding equity interests in FDS Amplicare, pursuant to the terms and conditions of the Agreement and Plan of Merger, dated July 25, 2021, by and among FDS Amplicare, Omnicell, Inc., Fleming Acquisition Corp., and the representative of the securityholders for a base purchase price of $177.0 million, prior to post-closing adjustments for closing cash, net working capital, and assumed indebtedness, which is expected to be finalized in the fourth quarter of 2021. The following table summarizes the preliminary purchase price for the FDS Amplicare acquisition:
| FDS Amplicare
| (In thousands)
Base purchase price | $ | 177,000 |
Add: Estimated closing cash | 859 |
Add: Estimated net working capital adjustment | 1,333 |
Less: Assumed indebtedness | (647) |
Total purchase price transferred | $ | 178,545 |
The FDS Amplicare acquisition adds a comprehensive and complementary suite of software-as-a-services (“SaaS”) financial management, analytics, and population health solutions to Omnicell’s EnlivenHealth TM offering. The results of FDS Amplicare’s operations have been included in the Company’s consolidated results of operations, commencing as of the acquisition date. The Company accounted for the acquisition of FDS Amplicare in accordance with ASC 805, Business Combinations. The tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date. The preliminary fair values assume management’s best estimates based on information available at the acquisition date and may change over the measurement period, which will end no later than one year from the acquisition date, as additional information is received. The following table represents the preliminary allocation of the purchase price to the assets acquired and the liabilities assumed by the Company as part of the acquisition included in the Company’s Condensed Consolidated Balance Sheets, and is reconciled to the purchase price transferred:
| FDS Amplicare (Preliminary)
| (In thousands)
Cash and cash equivalents | $ | 465 |
Accounts receivable and unbilled receivables | 4,235 |
Prepaid expenses | 506 |
Other current assets | 45 |
Total current assets | 5,251 |
Property and equipment | 444 |
Operating lease right-of-use assets | 2,252 |
Goodwill | 118,846 |
Intangible assets | 69,600 |
Other long-term assets | 51 |
Total assets | 196,444 |
Accounts payable | 950 |
Accrued compensation | 1,312 |
Accrued liabilities | 1,396 |
Deferred revenues | 1,916 |
Long-term deferred tax liabilities | 11,275 |
Long-term operating lease liabilities | 920 |
Other long-term liabilities | 130 |
Total liabilities | 17,899 |
Total purchase price | $ | 178,545 |
Total purchase price, net of cash acquired | $ | 178,080 |
The $118.8 million of goodwill arising from the FDS Amplicare acquisition is primarily attributed to sales of future SaaS solutions and FDS Amplicare’s assembled workforce. None of the goodwill is expected to be deductible for tax purposes. Intangible assets eligible for recognition separate from goodwill were those that satisfied either the contractual or legal criterion or the separability criterion in the accounting guidance. The identifiable intangible assets acquired and their estimated useful lives for amortization are as follows:
| FDS Amplicare
| Fair value |  | Useful life (years)
| (In thousands, except for years)
Customer relationships | $ | 59,500 |  |  | 23
Acquired technology | 7,700 |  |  | 5 - 7
Trade names | 2,400 |  |  | 5
Total purchased intangible assets | $ | 69,600 |  |  |
The customer relationships intangible asset represents the fair value of the underlying relationships and agreements with FDS Amplicare’s customers. The acquired technology intangible assets represent the fair value of FDS Amplicare’s portfolio of SaaS solutions that have reached technological feasibility and were part of FDS Amplicare’s offerings at the acquisition date. The trade names intangible asset represents the fair value of brand and name recognition associated with the marketing of certain FDS Amplicare SaaS solutions. The fair value of the customer relationships intangible asset was determined based on the excess earnings method, and the fair values of the acquired technology and trade names intangible assets were determined based on the relief-from-royalty method. The key assumptions used in estimating the fair values of intangible assets included forecasted financial information; customer attrition rates; royalty rates of 10.0% and 2.0% for the acquired technology and trade names intangible assets, respectively; a discount rate of 13.0% for all intangible assets; and certain other assumptions. The customer relationships and acquired technology intangible assets are being amortized using a double-declining method of amortization as such method better represents the economic benefits to be obtained. The trade names intangible asset is being amortized over its estimated useful life using the straight-line method of amortization. The Company believes that the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that market participants would use. Actual results may differ from these estimates and assumptions. The Company incurred approximately $4.6 million and $6.6 million in acquisition-related costs related to the FDS Amplicare acquisition during the three and nine months ended September 30, 2021, respectively. These costs were expensed as incurred, and are included in selling, general, and administrative expenses in the Company’s Condensed Consolidated Statements of Operations. 340B Link Business Acquisition On October 1, 2020, the Company completed the acquisition of all of the outstanding equity of the 340B Link business (the “340B Link Business”) of Pharmaceutical Strategies Group, LLC pursuant to the terms and conditions of the Equity Purchase Agreement, dated August 11, 2020, as amended, by and among Omnicell, Inc., PSGH, LLC, BW Apothecary Holdings, LLC, the sellers identified therein, and the sellers’ representative for total cash consideration of $225.0 million. The 340B Link Business acquisition adds a comprehensive and differentiated suite of software-enabled services and solutions used by certain eligible hospitals, health systems, clinics, and entities to manage compliance and capture 340B drug cost savings on outpatient prescriptions filled through the eligible entity’s pharmacy or a contracted pharmacy partner. The results of the 340B Link Business’s operations have been included in the Company’s consolidated results of operations, commencing as of the acquisition date. The Company accounted for the acquisition of the 340B Link Business in accordance with ASC 805. The tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date. The following table represents the allocation of the purchase price to the assets acquired and the liabilities assumed by the Company as part of the acquisition included in the Company’s Condensed Consolidated Balance Sheets, and is reconciled to the purchase price transferred:
| 340B Link Business
| (In thousands)
Accounts receivable and unbilled receivables | $ | 8,197 |
Prepaid expenses | 232 |
Other current assets (1) | 23,040 |
Total current assets | 31,469 |
Property and equipment | 531 |
Operating lease right-of-use assets | 3,138 |
Goodwill (1) | 160,268 |
Intangible assets | 62,800 |
Total assets | 258,206 |
Accounts payable | 568 |
Accrued liabilities (1) | 23,715 |
Long-term deferred tax liabilities (1) | 6,334 |
Long-term operating lease liabilities | 2,589 |
Total liabilities | 33,206 |
Total purchase price | $ | 225,000 |
_________________________________________________ (1) During the third quarter of 2021, the Company recorded measurement period adjustments of $0.9 million to goodwill, consisting of an increase in other current assets, a decrease in accrued liabilities, and a decrease in long-term deferred tax liabilities of $0.3 million, $0.1 million, and $0.5 million, respectively. The $160.3 million of goodwill arising from the 340B Link Business acquisition is primarily attributed to sales of future software-enabled services and solutions and the 340B Link Business’s assembled workforce. Goodwill that is expected to be deductible for tax purposes is approximately $93.7 million. Intangible assets eligible for recognition separate from goodwill were those that satisfied either the contractual or legal criterion or the separability criterion in the accounting guidance. The identifiable intangible assets acquired and their estimated useful lives for amortization are as follows:
| 340B Link Business
| Fair value |  | Useful life (years)
| (In thousands, except for years)
Customer relationships | $ | 53,000 |  |  | 21
Acquired technology | 9,000 |  |  | 5
Trade names | 200 |  |  | 1
Non-compete agreements | 600 |  |  | 3
Total purchased intangible assets | $ | 62,800 |  |  |
The customer relationships intangible asset represents the fair value of the underlying relationships and agreements with the 340B Link Business’s customers. The acquired technology intangible asset represents the fair value of the 340B Link Business’s portfolio of software and solutions that have reached technological feasibility and were part of the 340B Link Business’s offerings at the acquisition date. The trade names intangible asset represents the fair value of brand and name recognition associated with the marketing of the 340B Link Business’s software-enabled services and solutions. The non-compete agreements intangible asset represents the fair value of non-compete agreements with former key members of the 340B Link Business’s management. The fair value of the customer relationships intangible asset was determined based on the excess earnings method; the fair values of the acquired technology and trade names intangible assets were determined based on the relief-from-royalty method; and the fair value of the non-compete agreements intangible asset was determined based on the lost profits method. The key assumptions used in estimating the fair values of intangible assets included forecasted financial information; customer attrition rates; royalty rates of 10.0% and 0.5% for the acquired technology and trade names intangible assets, respectively; a discount rate of 14.0% for all intangible assets; and certain other assumptions. The customer relationships and acquired technology intangible assets are being amortized using a double-declining method of amortization as such method better represents the economic benefits to be obtained. The trade names and non-compete agreements are being amortized over their estimated useful lives using the straight-line method of amortization. The Company believes that the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that market participants would use. Actual results may differ from these estimates and assumptions. The Company incurred approximately $3.9 million in acquisition-related costs related to the 340B Link Business acquisition during the nine months ended September 30, 2020. These costs were expensed as incurred, and are included in selling, general, and administrative expenses in the Company’s Condensed Consolidated Statements of Operations. Pro Forma Financial Information The following table presents certain unaudited pro forma consolidated financial information for the three and nine months ended September 30, 2021 and 2020 as if the FDS Amplicare acquisition had been completed on January 1, 2020 and the 340B Link Business acquisition had been completed on January 1, 2019. The unaudited pro forma financial information is presented for informational purposes only, and is not indicative of what would have occurred had the FDS Amplicare acquisition and the 340B Link Business acquisition taken place on January 1, 2020 and January 1, 2019, respectively. The unaudited pro forma financial information combines the historical results of the acquisitions with the Company’s consolidated historical results and includes certain adjustments including, but not limited to, amortization and depreciation of intangible assets and property and equipment acquired; imputed interest, interest expense, and amortization of debt issuance costs related to acquisitions, as applicable; and certain acquisition-related costs incurred.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
| (In thousands)
Pro forma revenues | $ | 302,114 |  |  | $ | 230,099 |  |  | $ | 840,896 |  |  | $ | 689,208 |
Pro forma net income | $ | 32,050 |  |  | $ | 10,350 |  |  | $ | 65,194 |  |  | $ | 8,476 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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