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Business Combinations | 9 Months Ended
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Sep. 30, 2022
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business CombinationsThe Company accounted for its acquisitions in accordance with ASC 805, Business Combinations. The tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the respective acquisition dates. Intangible assets eligible for recognition separate from goodwill were those that satisfied either the contractual or legal criterion or the separability criterion, each as set forth in the accounting guidance. The preliminary fair values reflect management’s best estimates based on information available at the respective acquisition dates and may change as additional information is received over the measurement period, which will end no later than one year from the respective acquisition date. 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’s Condensed Consolidated Financial Statements include the results of operations of each acquired company, commencing as of their respective acquisition dates. Acquisition-related costs were expensed as incurred, and are included in selling, general, and administrative expenses in the Company’s Condensed Consolidated Statements of Operations. 2022 Acquisition Hub and Spoke Innovations On January 10, 2022, the Company completed the acquisition of all of the outstanding equity interests in Hub and Spoke Innovations, pursuant to the terms and conditions of the Share Purchase Agreement, dated January 10, 2022, by and among Omnicell Limited (a wholly-owned subsidiary of the Company), Hub and Spoke Innovations Limited, and certain beneficial stockholders specified therein for a base purchase price of £2.5 million (approximately $3.4 million based on the exchange rate in effect at the acquisition date), prior to customary adjustments for closing cash, net working capital, and assumed indebtedness. The preliminary purchase price transferred for the transaction, net of cash acquired, was £2.5 million (approximately $3.4 million based on the exchange rate in effect at the acquisition date). Of the purchase price transferred, £1.9 million (approximately $2.5 million based on the exchange rate in effect at the acquisition date) was allocated to goodwill; £0.8 million (approximately $1.1 million based on the exchange rate in effect at the acquisition date) was allocated to intangible assets, which included customer relationships; and the remainder was allocated to net assets acquired. The Hub and Spoke Innovations acquisition is expected to complement Omnicell’s total solution technology portfolio for retail pharmacy in the United Kingdom to help pharmacies improve workflows, offer patients 24/7 access to their medications and provide enhanced patient care. 2021 Acquisitions MarkeTouch Media On December 31, 2021, the Company completed the acquisition of all of the outstanding equity interests in MarkeTouch Media, LLC (“MarkeTouch Media”) pursuant to the terms and conditions of the Unit Purchase Agreement, dated December 31, 2021, by and among ateb, Inc. (a wholly-owned subsidiary of the Company), MarkeTouch Media, LLC, MarkeTouch Holdings, Inc., Toucan Enterprises, Inc., and certain beneficial stockholders specified therein for a base purchase price of $82.0 million, prior to customary adjustments for closing cash, net working capital, and assumed indebtedness. The MarkeTouch Media acquisition adds mobile and web-based technology and patient engagement solutions, which is expected to expand the footprint of EnlivenHealth® across the retail pharmacy sector, while enhancing potential growth opportunities in new market segments like specialty pharmacy and pharmacy benefits management. ReCept On December 29, 2021, the Company completed the acquisition of all outstanding equity securities of ReCept Holdings, Inc. (“ReCept”) pursuant to the terms and conditions of the Agreement and Plan of Merger, dated December 1, 2021, by and among Omnicell, Inc., ReCept Holdings, Inc., Redfish Acquisition Corp, and the representative of the securityholders for a base purchase price of $100.0 million, prior to customary adjustments for closing cash, net working capital, and assumed indebtedness. The addition of ReCept’s specialty pharmacy management services, now a part of the Company’s Specialty Pharmacy Services (“Specialty Pharmacy Services”), for health systems, provider groups, and federally qualified health centers expands Omnicell’s Advanced Services portfolio in an effort to address the growing and complex specialty pharmacy market. FDS Amplicare On September 9, 2021, the Company completed the acquisition of all of the outstanding equity interests in RxInnovation, Inc., operating as FDS Amplicare (“FDS Amplicare”), pursuant to the terms and conditions of the Agreement and Plan of Merger, dated July 25, 2021, by and among RxInnovation Inc., Omnicell, Inc., Fleming Acquisition Corp., and the representative of the securityholders for a base purchase price of $177.0 million, prior to customary adjustments for closing cash, net working capital, and assumed indebtedness. The FDS Amplicare® acquisition adds a comprehensive and complementary suite of Software-as-a-Service (“SaaS”) financial management, analytics, and population health solutions to the Company’s EnlivenHealth offering. The following tables represent the preliminary allocation of the respective purchase price to the assets acquired and the liabilities assumed by the Company as part of each acquisition included in the Company’s Consolidated Balance Sheets, and is reconciled to the respective purchase price transferred:
| FDS Amplicare (1) |  | ReCept (2) (3) |  | MarkeTouch Media (4)
| (In thousands)
Purchase price transferred: |  |  |  |  |
Base purchase price | $ | 177,000 |  |  | $ | 100,000 |  |  | $ | 82,000 |
Add: Closing cash | 465 |  |  | 6,569 |  |  | 237 |
Add: Net working capital adjustment | 1,654 |  |  | (7,357) |  |  | 147 |
Less: Assumed indebtedness | (653) |  |  | (1,973) |  |  | (15) |
Total purchase price transferred | $ | 178,466 |  |  | $ | 97,239 |  |  | $ | 82,369 |
| FDS Amplicare (1) |  | ReCept (Preliminary) (2) (3) |  | MarkeTouch Media (Preliminary) (4)
Fair value of assets acquired and liabilities assumed: |  |  |  |  |
Cash and cash equivalents | $ | 465 |  |  | $ | — |  |  | $ | 237 |
Accounts receivable and unbilled receivables | 5,330 |  |  | 2,383 |  |  | 2,302 |
Prepaid expenses | 506 |  |  | 192 |  |  | 96 |
Other current assets | 45 |  |  | 12,223 |  |  | — |
Total current assets | 6,346 |  |  | 14,798 |  |  | 2,635 |
Property and equipment | 444 |  |  | 172 |  |  | 177 |
Operating lease right-of-use assets | 2,252 |  |  | 773 |  |  | 602 |
Goodwill | 117,784 |  |  | 77,394 |  |  | 42,273 |
Intangible assets | 70,000 |  |  | 28,100 |  |  | 38,000 |
Other long-term assets | 51 |  |  | 195 |  |  | 2,850 |
Total assets | 196,877 |  |  | 121,432 |  |  | 86,537 |
Accounts payable | 950 |  |  | 219 |  |  | 473 |
Accrued compensation | 1,312 |  |  | 1,756 |  |  | — |
Accrued liabilities | 1,497 |  |  | 18,499 |  |  | 292 |
Deferred revenues | 1,916 |  |  | 222 |  |  | 347 |
Long-term deferred tax liabilities | 11,686 |  |  | 2,883 |  |  | — |
Long-term operating lease liabilities | 920 |  |  | 614 |  |  | 206 |
Other long-term liabilities | 130 |  |  | — |  |  | 2,850 |
Total liabilities | 18,411 |  |  | 24,193 |  |  | 4,168 |
Total purchase price | $ | 178,466 |  |  | $ | 97,239 |  |  | $ | 82,369 |
Total purchase price, net of cash acquired | $ | 178,001 |  |  | $ | 90,670 |  |  | $ | 82,132 |
_________________________________________________ (1) During the fourth quarter of 2021, the Company recorded measurement period adjustments of $1.5 million to goodwill, consisting of an increase in intangible assets, accounts receivable and unbilled receivables, and long-term deferred tax liabilities of $0.4 million, $1.1 million, and $0.1 million, respectively, and a net working capital adjustment of $0.1 million. During the nine months ended September 30, 2022, the Company recorded a measurement period adjustments of $0.4 million to goodwill, consisting of an increase in long-term deferred tax liabilities and accrued liabilities of $0.3 million and $0.1 million, respectively. (2) Closing cash is included in other current assets due to its restrictive nature as cash held for customers. (3) During the nine months ended September 30, 2022, the Company recorded measurement period adjustments of $4.2 million to goodwill, consisting of a purchase price adjustment of $5.2 million and a decrease in long-term deferred tax liabilities of $0.7 million, partially offset by a decrease to other current assets of $1.7 million. (4) During the second quarter of 2022, the Company recorded a measurement period adjustment of $0.3 million to goodwill related to a purchase price adjustment. The $117.8 million of goodwill arising from the FDS Amplicare acquisition is primarily attributed to future sales of SaaS solutions and FDS Amplicare’s assembled workforce. The $77.4 million of goodwill arising from the ReCept acquisition is primarily attributed to future sales of its offerings and services and ReCept’s assembled workforce. None of the FDS Amplicare and ReCept goodwill is expected to be deductible for tax purposes as these acquisitions were treated as stock acquisitions for U.S. tax purposes. The $42.3 million of goodwill arising from the MarkeTouch Media acquisition is primarily attributed to future sales of SaaS solutions and MarkeTouch Media’s assembled workforce. The full amount of the MarkeTouch Media goodwill is expected to be deductible for tax purposes as this acquisition was treated as an asset acquisition for U.S. tax purposes. The identifiable intangible assets acquired and their estimated useful lives for amortization are as follows:
| FDS Amplicare (1) |  | ReCept |  | MarkeTouch Media
| Fair value |  | Useful life (years) |  | Fair value |  | Useful life (years) |  | Fair value |  | Useful life (years)
| (In thousands, except for years)
Customer relationships | $ | 59,900 |  |  | 23 |  | $ | 28,100 |  |  | 23 |  | $ | 34,100 |  |  | 26
Acquired technology | 7,700 |  |  | 5 - 7 |  | — |  |  | — |  | 2,100 |  |  | 4
Backlog | — |  |  | — |  | — |  |  | — |  | 1,800 |  |  | 2
Trade names | 2,400 |  |  | 5 |  | — |  |  | — |  | — |  |  | —
Total purchased intangible assets | $ | 70,000 |  |  |  |  | $ | 28,100 |  |  |  |  | $ | 38,000 |  |  |
_________________________________________________ (1) During the fourth quarter of 2021, the Company recorded a measurement period adjustment of $0.4 million in customer relationships. The customer relationships intangible assets represent the fair values of the underlying relationships and agreements with each acquired company’s customers. The acquired technology intangible assets represent the fair values of the portfolio of SaaS solutions that have reached technological feasibility and were part of the respective acquired company’s offerings at their respective acquisition dates. The backlog intangible asset represents contractually committed future billings associated with MarkeTouch Media customer contracts. 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 values of the customer relationships and backlog intangible assets were 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 rate of 10.0% for the acquired technology intangible assets for both FDS Amplicare and MarkeTouch Media; royalty rate of 2.0% for the FDS Amplicare trade names intangible asset; discount rate of 13.0% for the FDS Amplicare acquisition; discount rate of 15.0% for the ReCept acquisition; discount rate of 11.5% for the MarkeTouch Media acquisition; 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 backlog and trade names intangible assets are being amortized over their respective estimated useful lives using the straight-line method of amortization. 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 as if the FDS Amplicare, ReCept, and MarkeTouch Media acquisitions had been completed on January 1, 2020. The pro forma effects of the Hub and Spoke Innovations acquisition were not material to the Company’s consolidated results of operations. The unaudited pro forma financial information is presented for informational purposes only, and is not indicative of what would have occurred had the acquisitions taken place on those respective dates. 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; and certain acquisition-related costs incurred.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  |  |  | 2021 |  |
| (In thousands)
Pro forma revenues | $ | 313,170 |  |  |  |  | $ | 873,061 |  |  |
Pro forma net income | $ | 31,157 |  |  |  |  | $ | 65,050 |  |  |

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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 https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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