Omnicell Achieves Record Revenue In The Third Quarter 2016

MOUNTAIN VIEW, Calif., Oct. 27, 2016 /PRNewswire/ -- Omnicell, Inc. (NASDAQ: OMCL), a leading provider of medication and supply management solutions to healthcare systems, today announced results for its third quarter ended September 30, 2016.

GAAP results: Revenue for the third quarter of 2016 was $176.7 million, up $3.8 million, or 2.2% from the second quarter of 2016, and up $51.5 million or 41.1% from the third quarter of 2015. Revenue for the nine months ended September 30, 2016 was $520.6 million, up $166.4 million or 47.0% from the nine months ended September 30, 2015.

Third quarter 2016 net income as reported in accordance with U.S. generally accepted accounting principles (GAAP) was $2.0 million, or $0.05 per diluted share. This compares to GAAP net loss of $(1.2) million, or $(0.03) per diluted share, for the second quarter of 2016, and GAAP net income of $8.0 million, or $0.22 per diluted share, for the third quarter of 2015.

GAAP net income for the nine months ended September 30, 2016 was $0.4 million, or $0.01 per diluted share. GAAP net income for the nine months ended September 30, 2015 was $23.1 million, or $0.63 per diluted share, which included a $3.4 million gain on business combination of an equity investment.

Non-GAAP results: Non-GAAP revenue for the third quarter of 2016 was $179.4 million, up $3.8 million, or 2.2% from the second quarter of 2016, and up $54.2 million or 43.3% from the third quarter of 2015.

Non-GAAP net income for the third quarter of 2016 was $14.9 million, or $0.40 per diluted share, excluding $4.7 million of stock-based compensation expense, $5.5 million, net of tax effect of $3.4 million, of intangible assets amortization expense, $0.5 million, net of tax effect of $0.3 million, of acquisition related expenses, and $0.6 million, net of tax effect of $0.3 million, of inventory fair value adjustments. Non-GAAP net income includes the effect of a deferred revenue fair value adjustment of $1.7 million, net of tax effect of $1.0 million. This compares to non-GAAP net income for the second quarter 2016 of $14.0 million, or $0.38 per diluted share, excluding $5.5 million of stock-based compensation expense, $5.6 million, net of tax effect of $3.4 million, of intangible assets amortization expense, $1.9 million, net of tax effect of $1.1 million, of acquisition related expenses and $0.6 million, net of tax effect of $0.3 million, of inventory fair value adjustments. Non-GAAP net income for the second quarter of 2016 also includes the effect of a deferred revenue fair value adjustment of $1.7 million, net of tax effect of $1.0 million. Non-GAAP net income for the third quarter of 2015 was $13.2 million, or $0.36 per diluted share, which excluded $4.0 million of stock-based compensation expense and $1.2 million, net of tax effect of $0.8 million, of amortization expense for all intangible assets associated with past acquisitions.

Non-GAAP net income for the nine months ended September 30, 2016 was $42.0 million, or $1.14 per diluted share, excluding $14.1 million of stock-based compensation expense, $16.8 million, net of tax effect of $10.3 million, of intangible assets amortization expense, $4.0 million, net of tax effect of $2.4 million, of acquisition related expenses and $1.7 million, net of tax effect of 1.0 million, of inventory fair value adjustments. Non-GAAP net income includes the effect of a deferred revenue fair value adjustment of $5.0 million, net of tax effect of $3.0 million. This compares to non-GAAP net income of $34.2 million, or $0.93 per diluted share for the nine months ended September 30, 2015, which excludes $11.3 million of stock-based compensation expense and $3.3 million, net of tax effect of $1.7 million of amortization expense for intangible assets associated with past acquisitions. Non-GAAP net income for the nine months ended September 30, 2015 also excludes a $3.4 million gain on an equity investment in Avantec Healthcare Ltd.

“Omnicell completed another strong quarter marked by record revenues and market share gains,” said Randall Lipps, Omnicell President, CEO and Chairman. “Omnicell’s continued growth is the result of successfully broadening our product portfolio, expanding the markets we participate in, and partnering with our customers to address medication management across the full continuum of patient care. The Company is well positioned to take advantage of the great opportunities ahead,” Mr. Lipps added.

2016 Guidance

For full year 2016, the Company re-confirms its 2016 total year guidance. The Company continues to expect product bookings to be between $540 million and $560 million. The Company is narrowing the 2016 non-GAAP revenue guidance range to be between $700 million to $710 million. The range was previously $695 million to $715 million. The Company expects 2016 non-GAAP EPS to be in the middle of the range that we previously guided to of $1.50 to $1.60 per share.

Omnicell Conference Call Information

Omnicell will hold a conference call today, Thursday, October 27, 2016 at 1:30 p.m. PT to discuss third quarter financial results. The conference call can be monitored by dialing 1-800-696-5518 within the U.S. or 1-706-758-4883 for all other locations. The Conference ID # is 4139562. Internet users can access the conference call at http://ir.omnicell.com/events.cfm. A replay of the call will be available today at approximately 4:30 p.m. PT and will be available until 11:59 p.m. PT on December 08, 2016. The replay access numbers are 1-855-859-2056 within the U.S. and 1-404-537-3406 for all other locations, Conference ID # is 4139562.

About Omnicell

Since 1992, Omnicell (NASDAQ: OMCL) has been inspired to create safer and more efficient ways to manage medications and supplies across all care settings. As a leader in medication and supply dispensing automation, central pharmacy automation, IV robotics, analytics software, and medication adherence and packaging systems, Omnicell is focused on improving care across the entire healthcare continuum-from the acute care hospital setting, to post-acute skilled nursing and long-term care facilities, to the patient’s home.

Over 4,000 customers worldwide use Omnicell automation and analytics solutions to increase operational efficiency, reduce medication errors, deliver actionable intelligence and improve patient safety. The recent acquisition of Aesynt adds distinct capabilities, particularly in central pharmacy and IV robotics, creating the broadest medication management product portfolio in the industry.

The Omnicell SureMed solution provides innovative medication adherence packaging to help reduce costly hospital readmissions. These medication adherence solutions are used by over 17,000 institutional and retail pharmacies in North America and the United Kingdom. These pharmacies are served via the Company’s sales channels and our solutions enable them to maintain high accuracy and quality standards in medication dispensing and administration while optimizing productivity and controlling costs.

For more information about Omnicell, Inc. please visit www.omnicell.com.

Forward-Looking Statements

To the extent any statements contained in this release deal with information that is not historical, these statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. As such, they are subject to the occurrence of many events outside Omnicell’s control and are subject to various risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statement. Such statements include, but are not limited to Omnicell’s momentum, pipeline and new sales opportunities, profit and revenue growth, and the success of Omnicell’s strategy for growth, including differentiated products, expansion into new markets and targeted acquisitions. Risks that contribute to the uncertain nature of the forward-looking statements include our ability to take advantage of the growth opportunities in medication management across the spectrum of healthcare settings from long term care to home care, unfavorable general economic and market conditions, risks to growth and acceptance of our products and services, including competitive conversions, and to growth of the clinical automation and workflow automation market generally, the potential of increasing competition, potential regulatory changes, the ability of the company to improve sales productivity to grow product bookings, to develop new products and to acquire and successfully integrate companies, such as Aesynt. These and other risks and uncertainties are described more fully in Omnicell’s most recent filings with the Securities and Exchange Commission. Prospective investors are cautioned not to place undue reliance on forward-looking statements. All forward-looking statements contained in this press release speak only as of the date on which they were made. Omnicell undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.

Use of Non-GAAP Financial Information

This press release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). Our management evaluates and makes operating decisions using various performance measures. In addition to Omnicell’s GAAP results, we also consider non-GAAP revenue, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP net income, and non-GAAP net income per diluted share. Additionally, we calculate Adjusted EBITDA (another non-GAAP measure) by means of adjustments to GAAP Net Income. These non-GAAP results should not be considered as an alternative to gross profit, operating expenses, net income, net income per diluted share, or any other performance measure derived in accordance with GAAP. We present these non-GAAP results because we consider them to be important supplemental measures of Omnicell’s performance.

Our non-GAAP revenue, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP net income and non-GAAP net income per diluted share are exclusive of certain items to facilitate management’s review of the comparability of Omnicell’s core operating results on a period to period basis because such items are not related to Omnicell’s ongoing core operating results as viewed by management. We define our “core operating results” as those revenues recorded in a particular period and the expenses incurred within that period that directly drive operating income in that period. Management uses these non-GAAP financial measures in making operating decisions because, in addition to meaningful supplemental information regarding operating performance, the measures give us a better understanding of how we should invest in research and development, fund infrastructure growth and evaluate the effectiveness of marketing strategies. In calculating the above non-GAAP results, management specifically adjusted for the following excluded items:

a) Stock-based compensation expense. We excluded from our non-GAAP results the expense related to equity-based compensation plans as they represent expenses that do not require cash settlement from Omnicell.

b) Intangible assets amortization from business acquisitions. We excluded from our non-GAAP results the intangible assets amortization expense resulting from our past acquisitions. These non-cash charges are not considered by management to reflect the core cash-generating performance of the business and therefore are excluded from our non-GAAP results.

c) Amortization of debt issuance cost. Debt issuance cost represents costs associated with the issuance of Term Loan and Revolving Line of Credit facilities. The cost includes underwriting fees, original issue discount, ticking fee, and legal fees. This non-cash expense is not considered by management to reflect the core cash-generating performance of the business and therefore is excluded from our non-GAAP results.

d) Acquisition accounting impact related to deferred revenue. In connection with acquisition of Aesynt, business combination rules require us to account for the fair values of arrangements for which acceptance has not been obtained, and post installation support has not been provided in our purchase accounting. The non-GAAP adjustment to our revenues is intended to include the full amounts of such revenues. We believe the adjustment to these revenues is useful as a measure of the ongoing performance of our business.

e) Inventory fair value adjustments. In connection with acquisition of Aesynt, business combination rules require us to account for the fair values of inventory acquired in our purchase accounting. The non-GAAP adjustment to the cost of revenues is intended to include the impact of such adjustment. We believe the adjustment is useful as a measure of the ongoing performance of our business.

f) Acquisition related expenses. We excluded from the non-GAAP results the expenses which are related to the recent acquisitions. These expenses are unrelated to our ongoing operations and we do not expect them to occur in the ordinary course of business. We believe that excluding these acquisition related expenses provides more meaningful comparisons of the financial results to our historical operations and forward looking guidance and the financial results of less acquisitive peer companies.

Management adjusts for the above items because management believes that, in general, these items possess one or more of the following characteristics: their magnitude and timing is largely outside of Omnicell’s control; they are unrelated to the ongoing operation of the business in the ordinary course; they are unusual and we do not expect them to occur in the ordinary course of business; or they are non-operational, or non-cash expenses involving stock compensation plans.

We believe that the presentation of these non-GAAP financial measures is warranted for several reasons:

1) Such non-GAAP financial measures provide an additional analytical tool for understanding Omnicell’s financial performance by excluding the impact of items which may obscure trends in the core operating results of the business;

2) Since we have historically reported non-GAAP results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency and enhances investors’ ability to compare our performance across financial reporting periods;

3) These non-GAAP financial measures are employed by Omnicell’s management in its own evaluation of performance and are utilized in financial and operational decision making processes, such as budget planning and forecasting; and

4) These non-GAAP financial measures facilitate comparisons to the operating results of other companies in our industry, which use similar financial measures to supplement their GAAP results, thus enhancing the perspective of investors who wish to utilize such comparisons in their analysis of our performance.

Set forth below are additional reasons why share-based compensation expense is excluded from our non-GAAP financial measures:

i) While share-based compensation calculated in accordance with ASC 718 constitutes an ongoing and recurring expense of Omnicell, it is not an expense that requires cash settlement by Omnicell. We therefore exclude these charges for purposes of evaluating core operating results. Thus, our non-GAAP measurements are presented exclusive of stock-based compensation expense to assist management and investors in evaluating our core operating results.

ii) We present ASC 718 share-based payment compensation expense in our reconciliation of non-GAAP financial measures on a pre-tax basis because the exact tax differences related to the timing and deductibility of share-based compensation, under ASC 718 are dependent upon the trading price of Omnicell’s common stock and the timing and exercise by employees of their stock options. As a result of these timing and market uncertainties the tax effect related to share-based compensation expense would be inconsistent in amount and frequency and is therefore excluded from our non-GAAP results.

Our Adjusted EBITDA calculation is defined as earnings before interest income and expense, taxes, depreciation and amortization, and non-cash expenses, including ASC 718 stock compensation expense, as well as excluding certain non-GAAP adjustments.

As stated above, we present non-GAAP financial measures because we consider them to be important supplemental measures of performance. However, non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for Omnicell’s GAAP results. In the future, we expect to incur expenses similar to certain of the non-GAAP adjustments described above and expect to continue reporting non-GAAP financial measures excluding such items. Some of the limitations in relying on non-GAAP financial measures are:

• Omnicell’s stock option and stock purchase plans are important components of incentive compensation arrangements and will be reflected as expenses in Omnicell’s GAAP results for the foreseeable future under ASC 718.
• Other companies, including companies in Omnicell’s industry, may calculate non-GAAP financial measures differently than Omnicell, limiting their usefulness as a comparative measure.

Pursuant to the requirements of SEC Regulation G, a detailed reconciliation between Omnicell’s non-GAAP and GAAP financial results is set forth in the financial tables at the end of this press release. Investors are advised to carefully review and consider this information strictly as a supplement to the GAAP results that are contained in this press release and in Omnicell’s SEC filings.