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Omnicell Announces Third Quarter 2011 Results
Oct 27, 2011 (04:10 PM EDT)


MOUNTAIN VIEW, Calif., Oct. 27, 2011 /PRNewswire/ -- Omnicell, Inc. (NASDAQ: OMCL), a leading provider of medication and supply management solutions and analytics software for healthcare facilities, today announced results for its quarter ended September 30, 2011.

GAAP results: Revenue for the third quarter of 2011 was $64.4 million, up $3.4 million or 5.6% from the second quarter of 2011, and up $8.1 million or 14.4% from the third quarter of 2010. Revenue for the nine months ended September 30, 2011 was $182.6 million, up $17.5 million or 10.6% from the nine months ended September 30, 2010.

Third quarter 2011 net income as reported in accordance with U.S. generally accepted accounting principles (GAAP) was $3.0 million, or $0.09 per diluted share. This compares to net income of $2.6 million, or $0.08 per diluted share in the second quarter of 2011 and net income of $1.3 million, or $0.04 per diluted share in the third quarter of 2010. For the nine months ended September 30, 2011, net income was $6.3 million, or $0.18 per diluted share. This compares to net income of $4.2 million, or $0.13 per diluted share for the nine months ended September 30, 2010.

Non-GAAP results: Non-GAAP net income was $5.4 million for the third quarter of 2011, or $0.16 per diluted share. Non-GAAP net income for the third quarter excludes $2.4 million of stock-based compensation expense. This compares to non-GAAP net income of $5.0 million, or $0.15 per diluted share for the second quarter of 2011, which excluded $2.5 million of stock-based compensation expense. Third quarter 2011 results compare to non-GAAP net income of $3.6 million, or $0.11 per diluted share for the third quarter of 2010, which excluded $2.2 million of stock-based compensation expense, a $2.4 million gain ($1.4 million, net of tax) related to the settlement of litigation claims and $2.3 million ($1.6 million, net of tax) related to restructuring, reduction-in-force and tax on repatriation of profits from India associated with a facilities consolidation.

For the nine months ended September 30, 2011, non-GAAP net income was $14.1 million, or $0.41 per diluted share. This excluded $7.3 million in stock-based compensation expense and a $1.0 million pre-tax settlement expense for litigation claims, net of a $0.4 million tax effect. For the nine months ended September 30, 2010, non-GAAP net income was $10.8 million, or $0.32 per diluted share, excluding $6.5 million of stock-based compensation expense, a $2.4 million gain ($1.4 million, net of tax) related to the settlement of litigation claims and $2.3 million ($1.6 million, net of tax) related to restructuring, reduction-in-force and income tax on repatriation of profits from India associated with a facilities consolidation.

"I am very pleased with our performance in the third quarter," said Randall Lipps, Omnicell president, chairman and CEO. "The marketplace continues to be very receptive to our recently introduced G4 platform of new medication and supply automation solutions. This is confirmed by our continued success in expanding market share, as well as the response of our customer base to the opportunity to upgrade their Omnicell systems." 

Omnicell Conference Call Information

Omnicell will hold a conference call today at 2:30 p.m. PT today to discuss the 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 18229268. 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 5:30 p.m. PT and will be available until 11:59 p.m. PT on November 3. The replay access numbers are 1-855-859-2056 within the U.S. and 1-404-537-3406 for all other locations, conference code # 18229268.

About Omnicell

Omnicell, Inc. (NASDAQ: OMCL) is a leading provider of automated and business information solutions enabling hospitals and healthcare systems to streamline the medication administration process and manage costly medical supplies for increased operational efficiency and enhanced patient safety. Through seamless integration with a hospital's existing IT infrastructure, Omnicell solutions empower healthcare facilities to achieve comprehensive automation of medication and supply management from the arrival at the loading dock to the patient's bedside. Omnicell also provides healthcare facilities with business analytics software designed to improve medication diversion detection and regulatory compliance.

Since 1992, more than 2,200 hospital customers worldwide have relied on Omnicell's medication automation, supply chain, and hospital analytics solutions to increase patient safety, improve efficiency and address changing healthcare regulations while providing effective control of costs, charge capture for payer reimbursement and inventory management of medications and supplies.

For more information about Omnicell, 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 necessarily forward-looking. 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. The risk factors are described in the Company's Securities and Exchange Commission (SEC) filings and include, without limitation, the unfavorable general economic and market conditions, volatility in the credit market, risks to growth and acceptance of our products and services and to growth of the clinical automation and workflow automation market generally, the potential of increasing competition, potential regulatory changes, and the ability of the company to improve sales productivity to grow product backlog, retain key personnel, to cut expenses, to manage future changes in revenue levels, to develop new products and integrate acquired companies, products or intellectual property in a timely and cost-effective manner. Prospective investors are cautioned not to place undue reliance on forward-looking statements.

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 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 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 impact of Accounting Standards Codification (ASC) 718. We recognize equity plan-related compensation expenses, which represent the fair value of all share-based payments to employees, including grants of employee stock options, as required under ASC 718, "Stock Compensation" as non-GAAP adjustments in each period.

b) 2011 litigation settlement. We recorded an accrual in the first quarter of 2011 for settlement of litigation with Medacist Solutions Group, LLC for $1.0 million, which was paid in the second quarter of 2011. The net impact was $0.6 million after the $0.4 million income tax effect.

c) 2010 litigation settlement. In the third quarter of 2010 we settled two pending litigation matters with Flo Healthcare LLC (now part of InterMetro Industries Corporation), with payment to InterMetro of $2.65 million. The resulting $2.4 million credit to third quarter 2010 Selling general and administrative expense reflected adjustment for the settlement with release of the liability in excess of the amounts settled.

d) 2010 restructuring charges. In the third quarter of 2010 we incurred charges for restructuring and impairment in executing our plan for consolidation of our Bangalore, India and Woodlands, Texas offices with our California and Tennessee facilities. These charges consisted of severance for departing employees and relocation benefits for transferring employees, exit and disposal costs related to the closed facilities, and impairment of abandoned leasehold improvements.

e) 2010 reduction-in-force and other exit related charges. In the third quarter of 2010 we conducted a small reduction-in-force to rebalance the required workforce by function to our current business environment. Additionally, we incurred lease termination costs and leasehold improvement impairment costs (upon abandonment) in connection with merging our Lebanon, Tennessee office with our office in Nashville.

f) 2010 taxes on repatriated foreign earnings. In the third quarter of 2010, the closure of our Bangalore, India office resulted in a charge for repatriation taxes and a valuation allowance against related deferred tax assets.

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 option grants.

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 related to ASC 718 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 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 other 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.

OMCL-E

Omnicell, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data, unaudited)




Three Months Ended


Nine Months Ended




September 30,
2011


June 30,
2011


September 30,
2010


September 30,
2011


September 30,
2010


Revenues:












Product


$

49,790


$

46,218


$

43,241


$

138,583


$

127,559


Services and other revenues


14,649


14,787


13,045


44,021


37,580


Total revenue


64,439


61,005


56,286


182,604


165,139














Cost of revenues:












Cost of product revenues


22,429


19,730


19,449


59,995


57,723


Cost of services and other revenues


7,562


7,468


6,698


22,704


20,823


Restructuring charges






39




39


Total cost of revenues


29,991


27,198


26,186


82,699


78,585














Gross profit


34,448


33,807


30,100


99,905


86,554


Operating expenses:












Research and development


6,019


5,280


6,089


16,139


15,604


Selling, general, and administrative 


23,635


24,297


19,851


73,713


61,789


Restructuring/asset impairment charges






1,157




1,157


Total operating expenses


29,654


29,577


27,097


89,852


78,550


Income from operations


4,794


4,230


3,003


10,053


8,004


Other income and (expense), net


(191)


71


159


(66)


286


Income before provision for income taxes


4,603


4,301


3,162


9,987


8,290


Provision for income taxes


1,609


1,714


1,886


3,736


4,070


Net income


$

2,994


$

2,587


$

1,276


$

6,251


$

4,220














Net income per share:












Basic


$

0.09


$

0.08


$

0.04


$

0.19


$

0.13


Diluted


$

0.09


$

0.08


$

0.04


$

0.18


$

0.13














Weighted average shares outstanding:












Basic


33,209


33,003


32,822


33,132


32,534


Diluted


34,219


33,981


33,540


34,100


33,383





Omnicell, Inc.

Condensed Consolidated Balance Sheets

(In thousands)




September 30,


December 31,




2011


2010




(unaudited)


(1)








ASSETS






Current assets:






Cash and cash equivalents


$

179,303


$

175,635


Short-term investments


8,101


8,074


Accounts receivable, net


45,987


42,732


Inventories


17,056


9,785


Prepaid expenses


10,643


11,959


Deferred tax assets


13,052


13,052


Other current assets


6,518


7,266


Total current assets


280,660


268,503








Property and equipment, net


16,890


14,351


Non-current net investment in sales-type leases


8,821


9,224


Goodwill


28,543


28,543


Other intangible assets


4,318


4,672


Non-current deferred tax assets


9,836


9,566


Other assets


9,442


8,365


Total assets


$

358,510


$

343,224








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities:






Accounts payable


$

14,422


$

13,242


Accrued compensation


7,062


7,731


Accrued liabilities


7,792


8,684


Deferred service revenue


19,637


16,788


Deferred gross profit


12,161


11,719


Total current liabilities


61,074


58,164








Long-term deferred service revenue


18,447


19,171


Other long-term liabilities


1,014


675


Total liabilities


80,535


78,010








Stockholders' equity:






Total stockholders' equity


277,975


265,214








Total liabilities and stockholders' equity


$

358,510


$

343,224





(1) Information derived from our December 31, 2010 audited Consolidated Financial Statements.



Omnicell, Inc.

Reconciliation of GAAP to Non-GAAP

(In thousands, except per share data, unaudited)




Three months ended




September 30, 2011


June 30, 2011


September 30, 2010




Net
income


Earnings
per share-
diluted


Net
income


Earnings
per share-
diluted


Net
income


Earnings
per share-
diluted


GAAP


$

2,994


$

0.09


$

2,587


$

0.08


$

1,276


$

0.04


Non-GAAP adjustments:














Restructuring cost














Gross profit










39




Operating expenses










1,157


















Reduction-in-force, other exit-related charges














Gross profit










285




Operating expenses










219


















Litigation settlement (a)









(2,439)




Subtotal pretax adjustments








(739)




Income tax effect of non-GAAP adjustments










326




Taxes on repatriated foreign earnings










574


















ASC 718 share-based compensation adjustment (b)














Gross profit


358




383




293




Operating expenses


2,053




2,068




1,905




Total after tax adjustments


2,411


0.07


2,451


0.07


2,359


0.07
















Non-GAAP


$

5,405


$

0.16


$

5,038


$

0.15


$

3,635


$

0.11



(a) This adjustment reflects the reversal in operating expenses for the settlement of litigation in the third quarter of 2010 for amounts less than accrued.


(b) This adjustment reflects the accounting impact of non-cash stock-based compensation expense related to the impact of ASC 718 (formerly referred to as SFAS No. 123R) for the periods shown.



Omnicell, Inc.

Reconciliation of GAAP to Non-GAAP

(In thousands, except per share data, unaudited)




Nine months ended




September 30, 2011


September 30, 2010




Net
income


Earnings
per share-
diluted


Net
income
(loss)


Earnings
(loss)
per share-
diluted


GAAP


$

6,251


$

0.18


$

4,220


$

0.13


Non-GAAP adjustments:










Restructuring cost










Gross profit






39




Operating expenses






1,157














Reduction-in-force, other exit-related charges










Gross profit






285




Operating expenses






219














Litigation settlement (a)


1,000




(2,439)




Subtotal pretax adjustments


1,000




(739)




Income tax effect of non-GAAP adjustments


(380)




326




Taxes on repatriated foreign earnings






574














ASC 718 share-based compensation adjustment (b)










Gross profit


1,108




977




Operating expenses


6,146




5,474




Total after tax adjustments


7,874


0.23


6,612


0.19












Non-GAAP


$

14,125


$

0.41


$

10,832


$

0.32



(a) The 2011 adjustment is for the accrual of a $1.0 million pre-tax settlement in operating expenses ($0.6 million, net of tax effect of $0.4 million) in the first quarter of 2011. The 2010 adjustment reflects the reversal in operating expenses for the settlement of litigation in the third quarter of 2010 for amounts less than accrued.


(b) This adjustment reflects the accounting impact of non-cash stock-based compensation expense related to the impact of ASC 718 (formerly referred to as SFAS No. 123R) for the periods shown.





Omnicell, Inc.

Calculation of Adjusted EBITDA (1)

(In thousands, unaudited)




Three Months Ended


Nine months ended




September 30,
2011


June 30,
2011


September 30,
2010


September 30,
2011


September 30,
2010














GAAP net income


$

2,994


$

2,587


$

1,276


$

6,251


$

4,220


Add back:












ASC 718 stock compensation expense


2,411


2,451


2,198


7,254


6,451


Restructuring charges




1,196



1,196


Reduction-in-force, other exit-related charges




504



504


Litigation settlement




(2,439)


1,000


(2,439)


Interest income


(34)


(75)


(181)


(184)


(341)


Depreciation and amortization expense


2,027


1,942


2,188


5,821


6,489


Income tax expense


1,609


1,714


1,886


3,736


4,070


Non-GAAP adjusted EBITDA (1)


$

9,007


$

8,619


$

6,628


$

23,878


$

20,150





(1) Defined as earnings before interest income and expense, taxes, depreciation and amortization, and non-cash expenses, including stock compensation expense, per ASC 718, formerly FAS 123R. Also excludes non-GAAP adjustments for restructuring, reduction-in-force and other exit-related charges, and litigation settlement.




SOURCE Omnicell, Inc.