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Jul 21, 2005

Omnicell Announces Second Quarter 2005 Financial Results

Omnicell Announces Second Quarter 2005 Financial Results

MOUNTAIN VIEW, Calif. - July 21, 2005 -- Omnicell, Inc. (NASDAQ: OMCL), a leading provider of patient safety solutions preferred by nurses, today announced second quarter 2005 results.

Revenue for the second quarter of 2005 totaled $28.6 million, down 2% from the second quarter of 2004 and down less than 1% from Q1 2005. Total backlog as of June 30, 2005 totaled a record $53.9 million, up $7.5 million or 20% from second quarter 2004 and up $8.7 million or 20% sequentially.

Net income for the quarter totaled $66,000, up from a GAAP loss of $(5.8) million or $(0.23) per share in Q1 2005, but down from a net income of $2.4 million or $0.09 per share in Q2 2004.

Gross margin for the second quarter was 56.9%. This was an improvement of 6.9 points from our GAAP gross margin in Q1 2005 and up 3.0 points from pro forma gross margin in Q1 2005. The improvement versus Q1 pro forma results was primarily a result of overhead cost reductions in the company's manufacturing, field installation, and service organizations.

Operating expenses were $16.3 million for the second quarter of 2005. This compares with operating expenses of $20.3 million on a GAAP basis in Q1 2005 and pro forma operating expenses of $18.1 million for the first quarter of 2005. The decrease from Q1 pro forma operating expenses was due to significant cost reductions associated with ceasing the company's practice of chasing "turns" business, a reduction in fees for audit and SOX compliance, and a reduction of sales and marketing expenses unique to the first quarter of 2005.

Omnicell Chairman, President and CEO Randall A. Lipps commented, "I'm very pleased with the increased order activity we saw in the second quarter. We made some strategic investments in the latter half of 2004 to realign our sales force and bring more focus on our main supply and medication product lines, and concentrated our corporate sales team on business opportunities with large integrated delivery networks. While the transition has not been easy, this past quarter's results clearly indicate that we have begun to see the benefits of these initiatives."

Omnicell Interim CFO James T. Judson added, "We have made excellent strides during Q2 taking costs out of our business. The organization is focused on driving linearity which minimizes our costs and cash needs, but also frees up time to make the necessary changes in business practices to adapt to the larger deals and new market opportunities ahead of us."

Financial Results Conference Call Details
Management will discuss financial results for the second quarter of 2005 on Thursday, July 21, 2005 at 2:00 p.m. PT via conference call. Investors and analysts may listen to this conference call by logging on to www.omnicell.com or by dialing 800-240-7305 (domestic) or 303-262-2194 (international) approximately 10 minutes prior to the scheduled start. A replay of the call will be available from 4:00 p.m. PT on July 21, 2005 through 11:59 p.m. PT on July 28, 2005. Dialing 800-405-2236 (domestic) or 303-590-3000 (international) and entering the passcode 11034476# for both numbers will access the call replay. On the conference call, management will be discussing certain additional financial and statistical information. That information can be located on the "Investor Relations" page of Omnicell's Web site at www.omnicell.com.

About Omnicell
Established in 1992, Omnicell (NASDAQ: OMCL) is a leading provider of patient safety solutions preferred by nurses. Improving patient care by enhancing operational efficiency, Omnicell solutions are used throughout the healthcare facility--in the pharmacy, nursing units, surgical services, cath lab, and all the way to the patient's bedside. The company's MedGuard™ line of solutions for the medication-use process includes systems for physician order management, automated pharmacy retrieval, medication packaging, medication dispensing, and nursing workflow automation with bar code medication administration. For the medical-surgical supply chain, Omnicell provides open bar code systems, cabinet-based supply management, integrated open and cabinet-based systems, and Web-based procurement. More than 1,600 healthcare facilities use Omnicell solutions to help reduce medication errors, operate more efficiently, and decrease costs--ultimately contributing to improved clinical and financial outcomes. For more information, 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 filings and include, without limitation, the continued growth and acceptance of our products and services and the continued growth of the clinical automation and workflow automation market generally, the potential of increasing competition, the ability of the company to achieve profitability in the next few quarters, grow product backlog, retain key personnel, cut expenses, develop new products and integrate acquired products or intellectual property in a timely and cost-effective manner, and improve sales productivity. Prospective investors are cautioned not to place undue reliance on forward-looking statements.

Statement of Utility

Omnicell provides all information required in accordance with GAAP, but it believes that evaluating its ongoing operating results may be difficult if an investor is limited to reviewing only GAAP financial measures. Accordingly, Omnicell uses non-GAAP financial measures of its performance internally to evaluate its ongoing operations and to allocate resources within the organization.

Omnicell's management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The non-GAAP financial measures used by Omnicell may not be consistent with the presentation of similar companies in Omnicell's industry. However, Omnicell presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate its operating results in a manner that focuses on what it believes to be its ongoing business operations.

Omnicell's management believes it is useful for itself and investors to review both GAAP information and the non-GAAP measures earnings per share to have a better understanding of the overall performance of its business and its ability to perform in subsequent periods.

Omnicell has computed the non-GAAP earnings per share impact for the first quarter of 2005 of severance costs related to a reduction in force, charges related to the end-of-life of certain older products and the costs related to two suspended acquisitions, all occurring in the first quarter of 2005. Management believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with the reports of financial results for the second quarter of 2005 and it better enables investors to evaluate the ongoing operations and prospects of Omnicell by providing a better comparison to prior periods. Omnicell has provided a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.

(in thousands, except per share amounts)

  Three months ended
March 31
Six months ended
June 30
  2005 2004   2005 2004  
   Product revenues $ 21,752 $ 23,380   $ 44,494 $ 45,607  
   Service and other revenues 6,846 5,827   12,855 11,429  
      Total revenues 28,598 29,207 -2% 57,349 57,036 1%
Costs of revenues:
   Cost of product revenues 10,052 9,340   21,585 18,537  
   Cost of service and other revenues 2,286 2,185   5,123 4,206  
      Total cost of revenues 12,338 11,525   26,708 22,743  
Gross profit 16,260 17,682 -8% 30,641 34,293 -11%
Operating expenses:
   Research and development 2,732 1,837   5,441 4,203  
   Selling, general and administrative 13,563 13,218   30,705 25,094  
   Restructuring and severance charges  - 171   406 171  
      Total operating expenses 16,295 15,226 7% 36,552 29,468 24%
Income from operations (35) 2,456   (5,911) 4,825  
Interest and other income 122 77   247 161  
Income and other expense (4) (56)   (28) (58)  
Income before provision for income taxes 83 2,477   (5,692) 4,928  
Provision for income taxes 17 104   34 201  
Net income $ 66 $ 2,373 -97% $ (5,726) $ 4,727 -221%
Net income per share - basic $ 0.00 $ 0.10   $ (0.22) $ 0.19  
Net income per share - diluted $ 0.00 $ 0.09   $ (0.22) $ 0.17  
Weighted average common shares outstanding - basic 25,784 24,752 4% 25,637 24,527 5%
Weighted average common shares outstanding - diluted 26,743 27,709 -3% 25,637 27,927 -8%

(in thousands)

June 30, December 31, Change
2005 2004 (1) ($) (%)

Current assets:
   Cash and cash equivalents $ 24, 259 $ 19,482 4,777 25%
   Short-term investments 3,713 11,117 (7,404) -67%
   Accounts receivable, net 22,432 21,967 465 2%
   Inventories 15,961 14,592 1,369 9%
   Receivables subject to a sales agreement 2,987 2,878 109 4%
   Other current assets 7,685 7,730 (45) -1%
      Total current assets 77,037 77,766 (729) -1%
Property and equipment, net 5,009 5,660 (651) -12%
Long-term receivables subject to a sales agreement 2,234 3,224 (990) -31%
Other assets 10,312 12,841 (2,529) -20%
   Total assets $ 94,592 $ 99,491 (4,899) -5%


Current liabilities:
   Accounts payable $ 6,841 $ 4,489 2,352 52%
   Accrued liabilities 9,296 12,918 (3,622) -28%
   Deferred service revenue 15,708 13,922 1,786 13%
   Deferred gross profit 7,195 7,846 (651) -8%
   Obligation resulting from sales of receivables 2,987 2,878 109 4%
   Current portion of note payable - - - -
      Total current liabilities 42,027 42,053 (26) 0%
Long-term obligation resulting from sale of receivables 2,234 3,224 (990) -31%
Other long-term liabilities 250 517 (267) -52%
Stockholders' equity 50,081 53,697 (3,616) -7%
Total liabilties and stockholders' equity $ 94,592 $ 99,491 (4,899) -5%

(1) Derived from the December 31, 2004 audited consolidated balance sheet.


Reconciliation of GAAP-based EPS to Pro Forma EPS
for the three months ended March 31, 2005

GAAP-based EPS $(0.22)
Restructuring Cost $(0.06)
Inventory Obsolescence Due to Discontinuation of Product $(0.04)
Write-off of costs for suspended acquisitions $(0.03)
Pro Forma EPS $(0.10)

Reconciliation of GAAP-based Operating Expenses
to Pro Forma Operating Expenses
for the three months ended June 30, 2005
($ in millions)

GAAP-based Operating Expenses $36.6
Restructuring Cost (1.5)
Write-off of costs for suspended acquisitions (0.6)
Pro Forma Operating Expenses $34.5

Reconciliation of GAAP-based Cost of Revenue and Gross Margin Percentage
to Pro Forma Cost of Revenue and Gross Margin Percentage
for the three months ended March 31, 2005
($ in millions)

  Actual Gross Margin %
GAAP-based Cost of Revenue $26.7 53.4%
Inventory Obsolescence Due to Discontinuation of Product $(1.1) (1.9%)
Pro Forma Cost of Revenue $25.6 55.3%