Omnicell, Inc.
OMNICELL, Inc (Form: 8-K, Received: 10/27/2016 16:12:30)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.  20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  October 27, 2016

OMNICELL, INC.
(Exact name of registrant as specified in its charter)

Delaware
 
000-33043
 
94-3166458
(State or other jurisdiction of
incorporation or organization)
 
(Commission File Number)
 
(IRS Employer Identification Number)

590 East Middlefield Road
Mountain View, CA 94043
(Address of principal executive offices, including zip code)

(650) 251-6100
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 







Item 2.02 Results of Operations and Financial Condition

On October 27, 2016 , Omnicell, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2016 . The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Number
 
Description of Document
99.1
 
Press release entitled "Omnicell Achieves Record Revenue in the Third Quarter 2016" dated October 27, 2016

 







SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 
OMNICELL,  INC.
 
 
 
Dated: October 27, 2016
 
 
 
 
/s/ Dan S. Johnston
 
 
Dan S. Johnston
 
 
Executive Vice President and Chief Legal & Administrative Officer
                                                      
                                                                           

 







EXHIBIT INDEX

Number
 
Description of Document
99.1
 
Press release entitled "Omnicell Achieves Record Revenue in the Third Quarter 2016" dated October 27, 2016

                                                                           

 





Exhibit 99.1

EXHIBIT991Q414LOGOA01A04.JPG

Contact:
 
 
 
 
 
Peter Kuipers
 
Omnicell, Inc.
Chief Financial Officer
 
590 East Middlefield Road
800-850-6664, ext. 6180
 
Mountain View, CA 94043
Peter.kuipers@omnicell.com
 
 


Omnicell Achieves Record Revenue in the Third Quarter 2016

Record GAAP revenue of $176.7 million representing 41% year over year growth
Record Non-GAAP revenue of $179.4 million representing 43% year over year growth


MOUNTAIN VIEW, Calif. -- October 27, 2016 -- 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

1



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

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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.

 

3



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.


4



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.

 

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Omnicell, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)

 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
June 30,
2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
Revenues:
 
 
 
 
 
 
 
 
 
Product
$
133,621

 
$
130,674

 
$
100,941

 
$
392,190

 
$
284,204

Services and other revenues
43,116

 
42,233

 
24,293

 
128,458

 
70,039

Total revenues
176,737

 
172,907

 
125,234

 
520,648

 
354,243

Cost of revenues:
 
 
 
 
 
 
 
 
 
Cost of product revenues
76,188

 
76,306

 
51,700

 
224,412

 
143,319

Cost of services and other revenues
19,041

 
18,584

 
9,831

 
56,766

 
28,074

Total cost of revenues
95,229

 
94,890

 
61,531

 
281,178

 
171,393

Gross profit
81,508

 
78,017

 
63,703

 
239,470

 
182,850

Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
15,264

 
13,794

 
9,176

 
42,896

 
25,941

Selling, general and administrative
61,316

 
64,341

 
40,668

 
189,912

 
123,690

Gain on business combination

 

 

 
 
 
(3,443
)
Total operating expenses
76,580

 
78,135

 
49,844

 
232,808

 
146,188

Income (loss) from operations
4,928

 
(118
)
 
13,859

 
6,662

 
36,662

Interest and other income (expense), net
(2,721
)
 
(1,881
)
 
(646
)
 
(6,773
)
 
(1,635
)
Income (loss) before provision for income taxes
2,207

 
(1,999
)
 
13,213

 
(111
)
 
35,027

Provision (benefit) for income taxes
224

 
(840
)
 
5,177

 
(557
)
 
11,922

Net income (loss)
$
1,983

 
$
(1,159
)
 
$
8,036

 
$
446

 
$
23,105

Net income (loss) per share:
 
 
 
 
 
 
 
 
 
Basic
$
0.05

 
$
(0.03
)
 
$
0.22

 
$
0.01

 
$
0.64

Diluted
$
0.05

 
$
(0.03
)
 
$
0.22

 
$
0.01

 
$
0.63

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
36,332

 
35,987

 
35,806

 
36,020

 
35,983

Diluted
37,079

 
35,987

 
36,613

 
36,695

 
36,870


 


6




Omnicell, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
 
September 30, 2016
 
December 31, 2015
 
 
 
 
ASSETS
Current assets:
 

 
 
Cash and cash equivalents
$
47,287

 
$
82,217

Accounts receivable, net
177,019

 
107,957

Inventories
74,125

 
46,594

Prepaid expenses
29,620

 
19,586

Other current assets
9,016

 
7,774

Total current assets
337,067

 
264,128

Property and equipment, net
41,034

 
32,309

Long-term investment in sales-type leases, net
18,756

 
14,484

Goodwill
311,420

 
147,906

Intangible assets, net
187,571

 
89,665

Long-term deferred tax assets
2,955

 
2,361

Other long-term assets
32,612

 
27,894

Total assets
$
931,415

 
$
578,747

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 

 
 
Accounts payable
$
36,715

 
$
22,646

Accrued compensation
27,117

 
18,195

Accrued liabilities
32,809

 
30,133

Long-term debt, current portion, net
8,410

 

Deferred revenue, net
93,120

 
53,656

Total current liabilities
198,171

 
124,630

Long-term, deferred revenue
17,096

 
17,975

Long-term deferred tax liabilities
61,576

 
21,822

Other long-term liabilities
12,173

 
11,932

Long-term debt, net
214,834

 

Total liabilities
503,850

 
176,359

Total stockholders’ equity
427,565

 
402,388

Total liabilities and stockholders’ equity
$
931,415

 
$
578,747


 

7



Omnicell, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 
Nine months ended September 30,
 
2016
 
2015
Operating Activities
 
 
 
Net income
$
446

 
$
23,105

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
43,905

 
18,457

(Gain) loss on disposal of fixed assets
(9
)
 
114

Gain on business combination

 
(3,443
)
Share-based compensation expense
14,063

 
11,267

Income tax benefits from employee stock plans
1,256

 
3,838

Excess tax benefits from employee stock plans
(1,560
)
 
(3,942
)
Deferred income taxes
(4,767
)
 
(2,235
)
Amortization of debt financing fees
1,192

 

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(25,802
)
 
(25,590
)
Inventories
(7,745
)
 
(12,898
)
Prepaid expenses
(5,782
)
 
5,937

Other current assets
(89
)
 
1,019

Investment in sales-type leases
(5,296
)
 
(3,220
)
Other long-term assets
1,153

 
247

Accounts payable
5,573

 
(127
)
Accrued compensation
(687
)
 
(5,003
)
Accrued liabilities
(1,901
)
 
4,608

Deferred revenue
12,819

 
(5,369
)
Other long-term liabilities
(2,299
)
 
(833
)
Net cash provided by operating activities
24,470

 
5,932

Investing Activities
 
 
 
Purchases of intangible assets, intellectual property and patents
(1,311
)
 
(331
)
Software development for external use
(10,569
)
 
(9,445
)
Purchases of property and equipment
(10,005
)
 
(6,081
)
Business acquisition, net of cash acquired
(271,458
)
 
(25,455
)
Net cash used in investing activities
(293,343
)
 
(41,312
)
Financing Activities
 
 
 
Proceeds from debt, net
247,051

 

Repayment of debt and revolving credit facility
(25,000
)
 

Payment for contingent consideration
(3,000
)
 

Proceeds from issuances under stock-based compensation plans
16,516

 
15,665

Employees' taxes paid related to restricted stock units
(1,917
)
 
(2,285
)
Excess tax benefits from employee stock plans
1,560

 
3,942

Common stock repurchases

 
(50,021
)
Net cash provided by (used in) financing activities
235,210

 
(32,699
)
Effect of exchange rate changes on cash and cash equivalents
(1,267
)
 
(52
)
Net decrease in cash and cash equivalents
(34,930
)
 
(68,131
)
Cash and cash equivalents at beginning of period
82,217

 
125,888

Cash and cash equivalents at end of period
$
47,287

 
$
57,757


8



Omnicell, Inc.
Reconciliation of GAAP to Non-GAAP
(Unaudited, in thousands, except per share data)
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
 
 
September 30, 2016
 
June 30, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP revenue to non-GAAP revenue:
 
 
 
 
 
 
GAAP revenue
 
$
176,737

 
$
172,907

 
$
125,234

 
$
520,648

 
$
354,243

 
Acquisition accounting impact related to deferred revenue
2,663

 
2,663

 

 
7,989

 

Non-GAAP revenue
$
179,400

 
$
175,570

 
$
125,234

 
$
528,637

 
$
354,243

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP gross profit to non-GAAP gross profit:
 
 
 
 
 
 
GAAP gross profit
$
81,508

 
$
78,017

 
$
63,703

 
$
239,470

 
$
182,850

GAAP gross margin
46.1%
 
45.1%
 
50.9%
 
46.0%
 
51.6%
 
Share-based compensation expense
628

 
644

 
581

 
1,821

 
1,630

 
Amortization of acquired intangibles
5,199

 
5,214

 
570

 
15,624

 
1,469

 
Acquisition accounting impact related to deferred revenue
2,663

 
2,663

 

 
7,989

 

 
Inventory fair value adjustments
920

 
920

 

 
2,761

 

 
Acquisitions related expenses
44

 
227

 

 
271

 

Non-GAAP gross profit
$
90,962

 
$
87,685

 
$
64,854

 
$
267,936

 
$
185,949

Non-GAAP gross margin
50.7%
 
49.9%
 
51.8%
 
50.7%
 
52.5%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP operating expenses to non-GAAP operating expenses:
 
 
 
 
GAAP operating expenses
$
76,580

 
$
78,135

 
$
49,844

 
$
232,808

 
$
146,188

GAAP operating expenses % to total revenue
 
43.3%
 
45.2%
 
39.8%
 
44.7%
 
41.3%
 
Share-based compensation expense
(4,049
)
 
(4,851
)
 
(3,385
)
 
(12,242
)
 
(9,637
)
 
Amortization of acquired intangibles
(3,714
)
 
(3,838
)
 
(1,408
)
 
(11,500
)
 
(3,550
)
 
Acquisitions related expenses
(342
)
 
(1,980
)
 

 
(4,924
)
 

 
Gain on business combination

 

 

 

 
3,443

Non-GAAP operating expenses
$
68,475

 
$
67,466

 
$
45,051

 
$
204,142

 
$
136,444

Non-GAAP operating expenses % to total revenue
38.2%
 
38.4%
 
36.0%
 
38.6%
 
38.5%
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
 
 
September 30, 2016
 
June 30, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
Reconciliation of GAAP income (loss) from operations to non-GAAP income from operations:
 
 
 
 
GAAP income (loss) from operations
$
4,928

 
$
(118
)
 
$
13,859

 
$
6,662

 
$
36,662

GAAP operating income % to total revenue
 
2.8%
 
(0.1)%
 
11.1%
 
1.3%
 
10.3%
 
Share-based compensation expense
4,677

 
5,495

 
3,966

 
14,063

 
11,267

 
Amortization of acquired intangibles
8,913

 
9,052

 
1,978

 
27,124

 
5,019

 
Acquisition accounting impact related to deferred revenue
2,663

 
2,663

 

 
7,989

 

 
Inventory fair value adjustments
920

 
920

 

 
2,761

 

 
Acquisitions related expenses
386

 
2,207

 

 
5,195

 

 
Gain on business combination

 

 

 

 
(3,443
)
Non-GAAP income from operations
$
22,487

 
$
20,219

 
$
19,803

 
$
63,794

 
$
49,505

Non-GAAP operating income % to total Non-GAAP revenue
12.5%
 
11.5%
 
15.8%
 
12.1%
 
14.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP net income (loss) to non-GAAP net income:
 
 
 
 
 
 
GAAP net income (loss)
$
1,983

 
$
(1,159
)
 
$
8,036

 
$
446

 
$
23,105


9



 
Share-based compensation expense
4,677

 
5,495

 
3,966

 
14,063

 
11,267

 
Amortization of acquired intangibles
8,913

 
9,052

 
1,978

 
27,124

 
5,019

 
Acquisition accounting impact related to deferred revenue
2,663

 
2,663

 

 
7,989

 

 
Inventory fair value adjustments
920

 
920

 

 
2,761

 

 
Acquisitions related expenses (a)
783

 
3,002

 

 
6,387

 

 
Gain on business combination

 

 

 

 
(3,443
)
 
Tax effect of the adjustments above (b)
(5,047
)
 
(5,942
)
 
(775
)
 
(16,820
)
 
(1,703
)
Non-GAAP net income
$
14,892

 
$
14,031

 
$
13,205

 
$
41,950

 
$
34,245

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP net income (loss) per share - diluted to non-GAAP net income per share - diluted:
 
 
Shares - diluted GAAP
37,079

 
35,987

 
36,613

 
36,695

 
36,870

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares - diluted Non-GAAP
37,079

 
36,649

 
36,613

 
36,695

 
36,870

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net income (loss) per share - diluted
$
0.05

 
$
(0.03
)
 
$
0.22

 
$
0.01

 
$
0.63

 
Share-based compensation expense
0.13

 
0.15

 
0.11

 
0.38

 
0.31

 
Amortization of acquired intangibles
0.24

 
0.25

 
0.05

 
0.74

 
0.14

 
Acquisition accounting impact related to deferred revenue
0.07

 
0.07

 

 
0.22

 

 
Inventory fair value adjustments
0.02

 
0.03

 

 
0.08

 

 
Acquisitions related expenses (a)
0.02

 
0.08

 

 
0.17

 

 
Gain on business combination

 

 

 

 
(0.10
)
 
Tax effect of the adjustments above (b)
(0.13
)
 
(0.17
)
 
(0.02
)
 
(0.46
)
 
(0.05
)
Non-GAAP net income per share - diluted
$
0.40

 
$
0.38

 
$
0.36

 
$
1.14

 
$
0.93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP net income (loss) to non-GAAP Adjusted EBITDA:
 
 
 
 
 
 
GAAP net income (loss)
$
1,983

 
$
(1,159
)
 
$
8,036

 
$
446

 
$
23,105

 
Share-based compensation expense
4,677

 
5,495

 
3,966

 
14,063

 
11,267

 
Interest (income) and expense, net
1,523

 
1,348

 
138

 
4,618

 
321

 
Depreciation and amortization expense
14,702

 
14,724

 
6,482

 
43,899

 
18,457

 
Acquisition accounting impact related to deferred revenue
2,663

 
2,663

 

 
7,989

 

 
Inventory fair value adjustments
920

 
920

 

 
2,761

 

 
Acquisitions related expenses (a)
783

 
3,002

 

 
6,387

 

 
Gain on business combination

 

 

 

 
(3,443
)
 
Income tax expense
224

 
(840
)
 
5,177

 
(557
)
 
11,922

Non-GAAP Adjusted EBITDA (c)
$
27,475

 
$
26,153

 
$
23,799

 
$
79,606

 
$
61,629

___________________________________________
(a) Business combination rules require us to account for the fair value of Property, Plant and Equipment (“PPE”) acquired in our purchase accounting.  In connection with the Aesynt acquisition, we recorded approximately $0.3 million of additional depreciation expense related to the fair value step-up of PPE in Q1, Q2, and Q3 2016, respectively.   As these costs represent the expense recognition of fair value adjustments in excess of the historical cost basis of PPE obtained through acquisition, these charges are outside the control of those responsible for the underlying operations of the business.  In connection with Q3’16 and year-to-date Q3’16 presentation, we revised the previously disclosed Non-GAAP measurements by $0.3 million for Q1 and Q2’2016, respectively, for the impact of depreciation expense related to the fair value step-up of PPE.
(b) Tax effects calculated for all adjustments except share-based compensation expense, using the estimated annual effective tax rate of 38% for fiscal year 2016.
(c) Defined as earnings before interest income and expense, taxes, depreciation and amortization, share-based compensation expense, as well as excluding certain non-GAAP adjustments.
 

10



Omnicell, Inc.
Segmented Information
(Unaudited, in thousands, except for percentages)

 
Three Months Ended September 30, 2016
 
Three Months Ended September 30, 2015
 
Automation and
Analytics
 
Medication
Adherence
 
Total
 
Automation and
Analytics
 
Medication
Adherence
 
Total
 
 
 
 
Revenues
$
152,437

 
$
24,300

 
$
176,737

 
$
102,967

 
$
22,267

 
$
125,234

Cost of revenues
77,828

 
17,401

 
95,229

 
45,668

 
15,863

 
61,531

Gross profit
74,609

 
6,899

 
81,508

 
57,299

 
6,404

 
63,703

Gross margin %
48.9%
 
28.4%
 
46.1%
 
55.6%
 
28.8%
 
50.9%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
49,123

 
6,137

 
55,260

 
30,628

 
6,070

 
36,698

Income from segment operations
$
25,486

 
$
762

 
$
26,248

 
$
26,671

 
$
334

 
$
27,005

Operating margin %
16.7%
 
3.1%
 
14.9%
 
25.9%
 
1.5%
 
21.6%
 
 
 
 
 
 
 
 
 
 
 
 
Corporate costs
 
 
 
 
21,320

 
 
 
 
 
13,146

Income from operations
 
 
 
 
$
4,928

 
 
 
 
 
$
13,859

 
 
 
 
 
 
 
 
 
 
 
 


11



Omnicell, Inc.
Segmented Information
(Unaudited, in thousands, except for percentages)


 
Nine Months Ended September 30, 2016
 
Nine Months Ended September 30, 2015
 
Automation and
Analytics
 
Medication
Adherence
 
Total
 
Automation and
Analytics
 
Medication
Adherence
 
Total
 
 
 
 
Revenues
$
450,043

 
$
70,605

 
$
520,648

 
$
284,447

 
$
69,796

 
$
354,243

Cost of revenues
233,401

 
47,777

 
281,178

 
123,923

 
47,470

 
171,393

Gross profit
216,642

 
22,828

 
239,470

 
160,524

 
22,326

 
182,850

Gross margin %
48.1%
 
32.3%
 
46.0%
 
56.4%
 
32.0%
 
51.6%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
151,108

 
17,518

 
168,626

 
85,195

 
18,321

 
103,516

Income from segment operations
$
65,534

 
$
5,310

 
$
70,844

 
$
75,329

 
$
4,005

 
$
79,334

Operating margin %
14.6%
 
7.5%
 
13.6%
 
26.5%
 
5.7%
 
22.4%
 
 
 
 
 
 
 
 
 
 
 
 
Corporate costs
 
 
 
 
64,182

 
 
 
 
 
42,672

Income from operations
 
 
 
 
$
6,662

 
 
 
 
 
$
36,662

 
 
 
 
 
 
 
 
 
 
 
 

 

12



Omnicell, Inc.
Segment Information - Non-GAAP Gross Margin and Non-GAAP Operating Margin
(Unaudited, in thousands, except for percentages)
 
Three Months Ended September 30, 2016
 
 
 
Automation and
Analytics
 
Medication
Adherence
 
Total
 
Amount
 
% of GAAP Revenue
 
% of Non-GAAP Revenue
 
Amount
 
% of GAAP Revenue
 
% of Non-GAAP Revenue
 
Amount
 
% of GAAP Revenue
 
% of Non-GAAP Revenue
Revenues
$
152,437

 
 
 
 
 
$
24,300

 
 
 
 
 
$
176,737

 
 
 
 
Acquisition accounting impact related to deferred revenue
2,663

 
1.7%
 
1.7%
 
 
—%
 
—%
 
2,663

 
1.5%
 
1.5%
Non-GAAP Revenues
$
155,100

 
 
 
 
 
$
24,300

 
 
 
 
 
$
179,400

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Gross profit
$
74,609

 
48.9%
 
 
 
$
6,899

 
28.4%
 
 
 
$
81,508

 
46.1%
 
45.4%
Stock-based compensation expense
511

 
0.3%
 
0.3%
 
117

 
0.5%
 
0.5%
 
628

 
0.4%
 
0.4%
Amortization expense of acquired intangible assets
4,867

 
3.2%
 
3.1%
 
332

 
1.4%
 
1.4%
 
5,199

 
2.9%
 
2.9%
Acquisition accounting impact related to deferred revenue
2,663

 
1.7%
 
1.7%
 

 
—%
 
—%
 
2,663

 
1.5%
 
1.5%
Inventory fair value adjustments
920

 
0.6%
 
0.6%
 

 
—%
 
—%
 
920

 
0.5%
 
0.5%
Acquisitions related expenses
44

 
—%
 
—%
 

 
—%
 
—%
 
44

 
—%
 
—%
Non-GAAP Gross profit
$
83,614

 
 
 
53.9%
 
$
7,348

 
 
 
30.2%
 
$
90,962

 
 
 
50.7%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Operating income
$
25,486

 
16.7%
 
 
 
$
762

 
3.1%
 
 
 
$
26,248

 
14.9%
 
 
Stock-based compensation expense
1,952

 
1.3%
 
1.3%
 
264

 
1.1%
 
1.1%
 
2,216

 
1.3%
 
1.2%
Amortization expense of acquired intangible assets
7,623

 
5.0%
 
4.9%
 
1,290

 
5.3%
 
5.3%
 
8,913

 
5.0%
 
5.0%
Acquisition accounting impact related to deferred revenue
2,663

 
1.7%
 
1.7%
 

 
—%
 
—%
 
2,663

 
1.5%
 
1.5%
Inventory fair value adjustments
920

 
0.6%
 
0.6%
 

 
—%
 
—%
 
920

 
0.5%
 
0.5%
Acquisitions related expenses
133

 
0.1%
 
0.1%
 


 
—%
 
—%
 
133

 
0.1%
 
0.1%
Non-GAAP Operating income
$
38,777

 
 
 
25.0
%
 
$
2,316

 
 
 
9.5
%
 
$
41,093

 
 
 
22.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Corporate costs
 
 
 
 
 
 
 
 
 
 
 
 
$
21,320

 
12.1%
 
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
 
 
 
 
2,461

 
1.4%
 
1.4%
Acquisition-related expenses
 
 
 
 
 
 
 
 
 
 
 
 
253

 
0.1%
 
0.1%
Non-GAAP Corporate costs
 
 
 
 
 
 
 
 
 
 
 
 
$
18,606

 
 
 
10.4%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Income from operations
 
 
 
 
 
 
 
 
 
 
 
 
$
22,487

 
 
 
12.5
%
 


13



Omnicell, Inc.
Segment Information - Non-GAAP Gross Margin and Non-GAAP Operating Margin
(Unaudited, in thousands, except for percentages)

 
Three Months Ended September 30, 2015
 
Automation and
Analytics
 
Medication
Adherence
 
Total
 
Amount
 
% of GAAP Revenue*
 
Amount
 
% of GAAP Revenue*
 
Amount
 
% of GAAP Revenue*
Revenues
$
102,967

 
 
 
$
22,267

 
 
 
$
125,234

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Gross profit
$
57,299

 
55.6%
 
$
6,404

 
28.8%
 
$
63,703

 
50.9%
Stock-based compensation expense
403

 
0.4%
 
178

 
0.8%
 
581

 
0.5%
Amortization expense of acquired intangible
assets
238

 
0.2%
 
332

 
1.5%
 
570

 
0.5%
Non-GAAP Gross profit
$
57,940

 
56.3%
 
$
6,914

 
31.1%
 
$
64,854

 
51.8%
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Operating income
$
26,671

 
25.9%
 
$
334

 
1.5%
 
$
27,005

 
21.6%
Stock-based compensation expense
1,572

 
1.5%
 
303

 
1.4%
 
1,875

 
1.5%
Amortization expense of acquired intangible
assets
902

 
0.9%
 
1,076

 
4.8%
 
1,978

 
1.6%
Non-GAAP Operating income
$
29,145

 
28.3%
 
$
1,713

 
7.7%
 
$
30,858

 
24.6%
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Corporate costs
 
 
 
 
 
 
 
 
$
13,146

 
10.5%
Stock-based compensation expense
 
 
 
 
 
 
 
 
2,091

 
1.7%
Non-GAAP Corporate costs
 
 
 
 
 
 
 
 
$
11,055

 
8.8%
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Income from operations
 
 
 
 
 
 
 
 
$
19,803

 
15.8%

 
_____________________________________________

* For the three months ended September 30, 2015, there were no differences between GAAP and non-GAAP revenues.

14