Omnicell, Inc. (OMCL)

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Omnicell, Inc. (OMCL)

Q2 2008 Earnings Call

July 21, 2008 4:30 pm ET


Rob Seim - Chief Financial Officer

Randall A. Lipps - President and Chief Executive Officer


Newton Juhng - BB&T Capital Markets

Steven Crowley - Craig-Hallum Capital Group LLC

Tom Gallucci – Merrill Lynch

Glenn Garmont - Broadpoint Securities Group, Inc.

Steve Halper -Thomas Weisel Partners

Sean Wieland - Piper Jaffray & Co.

Scott [Haugen] - PYGH Capital

Leo Carpio - Caris & Company



At this time I would like to welcome everyone to the Omnicell Second Quarter Earnings Conference Call. (Operator Instructions)

Rob Seim

Welcome to the Omnicell 2008 second quarter results conference call. Joining me today is Randall Lipps, Omnicell president and CEO. You can find our results in the Omnicell second quarter press release posted in the Investor Relations section of our web site at

This call will include forward-looking statements subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied. For a more detailed description of the risks that impact these forward-looking statements please refer to the information under the heading Risk Factors and under the heading Managements Discussions and Analysis of Financial Conditions and Results of Operations. In the Omnicell annual report on Form 10-K filed with the SEC on March 14, 2008 as well as our most recent filings with the SEC.

Please be aware that you should not place undue reliance on any forward-looking statements made today. The date of the conference call is July 21, 2008. All forward-looking statements made on this call are made based on Omnicell’s beliefs as of this date only. Future events or simply the passage of time may cause these beliefs to change. Finally this conference call is the property of Omnicell Inc. and any taping, other duplication or rebroadcast without the express written consent of Omnicell is prohibited.

During the call today I will start with an overview of the financial results for the quarter, followed by Randy who will cover some of the quarter’s business highlights. I will then discuss Omnicell’s guidance for 2008 and after that we will open the call to your questions.

In the second quarter of 20087 we again posted record revenues and our profits exceeded expectation. The slowing economic conditions we saw in March did continue through Q2 and it is clearer now that hospitals have experienced diminishing cash flows from lower interest rate returns on investments and increasing operating costs. Despite these conditions, orders were within our expected range and we saw some of the larger acquisitions of our products moving towards completion. We expect several of these multi-hospital organizations will complete their purchasing cycles during the second half of 2008 and during the quarter we saw competitive conversions increase.

Our orders during the quarter from new customers increased to 33% of our total orders, which is back within the historical range after a dip in Q1. New customers are comprised of a combination of competitive conversions and Greenfield accounts, where Greenfield accounts are those customers installing automation for the first time.

In Q2 we saw the competitive conversions return to over half of the new business mix, as customers continued to replace our competitors’ products with Omnicell solutions. Our financial results for the second quarter continue to demonstrate our ability to manage through tough economic conditions. Along with revenues higher than expectations, our non-GAAP earnings were $0.17 per share, excluding stock compensation expenses, $0.01 per share above analysts expectations.

As a reminder we are now fully taxed as compared to 2007 when we enjoyed a benefit from tax valuation allowances and profit from our operations measured by EBITDA grew faster than revenue. Backlog continues to allow us the stability of our financial performance and we remain within our backlog objective of six to nine months. We continue to drive customer satisfaction through our high touch sales, service and installation processes and we continue to complete installation from the customer’s timetable.

We have seen no degradation in the overall pricing or general business terms in our market and our competitive position remains strong with a robust sales pipeline. While customers have become more cautious and their buying decision processes have lengthened, we found our products remained competitive during the quarter.

Last quarter, in light of the uncertain economic conditions, we indicated that we would increase our staff by no more than 5% during the remainder of 2008. We have slowed our headcount growth and now have 880 full time employees on board. We believe this staffing level is appropriate to maintain our customer satisfaction ratings, to continue new product development and to complete implementation to some of the major infrastructure improvements in our training and our systems area. We do not expect to expand headcounts further, until the economic environment has improved.

During the quarter we also announced the closure of Rioux Vision in late 2007. The consolidation of Mobile Cart manufacturing closer to our California development labs supports the strategy of integrating medication management technology with mobile cart technology. The facility is scheduled to be closed by the end of July. Most of the production is moving to contract suppliers, with final assembly and test relocating to an existing facility in California. We incurred approximately $0.4 million of close down charges in Q2 and will incur another $0.5 to $0.7 million close down charges in Q3. We expect the consolidations to save approximately $1.3 million annually.

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