Total GAAP revenues of $299 million

GAAP net income per diluted share of $0.12

Non-GAAP net income per diluted share of $0.62

Omnicell, Inc. (NASDAQ:OMCL) (“Omnicell,” “we,” “our,” “us,” “management,” or the “Company”), a leader in transforming the pharmacy care delivery model, today announced results for its third quarter ended September 30, 2023.

Randall Lipps, chairman, president, chief executive officer, and founder of Omnicell, said, “The team delivered strong cost management and operational discipline this quarter. However, I am disappointed with the weakness in demand that we are seeing and accordingly, we have updated our near-term outlook. We are taking actions to manage the business that are intended to reduce our cost structure and to better align with our anticipated top line performance heading into 2024, while also positioning the Company to continue investing in our innovation agenda. We have taken steps to strengthen our leadership team and we have already begun to reduce discretionary expenses. We remain encouraged that hospitals, health systems, and retail pharmacies continue to rely on Omnicell to help them improve patient and health system outcomes — especially during this dynamic time in the industry. The need for the healthcare industry to automate, optimize, and modernize is more important than ever and we believe Omnicell is well positioned to deliver value to all of our stakeholders over the long-term.”

Financial Results

Total GAAP revenues for the third quarter of 2023 were $299 million, down $49 million, or 14%, from the third quarter of 2022. The year-over-year decrease in total GAAP revenues reflects lower point-of-care revenues primarily as a result of ongoing health systems capital budget and labor constraints.

Total GAAP net income for the third quarter of 2023 was $6 million, or $0.12 per diluted share. This compares to GAAP net income of $17 million, or $0.37 per diluted share, for the third quarter of 2022.

Total non-GAAP net income for the third quarter of 2023 was $28 million, or $0.62 per diluted share. This compares to non-GAAP net income of $45 million, or $1.00 per diluted share, for the third quarter of 2022.

Total non-GAAP EBITDA for the third quarter of 2023 was $41 million. This compares to non-GAAP EBITDA of $61 million for the third quarter of 2022.

Balance Sheet

As of September 30, 2023, Omnicell’s balance sheet reflected cash and cash equivalents of $447 million, total debt (net of unamortized debt issuance costs) of $569 million, and total assets of $2.22 billion. Cash flows provided by operating activities in the third quarter of 2023 totaled $57 million. This compares to cash flows provided by operating activities totaling $21 million in the third quarter of 2022.

As of September 30, 2023, the Company had $500 million of availability under its revolving credit facility with no outstanding balance. Subsequent to the quarter end, on October 10, 2023, the Company refinanced its revolving credit facility to provide for $350 million of funds available, which availability is subject to reduction in order to maintain compliance with certain financial covenants.

Corporate Highlights

• Health systems continue to choose Omnicell as a long-term partner for their pharmacy technology strategy, with several customers extending their sole-source agreements and one competitive conversion achieved during the quarter.
• Omnicell’s Central Pharmacy Dispensing Service appears to be gaining momentum in the market as many health systems seem to be recognizing the benefits to patient safety and workflow efficiency of automating central pharmacy operations through a comprehensive solution encompassing advanced robotics, dispensing optimization tools, and expert services.
• As health systems expand pharmacy care beyond the four walls of the hospital, Omnicell’s Specialty Pharmacy Services offering should provide a revenue-generating opportunity, while helping to support important patient care initiatives. Health systems are choosing Omnicell’s management services expertise to help drive financial and clinical outcomes for this rapidly growing area of healthcare.

Restructuring

Omnicell plans to take action as it relates to cost containment across the business, including a headcount reduction across our business functions, and is expecting approximately $12 million - $18 million of non-recurring restructuring and related charges related to the cost containment plan. The Company expects to incur a majority of the charges in fourth quarter of 2023 and substantially complete the plan by end of second quarter of 2024, subject to local law and consultation requirement. Annualized cost savings of $45 million - $55 million, approximately 75 percent of which are expected to be in Operating Expenses, are expected. A majority of the benefit from the cost actions is anticipated to be realized beginning in the first quarter of 2024 with a smaller portion of the savings expected as the year progresses. The cost actions should be partially offset by year over year increases in compensation and vendor price increases.

Updated 2023 Guidance

For the full year 2023, the Company expects bookings to be between $850 million and $950 million. The Company expects full year 2023 total revenues to be between $1.135 billion and $1.155 billion. The Company expects full year 2023 product revenues to be between $705 million and $715 million, and full year 2023 service revenues to be between $430 million and $440 million. The Company expects full year 2023 technical services revenues to be between $222 million and $227 million, and full year 2023 Advanced Services revenues to be between $208 million and $213 million. The Company expects full year 2023 non-GAAP EBITDA to be between $123 million and $133 million. The Company expects full year 2023 non-GAAP earnings per share to be between $1.65 and $1.80 per share.

For the fourth quarter of 2023, the Company expects total revenues to be between $247 million and $267 million. The Company expects fourth quarter 2023 product revenues to be between $142 million and $152 million, and fourth quarter 2023 service revenues to be between $105 million and $115 million. The Company expects fourth quarter 2023 non-GAAP EBITDA to be between $9 million and $19 million. The Company expects fourth quarter 2023 non-GAAP earnings per share to be between $0.07 and $0.22 per share.

The Company’s fourth quarter and full year 2023 guidance has been adjusted to include the anticipated effects and expected impact of current macroeconomic headwinds.

The table below summarizes Omnicell’s fourth quarter and updated full year 2023 guidance outlined above.

The Company does not provide guidance for GAAP net income or GAAP earnings per share, nor a reconciliation of these forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures on a forward-looking basis because it is unable to predict certain items contained in the GAAP measures without unreasonable efforts. These forward-looking non-GAAP financial measures do not include certain items, which may be significant, including, but not limited to, unusual gains and losses, costs associated with future restructurings, acquisition-related expenses, and certain tax and litigation outcomes.

Omnicell Conference Call Information

Omnicell will hold a conference call today, Thursday, November 2, 2023 at 8:30 a.m. ET to discuss third quarter 2023 financial results. The conference call can be monitored by dialing (888) 550-5424 in the U.S. or (646) 960-0819 in international locations. The Conference ID is 9581556. A link to the live and archived webcast will also be available on the Investor Relations section of Omnicell’s website at http://ir.omnicell.com/events-and-presentations/.

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About Omnicell

Since 1992, Omnicell has been committed to transforming the pharmacy care delivery model in an effort to optimize financial and clinical outcomes across all settings of care. Through a comprehensive portfolio of automation and advanced services, Omnicell is uniquely positioned to address evolving healthcare challenges, connect settings of care, and streamline the medication management process. Healthcare facilities worldwide partner with Omnicell to help increase operational efficiency, reduce medication errors, improve patient safety, and enhance patient engagement and adherence, helping to reduce costly hospital readmissions. To learn more, visit omnicell.com.

From time to time, Omnicell may use the Company’s investor relations website and other online social media channels, including its Twitter handle www.twitter.com/omnicell, LinkedIn page www.linkedin.com/company/omnicell, and Facebook page www.facebook.com/omnicellinc, to disclose material non-public information and comply with its disclosure obligations under Regulation Fair Disclosure (“Reg FD”).

OMNICELL and the Omnicell logo are registered trademarks of Omnicell, Inc. or one of its subsidiaries.

Forward-Looking Statements

To the extent any statements contained in this press 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. Without limiting the foregoing, statements including the words “expect,” “intend,” “may,” “will,” “should,” “would,” “could,” “plan,” “potential,” “anticipate,” “believe,” “forecast,” “guidance,” “outlook,” “goals,” “target,” “estimate,” “seek,” “predict,” “project,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to the occurrence of many events outside Omnicell’s control. Such statements include, but are not limited to, Omnicell’s projected bookings, revenues, including product, service, technical services and Advanced Services revenues, non-GAAP EBITDA, and non-GAAP earnings per share; expectations regarding our products and services and the expected benefits; our ability to deliver long-term value; statements related to the expected timing of incurring costs and completion of the cost containment plan, and the expected costs, related charges, and savings under the cost containment plan; and statements about Omnicell’s strategy, plans, objectives, goals, vision, and planned investments. Actual results and other events may differ significantly from those contemplated by forward-looking statements due to numerous factors that involve substantial known and unknown risks and uncertainties. These risks and uncertainties include, among other things, (i) unfavorable general economic and market conditions, including the impact and duration of inflationary pressures, (ii) ability to realize the benefits of our expense containment initiatives, (iii) restructuring may take longer than expected, costs may be greater than anticipated or that the savings may be less than anticipated; (iv) the Company’s efforts may have an adverse impact on the Company’s internal programs, and Omnicell’s ability to recruit and retain skilled and motivated personnel and may be distracting to management, (iv) Omnicell’s ability to take advantage of growth opportunities and develop and commercialize new solutions and enhance existing solutions, (v) reduction in demand in the capital equipment market or reduction in the demand for or adoption of our solutions, systems, or services, (vi) delays in installations of our medication management solutions or our more complex medication packaging systems, (vii) risks related to Omnicell’s investments in new business strategies or initiatives, including its transition to selling more products and services on a subscription basis, and its ability to acquire companies, businesses, or technologies and successfully integrate such acquisitions, (viii) risks related to failing to maintain expected service levels when providing our Advanced Services or retaining our Advanced Services customers, (ix) Omnicell’s ability to meet the demands of, or maintain relationships with, its institutional, retail, and specialty pharmacy customers, (x) risks related to climate change, legal, regulatory or market measures to address climate change and related emphasis on ESG matters by various stakeholders, (xi) changes to the 340B Program, (xii) Omnicell’s substantial debt, which could impair its financial flexibility and access to capital, (xiii) covenants in our credit agreement could restrict our business and operations, (xiv) continued and increased competition from current and future competitors in the medication management automation solutions market and the medication adherence solutions market, (xv) risks presented by government regulations, legislative changes, fraud and anti-kickback statues, products liability claims, the outcome of legal proceedings, and other legal obligations related to healthcare, privacy, data protection, and information security, including any potential governmental investigations and enforcement actions, litigation, fines and penalties, exposure to indemnification obligations or other liabilities, and adverse publicity as a result of the previously disclosed ransomware incident, (xvi) any disruption in Omnicell’s information technology systems and breaches of data security or cyber-attacks on its systems or solutions, including the previously disclosed ransomware incident and any potential adverse legal, reputational, and financial effects that may result from it and/or additional cybersecurity incidents, as well as the effectiveness of business continuity plans during any future cybersecurity incidents, (xvii) risks associated with operating in foreign countries, (xviii) Omnicell’s ability to recruit and retain skilled and motivated personnel, (xix) Omnicell’s ability to protect its intellectual property, (xx) risks related to the availability and sources of raw materials and components or price fluctuations, shortages, or interruptions of supply, (xxi) Omnicell’s dependence on a limited number of suppliers for certain components, equipment, and raw materials, as well as technologies provided by third-party vendors, (xxii) fluctuations in quarterly and annual operating results may make our future operating results difficult to predict, (xxiii) failing to meet (or significantly exceeding) our publicly announced financial guidance, and (xxiv) other risks and uncertainties further described in the “Risk Factors” section of Omnicell’s most recent Annual Report on Form 10-K, as well as in Omnicell’s other reports filed with or furnished to the United States Securities and Exchange Commission (“SEC”), available at www.sec.gov. Forward-looking statements should be considered in light of these risks and uncertainties. Investors and others 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 of this press release. Omnicell assumes no obligation to update any such statements publicly, or to update the reasons actual results could differ materially from those expressed or implied in any forward-looking statements, whether as a result of changed circumstances, new information, future events, or otherwise, except as required by law.

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”). Management evaluates and makes operating decisions using various performance measures. In addition to Omnicell’s GAAP results, we also consider non-GAAP revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share, non-GAAP diluted shares, non-GAAP EBITDA, non-GAAP EBITDA margin, and non-GAAP free cash flow. These non-GAAP results and metrics should not be considered as an alternative to revenues, gross profit, operating expenses, income from operations, net income, net income per diluted share, diluted shares, net cash provided by operating activities, or any other performance measure derived in accordance with GAAP. We present these non-GAAP results and metrics because management considers them to be important supplemental measures of Omnicell’s performance and refers to such measures when analyzing Omnicell’s strategy and operations.

Our non-GAAP revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share, non-GAAP EBITDA, and non-GAAP EBITDA margin 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 such period that directly drive operating income in such 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 believe we should invest in research and development, fund infrastructure growth, and evaluate the effectiveness of marketing strategies. In calculating the above non-GAAP results: non-GAAP revenues excludes from its GAAP equivalent item a) below; non-GAAP gross profit and non-GAAP gross margin exclude from their GAAP equivalents items a), b), c), f), and h) below; non-GAAP operating expenses excludes from its GAAP equivalents items b), c), d), e), f), g), h), and j) below; non-GAAP income from operations and non-GAAP operating margin exclude from their GAAP equivalents items a), b), c), d), e), f), g), h) and j) below; and non-GAAP net income and non-GAAP net income per diluted share exclude from their GAAP equivalents items a) through j) below. Non-GAAP EBITDA is defined as earnings before interest income and expense, taxes, depreciation, amortization, and share-based compensation, as well as excluding certain other non-GAAP adjustments. Non-GAAP EBITDA and non-GAAP EBITDA margin exclude from their GAAP equivalents items a), b), d), e), f), g), h), i), and j) below:

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 or other items.

We believe that the presentation of non-GAAP revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share, non-GAAP EBITDA, and non-GAAP EBITDA margin is warranted for several reasons:

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

Non-GAAP diluted shares is defined as our GAAP diluted shares, excluding the impact of dilutive convertible senior notes for which the Company is economically hedged through its anti-dilutive convertible note hedge transaction. We believe non-GAAP diluted shares is a useful non-GAAP metric because it provides insight into the offsetting economic effect of the hedge transaction against potential conversion of the convertible senior notes.

Non-GAAP free cash flow is defined as net cash provided by operating activities less cash used for software development for external use and purchases of property and equipment. We believe free cash flow is important to enable investors to better understand and evaluate our ongoing operating results and allows for greater transparency in the review and understanding of our overall financial, operational, and economic performance, because free cash flow takes into account certain capital expenditures and cash used for software development necessary to operate our business.

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:

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 as well as in Omnicell’s other reports filed with or furnished to the SEC.

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