Omnicell, Inc.

Good morning and welcome to the OmniCell Second Quarter 2021 Financial Results Conference Call. On the call with me today are Randall Lipps, OmniCell Chairman, President, CEO and Founder, Scott Seidelman, Executive Vice President and Chief Commercial Officer, and Peter Kuipers, Executive Vice President and Chief Financial Officer. This call will include forward-looking statements subject to risk, 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 in our press release today, in the OmniCell Annual Report on Form 10-K filed with the SEC on February 24th, 2021, and in other recent reports filed with the SEC. please be aware that you should not place undue reliance on any forward-looking statements made today. The date of this conference call is July 29, 2021, and all forward-looking statements made on this call are based on the beliefs of OmniCell as of this date only. Future events or simply the passage of time may cause these beliefs to change, and we undertake no obligation to update these forward-looking statements. 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. We've refreshed and expanded the investor relations section of our website, where you can find our first corporate sustainability report and other information. On our call today, Randall will provide an update on our business. After Randall's remarks, Scott will provide perspective on the healthcare industry and our market positioning. Finally, Peter will cover our results for the second quarter, our guidance for the third quarter, and commentary on our second half 2021 outlook. Our results were released earlier this morning and are posted in the Investor Relations section of our website at onresale.com. Additionally, we'd like to remind you that during this call, we will discuss some non-GAAP financial measures, Reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are included in our financial results press release. I will now turn the call over to Randall.

Thanks, Kathleen, and good morning. And thank you for joining us today. OmniCell continues to deliver strong results, and we are making significant progress towards the five-year outlook we outlined earlier this year. Before I dive in, I'd like to take a moment to welcome investors who may be new to OmniCell and share a bit of our history and our story. OmniCell is a healthcare IT company that was founded on the idea that innovation and technology that addressed complex medication management systems and workflows could help hospitals, health systems, and pharmacies improve patient care and health outcomes. We are proud of the pharmacy innovations we have brought to the market throughout our history, and we are humbled to be considered a trusted partner by many leading hospitals, health systems, and retail pharmacies. In 2019, OmniCell debuted the vision of the autonomous pharmacy, a zero-era, fully automated digital medication and supply management delivery platform that will enable pharmacists, nurses, and other clinicians to focus more on patients and less on non-clinical and administrative tasks. COVID has put a spotlight on the need for investment in medication management infrastructure, and the value OmniCell brings has never been more apparent. This is our purpose, to deliver a better way and it extends across all of our stakeholders and within the communities we serve. We are excited about the opportunities ahead for Amizel and welcome those shareholders that have recently joined us. Turning to our financial results, as a reminder of our previously stated five-year outlook, we are targeting a revenue CAGR of 14 to 15% from 2021 to 2025, reaching $1.9 billion to $2 billion in 2025. And we're targeting a non-GAAP operating margin of 21% and a non-GAAP EBITDA margin of 25% by 2025. Hospitals and health systems are experiencing a renaissance of importance in the health care continuum. And the role of the pharmacist in both acute care and non-acute care settings is increasing in importance. A key driver of our growth strategy is the continued customer adoption of our advanced services capabilities, which is seeing strong market interest and supports our continued competence in our long-term view. We are also executing on value-enhancing M&A. Earlier this week, we announced our intent to acquire FDS, Amplicare, a leading pharmacy SaaS solution provider that shares our mission to transform the practice and business of retail pharmacy. This acquisition will add a comprehensive and differentiated suite of financial management, analytics, and population health solutions to OmniCell's enlivened health division, broadening offerings that we believe will help pharmacies to measurably improve patient health outcomes and while enabling new clinical services and expanding their growth and profitability opportunities. Scott will discuss the acquisition in more detail, but we are excited to welcome the FDS AmpliCare team to Omnicell and look forward to their contributions as we continue to advance our vision of the autonomous pharmacy. In terms of second quarter financials, I am proud of the strong results the team delivered this quarter. We exceeded the top end of our guidance ranges for revenue, non-GAAP EBITDA, and non-GAAP EPS. Our second quarter results include record revenues of $273 million, record non-GAAP EBITDA of $61 million, and record non-GAAP earnings per share of $0.97. We believe these strong results reflect our customers' trust in OmniSale and their recognition of the significant benefits our products, solutions, and services bring to them. Our second quarter performance also reflects excellent operational execution and financial discipline, delivering the record non-GAAP EBITDA of $61 million and strong free cash flow of $58 million. Peter will review the financial results and the guidance for the third quarter and total year in more detail later in the call. Our third quarter guidance and second half 2021 outlook incorporate the anticipated effects of inflationary headwinds that many others are also facing. Over the last 29 years, we have experienced several challenging economic environments and have executed successfully within each of them. We are seeing cost inflation primarily due to semiconductor supply constraints, and to a lesser extent, freight and raw material cost increases. We have worked diligently to ensure our customers' implementation timelines remain unaffected and are pleased to note that we have high confidence in our supply of critical semiconductor and other key components through 2022. We're also taking steps to offset these higher costs. We remain very confident in our growth trajectory outlined in our five-year long-term outlook. Before I turn it over to Scott, I'd like to discuss OmniCell's ongoing efforts to have best-in-class corporate governance and our ongoing board refreshment process. We're very pleased to have announced the appointment of Edward Bosa to our board of directors. Ed brings nearly four decades of proven leadership in the financial community and a unique perspective as an early proponent of ESG initiatives. This independent viewpoint complements and strengthens our board, and we're looking forward to benefiting from his experience. With Ed's appointment, Omni Sales Board now includes eight independent directors who collectively bring a broad range of skills and experience to the board. Ed's appointment reflects our commitment to regular board refreshment and corporate governance enhancements. We are continuously focused on advancing our corporate governance standards as we work to deliver long-term value for all of our stakeholders. Looking ahead, we are excited to continue building on the momentum in our business and enabling our customers to solve the complex challenges of dedication management and adherence And in doing so, improve patient care. We appreciate your support and confidence in OmniCell. With that, let me turn it over to Scott.

Thank you, Randy. Last quarter, I discussed how we evolved our organizational design over the last three years from one that delivered a single hardware product to one that can deliver new products and technology-enabled services built on the cloud. These changes to position on the sell for the future included transforming our sales and customer organizations, but also notably included making significant investments in our product management and software engineering organizations. All of these changes were supported by our new world-class commercial leadership team. As a result of these organizational changes and our hard work over the last three years, we feel confident in our strategy and are truly excited about our innovation pipelines. On today's call, I would like to provide an overview of progress against that strategy and some areas of opportunity for innovation. When you look at healthcare today, it is clear that the industry is at an historic inflection point in terms of how healthcare is accessed and delivered. This change is being driven by the confluence of several key factors. First, hospitals are experiencing a renaissance of importance in the healthcare continuum. After over a decade of debating whether we have too many hospital beds in the U.S., it is clear now that the hospital plays a critical role in care delivery. And because scale matters, consolidation will continue and the top 300 health systems will be larger and more important. Second, some care will move from acute care and other institutional settings to the home. And not only are new entrants serving this emerging market, but traditional players like institutional pharmacies, retail pharmacies, and health systems will play a necessary role in caring for patients in the home. Third, the role of the pharmacist, both in retail and acute care settings, is increasing in importance. And as such, the pharmacist needs tools and services to free them from the day-to-day administrative work in order to deliver care directly to patients. Lastly, the cloud is now clearly a dominant mode of technology enablement for providers. We believe that these factors are driving a transformation of the pharmacy care delivery model and OmniCell is uniquely positioned to not only define that transformation, but share in the opportunities that emerge. I would like to highlight that OmniCell's products and solutions are installed in the majority of the top US health systems, and we are notably the sole source supplier to 148 of the top 300 health systems, reflecting the confidence our customers have in us to provide them the products they need today and long into the future. We are seeing more competitive wins now than we have at any time in our history, and it is clear that our full portfolio of products makes OmniCell the dominant pharmacy automation player in the health system market. This is evident by our recent addition of Scripps Health. While we are implementing automated dispensing systems for patient care areas and operating rooms, cloud-based intelligence solutions, and tech-enabled services. As we have said previously, this win is a competitive conversion for us. Based on the strength of our competitive conversion and renewals, it is clear that our strategy is working. Core to that strategy is a comprehensive portfolio of solutions. And just this morning, we announced that Spartanburg Regional Healthcare has expanded its partnership with Omnicel to become our first customer to fully extend the end-to-end medication management platform with the addition of Omnicel One, our cloud-based intelligence service, and our central pharmacy dispensing and compounding services. This is a great example of how OmniCell's advanced services portfolio can help partners like Spartanburg achieve the vision of the fully autonomous pharmacy. Now, looking at the expansion of care delivery to the home setting, while this market will attract new entrants, we also believe that traditional players like institutional pharmacies, retail pharmacies, and health systems will play a critical role in managing those patients in the home. One example of how OmniCell is supporting these new care delivery models is through our expanded partnership with Chartwell. a leading provider of home infusion and specialty pharmacy. Earlier this month, we announced that Chartwell selected our IVX workflow sterile compounding technology to manage chemotherapy medication preparations. This will enable improved clinical and operational outcomes and allow Chartwell to lead the way to zero-error medication management as it provides home-based care. We are exploring and increasingly excited about the opportunity in the ambulatory and home care markets and expect to continue delivering innovations in the future. As health systems continue to expand in the ambulatory market through retail and specialty pharmacy offerings, the 340B program is critical to their success. As a result, we continue to see strong demand from customers for our OmniCell 340B service, and we now have an integrated go-to-market strategy and are making progress against realizing synergies across the product portfolio. turning to the increasingly important role of the pharmacist. As this shift continues, the automation of medication management is critical to free pharmacists from their day-to-day administrative work in order to deliver care directly to patients. This is especially true in the retail setting, which we predominantly serve through our Enliven Health service. Enliven Health delivered strong second quarter results as we continue to expand and deepen key customer relationships. Notably in the quarter, we expanded our relationship with Walmart, which has continued to roll out key and live and health solutions to additional Walmart pharmacies around the U.S. And we announced the new strategic partnership with WSPC, a Washington state-based cooperative that represents more than 300 independent pharmacies nationwide. In addition to strong customer momentum in the quarter, Enliven Health continues to innovate. In Q2, Enliven Health launched Personalized Interactive Voice Response, a SaaS technology solution that automates patient communications and frees up pharmacists to spend more quality time with patients. As the first release of Enliven Health's new omnichannel communications platform, Personalized IVR is an inbound recognition solution that enables patients to seamlessly engage with the pharmacy via telephone without ever having to speak to a staff member. This builds off Enliven Health's strategic partnership with Twilio, the leading cloud communications and customer engagement platform that we announced in Q1. On the clinical care side, Enliven Health just launched two new capabilities for Care Scheduler, a digital solution that automates the scheduling, communications, and reporting for vaccinations and point-of-care testing for pharmacies. The new care scheduler enhancements include an AI-driven messaging solution to increase outreach to target patients for flu vaccines and fully electronic forms for flu documentation. And last but not least, we announced our acquisition of FDS Amplicare, which adds several key capabilities to Enliven Health's platform and expands our channel reach into independent pharmacies. Upon closing the acquisition, Enliven Health will have a comprehensive SaaS platform for retail and be capable of serving the entire retail pharmacy market. Finally, the cloud is now a dominant mode of technology enablement for providers, and OmniCell is well positioned. Year to date, we have added nearly 50 cloud software engineers to our employee base, and we continue to deliver new innovations on the cloud. Later this summer, we will release for general availability a cloud-hosted version of our OmniCenter platform, which is the primary software for our core products. This is a major milestone for our customers' journey to the cloud. We are excited about the opportunity that the cloud offers, and OmniCell is well-positioned to be an innovator in this area. In summary, in light of this rapidly changing healthcare environment, OmniCell is uniquely positioned to transform the pharmacy care delivery model and enable significant improvements in quality, provider efficiency, and reductions in cost. We are solely focused on this transformation and excited about the opportunity ahead. Now I would like to turn the call over to Peter to discuss our second quarter financial and operational results and third quarter guidance and second half 2021 outlook.