Omnicell, Inc. — FY 2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014; the filing also reports unaudited fourth-quarter results. Omnicell supplies healthcare medication and medical-supply automation, analytics, and medication-adherence products and services. The 2014 results include Surgichem from its August 2014 acquisition. Amounts below are in U.S. dollars.
Financial performance and position
| Metric | FY 2014 | FY 2013 | Change |
|---|---|---|---|
| Revenue | $440.9 million | $380.6 million | +16% |
| Gross profit / margin | $233.9 million / 53% | $203.4 million / 53% | Gross profit +15% |
| Operating income / margin | $49.6 million / 11% | $35.3 million / 9% | +40% |
| Net income | $30.5 million | $24.0 million | +27% |
| Diluted EPS | $0.83 | $0.67 | +24% |
| Cash from operations | $65.2 million | $55.3 million | +18% |
Product revenue was $360.3 million, up 17%; service and other revenue was $80.6 million, up 10%. Revenue mix was 80% Automation and Analytics and 20% Medication Adherence. Automation and Analytics revenue rose 17% to $354.1 million, with operating income of $47.6 million. Medication Adherence revenue rose 12% to $86.8 million, while operating income was $2.0 million; its gross margin declined to 36% from 38%.
Fourth quarter: Revenue was $121.5 million versus $105.8 million in Q4 2013; operating income was $13.5 million versus $11.1 million; net income was $9.2 million versus $6.8 million. Diluted EPS was $0.25 versus $0.19.
At year-end, cash and cash equivalents were $125.9 million, current assets $283.4 million, and current liabilities $112.3 million. Total liabilities were $170.1 million and stockholders’ equity $390.1 million. The company had no borrowings under its $75 million revolving credit facility and reported covenant compliance. Operating cash flow was partly offset by a $22.8 million increase in accounts receivable. Investing used $43.3 million, including $20.7 million for Surgichem, $11.9 million for property and equipment, and $10.4 million for software development. Stock repurchases totaled $24.1 million. No cash dividends were paid.
Changes, outlook and notable matters
- Bookings increased 11% to $364.0 million; backlog was $187.7 million, compared with $180.0 million at the end of 2013. U.S. hospital installations increased from 1,806 to 1,935.
- Management expected 2015 revenue to increase and intended to maintain operating margins similar to 2014. It expected R&D expense to increase from 6% to approximately 8% of revenue.
- Surgichem contributed $4.6 million in revenue and $0.1 million in operating losses after acquisition. Acquisition-related costs were approximately $1.1 million, partly offset by a $0.5 million reimbursement. A separate $0.4 million equity investment was written off in 2014.
- The filing was delayed after an employee alleged a customer “side letter” involving discounts and free products not reflected on final invoices. The investigation concluded March 25, 2015; management said controls remained effective in all material respects and no financial-statement changes were required. A putative securities class action filed March 19, 2015 alleges related misstatements; the company said it would defend the claims. The filing also describes pending patent-inventorship litigation; no loss accrual was recorded because management considered a loss reasonably possible, not probable, and could not estimate a range.
- Key risks include long sales and installation cycles, healthcare customer budget constraints, intense competition, reliance on suppliers and timely consumables production, acquisition integration, foreign-exchange exposure, and credit-agreement covenants. The company reported unqualified audit opinions on its financial statements and internal controls.
Important facts for investors to verify
- Whether the side-letter investigation’s findings, customer arrangements, and any related disclosures or litigation developments change.
- Whether backlog converts to installed, accepted revenue on schedule, given installation timing and the increase in receivables.
- Whether Medication Adherence margins recover and the Surgichem acquisition delivers expected benefits.
- Whether 2015 revenue and operating-margin expectations are achieved while R&D spending rises.
- Whether the company maintains cash generation, credit-covenant compliance, and effective controls amid continued growth and acquisitions.