Good evening. My name is Michel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Omnicell First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn this call over to Mr. Peter Kuipers. Please go ahead, sir.

Good afternoon and welcome to the Omnicell first quarter results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. Joining me today is Randall Lipps, Omnicell Founder, Chairman, President and CEO. 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 in our press release today, in the Omnicell Annual Report on Form 10-K filed with the SEC on February 26, 2016, and in other more 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 April 28, 2016, and all forward-looking statements on this call are made 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. Finally, this conference call is a property of Omnicell, Inc. and any taping, other duplication or rebroadcast without the expressed written consent of Omnicell, Inc. is prohibited. Randall will first cover an update on our business, then I’ll cover our results for the first quarter of 2016. Following our prepared remarks, we will take your questions. Our first quarter financial results are as usual included in our earnings announcement, which was released earlier today and is also posted in the Investor Relations section of our website at www.omnicell.com. Let me turn over the call to Randall.

Thanks, Peter. Good afternoon, everyone. We’re excited to discuss our first quarter results and proud of our performance in the first quarter, continuing our consistent track record over the past several years. For the first quarter, we exceeded our revenue guidance and analyst expectations with record quarterly non-GAAP revenue of $174 million. Together with good cost and integration execution, this revenue strength resulted in non-GAAP ESP of $0.35, also above analyst expectations. Bookings momentum for new and competitive conversions continues to be strong, driven by our award winning differentiated products. With the acquisition of Aesynt, Omnicell has gained an additional 10% of the Medication, Automation and Analytics market. On a combined basis, new and competitive conversions accounted for approximately 34% of first quarter bookings. This was another strong bookings quarter for the Omnicell legacy products with new and competitive conversion rates equal to the fourth quarter of 2015 and a robust quarter for the Aesynt products. Aesynt business has traditionally focused on expanding revenue from the existing customer base with strong recurring revenue. We do think that the blended customer base gives a very strong platform for future growth. Now on January 5, 2016, we closed the acquisition of Aesynt. The Aesynt business based in Cranberry Township, Pennsylvania is a leader in enterprise medication management with specific products in IV compounding, Central Pharmacy automation, point of care solutions, and enterprise software products. Our integration of Aesynt has been progressing very well. We have integrated the sales and field teams in North America to enable one face and contact through the customer. As part of this integration, we had a modest reduction in headcount in early April and we expect no impact on bookings and revenue in the second quarter from this sales and field integration. We have previously prepared a…

Thank you, Randall. I'll discuss the summary of our first quarter financial results and our guidance for the second quarter of 2016. Our first quarter 2016 GAAP revenues of $171 million or up 47% from the same quarter last year and up 31% sequentially. Strong demand in revenue was driven by both expansion and upgrades and existing customers, as well as by new and competitive conversion customers. We have seen particular strength of the combined portfolio to enable strategic and tailored solutions for customers. Earnings per share in accordance with GAAP were a net loss of $0.01, which is down from $0.17 in the first quarter of 2015. GAAP gross margin was at 47% for the quarter. In addition to GAAP financial results, we report our results on a non-GAAP basis, which excludes stock compensation expense and amortization of annual assets, associated with acquisition, one-time acquisition related expenses and the acquisition accounting impacts related to deferred revenue and inventory fair value adjustments. We use non-GAAP financial statements in addition to GAAP financial statements because we believe it is useful for investors to understand acquisition amortization related costs and non-cash stock compensation expenses that are a component of our reported results as well as one-time events such as the gain on the Avantec investment in 2Q 15 and one-time acquisition related expenses. The full reconciliation of our GAAP to non-GAAP results is included in our first quarter earnings press release and is posted on our website. Our first quarter 2016 non-GAAP revenues of $173.7 million were up 49% from the same quarter last year and up 33% sequentially. On a non-GAAP basis, earnings per share were $0.35 in the first quarter of 2016, up $0.06 from the same quarter last year. Non-GAAP adjusted earnings before interest, taxes depreciation amortization was $25.7…

Well, let's open it up for operator for questions and we'll then come back to me. Operator?

[Operator Instructions] And the first question comes from the line of Mohan Naidu with Oppenheimer.

Thanks for taking my questions, Randy and Peter congratulation on a great start to the year. Randy, maybe on the booking you guys had a series of course with fairly high mix of large deals, can you give us a sense of your pipeline with such deals and what is driving these cell systems to make such massive transformational deals?

Yeah, I think as we've seen consolidation continue to play out and the provider of healthcare space, we continue to see also providers act with the standardization toward their systems starting with their ERP systems, the health record systems and then their new systems like ours. So, it was more a demonstrative feeling in the marketplace where people what to go with one vendor and across the whole group. So I think that allows us to have a good approach to our enterprise feature set that we have and for our pipeline I think is consistent with what it’s been, which is around 30ish percent on a go-forward basis continuing to get new accounts and competitive wins.

And specifically on the UnityPoint deal, I thought the press release kind of read that the implementation is going to be done by the end of year. How confident are you with that completion, I thought it was aggressive given the size of the scale.

Yeah, this is one of the deals where we probably were already doing some of the pre-install work before the actual purchase order came through because the actual vendor of choice was made much earlier than the final finding of the documents and the purchase order. So there is a lot that's already going on there, there is a lot that's moving forward on that. So we feel really confident and then really we're driven by what the customers want and this customer really wants to move at this speed to meet their needs. So we are adjusting our rate to make sure they get what they need.

Maybe one question for Peter. The Medication Adherence continue to be weak in the quarter, can you give a sense of what's going on in the product side on the Medication Adherence?

Can you repeat that, did you say EAT or --?

Medication Adherence segment.

So you're asking about the year-over-year of the segment?

Yeah that's right.

So I would say, so year-over-year revenue is down slightly, there is a little bit of FX impact there, we are ramping up our automation products that you've seen also earlier. In the call I want to point out though that the profitability of the segment definitely has increased. Year-over-year we had a price increase earlier this year as well and we have taken some production cost actions as well that are reflected now in the margin.

Okay. One last question on M5000, is it still on track for Q2?

Yeah, this is Randy. Very frustrating, M5000 is not on track for Q2. We are still struggling with the large variability of SKUs and the ability to get those to throughput that. We would find acceptable and so I'm not going to forecast when it's ready anymore. I am just going to make our announcement when it's ready, but it wasn’t a very big part of the plan for this year, so it does not have any impact on the plant, but it is a very strategic place where we want to continue to pursue the automation, because we think that really is keeping back some of the growth in medication here and so it’s having the proper types of medications and so we're working very not only on that product but strategically in that area to figure out how to continue to bring automation to the market segment.

All right, that was very helpful. Thank you very much for taking my question.

Your next question comes from the line of Jamie Stockton with Wells Fargo.

Yeah, good evening. Thanks for taking my questions. I guess maybe the first one and I don’t if this is for Randy or Peter, but if M5000 is maybe not on track necessarily and it’s not a huge deal but that's a little less business than you might have otherwise expected this year. Is there any offset to that that might be coming from the Aesynt business performing better than you might have originally expected? I think that you guys were assuming that Aesynt would be down somewhat in 2016 because of the integration turbulence. If you could just touch on that that would be great.

Yes, thank Jamie for the question. Couple of answers there, right, so we had a really strong first quarter probably a little bit ahead of where we thought we would be. So that's a good sign and we are keeping - full year guidance remains unchanged though. You can also see that in [indiscernible] we're driving more profitability as well. So not only top line like Randy talked about earlier we are definitely looking at sourcing coming into the market with automation this year from adherence. So overall it holds really well together.

Okay, that's great. You may have said it and I missed it, did you give the Aesynt revenue during the quarter?

No, we don't. Like in earlier earnings calls what we have said and what we experienced actually that with the combination now, with the combined product portfolio that we actually do have customers that do change products, if you will, within the product portfolio and we don’t measure the company separately any more as we have crossovers and we also now have realigned resources like with sales and field realignment that we executed in April.

Okay. All right, that's great. I'll leave it there. Thank you.

Your next question comes from line of Matt Hewitt with Craig Hallum.

Hey, good evening guys, this is actually Dillon on for Matt. Digging into the UnityPoint when that contract structure of the sole provider for 10 years, has that been the typical structure of deals in the past and if it’s not is that the type of structure you guys are pursuing in the future.

Yeah, typically we pursue - we start at 10 years, sometimes it gets down to seven, but most of the time it’s 10 years. Many times it takes several years just to roll out the portfolio to a customer, so we don’t put everything in one, so you don’t want to have a five year term or something like that, but then you are having to readjust sort of half way through the relationships, but 10 years is typical target.

And then did that RFP start prior to the announcement in closing of Aesynt and if it did when did you guys did announce that and close that business with kind of the domino that got it over the goal line?

That deal started before the Aesynt deal, probably it did not have as much of an impact. Aesynt was not in the running in the final two selection. So - but the fact that - since we closed that deal now we can come in and talk about the IV station and we can talk about EMM products software, some things we didn’t even have. So obviously some things to add on to that available customers like we have all customers is a big plus, more things in the sales bags, salesmen and sales women bag that is calling on the same point as the - contact point is always good. Just want to digress a little bit back to Jamie’s question I'd say that we're particularly excited about the IV station if you were to just kind of pick one of the products that kind of surprised us in the first 90 days. The enthusiasm and the market for that and people really wanting to solve the expense of outsourcing solution they have in place and put that solution in place to really make economic sense and there are some quality and stability issues that it solve as well. We put it out on the example on the phone call. So we're still early on in the acquisition, still lot of enthusiasm, but almost in every case I’d say that it’s exceeded our expectations and what we thought we were going to get particularly the sense also have been - I mean they have just meshed in so well that they [indiscernible] really getting us a lot of momentum in the marketplace.

Okay. Last one for Peter. Gross margins came in a little bit below where we were expecting at least. Is there anything that you'd like to highlight there or is that - can we expect that for the new run rate moving forward?

So we are actually pleased with the gross margin, of course now this quarter and the reported results, the gross margin is a result of the two company companies if you will and we're happy with the pricing, we're happy with gross margin and we're happy with the productivity actions and programs in the manufacturing space as well.

Thanks. Congrats on the quarter.

Thank you.

Your next question comes from the line of Sean Wieland with Piper Jaffray.

Hi, thanks. Last quarter you were talking about some delays in Aesynt customers moving - contracts moving from bookings to revenue, do you have an update there?

Yeah, so what we - thank you, Sean, for the question. So what we said last time, those are referring to re-bookings, right, so we had a number of customers that had a contract with Aesynt legacy products now that we announced the deal actually want to stretch through some of the omnichannel products, unwind the contract, book a new contract if you will. So those are contracted now and they're being in installed on schedule.

Just to be clear, Sean, those were deals that were in the backlog when we acquired Aesynt, so these weren’t new deals and process. These were old deals that were in backlog expecting to be installed and revenued in the near future. Once we did the acquisition some of these deals in the old backlog folks came back and said, hey, I’d like a different mix than what I could have got from Aesynt only and now I want to either redo my contracts or repay for those and then re-setup the installation process. So that's been the disrupt - that’s been the biggest disruption and the ability to just kind of smash the two revenue and earnings pieces of the companies together. We haven’t lost any bookings, we haven't earned, I don’t think any customers have been upset, it’s just kind of redoing of some things that we are already in place because of the acquisitions has delayed some of the installs and therefore some of the revenue.

Okay. And on the M5000 timing, can you quantify maybe how much revenue is earmarked from that product this year just so we can size that a little better?

I would say under $5 million, less than $5 million.

And we don’t really - and as I said, Sean, just because we don’t really breakout specific products, product lines if you will.

Except for when Randy does.

Except for when you ask.

Okay, one last one I’d like to slide in if I could and that is this mix the gross profit that we saw between the two lines of businesses. Is that representative of what should happen for the balance of the year that kind of mix.

Yes, I think I confirmed that on the earlier question. Yes.

Okay, super. Thanks so much.

Thank you.

Your next question comes from the line of Steve Halper with FBR.

Hi, just a point of clarification. Your relative - when you are looking at the second quarter guidance you talked about timing of projects, is that the reason for the sequential decline in earnings and if you could provide any color on that that would be helpful.

Thanks, Steve, for the question. So I mean the additional kind of disclosure just to kind of reminder around the nature of our business is not - we did not put any script because of the outlook, it always has been, so just a clarification. We did exceed first quarter kind of from our own internal plans, perspective. There are no kind of known headwinds if you will whereas sequential decrease. We feel good about second quarter just wanted to give a range that works well.

Were there certain projects that hit earlier than expected?

I would just think it’s the timing of the deals and how we kind of had on their scoped in and we feel very good about the year, we feel very good about second quarter.

I think sequentially also, Steve, the last couple of years, in most years the second quarter revenue was smaller than the first quarter, so there is a little bit seasonality in there.

And is there any timing that we should consider about the integration cost that you are essentially absorbing. Is there more of it Q2 or did we get - did we work through most of that in Q1?

No, it’s equally spread throughout the year, roughly. We under-ran it a little bit in the first quarter. Still in the fourth quarter tiny bit higher, but it’s roughly equally spread throughout the year.

And when did you finish up the sales sort of rationalization?

Yeah. That was in the second week of April.

Second week in April. Okay, thank you.

Your next question comes from the line of Gene Mannheimer with Topeka Capital.

Thanks. Good afternoon and congrats to a good start to the year. I wanted to drill down a little bit more on the M5000 delay and just curious, given some of the tribulations there in getting them that product right, would you consider buying into the multi mid-market through some of the existing competitive solutions out there?

I think all the strategic options are open. We have a great sales engine to - particularly to institutional pharmacy. So we think that they are already using a lot of our consumable products and so adding some type of automation in addition to what we’re working on potentially could make sense. There aren’t a lot of options out there, but anything that would make sense that we could help customers move more quickly in this marketplace to help patients get their meds in the right format is something we would entertain if we can construct the right strategic deal.

Okay. Thanks, Randy. And in regards to the overall med adherence business, I know you called out a year-over-year decline, but my sense is that that business is largely recurring, growing mid-single-digit growth, what accounted for the hiccup there?

Well, like I said in earlier questions, we had a little bit of FX headwinds and we need to come out with automation like we talked about earlier. If you take one level down in the med adherence business, there is essentially two product lines there. One is single dose, it’s a very stable recurring revenue base and then the multimed, the Blister packs and multiple tablets if you will in each blister, that is a significant market and we do have a great position there. We're trying to get automation out to really crack that market open and keep leading that market.

Okay. Thanks, Peter. And last one for me and Randy, you talked about this with the excitement over the IV system, can you quantify possibly some of the revenue synergies that are coming from selling IV or enterprise dedication manager into the base or said differently, is that - is any of that built in to your view for the year today?

Well, so what we have said earlier, on the earlier calls, right, is that we have not counted on any revenue synergies within the fiscal year from both the IV solutions or the software solutions like EMM? Our sales teams have good traction. I think it's fair to say, a lot of enthusiasm about those solutions, but not counted into guidance on both bookings or revenue, and then of course we have to take into account also the sales cycle, 6, 9 to 12 months between initial call, initial meeting and actual close of the deal and install if you will.

Gene, I’d add two other things. We added on the investor deck sort of a market analysis of TAM. We believe that's about $0.5 billion TAM per annum. On that product, we are the market leader worldwide in that product and barely penetrated. So I guess I would say there are lots of opportunity there for automated IVs and probably particularly in the marketplace because of a lot of people moving to expensive outsourcing kind of creates an opportunity to do some in-sourcing with automation to help fill some of those needs.

And just to clarify, the $0.5 billion TAM is the annual US TAM by the fee products. There is close to another $0.5 billion TAM outside the US and you can find that in the investor deck on page 22.

[Operator Instructions] Your next question comes from the line of Raymond Myers with Benchmark.

Thank you. First question I have is, did you tell us what percentage of customers converted to the G4 in the first quarter?

We have not. So we reported 78% for the end of last year. It is higher now, closer to 80%.

Great, thank you. And then I wanted to touch on the deferred revenue for a second, you had $2.7 million of non-GAAP deferred revenue in the first quarter, which is the truer reflection of the business, is it the $173 million revenue figure or is it $171 million, can you describe that a little?

Yes. So that really is the result of purchase accounting. So in purchase accounting, you have to take a haircut on deferred revenue, you believe that in overtime, shipments occur and installation occur. So the $173.7 million of non-GAAP revenue that reflects the economic underlying activity.

Excellent, good. That's helpful. So when we then look at the Q2 guidance of 168 million to 175 million and compare that to the 173 million, is that Q2 guidance, including impact of significant amounts of non-GAAP deferred revenue. Or have the inventories which underlie that already been sold through in Q1?

It's roughly a similar amount. It’d be fair for you to put in your model because the deferred revenue again in our business gets installed between 9 and 12 months from when it gets to the balance sheet.

And when should we think about the deferred revenue adjustment going away, would that be by Q4?

Yes. Going at the 1Q next year, yes, by at the end of 4Q. Yeah.

Okay, great. And then if you could touch on this last question. Now that the businesses are combined, what percentage of the overall business would you estimate is recurring revenue today?

It is now closer to almost 40%. I think it's also - I think it’s used to be about 35%. I think about 39% now, because the SM business with the Central Pharmacy model has almost 50% recurring business. So that's a great revenue stream to have.

Your next question comes from the line of Mitra Ramgopal with Sidoti.

Good afternoon. Just a couple of questions. First, Peter, I don’t know, in terms of the first quarter, if you can give me a sense as to the mix you saw in terms of new customers, larger orders, et cetera. I remember in the second half of ‘15, you were affected a little by that in terms of the mix being skewed, is it more back to normal now?

Yes. Of course, we see with the addition, the mix changes as well, like Randy talked about earlier in the conference call on a combined basis. Bookings on new and competitive solutions were around 34%. So it definitely balances more, but we have a number of great customer wins, some of which we have alluded to here in the earnings script.

And in terms of the larger orders, are you seeing a lot more of that also or?

We have a number. Yeah. I mean, I wouldn’t say it’s as skewed if you will as early or last year. So I think it is more balanced, but because the size of the business now is bigger, we can also show more bigger deals if you will and have the capacity to install those. So that's a very few.

Okay, thanks. And then Randy a quick question regarding the organizational realignment, what should we expect from that going forward versus what we might not have been getting before?

Well, I think this has grown over the last couple of years in terms of acquisition and focus, and particularly with the Aesynt integration, putting that under a veteran of Omnicell to run the North American domestic business and Aesynt really did not have a lot of business outside of North America, other than the IV solution piece, which was manufactured and designed in Italy and a lot of shipments in pan Europe. So, that allows us to concentrate a lot of the integration activities and integration of the departments under a single leadership, and then [indiscernible] focus on other aspects of the business, the International, the IV robotics and the med adherence piece, which is also growth areas of the hospital. It allows us to function and deliver on the task that we have ahead of us in very specific ways and unburdens the company from a multi-focus and several departments by giving the company to different leaderships to drive the business and I think it's going extremely well and it continues to feel good.

And there are no further audio questions at this time. I would like to hand the conference over to Randall Lipps for closing remarks.

Well, again, thanks for joining us today. Obviously, a good quarter for us to do great acquisition, to deliver great results and really continue to fuel the company with new competitive wins and with a broader portfolio. I specifically want to recognize the Aesynt employee base who has joined the Omnicell family with enthusiasm, been right there with us step-by-step to make sure we can be successful, while our customers can be successful and then we can be successful for one another. Thanks for joining us today. We'll see you next time.

This concludes today's conference call. We thank you for your participation and ask that you please disconnect your lines.