Good afternoon. My name is Erica and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Omnicell Third Quarter Earnings Announcement. 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] Thank you, Mr. Peter Kuipers. You may begin your conference.

Thank you. Good afternoon and welcome to the Omnicell third quarter 2017 results conference call. At this time all participants are in a listen only-mode. Later we will conduct a Q&A 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 28, 2017 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 October 26, 2017 and all forward-looking statements made on this call are made 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 the property of Omnicell, Inc. and any taping, auto duplication or rebroadcast without the expressed written consent of Omnicell, Inc. is prohibited. Randall will first provide an update on our business then I will cover our results for the third quarter of 2017 and our guidance for the year. Following our prepared remarks, we will take your questions. Our third quarter financial results are, as usual, included in our earnings announcement which was released earlier today and is posted in the Investor Relations section of our website at omnicell.com. Our prepared remarks will also be posted in the same section. Let me now turn over the call to Randall.

Good afternoon everyone. We’re excited to discuss our third quarter results as well as our continued progress and scaling of the XT Series market introduction that is gaining momentum every day. We are pleased with our progress and continuous innovation to build and expand the industry leading platform of pharmacy automation. Specifically so far this year, we have launched our new XT Series in January, which received great responses and we experience continued momentum for both existing and new customers. Secondly in April we announced the launch of AcuDose software on XT hardware which allows our Aesynt customers to take full advantage of the XT Series. Last quarter, we announced the launch of the XT Series Automated Supply Dispensing system and the controlled substance dispenser module providing innovative, efficient and secure workflow for dispensing and administration of controlled substances. We provided rate of flexibility through new mobile capabilities in Central Pharmacy Manager to integrate automated inventory management more naturally into pharmacy workflows. We also expanded the medication interference ecosystem on the Omnicell platform with the addition of the new VBM 200F advanced automated packaging solution, which adds to the market leading timeline medication synchronization cloud-based software and the proprietary SureMed multimed blister cards. And lastly, we expanded performance centers core capabilities of operational improvements and to clinical outcomes and regulatory compliance through internal development and the acquisition of InPharmics positioning Omnicell as the partner of choice for health systems looking to drive improvement across all facets of medication management. Earlier this week we announced our Annual Innovation Day for investors and analysts, which will be held at the American Society of Health-System Pharmacists ASHP mid-year meeting on December 4, in Orlando, Florida. At that time, we will showcase Omnicell’s innovation and industry leading differentiated platform of solutions. As a technology…

Thank you, Randall. Our third quarter 2017 GAAP revenue of $187 million was up $6 million or up 3% sequentially, driven by the product sensation and related ramp-up of the XT Series launch. Earnings per share in accordance with GAAP were $0.16, which is up from a GAAP EPS of $0.05 in the third quarter of 2016. GAAP gross margin was 45.4% for the quarter or up 230 basis points from the second quarter this year. In addition to GAAP financial results, we report our results on a non-GAAP basis, which excludes stock compensation expense and amortization of intangible assets associated with acquisitions, onetime 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 cost and non-cash stock compensation expenses that are a component of our reported results as well as onetime events and onetime acquisition and restructuring-related expenses. A full reconciliation of our GAAP to non-GAAP results is included in our third quarter earnings press release and is posted on our website. Our third quarter 2017 non-GAAP revenues of $187 million were up 3% from the prior quarter driven by the continued ramp up of the XT Series market introduction. On the non-GAAP basis, earnings per share were $0.42 in the third quarter of 2017, which is above consensus and up $0.11 sequentially. We’re seeing good gross margin expansion as non-GAAP gross margin was 47.6% in the third quarter or up 230 basis points from the prior quarter. We expect gross margin to further increase in the fourth quarter as the XT Series will rollout continues to ramp up and we gain pro skill in efficiencies in manufacturing and…

Well, in summary definitely pleased with our execution in the third quarter and the continual ramp of XT. And as well excited about the new product introductions that we’ll be talking about and demonstrating at ASHP at or innovation day. And really I think the most exciting thing we’re seeing in the marketplace is just the adoption of the more systematic approach to medication management across all the venues both in hospitals and across post-acute and non-acute areas. And it’s just a lot of excitement because we really feel like as a company we’re grabbing hold of our mission to really impact healthcare in a significant way to bend the cost curve to improve outcomes in a real significant manner. And it’s very satisfying and it is satisfying for me and I think it satisfying all our employees who put their heart and soul into this company. So that concludes our prepared remarks. Let’s open it up for questions operator.

[Operator Instructions] And your first question does come from Matt Hewitt from Craig-Hallum Capital.

Two for me. First of all, I’m wondering if you could quantify what’s the hurricane impact was in the third quarter. It sounds like you had one customer in particular a large customer that was pushed to Q4. If you could quantify that and then the follow-up question relates to the growth rate that you’re stating for next year, your longer-term plan. As we look at next year 8% to 12% growth and then obviously the potential for M&A. But if you exclude that 8% to 12% growth next year historically you’ve talk about your bookings translating into revenues in six to nine months. You’re exiting this year at a much faster rate than 8% to 12%. I’m just trying to figure out or rationalize the delta here. Why the growth rate wouldn’t be faster next year? I’ll hang up and listen. Thank you.

Thank you, Matt. So if you look at the revenue performance in the third quarter, there was about a third to third to thirds and there was two drivers kind of compared to the midpoint of consensus. So about $1.5 million of each of those factors roughly, for the hurricane specifically which is your question. Then on the outlook, preliminary outlook for 2018, we definitely have a lot of momentum in our pipeline for the bookings. So we think we’ll be at the very high end of the 8% to 12%, EI at 12%. And potentially you are above that range, right? So will be the bookings growth as we can see it today, which is preliminary, it will solidify of course the visibility over the next couple of months. And then what we can see now for revenue growth what we said earlier is that’s for now, we see – we’re also in that 8% to 12% long-term range. And for now visibility is to the middle of that range, so EI close to 10% with potential upside as well. And it’s all about revenue timing, backlog timing and how it converts into revenue.

Great. Thank you.

Okay.

And your next question comes from Mohan Naidu from Oppenheimer.

My questions – Randy, Peter how should we bridge the growth rates over the long-term as you think about the various segments, if I think about the XT versus your Adherence and Performance Center, fluid robotics segment as you bridge from where we are right now to that 8% to 12% range?

Yes. There is specifically a breakout that we don’t provide specific product line guidance on kind of where revenues, we can give you a feel where we see the revenue growth. So of course, as expected I would think, so the dollar-wise the biggest driver in bookings is of course the XT Series upgrade cycle. But we definitely have order cycle as well. And please make sure you are at ASHP where we always now going forward, we’ll have product introductions. But for 2018 XT bookings will be the biggest compound. But we have nice and healthy growth also on other product lines like the multimed automated small footprint packager like PBM and associated software. Those also show a nice run rate. So all together if you will, our XT itself I would say that average up the growth rate overall. That’s kind of where we – we’ll leave it for now. But that can accelerate it further that as always.

Okay. Got it. Maybe one quick follow-up on the 15% margin target. Then you will be able to reach that in calendar 2018 or if you have a different timeframe to get to that. That would be useful.

Yes. So what we said in the prepared remarks, we think it will be at that 15% long-term goal in the fourth quarter. We continue to interest in the business. If you look at our Omnicell portfolio really the only innovator in the space with a integrated portfolio and there are opportunities both in segments where are in today. So refresh and come out with new products but also come out with Greenfield product. So from a R&D cost perspective, we likely expected to be roughly at the same percentage of R&D expense as we’ve done over the last couple of years. There might be a little bit of leverage over time on SG&A. But if you look at our market opportunities and we won’t – Randall said earlier on the call we definitely want to have maybe another significant XT. But we do want to have multiple simultaneous new products launches that impact both bookings growth and revenue growth. So that of course requires also investments in R&D and to some extend in SG&A.

Okay. I’ll leave it there. Thank you very much.

Okay. Thank you.

And your next question comes from Nina Deka from Piper Jaffray.

Hi, thanks for taking the question. Can you please provide some insight on what comprises the potential upside for next year to be above the midpoint and toward the higher end of the range? Or in other words, what would have to happen to get toward that 12%.

Well, I think traditionally we talk about next year 90 days from now. And so I think that probably has – we are just thought about the visibility we see now and so we’ll evaluate that again in 90 days and refine those statements later on. But XT is probably the biggest data in equation I would say. But there is a lot of upsides in the new growth. We have a lot of momentum in IV and Performance Center both, feel really good about those. Those do take a little longer in the backlog cycle, the backlog to revenue then maybe an XT would, but the biggest driver obviously is XT is just every customer has a reason to buy an XT from us just about. And we’ve already shipped to 600 sites, which is a large portion of our customer base in just 12 months adopted the product, and I just think that momentum is going to continue to go up and not go down as we move forward.

Thanks. And also what size of the 5% in long term inorganic growth target, if you could give us some more insight on your M&A strategy?

Yes, so this has unchanged from the last many years. So when we do acquisitions and we – we’ve talked about publicly before that we’ve prepared strategic five year growth plans. And in those growth plans we aim to achieve 8% to 12% organic revenue growth and then we supplement that for a strategic acquisitions. If you look at a multi-year path contributing 5% to the CAGR over those five years, of course, the timing of when we do those acquisitions and how they got to fit in into the segment. We’ve got to add to profitability. We’ve to got to add to going to be accretive as well. So it’s just a calculation if you will, so over the longer term to be roughly at 5%.

And I would just to add that, as we build out these large system approaches to go across the continuum of care. A lot of the acquisition targets including the one we just did with Ateb and InPharmics are all software, right. We’ve got these ecosystems of workflows, how do you enhance those workflows. You put on a cloud based or software based solution sets that enhance those or tie them together and you know that that’s generally drive higher margins on the software side.

Okay. And also, can you describe a little bit more to that point. What type of demand you’re seeing in the non-acute care setting in U.S. and also internationally. And how do you expect this to continue to trend overtime?

Well, I think as we said in the call, the VBM 200 is doing really well for us as it really is an enabler to take and package medications and a way that makes it very easy for patients to comply, as well as it brings patients and to particular providers and make it sticky, because they want to use that particular form of medication packaging. And if you’re going to ramp up and do that as either a single pharmacy or a large pharmacy, you need automation to enable that to happen and that’s why VBM 200 is such a popular product that we’ve started. So we’re – we’ve launched that and we’re seeing some big growth for next year in that product line. So as we just launched it this year. And I don’t know I guess – I’d say the UK market is a big market for us continues to be strong both on our broad based products, Germany, France and the Middle East continue to provide additional growth for us.

Maybe a last comment just on the non-acute space, if you look at hospital systems, they are more and more force integrating and centering into outpatient and non-acute facilities as part of their system. So we definitely see a lot of growth there, because we are firstly the only company that has an integrated solution across – what we call it, continuum of care from both acute to non-acute in different settings. So that market dynamic is actually really positive for us.

Great thanks.

I will add one other comment today on our recent announcement as you’ve seen. CVS and Walgreens building a network to help with medication adherence and provide a large network to payers for medication adherence. We have some sort of solution almost in every chain and that really goes well for us in our med adherence marketplace. And we don’t know exactly what that opportunity will lean for us, but it certainly exciting. It validates the fact the reason we got into med adherence almost five years ago, because we knew that it would be a big game changer for healthcare. And as you see in today’s action it definitely is. Next question please.

[Operator Instruction] And your next question does come from Gene Mannheimer from Dougherty & Co.

Thanks, good afternoon. Congrats in all the good progress. Let’s see, I wanted to ask some non-XT questions. The VBM 200 traction you’re seeing very positive. What is that mean for the M5000, are those substitute products or complimentary?

There are actually a complimentary, right. So the M5000 is a bigger footprint fully automated solution and close thus can do a PV2 pharmacy check fully automated. Just to printing of the labels and the packaging and ceiling, so that’s a bigger machine and we actually will announce probably later this year, the first installation at a show site at one, I would say, one of the top 10 U.S. hospital systems. So we have some traction there. And then the CBM is a smaller machine for chains, retail pharmacies and specialty pharmacies that is what we call highly automated. It’s a smaller footprints, it doesn’t do the ceiling and the printing the seal [ph] manual step there. But it has many benefits as well. So we see some really good momentum on the CBM machine both in the U.S., in Europe and in China.

Great. Peter in the progress with the VBM is that going to drive more consumable sales, and it will have to change that growth rate there?

Yes, that will help consumable revenue as well.

Okay. And then on the IV side, I don’t know, I don’t recall if you’ve talked about any new wins there, but how would you characterize your growth in that product line?

It’s definitely a growth area for us. We don’t really see a reason for hospital system, not to have an IV robotic solution into a system, that makes more sense from a efficiency and safety perspective. And if you now look at the growth for IV, about half is capital purchases and half is in sourcing solution that we put in market, which you mentioned a couple times in the prepared remarks as well.

So now we’re seeing really nice traction from the IV in particular, because it’s we’re now on our second year of the Aesynt acquisition, which is really allowed that product to get down in the pipeline of our sales reps and get them accurately presenting and selling that product, and so that that product is just continue to grow every year, and it’s going to grow a lot more next year. So feel really good about that product.

Okay, great. Thank you.

And there are no further questions at this time. We’ll go to Mr. Randall Lipps for any closing remarks.

Well, I hope to see everybody at our Innovation’s Day roll about changing the world for our innovation for healthcare. If you just figure out how everybody can get their meds and take their meds and whatever continuum they are in we’re going to win in healthcare. So hope to see there and be excited to talk about the things that we have to show the market and how it’s going to impact healthcare for the long term. Thanks for joining us today.

Thank you. And this does conclude today’s conference call. You may now disconnect.