Credit: Shutterstock photoOmnicell, Inc.OMCL reported fourth-quarter 2015 adjusted earnings per share (EPS) of 40 cents, reflecting year over year improvement of 11.1%.
However, considering stock-based compensation as a regular expense, the company posted adjusted EPS of 29 cents; up 7.4% from the year-ago number.
Per management, strong revenue growth and better cost execution drove the year-over-year improvement in the quarter's adjusted EPS.
Including one-time items, the company reported net income of $7.7 million or 21 cents per share, reflecting a year-over-year deterioration of 4.7% or 4.5%, respectively.
For full-year 2015, the company reported adjusted EPS of 92 cents per share, up 1.1% from 2014.
Revenues in Detail
Revenues increased 7.2% year over year to $130.3 million, beating the Zacks Consensus Estimate of $126 million. The acquisitions of Mach4 and Avantec contributed approximately $9 million in revenues in the reported quarter.
According to management, the company witnessed strong demand in the fourth quarter on account of both expansion and upgrades by existing customers, as well as new and competitive conversion customers. Strong revenue growth in the fourth quarter resulted in record revenues in full year 2015.
In 2015, the company delivered revenues of $484.6 million, reflecting a year-over-year improvement of 9.9%. Omnicell's full-year top line also steered ahead of the Zacks Consensus Estimate of $481 million.
On a segmental basis, during the quarter, Omnicell's Automation and Analytics segment's revenues increased 7.7% to $105.9 million. The recently acquired Avantec is also part of this segment.
Meanwhile, revenues from the Medication Adherence segment improved 5.4% to $24.4 million. The acquisitions of MTS and Surgichem are included in this segment.
Omnicell witnessed strong momentum in bookings at the end of the fourth quarter that has been continuing into first-quarter 2016 as well. The company ended 2015 with the highest ever annualized new and competitive conversion rate of 41% of bookings, indicating strong potential of its business. This conversion rate was higher than its 10-year historical trend ranging between 33% and 40%.
Operational Update
Omnicell's adjusted gross profit during the reported quarter improved 2.3% to $65.6 million (considering stock-based compensation as a regular expense). However, adjusted gross margin contracted 240 basis points (bps) to 50.4%.
Adjusted operating expenses in the fourth quarter dropped 1.2% to $48.9 million. Consequently, adjusted operating profit surged 14% to $16.8 million, with adjusted operating margin expanding 80 bps to 12.9% in the quarter.
Acquisitions
In the fourth quarter of 2015, Omnicell initiated the acquisition of Aesynt, which was completed recently in Jan 2016, for $250 million. Based in Pennsylvania, Aesynt is a leader in enterprise medication management with specific products in IV compounding, Central Pharmacy automation, point of care solutions and enterprise software products.
Management expects this acquisition to widen Omnicell's product portfolio for the point-of-care and centralized medication management equipment and solutions. It should also expand Omnicell's presence in hospitals by adding world leading IV solutions, while also accelerating development of enterprise software and real-time analytics. So far, Omnicell has received positive customer response to this deal.
Financial Update
Omnicell exited 2015 with cash and cash equivalents of $82.2 million, compared with $125.9 million at the end of full-year 2014.
Outlook
For full-year 2016, Omnicell expects to deliver adjusted EPS in the range of $1.50-$1.60 on revenues of $695-$715 million. The company also expects to generate product bookings in the range of $540-$560 million, during 2016.
For the first quarter of 2016, management expects to deliver adjusted EPS in the 25-28 cents range on revenues of $165-$170 million.
Our Take
Omnicell's outperformance on the revenue front, both in the fourth quarter and full-year 2015, is encouraging. However, the company's performance on the bottom-line front remains mixed, on a year over year basis. Omnicell's fourth quarter gross margin contraction is also disappointing. Nevertheless, post the Aesynt takeover, management's confidence in delivering significant revenue and earnings growth over the coming years, bolsters our confidence in the stock.
The prior acquisitions of Mach4 Robotic Dispensing Equipment business and the super business of Avantec in the U.K. are already contributing significantly to the company's operations. Going forward, its recent Aesynt buyout is expected to be accretive to Omnicell's adjusted earnings in 2016. We believe such strategic acquisitions will add value to the company's growth profile significantly, apart from expanding its product portfolio and geographic presence.
Zacks Rank
Currently, Omnicell has a Zacks Rank #1 (Strong Buy). Some better-ranked medical stocks are LeMaitre Vascular, Inc. LMAT , Vascular Solutions Inc. VASC and Hill-Rom Holdings, Inc. HRC . All these stocks carry a Zacks Rank similar to Omnicell.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
