Vocera Communications Inc. Reports Second Quarter 2012 Results

Thursday, August 2, 2012
  • Revenue of $24.9 million, an increase of 30% year over year
  • Non-GAAP earnings per share of $0.09 / GAAP earnings per share of $0.00
  • Non-GAAP Adjusted EBITDA of $3.0 million, compared to $0.4 million in the second quarter of 2011
  • Raises 2012 Earnings Guidance

SAN JOSE, Calif., August 2, 2012 -- Vocera Communications, Inc. (NYSE: VCRA), a provider of mobile communication solutions focused on addressing critical communication challenges facing hospitals, today announced results for its second quarter that ended June 30, 2012.

Revenue for the quarter of $24.9 million increased 30% compared to $19.1 million in the second quarter of 2011. For the second quarter of 2012, GAAP net income was $1.2 million, or  $0.00 per diluted share, which reflects the allocation of earnings to preferred shares that remained outstanding at the beginning of the quarter, compared to a net loss of $1.5 million, or $(0.45) per diluted share, in the second quarter of 2011. Non-GAAP net income was $2.3 million for the second quarter of 2012, or $0.09 per diluted share, which compares to a non-GAAP net loss of $33,000, or $0.00 per diluted share, for the second quarter of 2011. A reconciliation of GAAP to non-GAAP financial measures is provided in the schedules included below.

"Our Voice Communication solution continues to perform well," said Bob Zollars, Vocera Chairman and CEO. "Our new B3000 badge is being well received in the marketplace and is driving healthy growth and improved profitability.  As we enter the second half of 2012, we remain confident in our ability to execute on our growth opportunities."

Second Quarter 2012 Results

  • Total revenue in the second quarter of 2012 of $24.9 million was comprised of $16.2 million of product revenue and $8.7 million of service revenue.   

  • Product revenue increased 35% compared to the second quarter of 2011 and was driven by strength in our Voice Communication solution and sales of our new B3000 badge and server software.  Product revenue in the second quarter of 2012 was comprised of $3.9 million from software sales and $12.3 million of device sales. GAAP product gross margin of 66.1% in the quarter decreased 10 basis points compared to the year ago period. Non-GAAP product gross margin of 66.9% in the quarter decreased 30 basis points compared to the year ago period.  

  • Service revenue increased 22% compared to the second quarter of 2011 and was driven by new customers and expanded implementations at existing customers. Service revenue in the second quarter of 2012 was comprised of $6.3 million of software maintenance and $2.4 million of professional services.  GAAP services gross margin of 56.2% in the quarter increased 580 basis points compared to the year ago period.  Non-GAAP services gross margin of 56.9% in the quarter increased 650 basis points compared to the year ago period.  

  • Non-GAAP net income was $2.3 million for the second quarter of 2012, or $0.09 per diluted share, which excludes $0.9 million in stock compensation expense, $0.2 million in amortization of acquired intangibles, and $0.1 million benefit in stock warrant revaluation.  This compares to non-GAAP net loss of $33,000, or $0.00 per diluted share, for the second quarter of 2011, which excludes $0.5 million in stock compensation expense, $0.3 million in amortization of acquired intangibles and $0.7 million in stock warrant revaluation expense.   

  • Non-GAAP Adjusted EBITDA was $3.0 million in the second quarter of 2012, compared to $0.4 million in the second quarter of 2011.  Non-GAAP Adjusted EBITDA margins in the second quarter of 2012 were 12% compared to 2% in the second quarter of 2011. 

  • Cash and short term investments totaled $79.8 million as of June 30, 2012.  This reflects the repayment in April 2012 of $7.8 million in debt outstanding.  

2012 Guidance

The Company is updating its guidance outlook for the full year and providing guidance for the third quarter of 2012. For the full year 2012, Vocera is maintaining revenue guidance of between $100 million and $102 million, but is increasing its earning guidance. We expect a GAAP loss per share between $(0.03) and $(0.08), non-GAAP earnings between $5.0 million and $6.0 million, non-GAAP earnings per share between $0.20 and $0.24 and non-GAAP Adjusted EBITDA between $7.0 million and $8.0 million.  Our full year 2012 non-GAAP guidance excludes estimated stock compensation expense of approximately $4.1 million, estimated amortization of intangibles of approximately $0.9 million, and preferred warrant revaluation expense of approximately $1.6 million.  

For the third quarter of 2012, Vocera expects revenues between $25 million and $26 million, GAAP loss per share between $(0.04) and $0.00, non-GAAP earnings between $0.5 million and $1.5 million, non-GAAP earnings per share between $0.02 and $0.06, and non-GAAP Adjusted EBITDA between $1.0 million and $2.0 million. Our third quarter 2012 non-GAAP guidance excludes stock compensation expense of $1.3 million and amortization of intangibles of $0.2 million.  

Conference Call Information

The Company will conduct a conference call at 2:00 p.m. (Pacific), or 5:00 p.m. (Eastern), today, August 2, 2012.  To participate in the Company's live conference call, please dial 800-510-0219 or for international callers please dial 617-614-3451.  The conference passcode is 64881341.  You may also participate in the live webcast by visiting, the Investors section of the Company's web site at www.vocera.com. A replay will be available from Friday, August 3rd through Friday, August 10th at 888-286-8010 or 617-801-6888 for international callers, by using the access code 75964421. A webcast replay will also be archived on the Company's website.

About Vocera Communications

Vocera provides mobile communication solutions addressing critical communication challenges facing hospitals today. We help our customers improve patient safety and satisfaction, and increase hospital efficiency and productivity through our Voice Communication, Secure Messaging and Care Transition solutions. Exclusively endorsed by the American Hospital Association, the Vocera solutions are installed in more than 800 hospitals and healthcare facilities worldwide. The company is headquartered in San Jose, Calif., with offices in Tennessee, Canada and the United Kingdom. For more information, visit https://www.vocera.com/.

Vocera and the Vocera logo are registered trademarks of Vocera Communications, Inc.  All other product, trademark, company or service names mentioned in this press release are the property of their respective owners.

Forward Looking Statements

Statements in this press release that are not strictly historical in nature are forward-looking statements within the meaning of the U.S. federal securities laws, including statements regarding future events such as our expected operating results for the full year, and third quarter of 2012 as well as the performance of our Voice Communication solution, the successful execution of our business opportunities and the future financial performance of our company. These forward-looking statements are based on limited information currently available to Vocera and our management's expectations that are inherently subject to change and involve a number of risks and uncertainties. Actual events or results may differ materially from those in any forward-looking statement due to various factors, including but not limited to the failure to achieve and maintain profitability; the demand for our Voice Communication solution in the healthcare market; our lengthy and unpredictable sales cycle; our ability to offer high-quality services and support for our products, to acquire the sole and limited source hardware and software components of our products, to obtain the required capacity and product quality from our contract manufacturer, to develop and introduce new solutions and features to existing solutions and to manage our growth; and the other factors described in Vocera's final prospectus for its initial public offering filed with the Securities and Exchange Commission ("SEC") on March 28, 2012 and Vocera's other filings with the SEC. Vocera's SEC filings are available on the Investors section of our company's web site at www.vocera.com. The financial and other information contained in this press release should be read in conjunction with the financial statements and notes thereto included in Vocera's final initial public offering prospectus. Vocera's operating results for the three months ended June 30, 2012 are not necessarily indicative of Vocera's operating results for any future periods. This press release speaks only as of its date.  Vocera assumes no obligation to update the information in this press release, to revise any forward-looking statements or to update the reasons actual events or results could differ materially from those anticipated in forward-looking statements.

Use of Non-GAAP Financial Information

This press release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). Our management evaluates our company's results and makes operating decisions using various GAAP and non-GAAP measures. In addition to Vocera's GAAP results, we also consider non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net income, and non-GAAP earnings per diluted share. We also present Adjusted EBITDA, a non-GAAP measure that we reconcile to net income.  These non-GAAP measures should not be considered as a substitute to gross margin, operating expenses, net income, earnings per diluted share, or any other financial measure derived in accordance with GAAP. We present the non-GAAP measures because we consider them to be important supplemental information for our investors for analyzing Vocera's performance, core operating results and trends. Investors are encouraged to review the reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures included with this press release.

Our non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net income, and non-GAAP earnings per diluted share as well as Adjusted EBITDA are exclusive of certain items to facilitate management's review of the comparability of Vocera's core operating results on a period to period basis because such items are not related to Vocera's ongoing core operating results as viewed by management. We define our "core operating results" as those revenues recorded in a particular period and the expenses incurred within that period that directly drive operating income in that period. Management uses these non-GAAP financial measures in making operating decisions because, in addition to meaningful supplemental information regarding operating performance, the measures give us a better understanding of how we should invest in research and development, fund infrastructure growth and evaluate the effectiveness of marketing strategies. In calculating the above non-GAAP results, management specifically adjusted for the following excluded items:

a) Stock-based compensation expense impact. We recognize equity plan-related compensation expenses, which represent the fair value of all share-based payments to employees, including grants of employee stock options, as required under ASC 718, "Stock Compensation" as non-GAAP adjustments in each period.

b) Amortization of acquired intangibles. We acquired certain companies in 2010 and booked intangible assets related to these acquisitions.  The amortization of these acquisition related costs is excluded from non-GAAP net income because it is not related to ongoing controllable management decisions and because it is non-cash in nature.

c) Stock warrant revaluation expenses. This is a non-cash expense as a result of preferred warrants outstanding that have to be revalued each quarter.  We believe the comparisons of ongoing operations should exclude effects of such revaluations.

Management adjusts for the above items because management believes that, in general, these items possess one or more of the following characteristics: their magnitude and timing is largely outside of Vocera's control; they are unrelated to the ongoing operation of the business in the ordinary course; they are unusual and we do not expect them to occur in the ordinary course of business; or they are non-operational, or non-cash expenses involving stock option grants.

We believe that the presentation of these non-GAAP financial measures is warranted for several reasons:

1) Such non-GAAP financial measures provide an additional analytical tool for understanding Vocera's financial performance by excluding the impact of items which may obscure trends in the core operating results of the business;

2) These non-GAAP financial measures facilitate comparisons to the operating results of other companies commonly compared to Vocera, which use similar financial measures to supplement their GAAP results, thus enhancing the perspective of investors who wish to utilize such comparisons in their analysis of our performance; and

3) These non-GAAP financial measures are employed by Vocera's management in its own evaluation of performance and are utilized in financial and operational decision making processes, such as budget planning and forecasting.

Set forth below are additional reasons why share-based compensation expense related to ASC 718 is excluded from our non-GAAP financial measures:

i) While share-based compensation calculated in accordance with ASC 718 constitutes an ongoing and recurring expense of Vocera, it is not an expense that requires cash settlement by Vocera. We therefore exclude these charges for purposes of evaluating core operating results. Thus, our non-GAAP measurements are presented exclusive of stock-based compensation expense to assist management and investors in evaluating our core operating results.

ii) We present ASC 718 share-based payment compensation expense in our reconciliation of non-GAAP financial measures on a pre-tax basis because the exact tax differences related to the timing and deductibility of share-based compensation, under ASC 718, are dependent upon the trading price of Vocera's common stock and the timing and exercise by employees of their stock options. As a result of these timing and market uncertainties the tax effect related to share-based compensation expense would be inconsistent in amount and frequency and is therefore excluded from our non-GAAP results.

As stated above, we present non-GAAP financial measures because we consider them to be important supplemental measures of performance. However, non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for Vocera's GAAP results. In the future, we expect to incur expenses similar to certain of the non-GAAP adjustments described above and expect to continue reporting non-GAAP financial measures excluding such items. Some of the limitations in relying on non-GAAP financial measures are:

  • Vocera's stock option and stock purchase plans are important components of incentive compensation arrangements and will be reflected as expenses in Vocera's GAAP results for the foreseeable future under ASC 718; and 

  • Other companies may calculate non-GAAP financial measures differently than Vocera, limiting their usefulness as a comparative measure. 

Pursuant to the requirements of SEC Regulation G, a detailed reconciliation between Vocera's non-GAAP and GAAP financial results is set forth in the financial tables at the end of this press release. Investors are advised to carefully review and consider this information strictly as a supplement to the GAAP results that are contained in this press release and in Vocera's SEC filings.

Contact:

Bob East
Westwicke Partners
443-213-0502
bob.east@westwicke.com

Vocera Communications, Inc.
Consolidated statements of operations
Three months ended June 30, Six months ended June 30
(in thousands, except per share amounts) 2012 2011 2012 2011
Revenue
Product $16,155 $11,925 $30,792 $23,561
Service                    8,723                7,148                  17,205              13,835
Total revenue                  24,878              19,073                  47,997              37,396
Cost of revenue
Product                    5,472                4,026                  10,901                7,678
Service                    3,822                3,546                    7,391                6,708
Total cost of revenue                    9,294                7,572                  18,292              14,386
Gross profit 15,584 11,501 29,705 23,010
Operating expenses
Research and development 2,694 2,433 5,205 4,591
Sales and marketing 8,002 6,702 15,532 13,175
General and administrative 3,617 2,842 6,704 5,081
Total operating expenses 14,313 11,977 27,441 22,847
Income from operations 1,271 (476) 2,264 163
Interest income 14 3 26 8
Interest expense and other finance charges (3) (61) (74) (122)
Other income (expense), net 105 (752) (1,492) (1,217)
Income (loss) before income taxes                    1,387               (1,286)                       724               (1,168)
Benefit from (provision for) income taxes                     (206)                  (211)                     (379)                  (174)
Net income (loss) $1,181 ($1,497) $345 ($1,342)
Net income (loss) per common share - basic $0.00 ($0.45) $0.00 ($0.42)
Net income (loss) per common share - diluted $0.00 ($0.45) $0.00 ($0.42)
Weighted average common shares - outstanding basic                  21,738                3,313                  12,700                3,164
Weighted average common shares - outstanding diluted                  24,520                3,313                  15,421                3,164

Vocera Communications, Inc.
Condensed consolidated balance sheets
As at
June 30, December 31,
(in thousands, except share amounts) 2012 2011
Assets
Current assets
Cash and cash equivalents $20,117 $14,898
Short term investments 59,724 -
Accounts receivable, net 17,922 15,782
Other receivables 1,456 865
Inventories 2,932 3,363
Restricted cash 303 303
Prepaid expenses and other current assets 1,984 2,851
Total current assets 104,438 38,062
Property and equipment, net 2,694 2,701
Other long-term assets 1,208 339
Intangible assets, net 2,705 3,141
Goodwill 5,575 5,575
Total assets $116,620 $49,818
Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)
Current liabilities
Accounts payable $2,125 $4,087
Product warranty 776 983
Accrued payroll and other accruals 9,101 10,143
Deferred revenue, current 19,408 18,220
Borrowings, current - 6,500
Total current liabilities 31,410 39,933
Deferred revenue, long-term 5,584 4,273
Borrowings, long-term - 1,833
Other long-term liabilities 164 165
Total liabilities 37,158 46,204
Commitments
Convertible Preferred Stock - 53,013
Stockholders equity (deficit) 79,462 (49,399)
Total liabilities, convertible preferred stock and
stockholders' equity (deficit) $116,620 $49,818

  

Vocera Communications, Inc.
Reconciliation of GAAP to Non-GAAP
(In thousands, except per share data, unaudited)
Three months ended June 30,
2012 2011
Net
income
(loss)
Diluted
shares
Earnings
(loss) per
share-
diluted
Net
income
(loss)
Diluted
shares
Earnings
(loss) per
share-
diluted

GAAP
 
$1,181
 
24,520

$0.00

($1,497)

3,313

($0.45)
Non-GAAP
Adjustments:
Add dilutive shares
for EPS (e)

-
Add preferred shares
conversion (f)

142

12,899

Add IPO shares (g)

55

-
Stock compensation
adjustment (a)

   Gross Margin

85

10

   Operating Expenses

848

469
Intangible
amortization (b)

   Gross Margin

97

106

   Operating Expenses

122

145
Warrant expense
(non-operating) (c)
 
(75)

734

Total adjustments (d)

1,077

197

0.09

1,464

12,899

0.45

Non-GAAP
(d)

$2,258

24,717

$0.09

($33)

16,212

$0.00

  

(a) This adjustment reflects the accounting impact of non-cash stock-based compensation expense.
(b) This adjustment reflects the accounting impact of acquisitions in 2010 in non-cash expenses.
(c) This adjustment reflects the accounting impact of revaluing stock warrants in non-cash expenses.
(d) Non-GAAP earnings are not reserved for payment to preferred shareholders, allowing EPS to be calculated as earnings divided by diluted shares.
(e) Dilutive shares added to reflect change to share count calculation from loss to profit, i.e., from "basic" to "fully diluted" weighted average shares.
(f) Preferred shares as if converted and outstanding for the full quarter.
(g) Newly issued IPO shares as if they had been outstanding for the full quarter.

Vocera Communications, Inc.
Reconciliation of GAAP to Non-GAAP
(In thousands, except per share data, unaudited)
Six months ended June 30,
2012 2011
Net
Income
(loss)
Diluted
shares
Earnings
(loss) per
share-
diluted
Net
Income
(loss)
Diluted
shares
Earnings
(loss) per
share-
diluted

GAAP

$345

15,421

$0.00

($1,342)

3,164

($0.42)
Non-GAAP
Adjustments:
Add dilutive shares
for EPS (e)

1,838
Add preferred shares
conversion (f)

 6,540

12,899

Add IPO shares (g)

2,527

-
Stock compensation
adjustment (a)

   Gross Margin

106

14

   Operating Expenses

1,172

 801
Intangible
amortization (b)

   Gross Margin

193

 213

   Operating Expenses

243

291
Warrant expense
(non-operating) (c)

1,631

1,201

Total adjustments (d)

3,345

9,067

 0.15

2,520

14,737

0.49

Non-GAAP
(d)

$3,690

24,488

$0.15

$1,178

17,901

$0.07

 

(a) This adjustment reflects the accounting impact of non-cash stock-based compensation expense.
(b) This adjustment reflects the accounting impact of acquisitions in 2010 in non-cash expenses.
(c) This adjustment reflects the accounting impact of revaluing stock warrants in non-cash expenses.
(d) Non-GAAP earnings are not reserved for payment to preferred shareholders, allowing EPS to be calculated as earnings divided by diluted shares.
(e) Dilutive shares added to reflect change to share count calculation from loss to profit, i.e., from "basic" to "fully diluted" weighted average shares.
(f) Preferred shares as if converted and outstanding for the full year.
(g) Newly issued IPO shares as if they had been outstanding for the full year.

Vocera Communications, Inc.
Non-GAAP income adjusting items
(In thousands, unaudited)
Three months ended June 30,
2012 2011
Stock based Intangible Warrant Total Stock based Intangible Warrant Total
compensation amortization expenses adjustments compensation amortization expenses adjustments
Gross margin:
Product $22 $97 $119 $10 $106 $116
Services                    63                  63                     -                    -  
Operating expenses:
Research and development                  111                111                    26                  26
Sales and marketing                  205                 110                315                    70                 141                211
General and administrative                  532                   12                544                  373                     4                377
Other income (expense), net ($75)                (75) $734                734
Non-GAAP income adjustments $933 $219 ($75) $1,077 $479 $251 $734 $1,464

Vocera Communications, Inc.
Non-GAAP income adjusting items
(In thousands, unaudited)
Six months ended June 30,
2012 2011
Stock based Intangible Warrant Total Stock based Intangible Warrant Total
compensation amortization expenses adjustments compensation amortization expenses adjustments
Gross margin:
Product $30 $193 $223 $14 $213 $227
Services 76                  76                     -                    -  
Operating expenses:
Research and development 136                136                    42                    -   42
Sales and marketing 270 220                490                  114 284 398
General and administrative 766 23                789                  645 7 652
Other income (expense), net $1,631             1,631 $1,201 1,201
Non-GAAP income adjustments $1,278 $436 $1,631 $3,345 $815 $504 $1,201 $2,520
Vocera Communications, Inc.
Adjusted EBITDA
(In thousands, unaudited)
Three months ended June 30, Six months ended June 30,
2012 2011 2012 2011
GAAP net income (loss) $1,181 ($1,497) $345 ($1,342)
Add back:
Stock compensation expense                       933                   479                    1,278                   815
Non-cash stock warrant expense                       (75)                   734                    1,631                1,201
Interest, net                       (11)                     58                         48                   114
Depreciation and Amortization                       724                   399                    1,278                   811
Income tax expense                       206                   211                       379                   174
Non-GAAP adjusted EBITDA $2,958 $384 $4,959 $1,773
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