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Vocera Announces Third Quarter 2020 Financial Results

SAN JOSE, Calif. - October 29, 2020 - Vocera Communications, Inc. (NYSE: VCRA), a recognized leader in clinical communication and workflow solutions, today reported total revenue of $53.8 million for the third quarter of 2020, compared to revenue of $50.8 million in the third quarter of 2019.

“Q3 was an outstanding quarter for us, driven by tremendous success with Veterans Administration hospitals and large customer expansions,” said Brent Lang, Chairman and CEO. “Despite another quarter of dealing with the COVID-19 pandemic, our teams remain focused on serving customers and supporting one another, and our connection to our mission has never been stronger.”

Third quarter of 2020 financial highlights include:

Total revenue of $53.8 million, compared to $50.8 million last year
GAAP net income per share of $0.13; non-GAAP diluted income per share of $0.31
GAAP net income of $4.2 million; Adjusted EBITDA of $13.5 million
Deferred revenue and backlog combined of $151.1 million as of September 30, 2020, an increase of 23% over last year
Successful acquisition and integration of EASE Applications, which offers a cloud-based communication platform to enhance the patient experience

Third Quarter 2020 Results
Total revenue for the third quarter of 2020 was $53.8 million, an increase of 6% compared to last year.
(in thousands)Three months ended September 30,
20202019% change
Product revenue
Device$17,027 $19,002 (10.4)%
Software11,483 9,509 20.8 
Total product$28,510 $28,511 — %
Service revenue
Subscription and support$20,387 $17,538 16.2 %
Professional services and training4,918 4,732 3.9 
Total service25,305 22,270 13.6 %
Total revenue$53,815 $50,781 6.0 %




GAAP gross margin for the third quarter of 2020 was 67.5%, compared to 62.8% in the third quarter of 2019.
Three months ended September 30,
20202019
Gross margin
Product75.0 %71.2 %
Service59.1 52.0 
Total gross margin67.5 %62.8 %
Non-GAAP gross margin
Product75.9 %73.9 %
Service62.7 56.4 
Total non-GAAP gross margin69.7 %66.2 %

GAAP net income for the third quarter of 2020 was $4.2 million, or $0.13 per share, compared to GAAP net income of $0.3 million, or $0.01 per share in the third quarter of 2019.
Three months ended September 30,
(in thousands except per share amounts)20202019
Net income$4,161 $298 
Net income per share$0.13 $0.01 
Non-GAAP net income$10,176 $7,454 
Non-GAAP diluted net income per share$0.31 $0.23 
Adjusted EBITDA$13,498 $9,545 

Deferred revenue at September 30, 2020 was $57.4 million compared to $61.5 million at December 31, 2019. Including the impact for the acquisition of EASE, cash, cash equivalents and short-term investments were $211.2 million at September 30, 2020 compared to $229.9 million at December 31, 2019.

Conference Call Information
Vocera Communications will host a conference call at 5 p.m. ET (2 p.m. PT) today, October 29, 2020, to discuss the Company’s results.

A free, live webcast of the conference call will be available on the Investors section of the company’s website at investors.vocera.com.

The call also can be accessed by dialing 833-968-2210, or 647-689-4192 for international callers, and using the access code 5064238.

A replay of the call will be archived after the event at investors.vocera.com.

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. These forward-looking statements are based on limited information currently available to us and our management`s expectations, which 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, potential impacts of the COVID-19 pandemic on our operations, changes in regulations in the U.S. and other countries; the effects on government and commercial hospital customers of the federal budget and budgetary uncertainty; changes in healthcare insurance coverage and consumers’ utilization of healthcare and hospital services; our ability to achieve and maintain profitability; the demand for our various solutions in the healthcare and other markets; our lengthy and unpredictable sales cycle; our ability to offer high-quality services and support for our solutions; our ability to achieve anticipated strategic or financial benefits from our acquisitions; our ability to acquire the sole and limited source hardware and software components of our solutions; our ability to obtain the required capacity and product quality from our contract manufacturers; our ability to develop and introduce new solutions and features to existing solutions and to manage our growth; the impact of tax law reform on us or our customers; and the other factors described in our most recently filed Quarterly Report on Form 10-Q, as well as our other filings with the Securities and Exchange Commission (SEC). Our filings with the SEC are available on the Investors section of the 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 our filings with the SEC. Our operating results for any historical period, including the third quarter of 2020, are not necessarily indicative of our operating results for any future periods. This press release speaks only as of its date. We assume 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 the Company’s results and makes operating decisions using various GAAP and non-GAAP measures. In addition to our GAAP results, we also consider non-GAAP gross margin, non-GAAP gross margin for products and for services, non-GAAP net income/(loss), non-GAAP diluted income/(loss) per share, non-GAAP operating expenses, non-GAAP other expense, net and non-GAAP benefit from (provision for) income taxes. We also present Adjusted EBITDA, a non-GAAP measure that we reconcile to net income/(loss). These non-GAAP measures should not be considered as a substitute for the corresponding 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 our 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 margins, non-GAAP net income/(loss), non-GAAP diluted income/(loss) per share, non-GAAP operating expenses, non-GAAP other expense, net, non-GAAP benefit from (provision for) income taxes, and Adjusted EBITDA are exclusive of certain items to facilitate management’s review of the comparability of our core operating results on a period to period basis because such items are not related to our 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 and restricted stock units as non-GAAP adjustments in each period.
b) Amortization of acquired intangibles. We acquired certain companies in 2014 and 2016, and booked intangible assets related to these acquisitions. The amortization of these acquired intangible assets 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) Acquisition related expenses. In addition to the amortization of acquired intangibles mentioned above, we also adjust for certain acquisition-related expenses that we may incur including (i) professional service fees, (ii) transition costs and (iii) non-cash tax adjustments. Professional service fees include third party costs related to the acquisition, such as due diligence costs, accounting fees, legal fees, valuation services and commissions, if any. Transition costs include retention payments and other transitional employee costs treated as compensation expense as well as the change in the fair value of contingent consideration payments payable to the selling shareholders. Non-cash tax adjustments includes the benefit received from releasing deferred tax assets reserves that were available to offset tax liabilities acquired through acquisition. We consider such costs and adjustments as highly variable in amount and frequency, being significantly impacted by the timing and size of any acquisitions. By excluding acquisition-related costs and adjustments from our non-GAAP measures, management can better focus on the organic continuing operations of our baseline and acquired businesses.
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 are 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 award grants.
We believe that the presentation of these non-GAAP financial measures is warranted for several reasons:
a) Such non-GAAP financial measures provide an additional analytical tool for understanding our financial performance by excluding the impact of items which may obscure trends in the core operating results of the business;
b) These non-GAAP financial measures facilitate comparisons to the operating results of other companies commonly compared to us, 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
c) These non-GAAP financial measures are employed by our management in their 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 is excluded from our non-GAAP financial measures:
a) While share-based compensation constitutes one of our ongoing and recurring expenses, it is not an expense that requires cash settlement by us. 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.
b) We present 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 are dependent upon the trading price of our 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 our 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:
Our stock options, restricted stock units, and stock purchase plans are important components of incentive compensation arrangements and will be reflected as expenses in our GAAP results for the foreseeable future; and
Other companies may calculate non-GAAP financial measures differently than us, limiting their usefulness as a comparative measure.
Pursuant to the requirements of SEC Regulation G, a detailed reconciliation between our non-GAAP and GAAP financial results is set forth in the financial tables referred to above, and linked to, this press release. Investors are advised to carefully review and consider this information strictly as a supplement to the GAAP results for the respective periods.
About Vocera:
The mission of Vocera Communications, Inc. is to simplify and improve the lives of healthcare professionals, patients, and families while enabling hospitals to enhance quality of care and operational efficiency and humanize the healthcare experience. In 2000, when the company was founded, we began to forever change the way care teams communicate. Today, Vocera offers the leading platform for improving clinical communication and workflow. More than 2,100 facilities worldwide, including nearly 1,700 hospitals and healthcare facilities, have selected our solutions. Care team members use our solutions to communicate and collaborate with co-workers by securely texting or calling, and to be notified of important alerts and alarms. They can choose the right device for their role or task, including smartphones or our hands-free, wearable Vocera Smartbadge and Vocera Badge. They can create a richer, more human connection for patients and their loved ones before, during, and after care using Vocera Ease applications. Interoperability between the Vocera Platform and more than 150 clinical and operational systems helps reduce alarm fatigue; speed up staff response times; and improve patient care, safety, and experience. In addition to healthcare, Vocera solutions are found in luxury hotels, aged care facilities, retail stores, schools, power facilities, libraries, and more. Vocera solutions make mobile workers safer and more effective by enabling them to connect instantly with other people and access resources or information quickly. Vocera has made the list of Forbes 100 Most Trustworthy Companies in America. Learn more at www.vocera.com, and follow @VoceraComm and @VoceraEase on Twitter.

Vocera® and the Vocera logo are trademarks of Vocera Communications, Inc. registered in the United States and other jurisdictions. All other trademarks appearing in this release are the property of their respective owners.




Contacts:

Investors:             
Sue Dooley            
Vocera Communications, Inc.            
408.882.5971        
investorrelations@vocera.com

Media:
Shanna Hearon
Vocera Communications, Inc.                                 
669.999.3368
shearon@vocera.com




Vocera Communications, Inc.
Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three months ended September 30,Nine months ended September 30,
2020201920202019
Revenue
Product$28,510 $28,511 $70,311 $65,646 
Service25,305 22,270 71,524 65,203 
Total revenue53,815 50,781 141,835 130,849 
Cost of revenue
Product7,139 8,204 21,213 20,450 
Service10,346 10,689 30,563 31,810 
Total cost of revenue17,485 18,893 51,776 52,260 
Gross profit36,330 31,888 90,059 78,589 
Operating expenses
Research and development9,559 8,363 27,940 25,452 
Sales and marketing15,291 15,506 48,252 47,003 
General and administrative7,464 6,420 20,778 19,535 
Total operating expenses32,314 30,289 96,970 91,990 
Income (Loss) from operations4,016 1,599 (6,911)(13,401)
Interest income645 1,299 2,678 3,910 
Interest expense(2,368)(2,233)(6,950)(6,524)
Other income (expense), net264 (145)(117)(173)
Income (loss) before income taxes2,557 520 (11,300)(16,188)
Benefit from (provision for) income taxes1,604 (222)1,523 (106)
Net income (loss)$4,161 $298 $(9,777)$(16,294)
Income (loss) per share
     Basic$0.13 $0.01 $(0.30)$(0.52)
     Diluted$0.13 $0.01 $(0.30)$(0.52)
Weighted average shares used to compute net income (loss) per share
     Basic32,394 31,459 32,096 31,170 
     Diluted33,019 31,944 32,096 31,170 




Vocera Communications, Inc.
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
September 30,
2020
December 31,
2019
Assets
Current assets
Cash and cash equivalents$31,242 $25,704 
Short-term investments179,995 204,164 
Accounts receivable, net of allowance39,210 42,547 
Other receivables6,263 6,312 
Inventories10,451 4,576 
Prepaid expenses and other current assets6,141 5,149 
Total current assets273,302 288,452 
Property and equipment, net8,070 8,661 
Intangible assets, net13,546 5,461 
Goodwill69,168 49,246 
Deferred commissions11,325 10,477 
Other long-term assets6,834 8,158 
Total assets$382,245 $370,455 
Liabilities and stockholders' equity
Current liabilities
Accounts payable$4,832 $6,036 
Accrued payroll and other current liabilities17,212 14,757 
Deferred revenue, current47,884 50,033 
Total current liabilities69,928 70,826 
Deferred revenue, long-term9,524 11,442 
Convertible senior notes, net122,511 117,178 
Other long-term liabilities8,580 7,184 
Total liabilities210,543 206,630 
Stockholders' equity 171,702 163,825 
Total liabilities and stockholders’ equity $382,245 $370,455 





Vocera Communications, Inc.
Three months ended September 30, 2020
Stock Acquisition
(In thousands)GAAPcompensationIntangible relatedTotal Non-GAAP
2020expense (a)amortization (b)expense (c)adjustments2020
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)
Revenue
Product$28,510 $— $— $— $— $28,510 
Service25,305 — — — — 25,305 
Total revenue53,815 — — — — 53,815 
Cost of revenue
Product7,139 147 114 — 261 6,878 
Service10,346 895 — — 895 9,451 
Total cost of revenue17,485 1,042 114 — 1,156 16,329 
Gross profit$36,330 $1,042 $114 $— $1,156 $37,486 
Stock Acquisition
(In thousands)GAAPcompensationIntangible relatedTotal Non-GAAP
2020expense (a)amortization (b)expense (c)adjustments2020
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (Unaudited)
Research and development$9,559 $1,046 $— $222 $1,268 $8,291 
Sales and marketing15,291 2,037 375 148 2,560 12,731 
General and administrative7,464 2,554 40 485 3,079 4,385 
Total operating expenses$32,314 $5,637 $415 $855 $6,907 $25,407 

(a)This adjustment reflects the accounting impact of non-cash stock-based compensation expense.
(b)This adjustment reflects the accounting impact of acquisitions in 2016 in non-cash expense.
(c)This adjustment reflects the costs associated with the acquisition in 2020.






Three months ended September 30, 2019
Stock Intangible
(In thousands)GAAPcompensationamortization Total Non-GAAP
2019expense (a)(b)adjustments2019
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)
Revenue
Product$28,511 $— $— $— $28,511 
Service22,270 — — — 22,270 
Total revenue50,781 — — — 50,781 
Cost of revenue
Product8,204 193 579 772 7,432 
Service10,689 982 — 982 9,707 
Total cost of revenue18,893 1,175 579 1,754 17,139 
Gross profit$31,888 $1,175 $579 $1,754 $33,642 
Stock Intangible
(In thousands)GAAPcompensationamortization Total Non-GAAP
2019expense (a)(b)adjustments2019
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (Unaudited)
Research and development$8,363 $1,022 $— $1,022 $7,341 
Sales and marketing15,506 1,808 368 2,176 13,330 
General and administrative6,420 2,164 40 2,204 4,216 
Total operating expenses$30,289 $4,994 $408 $5,402 $24,887 

(a)This adjustment reflects the accounting impact of non-cash stock-based compensation expense.
(b)This adjustment reflects the accounting impact of acquisitions in 2014 and 2016 in non-cash expense.





Vocera Communications, Inc.
Nine months ended September 30, 2020
Stock Intangible Acquisition
(In thousands)GAAPcompensationamortization relatedTotal Non-GAAP
2020expense (a)(b)expense (c)adjustments2020
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)
Revenue
Product$70,311 $— $— $— $— $70,311 
Service71,524 — — — — 71,524 
Total revenue141,835 — — — — 141,835 
Cost of revenue
Product21,213 510 125 — 635 20,578 
Service30,563 2,619 — — 2,619 27,944 
Total cost of revenue51,776 3,129 125 — 3,254 48,522 
Gross profit$90,059 $3,129 $125 $— $3,254 $93,313 
Stock Intangible Acquisition
(In thousands)GAAPcompensationamortization relatedTotal Non-GAAP
2020expense (a)(b)expense (c)adjustments2020
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (Unaudited)
Research and development$27,940 $3,035 $— $222 $3,257 $24,683 
Sales and marketing48,252 5,858 912 148 6,918 41,334 
General and administrative20,778 6,864 118 485 7,467 13,311 
Total operating expenses$96,970 $15,757 $1,030 $855 $17,642 $79,328 

(a)This adjustment reflects the accounting impact of non-cash stock-based compensation expense.
(b)This adjustment reflects the accounting impact of acquisitions in 2014 and 2016 in non-cash expense.
(c)This adjustment reflects the costs associated with the acquisition in 2020.



Nine months ended September 30, 2019
Stock Intangible
(In thousands)GAAPcompensationamortization Total Non-GAAP
2019expense (a)(b)adjustments2019
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)
Revenue
Product$65,646 $— $— $— $65,646 
Service65,203 — — — 65,203 
Total revenue130,849 — — — 130,849 
Cost of revenue
Product20,450 502 1,762 2,264 18,186 
Service31,810 2,829 — 2,829 28,981 
Total cost of revenue52,260 3,331 1,762 5,093 47,167 
Gross profit$78,589 $3,331 $1,762 $5,093 $83,682 
Stock Intangible
(In thousands)GAAPcompensationamortization Total Non-GAAP
2019expense (a)(b)adjustments2019
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (Unaudited)
Research and development$25,452 $2,878 $— $2,878 $22,574 
Sales and marketing47,003 5,286 1,105 6,391 40,612 
General and administrative19,535 6,327 118 6,445 13,090 
Total operating expenses$91,990 $14,491 $1,223 $15,714 $76,276 

(a)This adjustment reflects the accounting impact of non-cash stock-based compensation expense.
(b)This adjustment reflects the accounting impact of acquisitions in 2014 and 2016 in non-cash expense.




Vocera Communications, Inc.
Non-GAAP Net income and net income per share and Adjusted EBITDA
(In thousands, except per share amounts)
(Unaudited)
Three months ended September 30,Nine months ended September 30,
2020201920202019
GAAP net income (loss)$4,161 $298 $(9,777)$(16,294)
Add back:
Stock compensation expense
6,679 6,169 18,886 17,822 
Acquisition related expenses
855 — 855 — 
Other expense, net (a)— — 
Benefit for income taxes (b)(2,056)— (2,056)— 
Interest income (638)(1,288)(2,655)(3,874)
Interest expense2,368 2,233 6,950 6,524 
Depreciation and amortization expense 1,669 1,911 4,470 5,708 
Provision for income taxes 452 222 533 106 
Non-GAAP adjusted EBITDA $13,498 $9,545 $17,214 $9,992 
GAAP net income (loss)$4,161 $298 $(9,777)$(16,294)
Add back:
Stock compensation expense 6,679 6,169 18,886 17,822 
Intangible amortization529 987 1,155 2,985 
Acquisition related expenses
855 — 855 — 
Other expense,net (a)— — 
Benefit for income taxes (b)(2,056)— (2,056)— 
Non-GAAP net income$10,176 $7,454 $9,071 $4,513 
Non-GAAP net income per share
     Basic$0.31 $0.24 $0.28 $0.14 
     Diluted$0.31 $0.23 $0.28 $0.14 
Weighted average shares used to compute non-GAAP net income per share
     Basic32,394 31,459 32,096 31,170 
     Diluted33,019 31,944 32,367 32,031 

(a)This adjustment reflects the accounting impact of non-cash expense resulting from the 2020 acquisition.
(b)This adjustment reflects the a non-cash tax benefit from the 2020 acquisition.