Vocera Announces Third Quarter 2020 Financial Results

October 29, 2020 4:05 PM

SAN JOSE, Calif.--(BUSINESS WIRE)-- 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:

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,

2020

2019

% change

Product revenue

Device

$

17,027

$

19,002

(10.4)

%

Software

11,483

9,509

20.8

Total product

$

28,510

$

28,511

%

Service revenue

Subscription and support

$

20,387

$

17,538

16.2

%

Professional services and training

4,918

4,732

3.9

Total service

25,305

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,

2020

2019

Gross margin

Product

75.0

%

71.2

%

Service

59.1

52.0

Total gross margin

67.5

%

62.8

%

Non-GAAP gross margin

Product

75.9

%

73.9

%

Service

62.7

56.4

Total non-GAAP gross margin

69.7

%

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)

2020

2019

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:

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.

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,

2020

2019

2020

2019

Revenue

Product

$

28,510

$

28,511

$

70,311

$

65,646

Service

25,305

22,270

71,524

65,203

Total revenue

53,815

50,781

141,835

130,849

Cost of revenue

Product

7,139

8,204

21,213

20,450

Service

10,346

10,689

30,563

31,810

Total cost of revenue

17,485

18,893

51,776

52,260

Gross profit

36,330

31,888

90,059

78,589

Operating expenses

Research and development

9,559

8,363

27,940

25,452

Sales and marketing

15,291

15,506

48,252

47,003

General and administrative

7,464

6,420

20,778

19,535

Total operating expenses

32,314

30,289

96,970

91,990

Income (Loss) from operations

4,016

1,599

(6,911)

(13,401)

Interest income

645

1,299

2,678

3,910

Interest expense

(2,368)

(2,233)

(6,950)

(6,524)

Other income (expense), net

264

(145)

(117)

(173)

Income (loss) before income taxes

2,557

520

(11,300)

(16,188)

Benefit from (provision for) income taxes

1,604

(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

Basic

32,394

31,459

32,096

31,170

Diluted

33,019

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 investments

179,995

204,164

Accounts receivable, net of allowance

39,210

42,547

Other receivables

6,263

6,312

Inventories

10,451

4,576

Prepaid expenses and other current assets

6,141

5,149

Total current assets

273,302

288,452

Property and equipment, net

8,070

8,661

Intangible assets, net

13,546

5,461

Goodwill

69,168

49,246

Deferred commissions

11,325

10,477

Other long-term assets

6,834

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 liabilities

17,212

14,757

Deferred revenue, current

47,884

50,033

Total current liabilities

69,928

70,826

Deferred revenue, long-term

9,524

11,442

Convertible senior notes, net

122,511

117,178

Other long-term liabilities

8,580

7,184

Total liabilities

210,543

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

(In thousands)

GAAP
2020

Stock
compensation
expense (a)

Intangible
amortization (b)

Acquisition
related
expense (c)

Total
adjustments

Non-GAAP
2020

Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)

Revenue

Product

$

28,510

$

$

$

$

$

28,510

Service

25,305

25,305

Total revenue

53,815

53,815

Cost of revenue

Product

7,139

147

114

261

6,878

Service

10,346

895

895

9,451

Total cost of revenue

17,485

1,042

114

1,156

16,329

Gross profit

$

36,330

$

1,042

$

114

$

$

1,156

$

37,486

(In thousands)

GAAP
2020

Stock
compensation
expense (a)

Intangible
amortization (b)

Acquisition
related
expense (c)

Total
adjustments

Non-GAAP
2020

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 marketing

15,291

2,037

375

148

2,560

12,731

General and administrative

7,464

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

(In thousands)

GAAP
2019

Stock
compensation
expense (a)

Intangible
amortization
(b)

Total
adjustments

Non-GAAP
2019

Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)

Revenue

Product

$

28,511

$

$

$

$

28,511

Service

22,270

22,270

Total revenue

50,781

50,781

Cost of revenue

Product

8,204

193

579

772

7,432

Service

10,689

982

982

9,707

Total cost of revenue

18,893

1,175

579

1,754

17,139

Gross profit

$

31,888

$

1,175

$

579

$

1,754

$

33,642

(In thousands)

GAAP
2019

Stock
compensation
expense (a)

Intangible
amortization
(b)

Total
adjustments

Non-GAAP
2019

Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (Unaudited)

Research and development

$

8,363

$

1,022

$

$

1,022

$

7,341

Sales and marketing

15,506

1,808

368

2,176

13,330

General and administrative

6,420

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

(In thousands)

GAAP
2020

Stock
compensation
expense (a)

Intangible
amortization
(b)

Acquisition
related
expense (c)

Total
adjustments

Non-GAAP
2020

Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)

Revenue

Product

$

70,311

$

$

$

$

$

70,311

Service

71,524

71,524

Total revenue

141,835

141,835

Cost of revenue

Product

21,213

510

125

635

20,578

Service

30,563

2,619

2,619

27,944

Total cost of revenue

51,776

3,129

125

3,254

48,522

Gross profit

$

90,059

$

3,129

$

125

$

$

3,254

$

93,313

(In thousands)

GAAP
2020

Stock
compensation
expense (a)

Intangible
amortization
(b)

Acquisition
related
expense (c)

Total
adjustments

Non-GAAP
2020

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 marketing

48,252

5,858

912

148

6,918

41,334

General and administrative

20,778

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

(In thousands)

GAAP
2019

Stock
compensation
expense (a)

Intangible
amortization
(b)

Total
adjustments

Non-GAAP
2019

Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)

Revenue

Product

$

65,646

$

$

$

$

65,646

Service

65,203

65,203

Total revenue

130,849

130,849

Cost of revenue

Product

20,450

502

1,762

2,264

18,186

Service

31,810

2,829

2,829

28,981

Total cost of revenue

52,260

3,331

1,762

5,093

47,167

Gross profit

$

78,589

$

3,331

$

1,762

$

5,093

$

83,682

(In thousands)

GAAP
2019

Stock
compensation
expense (a)

Intangible
amortization
(b)

Total
adjustments

Non-GAAP
2019

Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (Unaudited)

Research and development

$

25,452

$

2,878

$

$

2,878

$

22,574

Sales and marketing

47,003

5,286

1,105

6,391

40,612

General and administrative

19,535

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,

2020

2019

2020

2019

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)

8

8

Benefit for income taxes (b)

(2,056)

(2,056)

Interest income

(638)

(1,288)

(2,655)

(3,874)

Interest expense

2,368

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 amortization

529

987

1,155

2,985

Acquisition related expenses

855

855

Other expense, net (a)

8

8

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

Basic

32,394

31,459

32,096

31,170

Diluted

33,019

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.

Investors:

Sue Dooley

Vocera Communications, Inc.

408.882.5971

investorrelations@vocera.com

Media:

Shanna Hearon

Vocera Communications, Inc.

669.999.3368

shearon@vocera.com

Source: Vocera Communications, Inc.

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