VOCERA COMMUNICATIONS, INC. - FORM 8-K - EX-99.01 - EXHIBIT 99.01

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8-K - 8-K - VOCERA COMMUNICATIONS, INC.	a63020vcra8k.htm

Vocera Announces Second Quarter 2020 Financial Results

SAN JOSE, Calif. - July 27, 2020 - Vocera Communications, Inc. (NYSE: VCRA), a recognized leader in clinical communication and workflow solutions, today reported total revenue of $47.3 million for the second quarter of 2020, compared to revenue of $44.8 million in the second quarter of 2019.

“I am proud of the job Vocera employees achieved during this global pandemic to remain focused and deliver outstanding results across the board,” said Brent Lang, Chairman and CEO of Vocera. “We fought through rapidly changing market dynamics and enhanced our market relevance. Our employees were inspired by our mission to improve the lives of patients and caregivers.”

Second quarter of 2020 financial highlights include:


•	Total revenue of $47.3 million, compared to $44.8 million last year


•	GAAP net loss per share of $(0.11); non-GAAP diluted income per share of $0.10


•	GAAP net loss of $(3.5) million; Adjusted EBITDA of $5.7 million


•	Deferred revenue and backlog combined of $127.5 million as of June 30, 2020, an increase of 10% over last year

Second Quarter 2020 Results

Total revenue for the second quarter of 2020 was $47.3 million, an increase of 6% compared to last year.



(in thousands)	Three months ended June 30,
	2020		2019		% change
Product revenue
Device	$	17,100	$	14,504	17.9	%
Software	6,851		8,628		(20.6	)
Total product	$	23,951	$	23,132	3.5	%

Service revenue
Maintenance and support	$	18,994	$	16,928	12.2	%
Professional services and training	4,402		4,699		(6.3	)
Total service	23,396		21,627		8.2	%
Total revenue	$	47,347	$	44,759	5.8	%

GAAP gross margin for the second quarter of 2020 was 63.2%, compared to 60.4% in the second quarter of 2019.



	Three months ended June 30,
	2020		2019
Gross margin
Product	67.8	%	70.1	%
Service	58.6		49.9
Total gross margin	63.2	%	60.4	%

Non-GAAP gross margin
Product	68.6	%	73.3	%
Service	62.5		54.6
Total non-GAAP gross margin	65.6	%	64.3	%

GAAP net loss for the second quarter of 2020 was $(3.5) million, or $(0.11) per share, compared to GAAP net loss of $(4.9) million, or $(0.16) per share in the second quarter of 2019.



	Three months ended June 30,
(in thousands except per share amounts)	2020			2019
Net loss	$	(3,468	)	$	(4,857	)
Net loss per share	$	(0.11	)	$	(0.16	)
Non-GAAP net income	$	3,205		$	2,232
Non-GAAP diluted net income per share	$	0.10		$	0.07
Adjusted EBITDA	$	5,726		$	3,929

Deferred revenue at June 30, 2020 was $54.0 million compared to $61.5 million at December 31, 2019. Cash, cash equivalents and short-term investments were $233.9 million at June 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, July 27, 2020, to discuss the Company’s results.

Investors may access a free, live webcast of the call through 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 on the Vocera website.

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 second 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 and non-GAAP operating expenses. 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, 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 and (ii) transition costs. 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, transitional employee costs and earn-out payments (including amounts relating to the distribution of purchase consideration among the selling equity holders) treated as compensation expense. 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.

d) Restructuring costs. We exclude restructuring costs from non-GAAP measures because we do not regard these limited-term or one-time costs as reflective of normal costs we incur to operate our business. These are defined in U.S. GAAP to include one-time employee termination benefits, contract termination costs, and other associated costs, with respect to exit or disposal activities.

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 award 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 our 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 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

3) 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:

i) 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.

ii) 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 and patients, while enabling hospitals to enhance quality of care and operational efficiency. 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 clinical communication and workflow 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. 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 is at home 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 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 June 30,						Six months ended June 30,
	2020			2019			2020			2019
Revenue
Product	$	23,951		$	23,132		$	41,801		$	37,135
Service	23,396			21,627			46,219			42,933
Total revenue	47,347			44,759			88,020			80,068
Cost of revenue
Product	7,710			6,912			14,074			12,246
Service	9,694			10,831			20,217			21,121
Total cost of revenue	17,404			17,743			34,291			33,367
Gross profit	29,943			27,016			53,729			46,701
Operating expenses
Research and development	9,349			8,943			18,381			17,089
Sales and marketing	15,998			15,478			32,961			31,497
General and administrative	6,923			6,535			13,314			13,115
Total operating expenses	32,270			30,956			64,656			61,701
Loss from operations	(2,327		)	(3,940		)	(10,927		)	(15,000		)
Interest income	913			1,332			2,033			2,611
Interest expense	(2,308		)	(2,170		)	(4,582		)	(4,291		)
Other income (expense), net	210			(159		)	(381		)	(28		)
Loss before income taxes	(3,512		)	(4,937		)	(13,857		)	(16,708		)
Benefit from (provision for) income taxes	44			80			(81		)	116
Net loss	$	(3,468	)	$	(4,857	)	$	(13,938	)	$	(16,592	)

Loss per share
Basic	$	(0.11	)	$	(0.16	)	$	(0.44	)	$	(0.53	)
Diluted	$	(0.11	)	$	(0.16	)	$	(0.44	)	$	(0.53	)
Weighted average shares used to compute net loss per share
Basic	32,152			31,242			31,945			31,022
Diluted	32,152			31,242			31,945			31,022

Vocera Communications, Inc.

Condensed Consolidated Balance Sheets

(In Thousands)

(Unaudited)



	June 30, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	29,386	$	25,704
Short-term investments	204,476		204,164
Accounts receivable, net of allowance	28,255		42,547
Other receivables	6,645		6,312
Inventories	8,556		4,576
Prepaid expenses and other current assets	5,607		5,149
Total current assets	282,925		288,452
Property and equipment, net	7,669		8,661
Intangible assets, net	4,834		5,461
Goodwill	49,246		49,246
Deferred commissions	11,118		10,477
Other long-term assets	7,246		8,158
Total assets	$	363,038	$	370,455
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	4,765	$	6,036
Accrued payroll and other current liabilities	17,079		14,757
Deferred revenue, current	43,841		50,033
Total current liabilities	65,685		70,826
Deferred revenue, long-term	10,173		11,442
Convertible senior notes, net	120,682		117,178
Other long-term liabilities	5,843		7,184
Total liabilities	202,383		206,630
Stockholders' equity	160,655		163,825
Total liabilities and stockholders’ equity	$	363,038	$	370,455



Vocera Communications, Inc.
Three months ended June 30, 2020

			Stock
(In thousands)	GAAP		compensation		Intangible		Total		Non-GAAP
	2020		expense (a)		amortization (b)		adjustments		2020
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)
Revenue
Product	$	23,951	$	—	$	—	$	—	$	23,951
Service	23,396		—		—		—		23,396
Total revenue	47,347		—		—		—		47,347
Cost of revenue
Product	7,710		201		—		201		7,509
Service	9,694		913		—		913		8,781
Total cost of revenue	17,404		1,114		—		1,114		16,290
Gross profit	$	29,943	$	1,114	$	—	$	1,114	$	31,057

			Stock
(In thousands)	GAAP		compensation		Intangible		Total		Non-GAAP
	2020		expense (a)		amortization (b)		adjustments		2020
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (Unaudited)

Research and development	$	9,349	$	1,023	$	—	$	1,023	$	8,326
Sales and marketing	15,998		1,961		268		2,229		13,769
General and administrative	6,923		2,268		39		2,307		4,616
Total operating expenses	$	32,270	$	5,252	$	307	$	5,559	$	26,711

(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.



Three months ended June 30, 2019
			Stock		Intangible
(In thousands)	GAAP		compensation		amortization		Total		Non-GAAP
	2019		expense (a)		(b)		adjustments		2019
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)
Revenue
Product	$	23,132	$	—	$	—	$	—	$	23,132
Service	21,627		—		—		—		21,627
Total revenue	44,759		—		—		—		44,759
Cost of revenue
Product	6,912		172		573		745		6,167
Service	10,831		1,006		—		1,006		9,825
Total cost of revenue	17,743		1,178		573		1,751		15,992
Gross profit	$	27,016	$	1,178	$	573	$	1,751	$	28,767

			Stock		Intangible
(In thousands)	GAAP		compensation		amortization		Total		Non-GAAP
	2019		expense (a)		(b)		adjustments		2019
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (Unaudited)

Research and development	$	8,943	$	1,034	$	—	$	1,034	$	7,909
Sales and marketing	15,478		1,758		368		2,126		13,352
General and administrative	6,535		2,139		39		2,178		4,357
Total operating expenses	$	30,956	$	4,931	$	407	$	5,338	$	25,618

(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.
Six months ended June 30, 2020
			Stock		Intangible
(In thousands)	GAAP		compensation		amortization		Total		Non-GAAP
	2020		expense (a)		(b)		adjustments		2020
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)
Revenue
Product	$	41,801	$	—	$	—	$	—	$	41,801
Service	46,219		—		—		—		46,219
Total revenue	88,020		—		—		—		88,020
Cost of revenue
Product	14,074		363		11		374		13,700
Service	20,217		1,724		—		1,724		18,493
Total cost of revenue	34,291		2,087		11		2,098		32,193
Gross profit	$	53,729	$	2,087	$	11	$	2,098	$	55,827

			Stock		Intangible
(In thousands)	GAAP		compensation		amortization		Total		Non-GAAP
	2020		expense (a)		(b)		adjustments		2020
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (Unaudited)

Research and development	$	18,381	$	1,989	$	—	$	1,989	$	16,392
Sales and marketing	32,961		3,821		537		4,358		28,603
General and administrative	13,314		4,310		78		4,388		8,926
Total operating expenses	$	64,656	$	10,120	$	615	$	10,735	$	53,921

(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.



Six months ended June 30, 2019
			Stock		Intangible
(In thousands)	GAAP		compensation		amortization		Total		Non-GAAP
	2019		expense (a)		(b)		adjustments		2019
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Unaudited)
Revenue
Product	$	37,135	$	—	$	—	$	—	$	37,135
Service	42,933		—		—		—		42,933
Total revenue	80,068		—		—		—		80,068
Cost of revenue
Product	12,246		309		1,183		1,492		10,754
Service	21,121		1,847		—		1,847		19,274
Total cost of revenue	33,367		2,156		1,183		3,339		30,028
Gross profit	$	46,701	$	2,156	$	1,183	$	3,339	$	50,040

			Stock		Intangible
(In thousands)	GAAP		compensation		amortization		Total		Non-GAAP
	2019		expense (a)		(b)		adjustments		2019
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses (Unaudited)

Research and development	$	17,089	$	1,856	$	—	$	1,856	$	15,233
Sales and marketing	31,497		3,478		737		4,215		27,282
General and administrative	13,115		4,163		78		4,241		8,874
Total operating expenses	$	61,701	$	9,497	$	815	$	10,312	$	51,389

(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 June 30,						Six months ended June 30,
	2020			2019			2020			2019
GAAP net loss	$	(3,468	)	$	(4,857	)	$	(13,938	)	$	(16,592	)
Add back:
Stock compensation expense	6,366			6,109			12,207			11,653
Interest income	(904		)	(1,320		)	(2,017		)	(2,586		)
Interest expense	2,308			2,170			4,582			4,291
Depreciation and amortization expense	1,468			1,907			2,801			3,797
Provision for (benefit from) income taxes	(44		)	(80		)	81			(116		)
Non-GAAP adjusted EBITDA	$	5,726		$	3,929		$	3,716		$	447

GAAP net loss	$	(3,468	)	$	(4,857	)	$	(13,938	)	$	(16,592	)
Add back:
Stock compensation expense	6,366			6,109			12,207			11,653
Intangible amortization	307			980			626			1,998
Non-GAAP net income (loss)	$	3,205		$	2,232		$	(1,105	)	$	(2,941	)
Non-GAAP net income (loss) per share
Basic	$	0.10		$	0.07		$	(0.03	)	$	(0.09	)
Diluted	$	0.10		$	0.07		$	(0.03	)	$	(0.09	)
Weighted average shares used to compute non-GAAP net income (loss) per share
Basic	32,152			31,242			31,945			31,022
Diluted	32,430			32,105			31,945			31,962

VOCERA COMMUNICATIONS, INC. - FORM 8-K - EX-99.01 - EXHIBIT 99.01 - July 27, 2020

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