Good evening, my name is Conchetta and I will be your conference operator today. At this time, I would like to welcome everyone to the Omnicell third quarter earnings release conference call. (Operator Instructions). Mr. Seim, you may begin your conference.

Thank you. Good afternoon and welcome to the Omnicell 2008 third quarter results conference call. Joining me today is Randall Lipps, Omnicell President and CEO. You can find our results in the Omnicell third quarter press release posted in the Industrial Relations Section of our website at www.omnicell.com. This call will include forward-looking statements subject to risks, uncertainties and other factors that could cause actual results to differ materially, and those expressed or implied. For a more detailed description of the risks that impact these forward-looking statements, please refer to the information under the heading Risk Factors and under the heading Management Discussion and Analysis of Financial Conditions and Results of Operations in the Omnicell Annual Report on Form 10-K/A filed with the SEC on March 14, 2008, as well as more recent filings with the SEC. Please be aware that you should not place undue reliance on any forward-looking statements made today. The date of this conference call is October 23, 2008 and all forward-looking statements made on this call based on the beliefs of Omnicell as of this date only. Future events or simply the passage of time may cause these beliefs to change. Finally, this earnings call is the property of Omnicell Incorporated and any taping, other duplication or rebroadcast without the express written consent of Omnicell Incorporated is prohibited. During the call today, I will start with an overview of the financial results for the quarter followed by Randy who will cover some of the quarter’s business highlights. I’ll then discuss our guidance for the remainder of 2008 and our initial guidance for 2009. After that, we’ll open the call to your questions. For the third quarter of 2008, we’re happy to report that we experienced record bookings, posted record revenues and the profits exceeded expectations.…

Thanks, Rob. The number of customers that chose to move forward with Omnicell solutions during Q3 demonstrates our solutions remain an important element in providing patient safety. While there was a delay in buying decisions for larger capital purchases in the first half of the year, we saw increased order rates for our products in the third quarter. For instance, we saw good traction in our first full quarter of delivering our SinglePointe feature which allows us up to 100% of medications to be available and managed at a single point of medication administration. Our solutions continue to differentiate us from the market and our new customer and competitive conversions success this quarter shows that we continue to fare well in head-to-head competitive situations. Another exciting area of growth potential for Omnicell is in the operating room. There is a large opportunity to significantly improve safety and efficiency with our anesthesia workstation for medication control and with our OptiFlex Cath Labs and surgical services line that supply management systems. The increased interest in these solutions demonstrates the need for the safety our systems provide in every department of the hospital. As Rob mentioned, we have also seen more activity from our international distributors who’ve place our systems at large hospital institutions in geographies that are just starting to embrace medication and supply automation. The Guy’s and St. Thomas Hospital Trust in London comprised of the largest hospitals in the U.K. and King’s College Hospital Trust, one of the most renowned teaching hospitals in the U.K., recently announced the initiation of a joint project to automate the stocking and management of supplies and medications. Omnicell medication and supply systems are the cornerstone of a $10 million total inventory control project that includes an entirely new logistical management process. We received initial…

Thanks, Randy. Our third quarter was strong in just about every respect and we are reaffirming our previous revenue and profit guidance ranges for 2008. Our guidance for the rest of 2008 now incorporates better information on the mix of orders over the past six months and our customers’ installation needs. We previously guided revenue to a range of 17% to 20% growth for all of 2008 over 2007. We now expect ourselves to fall in the middle of that range at approximately 18% growth. We have several orders in our installation schedule that are either tied to physical construction projects at our customers or they are large orders of automation. Or as with our most recent orders, our new customers. And all of these types of customers generally require longer installation cycles and this is influencing our expectations for revenue in Q4. In terms of earnings, we continue to expect it to be towards the high-end of our previously guided range of $0.65 to $0.70 per share, non-GAAP excluding stock compensation expense. We see a strong order pipeline with several purchases in process but we do not yet know how the current economic conditions may affect the timing of those orders. So consequently, we are now widening the range of expected year-end 2008 backlog to be between 125 million and 140 million. For 2009, we believe it is possible that some capital equipment purchases and installations may be delayed until the current financial turmoil has settled and the overall credit markets become more accessible. Therefore, for the first two quarters of 2009, we expect only modest revenue growth year-to-year in the range of 5%. Regarding profitability, we are managing costs and expenses, and we still expect to achieve 15% operating margins, excluding stock option expense by the middle of 2009. A 15% operating margin equate to earnings growth from this year of between 15% and 20%. We’re not seeing a change in the competitive landscape and we believe medication safety has only become a more important concern in healthcare. We expect industry growth to return to historical levels once the economic environment has improved and our own growth rates to return to levels that we have seen in the past. We’ll give more detailed guidance for 2009 as the economic condition begins to stabilize. Now operator, I’d like to open the call to questions.

(Operator Instructions) Your first question comes from the line of Newton Juhng with BB&T Capital Markets. Newton Juhng - BB&T Capital Markets: Good afternoon gentlemen. Rob and Randy, I was wondering if you could give us a little more detail on the U.K. contract. It looks like you are working with a distribution partner here. Can you just give us an idea as to how this going forward is going to impact your numbers considering the size of the deal?

Yes, we do work through distributors on every other geography outside the United States except Canada and the distributor in the U.K. is a company called Ventech who’s done a great job placing our systems in some of the most renowned hospital trusts in the U.K.. These particular orders come from two large trusts in London, the Guy’s and St. Thomas Trust which are two hospitals and the King’s College Trust, which is a teaching hospital in London, and they’re jointly implementing a fairly major project to automate medical and surgical supply inventories throughout their facilities. It is a rollout of multiple hundreds of our units and in the U.K. the hospitals announced that it was a project with a budget of £6 million or roughly $10 million. That’s a total project cost includes everything they’re doing in the project. We’re kind of the cornerstone of it and our course it's at the end-user prices not the revenue that we would see selling to our distributor. The trusts have not actually fully designed that system yet so we’re not precisely sure how much they’re going to order. We did get the initial orders and we do expect it, as Randy said, to be several million dollars of orders over the next year. Newton Juhng - BB&T Capital Markets: Okay, in terms of the margin profile of that business similar to what you see in the States?

Our international pricing model is different than our U.S. pricing model because our distributors take on some of the responsibilities that we would normally take on in the United States. So gross margins will be lower but they then provide service installation and the sales, and the bottom line operating margins of the deals are about the same for us. Newton Juhng - BB&T Capital Markets: Okay, okay in terms of contribution there. Service gross margin was really light this quarter versus historical and I was just wondering, especially compared to what we were expecting. Can you just give us a little detail as to was the driving the contraction there?

Yes, I did say last quarter that we were not expecting to invest more in our service organization as we had over the last year and in fact, the spending in the organization was down quarter-to-quarter. What’s driving the margin there is in the service line. Besides pure maintenance service, there’s also some other non-product revenue, professional services, once a month income from leases that have expired and customers who’ve gone on month-to-month payments and so forth. Those other elements of that revenue line were down about half-a-million dollars. Spending was down a little bit and that’s what caused the contraction of the margin. Newton Juhng - BB&T Capital Markets: Okay, excellent, and then I just wanted to ask Randy a quick question here. Your comments around the competitive environment and all, we have been hearing that Pixis (ph 00:25:26) have been a little bit more customer-friendly. And we were just wondering, have you seen any effect to your win rate for competitive displacements? Or whether or not right now that hasn’t been coming through in terms of your ability to pull people away from Pixis?

Well, I think our numbers speak for themselves. We’re at 5% conversion rate. Forty-five percent of our business this quarter in the last ninety days were first time customers to Omnicell. And you’ve got to remember, customers that are Greenfield we’re usually competing against very strong competitors who have a lot of things to offer. But we do think we have a unique approach to the marketplace, which is more than just good service. It’s really taking to long-term perspective what our customers need and want and delivering that in a way that builds a reputation for us. And that reputation doesn’t go away because of what other people are doing in the short run. I’ve been here doing this for 16 years. I’ll be here another 16 years and I think the people who buy from us understand what we’re all about and what the company’s all about. Newton Juhng - BB&T Capital Markets: Okay, I appreciate the comments there. Last question, just on the status of your share buy back.

We did not buy back any shares during Q3 so we still have 25 million more authorized by the board and we’ll still make decisions on that as time goes on. Newton Juhng - BB&T Capital Markets : Okay, thank you.

Thanks.

And your next question comes from the line of Steven Crowley with Craig-Hallum Capital.

Gentlemen.

Hi Steve.

Congratulations on the good performance in Q3. You mentioned that you had a strong government business, interpret VA business quarter and Q3. Might you be able to give us a bit of a feel for, if not the specific contribution, a relative contribution? I think you described last year’s contribution from VA as pretty exceptional or extraordinary. Did you have a similar such experience this year or just a good quarter?

Yes, the U.S. government business is predominantly the VA. It also includes the Department of Defense and the Indian Health Services. And Q3 is always strong for the U.S. government because their fiscal year-end right at the beginning of October. So we did have an exceptionally strong quarter last year like we’ve really never seen before. And this quarter, this Q3 for the government was again strong, but it was more consistent with previous years.

That’s helpful. Now in terms of the preliminary guidance that you provided for next year, you said the first couple quarters of the year, best guess is they’ll feature 5%-ish type revenue growth. The implication is that there’s been some noticeable improvement in that growth rate to move into the second half of the year. The math would seem to imply that a reasonable expectation for the whole year is probably between 5 and 10% revenue growth just the way the math would have to work to get you out of that range would be pretty dramatic. Is that a reasonable exercise that I’m going through?

Well, I guess we’ll have to wait and see what happens with the economic conditions before we make a call on the second half of the year. Obviously we all see what’s going on in the news and it’s certainly a question mark about what that will do to buying patterns of all institutions. So that’s why we’re making a call on the first couple quarters and we’ll see how it goes.

And in terms of the key health of a customer metric or tell that you’ll get from customers, do you typically garners some visibility on overall 2009 capital budgets down the stretch run of the year or early in the next year? And what is the key health of a customer factor that you’re looking at? Is it accessibility of financing or is it investment portfolio or endowment portfolio income or? I’m just trying to get feel for the things to watch.

Well, of course it includes all of that. There is quite a few of our customers who are on 1231 year-ends and they’re generally doing their planning cycles either at the end of this year or the beginning of next year. We do get some visibility towards the end of Q1 of what their budgets are for the rest of the year. Yes, I think a lot of institutions are probably trying to figure out what the year will be for them and for the country and setting their budgets on that. And certainly influencing that will be their access to capital, their income from investments, and their prioritization of what’s most important to them to spend their dollars on in the year.

And one other topic and then I’ll hope back on the queue. In terms of REU and your latest plans and timetable for the introduction of a fully integrated outfitted mobile cart, I think that’s moved more towards middle of next year than early. Maybe you could just update us on that and what kind of variable that might represent in your model next year.

Yes, Steve this is Randy Lipps. Yes we’re on track to release that beginning of Q3 and we feel very confident that it’s going to be a very not only popular product but one that will really fill the gap, particularly in the mobility controlling drugs. We’re seeing our stationary units and all the way to the bedside and so it’s been getting good reception in the market place from people we’ve presented it to. And it is a very important need, so as soon as our next 14.0 release is done and at the end of Q2, we’ll begin shipping in Q3.

Great, thanks for taking my questions. I’ll hop back on the queue.

And your next question comes from the line of Tom Gallucci with Merrill Lynch.

Good evening Tom.

Thank you very much. Just a quick one here. One point of clarification, I guess, in the ’09 guidance this 15 to 20%, is that net income or is that EPS. And, I guess, along with that, how are you factoring buy backs into your expectations for next year?

That’s earnings per share excluding stock compensation expense and that’s not factoring in any more buy back at this point. We’ll adjust as we actually execute on buy backs.

Great, and you mentioned the DSO number up a bit, obviously due to some mix as you talked about in the past. Can you maybe give a little bit more granularity there if there’s any way to sort of put this in better perspective in terms of some detail, the amount of business where the least deals versus not? Are you seeing any lengthening of correction cycles in the non-lease deals or is it purely just the mix of one versus the other?

It’s pretty much just the mix of one versus the other. You’ll notice over the last few quarters we’ve had some fluctuation kind of from the low 60s to the high 60s and that’s predominately driven by the mix of leases versus non-leases that are installed during the quarter. Not the order rates but actually what’s installed and because that’s when the lease starts and that’s when the collection takes place in the lease.

Right, but yes, okay, so there’s nothing behind that other than just the mix, no lengthening of time to collect or anything?

Yes, that particular metric really doesn’t have anything to do with the economic conditions right now. In fact, our quality of the accounts receivable, the aging of the accounts receivable is still very good, pretty consistent with where it was last quarter.

Okay, good, thank you. I should have just asked that right off the bat. And then, I guess, just as a final thing, not to beat a dead horse in terms of the economy, but with the tweaking of the backlog expectation, is that just sort of prudence relative to what you’re seeing out there or are there specific projects that you know about right now that you sort of thought were going to happened but have been delayed. I’m just wondering how much granularity or how much visibility you have on that versus just sort of pruning back expectations conservatively.

Well, it’s more of the latter. We’ve still got a great pipeline. We really haven’t seen anything drop out of the pipeline that we were expecting for the quarter. But we’re just kind of mindful of what happened last year and we definitely saw some decisions just get delayed. And so we’re all just trying to be prudent and realize everything we’re seeing in the newspapers everyday is going to have some effect. And we’re just uncertain what the effect will be. It appears that customers are still very interested in our products. They’re absolutely interested in the safety and meeting regulatory concerns that our products and our solutions bring. But we would expect some of the larger deals—and there are quite a few larger deals in the pipeline—are going to be somehow affected by this.

Okay, thanks for the color.

And your next question comes from the line of Sean Wieland with Piper Jaffray. Sean Wieland - Piper Jaffray & Co.: Hi, thanks. I guess I’m still a little bit confused. With record bookings and strong pipeline and six to nine months revenue in backlog, I would think that the first half of ’09 would be stronger unless you thought for some reason that customers were going to delay the shipment of the product. So can you help me reconcile those?

Well, sure, the first half of next year’s revenue is comprised of the orders from Q2, Q3, and Q4 of this year predominately. Q2 wasn’t as strong as we would have liked it to be. We saw some improvements but it certainly wasn’t as strong. Q3 was very strong. Q4 is a bit of a question mark in front of us. We see great pipeline, big orders but a little bit of concern of what the economy’s going to do to it. So overall that makes for a mix of projects that we don’t believe is going to drive revenue to be a big growth number for the first half of next year. And the other aspect of this is the orders that we just took in Q3, as we said, a lot of the orders were new customers. And they take quite a long time to install. And a lot of those installations won’t even start until Q2. And so while it was a big order quarter, we expect those to be in backlog for quite a while. Sean Wieland - Piper Jaffray & Co.: Okay, and then the VA contracts, does the VA on average take their shipment faster or slower than average?

Slower. Sean Wieland - Piper Jaffray & Co.: Slower, so would the VA shipments possibly be pushed into second half of next year?

Some of them could. Some of those are new installations. They are new customers to us and they would certainly fall in the category of what I was just describing. Sean Wieland - Piper Jaffray & Co.: Okay, and is there a metric out there that you use or a combination of metrics to gauge you customers’ ability to access the credit markets?

Well each customer has their own personality and we know our customers pretty well individually and we have a pretty good idea of their capabilities accessing the credit markets. We do credit checks on our customers our selves, obviously, but we’re also pretty in tune with how they plan to pay for their purchases. So yes, we’re definitely watching those and understanding best as we can. Sean Wieland - Piper Jaffray & Co.: Okay, and last question, Randy, you’ve been doing this for a little while. I think I asked the same question on Q1. How does this environment compare to, I think you said, the 16 years that you’ve been doing this? I mean how does this environment compare, the purchasing environment?

Well, I don’t know. It’s really a little bit surreal because you go out and see hospitals and sometimes you, up to even last week, see COOs and CFOs and it felt like it was a typical environment and they could eventually access capital markets with—a lot of them were looking at bonds for major projects. So they didn’t look too panicked. But I don’t know exactly how they would know that or not. I think as far as accessing lease financing for our products, I think that’s a lot smaller problem or not much of a problem. And unless the financial markets just seize up for a very long time, there seems to be a lot of capital dollars out there willing to work with us to work at reasonable rates to get financing for our customers. So I think it’s really more on the larger grand scale where somebody’s trying to build a new 200 bed tower about when those major projects get started because you generally need bond money to go out and get those. And some of our purchases are obviously tied to those kinds of projects and when the complete and when they have the funds to move forward. But I think in general I felt like hospitals are getting paid these days. They’re getting the cash flow from the government or from payers sort of readily. And it’s just a matter of how much capital dollars they have to spend. And I think it’s a lot different than Q1 where people were not quite sure where they should go to get their shorter term capital dollars met by because the interest rate was falling so quickly. And here, it’s more about the longer term, big access to capital I think that most people have concerns about, not sort of the individual purchases. Smaller purchases they might have with us, but it could impact us. We don’t know for sure. Sean Wieland - Piper Jaffray & Co.: Okay, would it be fair to ask on average by what percent your customers would cut their ’09 CapEx budget by? Could you give us a range?

What they cut it by? Sean Wieland - Piper Jaffray & Co.: Yes.

You know what I hear mostly is people are putting it in a few accounts and not very many and just said well we’re going to freeze capital for 45 days. We’ll delay capital. And you don’t hear people just saying okay we’re not going to spend any money. So I think it’s hard choices and I think a lot of hospitals are sitting around kind of waiting to see before they actually make the decisions on actually cutting the list and just see what happens in the marketplace. And so I think there’s a lot of wait and see, which obviously gives us a little concern about are we on a wait and see list? Are we the go ahead list? And we may not know about a lot of those situations until December. So it’s a little bit tough to call. Sean Wieland - Piper Jaffray & Co.: Alright, thank you very much.

Thanks Sean.

And your next question comes from the line of Leo Carpio with Caris & Company. Leo Carpio - Caris & Company: Sorry to beat a dead horse here in terms of the credit crunch, was there any particular hospital segment that was weak or had expression more concerns to you regarding this? Was it the mid-sized hospitals, the large, academics? I’m just trying to get a sense of who’s feeling the pressure the most.

Well, the answer is no, there’s not a particular segment, but actually, as Randy said, we wouldn’t really indicate that there are very many hospitals saying anything about it. The term he used is it’s a little surreal. Clearly there is some contraction in the credit markets, but most of our customers really haven’t seen it yet. I think that’s probably part of the nature of their being a very long selling cycle with our type of solutions. And the people that are making the buying decisions have the money appropriated and it’s approved and they’re going to move forward. It’s buying decisions out in probably Q1 and beyond that would see some effect. Leo Carpio - Caris & Company: Okay, and in terms of the competitive environment regarding Pixis, have they been using their parents’ balance sheet or the Cardinal Health helping them out his quarter like they may have done in the beginning part of the year?

Well I think they’ll always do that in selective cases. We’ve typically been able to compete very well with our leasing partners. So if that tends to happen, it’s not really an issue. Leo Carpio - Caris & Company: Okay and then looking into 2009, since they’re being spun-off, does that give you some sort of optimism that that competitive pressure from them may ease up a bit?

Well, I think the spinout of that unit of Cardinal will cause some short-term disruption. But I expect to overcome that pretty quickly. Our products and our solutions compete very well and our overall delivery to the marketplace competes very well and we expect it to continue to compete very well as we come out with new and improved solutions. So I think the spinout will be an event and we will continue to find that our products are accepted and desired in the marketplace at a good rate. Leo Carpio - Caris & Company: Okay thanks.

And your next question comes from the line of Steve Halper with Thomas Weisel Partners

Relative to your leasing partners it sounded like you were able to find other leasing partners. What has happened on the applied discount rates on those leases and is that having any material impact on your profitability?

Well, not a material impact yet. I think it takes a little bit of time for pricing changes to thread through the environment. We have had a lot of opportunity with existing leasing partners that we already had and new leasing partners there. It just turns out that there are many leasing companies that operate predominately in the healthcare space. Hospitals do pay. They often pay light, but they almost always do pay. So they’re a good risk and those leasing partners probably can charge just a little bit more so they have great results and consequently they have access to funds and continue to have access to funds. That’s why we’re fairly confident that if some of our leasing partners are in some sort of economic difficulty, we’ll be able to shift to other ones and continue to provide the resources to our customers. At this point we’re not signaling that there’s any margin degradation due to pricing changes and we’ll see how that goes.

And finally, just to clarify on the earnings growth of next year, you talked about 5% growth of the top line for the first half. Just to clarify, you talked about 15 to 20% growth and adjusted earnings, that’s for the full year, correct?

Right.

Okay, thank you.

And your next question comes from the line of Gary Schwab with Valley Forge Capital.

Yes, hi, good afternoon. Just one quick question on the new regs on preventable medication errors, are you seeing any indication for quotes? Has that changed at all? Has that increased at all because of this new regulation?

Well, I think that’s really just another one of multiple inputs that drive a pharmacist to want to make sure that they’ve got the safest environment possible. The thing that’s riding people the most is just trying to prevent the errors themselves regardless of the reimbursement structure. No one wants someone to come to the hospital and get sicker because of a medication error. There are the Joint Commission Audits, there’s the CMS regulations that all drive buying behaviors and as more and more of these things come about and more and more reports about medication errors and more events like the Dennis Quaid event with his twins, those things just kind of all pull together and drive one desire for medication automation.

But you haven’t seen any real change in quotes asking for indications for quotes on your equipment because of that.

Yes, there’s nothing specifically tied to whatever.

Okay, thank you.

And your next question comes from the line of Steven Crowley with Craig-Hallum Capital Group LLC.

Guys, just one follow-up question, Rob, you mentioned that the orders that you’ve been able to garner so far that in large part of the funds are appropriated. My question really related to whether or not there are dollars that have already been allocated and circled for your projects or whether or not it’s a Q1 ’09 install the jump off for funds still has to happen. Is there a general answer or is there a variety of situations?

Well, generally what we see is the person who’s got the buying decision in the hospital makes sure the funds are allocated before they go down the whole process because it’s such a lengthy process to make the decision and then go through the installation cycle. So if we’ve got the purchase order and the contract signed, the hospital is committed the funds. And we don’t put anything in backlog until we have the purchase order. But we still see very little drop-off from the backlog on an ongoing basis.

Okay, so availability of your funds going forward really is going to dictate whether you can get a bunch of deals that are in process all the way to closure.

Correct.

Thanks again.

This concludes our Q&A session. I would now like to turn the call over to Randy Lipps.

Yes, I’d like to summarize the call by reiterating that our business is doing well with record bookings, revenue in the quarter as well. We’re profitable and cash flow positive. We’re managing out expenses and making sure our leasing partners are working closely with us to fund deals. And the market for medication management, driven by regulatory safety requirements continues to drive the adoption of our solution. Thanks for joining us today.

This concludes today’s Omnicell third quarter earnings release conference call. (Operator Instructions)