Good morning. My name is Phyllus, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2012 Omnicell Earnings Call. [Operator Instructions] Thank you. Mr. Rob Seim, you may begin your conference.

Thank you. Good morning, and welcome to the Omnicell 2012 Second Quarter Results Conference Call. Joining me today is Randall Lipps, Omnicell Chairman, President and CEO. You can find our results in the Omnicell's second quarter earnings press release posted in the Investor 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 from 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 Forward-Looking Statements in our press release today and under the headings Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations in the Omnicell Annual Report on Form 10-K filed with the SEC on March 8, 2012, as well as more recent reports filed 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 August 1, 2012, and all forward-looking statements made on this call are made 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 conference call is the property of Omnicell, Incorporated and any taping, other duplication or redistribution without the expressed written consent of Omnicell is prohibited. So Randy will give us an update on the Omnicell business today, and then I'll cover our Q2 results and our forecast going forward. And then following that, we'll open the call for your questions. Randy?

Thanks, Rob. Good morning. Q2 was a big quarter for us with record revenues, major wins worldwide, 33% of our orders from new customers and the acquisition of MTS Medication Technologies, the market leader in medication management systems for the long-term care market with a primary focus in medication adherence packaging solutions. We closed the acquisition on May 21, and our second quarter results include 6 weeks of MTS contribution. From a number of perspectives, we're happy to report that the acquisition is right on track to our expectations. Financial contributions to our business are on plan, the integration is progressing well and the reaction from customers has been positive. I'd like to recap why this acquisition makes sense. First, the combination creates a company that is aligned with the long-term care trends of the healthcare market to manage the health of patients across the continuum of care. Now, Omnicell has a more capability to serve the non-acute care market, which complements our current footprint and track record in serving the acute care market. The customers want and need sophisticated solutions to manage medications wherever their patients are, and we have the resources to be the company that provides those solutions. Second, our 2 businesses bring capabilities to each other that strengthen the product lines and expand the medication management coverage of both companies. The market strength of MTS opens up an exciting opportunity to sell medication cabinets into non-acute care and to sell adherence packaging systems into acute care. Long-term, we can also bring adherence multi-med packaging into other new markets where it does not exist today, which can significantly affect the cost and the quality of healthcare. 11% of total hospital admissions are related to medication non-adherence, according to the Center for Medicare & Medicaid Services. Blister cards…

All right. Thanks, Randy. Our financial results this quarter exceeded expectations. As Randy mentioned, our total revenue here is a record for Omnicell, and the revenue for just the acute care business is also a record. Profit, excluding transaction costs related to the MTS acquisition, was higher than planned and analysts' consensus. Cash is at the high-end of our expectations, even after buying back $7 million of stock during Q2. Our results include 6 weeks of MTS business following the transaction closing on May 21. And since this is a transition quarter, I will provide the consolidated results and I will also provide some acute care-only figures, which are comparable to Omnicell prior to the acquisition. And in addition, some of our measures discussed in the previous quarters will continue to apply only to our acute care business. And one of those measures is the portion of our orders from new and competitive conversion customers. As Randy mentioned earlier, we had 33% of our acute care orders from new and competitive conversion customers. And of those orders, we saw a shift towards competitive conversions with over 3/4 of the orders being competitive conversions and less than 1/4 from new greenfield customers who have never purchased automation before. We are very happy with these results and believe they continue to demonstrate the competitiveness of our solutions. Revenue for Q2 2012 was $75.4 million, up 24% from Q2 of 2011 and up 18% from last quarter. We always install on our customer's schedule and we ended Q2 with more installations than we had originally expected, driving revenue over our expectations and consensus. Q2 2012 profit on a GAAP basis was $0.04 per share. We will continue to report our profits on a non-GAAP basis also, which will now exclude stock compensation expense,…

[Operator Instructions] Your first question comes from the line of Matt Hewitt with Craig-Hallum.

My first question. You had a very strong quarter. I'm wondering if there -- it sounds like you had some customers that pulled some business forward into the second quarter, at least per your prior expectations. Was there anything special about some of those orders, or was it just simply a timing issue?

Yes. I don't know if I would say they pulled forward. We're always, as I said, installing on our customer's schedule and sometimes, customers need to have something installed a little bit earlier. So we did do a bit more revenue than we had originally expected, which helped the profitability this quarter. Nothing really special there. And really, we can call it a pull-forward. It's just timing of when transactions were completed.

Okay. And then another area that it appears that you had a good performance was in government. At least looking back over the last several years, what is your expectation? Normally, you see a bolus of business in the third quarter from government but it looks like you got a chunk of it in the second quarter this year. Given some of the macro issues, do you think that, that's probably maybe a little bit little bit lower in the third quarter than we have historically seen? Or is the government coming back at least as you see it?

Well, we did have a substantial presence in the VA system and with the other government hospitals. And there are ongoing orders from government institutions, pretty much every quarter. It's true that a lot of the government orders -- most of them, in fact, come in the third quarter just because the government's year end is right at the end of the third quarter. But we do see orders from, particularly, VA systems and some of the Department of Defense hospitals and Indian health systems throughout the year.

All right. Last question for me and then I'll hop back in the queue. You mentioned you had a good quarter internationally, the Saudi Arabia hospital. You also mentioned China. Could you update us on the progress there?

Sure. So -- yes, we talked about, with China, we're excited about that market. We expected that the rollout would be -- so hospitals installing 4 to 6 cabinets and trying out the Omnicell systems. That is definitely going on. The schedules of installations and rollout is meeting our expectations, so that's all good. We do find, of course, with all of our customers when they're admitting a new concept and each one of them wants to try out and see how it works and then they have to alter their workflows and to figure out how to optimize with our systems and that process is going on. So my feeling is that the rollout in China is going very well, and we're still the only ones with a Mandarin system in the market, so that's good.

Your next question comes from the line of Mohan Naidu with Piper Jaffray.

Randy, to start off with, now that you have MTS, what kind of conversations are you having with your customers, IDN [ph] customers, for cross-sells? And do you see any synergies in the sales force? And how do you -- how are you targeting cross-sell opportunities at this point?

Well, yes, we think some of the best opportunities we have right away, obviously, are to bring our cabinets presentations right into the institutional pharmacy, where MTS has 70% of the market share in the blister card world. So they have vastly more relationships and business partnerships there. So we can bring in our systems from the cabinet automation well right into those settings and it's creating a nice pipeline for us. So those are some easy wins for us. And we've actually reorganized our -- some of our sales force to attend to that directly. And then of course, into the IDNs that we sell into, readmission rates, which are going to be tracked next year, are directly tied, in some cases, to medication adherence. So we're looking at starting some initial projects in IDNs that would demonstrate the medication adherence packaging solutions and automation solutions to help drive success in those areas. And our early discussions are going very well. And we hope to have, at the end of the year, some pilot projects on that. And that's right in tune with the conversations that people in the C-Suite are having, how do we impact the cost and keep people out of hospitals and move them to other low-cost areas in the healthcare system. And medication adherence is a key driver in that. So it's nice to be right in the target of healthcare systems' conversations these days.

And, Rob, looking at the backlog for the year-end, how should we look at that? I'm presuming, at this point, it primarily consists of acute care product? Is that correct?

That's correct.

And so is there any way to give us a metric? How do we look at MTS, gauge their performance or to line them out?

Well, most of the MTS' revenue is from consumables. I -- so as I said, in my prepared remarks, 85% of their business is from consumables. The remaining part of their business is, compared to Omnicell, a relatively small amount of machines and somewhat lumpy. At any point in time, there's not necessarily any large backlog after the MTS machines. And many of those machines can be produced on a relatively short cycle. So we really didn't increment our backlog forecast for anything in MTS. If there is a machine on order, in stage of being produced or installed at the end of the year, that would be in the backlog but we don't expect it to significantly change the number.

Okay. On the consumables, is it accurate to look at that as more of a recurring revenue where you see constant stream of orders flowing in?

Absolutely. And that's -- frankly, one of the benefits of the acquisition is there's much more consumable revenue now as part of the Omnicell base.

Perfect. A last question for me here. R&D, significant leverage in the quarter. I thought that with MTS, in quarter-end, it will be a little bit up. Any comments there? Is that the accurate run rate to look forward to?

Yes. Well, our R&D is relatively the same total growth spending but as we've had in the past, part of our R&D is capitalized when we get towards the end of the development cycle. We are more into testing. We didn't really have hardly anything capitalized in Q1. And in Q2, we did capitalize $1.2 million. We actually capitalized $1.4 million, including MTS.

MTS. Okay. Are there any new program starting up that would impact Q3 and the capitalization?

We always have plenty of new development going on. Reinvesting in our business is very important.

[Operator Instructions] Your next question comes from the line of Steve Halper with Lazard Capital Markets.

George, just 2 quick questions. Number one, on the amortization add-back, obviously most of that is MTS, but what was the add-back related to, say, your other acquisitions that might have been included in that number now?

In the quarter, we amortized about $600,000 of intangible assets. About $150,000 of it was from previous acquisitions and the rest of it was from MTS.

Okay. And then just for information purposes, can you tell us what the MTS top line growth would've been in the quarter year-over-year, just for a comparable basis for the full quarter? I know you didn't own the company for the full quarter.

Well, MTS is growing at about 5% to 7%, depending from the quarter and the period that you're looking at.

Okay. So it would be within that range?

Right.

At this time, there are no further questions. I would now like to turn the call over to Randy Lipps.

Well, thanks for joining us this morning. We're really pleased with our acquisition and the momentum we have, both in the acute care and non-acute care businesses. We think it opens up some great growth opportunities to continue to explore and move both domestically and internationally. Thanks again for joining us today.

Thank you. This does conclude today's conference call. You may now disconnect.