Q3 2020 Omnicell Inc Earnings Call
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Time, all participants are in a listen only mode. After the presentation. There will be a question and answer session to ask a question during the session you'll need to press star one on your telephone. Please be advised today's conference is being recorded.
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The conference over to your Speaker today, Peter Piper. Please go ahead.
Thank you good luck.
No no welcome to the only so third quarter 2020 financial results call.
On the call with me today are Randall Lipps, Omnicell founder Chairman President and CEO.
Hi, Kathleen Nemeth, who recently joined us as our new Vice President of.
Stimulation.
He brings over 20 years of the customer likes experience and has been recognized by institutional Investor magazine for achievements and Investor Relations.
This call will include forward looking statements are subject to risks uncertainties and other factors that could cause actual results to differ materially from those expressed or implied.
For more detailed description of the risks.
These forward looking statements. Please refer to the information in our press release today.
And the only sell annual report on form 10, K. any color would you have to see on February 26, 2020 and.
Other 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 as opposed to 27.
And all forward looking statements made on this call are made only believes omnicell as of this date only.
Future events or simply the passage of time May coffee is believed to change and we undertake no obligation to update.
These forward looking statements.
Finally, this conference call is the property holdings Inc. and.
And any taping ought to duplicate or rebroadcast.
Without the expressed written consent omnicell is prohibited.
Randall will provide an update on our business.
After rentals remarks, I'll cover our results for third quarter 2020.
Our guidance for the fourth quarter 2020.
All right.
Our preliminary revenue guidance for 2021.
Our 2023rd quarter results are included in our earnings announcement, which was released earlier today.
It is posted in the Investor Relations section of our website at all Michele Buck Huh.
Oh prepared remarks will also be posted in the same section.
Additionally, we'd like to remind you that during this call we will discuss some non-GAAP financial measures reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are included in our earnings announcement.
Let me now turn the call over to run.
Good afternoon, and thank you for joining us today and welcome Kathleen So glad to have you.
On the Omnicell team.
Well, we delivered solid financial and operational performance in the third quarter.
Exceeding the high end of our guidance ranges as our customers began to return to more normal business operations.
This enabled us to resume those implementations that were delayed in the first half of the year.
And maybe more importantly in the third quarter, we drove significant increases in new customer wins and bookings.
Particularly with the top 300, U.S. health systems as customers accelerate their focus on the critical pharmacy supply chain.
Now against that backdrop.
Things are now clear first as our customers continue to navigate the impact of COVID-19, the need for our medication management automation solutions is more strategically relevant than ever.
Based on the bookings and implementations we saw in the third quarter. Our partners are investing in their pharmacy supply chain.
Which is being recognized as critical to their ability to effectively manage in a post cove at world.
There is widespread and growing and knowledge meant that more sophisticated automation and digitization capabilities enable health care providers to focus more on patient care and reduce costly errors.
The second part of the backdrop.
Our customers have resumed their pre cobot purchasing patterns.
In other words, not only has the pause we saw in the first half of the year ended.
But our health partners are buying at levels consistent with strategic investments for the long term.
We believe this reflects their confidence and their financial position and forecast and then turn it supports our confidence in our outlook for the remainder of the year and for 2021.
And as a result, I am pleased to announce that we are reinstating our pre pandemic product bookings guidance of 865 million to 900 million for the full year 2020.
Which is unchanged from the initial guidance we provided in February.
This includes bookings they were paused due to cove it in the first half.
Which you either have been booked already a in the third quarter or expected to book in the fourth quarter.
Now, let me provide some more insight and commentary on our long term sole source partnership strategy.
Our go to market strategy to increase our long term sole source partnerships continues to gain momentum.
We have been implementing an expanding this strategy successfully for the last two years.
And 2018, we are lot realigned our commercial structure to focus on the top 300 health systems in the U.S.
With dedicated customer success executives.
And we believe that the top 300 represent the vast majority.
The available markets we target.
That was a smart investment of resources for us is that as our recent announcements demonstrate.
As of the end of the third quarter more than half of the top 300 health systems as defined by definitive health care or current omnicell customers.
During this quarter, we added two new long term sole source contracts and we're honored to have these two leading health systems join us on the journey to the autonomous pharmacy.
This brings the total number 243 long term sole sourced partners with in the top 300 U.S. health systems.
Oh well.
With a duration of five to 10 years.
As discussed on our prior call with the majority of the sole source arrangements. We have a co developed multi year medication management automation plan to deliver improved accuracy.
Patient and financial outcomes, another words of a multi year plan to move our platform in place so.
So that we can it change out.
We can.
Effect the changes to drive these outcomes.
Now turning to key customer engagements in this quarter, congratulations I might say to the Omnicell team on the significant wins, especially at the time of Cove. It.
First Lehigh Valley Health network based in Allentown, P.A. is our hundred and 42nd long term sole source customer.
Big side to seven year agreement for X T systems, and anesthesia workstations for their flagship hospital in network locations.
<unk>, especially noted the value and opportunity of the autonomous pharmacy as a key driver of their purchasing decision.
Our 143 long term sole source agreement is a new 10 year partnership with a wider health network in Pittsburgh PA.
They will be converting existing medication management systems across their health system network, the omni sales platform.
Including Central Pharmacy, Ivy compounding the X T series and technology enabled services.
Oh, So Georgia based coastal community Hill.
Hey, Craig Ivey customer.
Signed a 10 year sole source agreement.
For our full portfolio of solutions, expanding omni sales footprint across the system.
We won our first official central Pharmacy dispensing service with Memorial <unk> Gulf Port in Mississippi.
They are looking to leverage XR to technology to expand their cart fill distribution model. So now support automated systems filling.
In our international market, we continue to expand our footprint in the middle East with a new partnership with the Dubai Health Authority for Us the Pontiac software supply chain solution.
We've also recently won our first robotic dispensing system deal with C. H, you 10 years, a leading academic hospital within the government hospital system of Morocco.
In addition to the customer wins I just spoke to.
We also are expanding technology enabled services, which are a key component of our strategy.
To that end, we're building on Enlivens health.
We have successfully launched Omnicell one.
And we recently completed our acquisition of 340 B. Lee on October 1st.
No in life and Health Division, formerly known as population Health solutions provides patient engagement and communications SAS solutions for retail pharmacies and health plans.
We noted last quarters conference call that we successfully launched our first location with Walmart.
As part of an enterprise wide rollout of our medication synchronization platform to all Walmart locations nationwide.
Today, I'm, particularly pleased to note that the Walgreens popular save a trip refill program.
Is powered by enliven health medication synchronization technology.
We're proud to support these two leading providers.
And this important work that they do to measurably improve medication adherence and health outcomes through enlivens help patient engagement and communication solutions. These systems are doing real work the impact health care by ensuring patients get them as they need as easily as possible.
And no when they're not picking up their meds that they get engaged in their pharmacy solution.
Next last quarter, we announced another key milestone on the journey that Philly.
To the fully autonomous pharmacy Omnicell one.
Which becomes available at all which became available in August.
Leveraging cloud based data and predictive analytics Ami so one provide pharmacy wide optimization through real time visibility.
As well as actionable insights and workflows to help pharmacies operate more efficiently.
As a result of COVID-19, many of our customers have prioritized investments in supply chain optimization and.
In order to provide critical care to patients and are increasingly turning to R&D, so want to help them understand where and how to make improvements.
Let me say, one helps pharmacists and technicians.
Focus on what matters. Most so they can work at the highest level their license and spend more time on direct patient care.
Customer interest in Ami. So one is strong we recently won Archibald health and they are anticipated to go live in the coming weeks along with other customers.
Oh similar to enliven health anomaly so one.
On the cell free 40 B.
He is a true technology enabled service that combines analytics workflow and experts.
To drive significant value for our customers Omnicells 340, <unk> bees business accelerate the development of Omnicells apart on the pharmacy and is a high growth software enabled recurring service revenue business.
I myself reported be capabilities are critical there.
The health systems, and Abel them to manage their medications inventory for all their patients across all care settings.
Omni self reported B is a compelling strategic and synergistic addition to our tech enabled services portfolio.
And as an attractive growing market with cross selling opportunities for 'em itself.
This acquisition is immediately accretive to non-GAAP EPS.
And we are thrilled to partner with all of these great health care organizations as they seek to deliver safe efficient.
Efficient and high quality patient care.
Now given the strong recovery in bookings from the first half of the year and a return to more normal business operations. We are accelerating hiring in the areas of cloud engineering and professional services. We're also ramping up implementation and customer success teams aligned with that.
Customers installation timeline.
I'd say in summary, we are very pleased with our strong financial and operational performance. This quarter. It is clear now more than ever that customers recognize the.
The criticality of Omnicells medication management automation solutions, and we're honored that they are joining us on the journey toward the autonomy pharmacy.
Now I'd like to turn it back over to Peter to give us an update on third quarter financials fourth quarter guidance.
And little prelim feed.
For 2021 revenue Peter.
Peter Thank you Renault.
As Randall known it our customers are returning to more normal business operations.
And as a result, our visibility has improved.
And continues to improve.
Yeah sure hospital admission rates increasing.
This is supported by a recent report by the Kyser family Foundation that noted had hospital admission rates are currently trending towards 90%.
We understand from our customers another industry participants and research firms the elective surgeries have increased as well from the second quarter to the third quarter and are expected to increase in the fourth quarter and into next year to more normalized levels.
Now moving to the third quarter results.
Our third quarter 2020 revenue of $214 million increased sequentially by 7% over the prior quarter.
Year over year revenue decreased by $50 million or 7% from the third quarter of 2019 marginally due to delays in bookings and implementations related to call for 19.
The third quarter earnings per share in accordance with GAAP or 20 cents per share.
Parents earnings per share of 46 to 46 cents per share in the third quarter of 2009 PM did.
The decrease in earnings per share is largely due to lower profit as a result of decrease in revenue, partially offset by a lower income tax expense.
For two years, one of our GAAP to non-GAAP results is included in our third quarter earnings press release and is posted on our website.
[laughter] quarter non-GAAP gross margin increased by 210 basis points to 47.1%, mostly driven by volume leverage as our revenue increased sequentially as well as kind of cost reduction programs.
Oh third quarter non-GAAP operating expenses of $72 million decreased 3 million from the second quarter as a result, the cost actions we discussed on the protocol.
[laughter] quarterly gotten 20, non-GAAP EPS was 60 cents per share compared to 76 cents in the same period last year.
The decrease in earnings per share is largely due to lower profit due to a decrease in revenue, which was partially offset by lower operating expenses and lower income tax expense.
Third quarter 2020, non-GAAP EPS increased by 22 cents per share on the prior quarter, driven primarily by higher revenue and lower operating expenses.
Now I would like to discuss cash flow and liquidity and capital structure. As we believe it is the strength of our business and positions us well as we grow to address future market demand.
At September 32020, a cash balance of $629 million up from a third to a $30 million at June 32020, largely due to the cash received from the issuance of how comfortable debt offerings.
During the quarter, we completed the issuance of a $575 million off.
To your point, 25% convertible senior notes due in 2025.
Which included the full exercise of the $75 million over over allotment option.
In conjunction with the notes issuance, we entered into a call spread transactions and your technical person price from the company's perspective with increased 240 $1.56 cents per share.
Reflecting a 100% conversion premium.
As far as the execution of the car from offering we repurchased.
$53 million worth common stock purchases of nodes and privately negotiated transactions.
The aggregate net profit net proceeds from the issuance of notes net of issuance costs were approximately $560 million.
For approximately $460 million, none of the housing transactions and Sofie purchase.
During the third quarter. We also entered into an amendment under our revolving credit facility to permit the issuance of the convertible senior notes.
The purchase of the handsets actually finish itself the stock warrants as opposed to update certain covenants the.
The amended revolving credit facility, along with the issuance of affordable nodes.
Suffice this minute to your capital structure, which we believe positions us well for potential merger and acquisition opportunities as long for general corporate purposes.
Subsequent to the third quarter on October one 2020, we close the only is healthy 40, B. link acquisition and used approximately $225 million of cash the cash balance for this purchase.
Free cash flow of $27 million was strong during the quarter driven by strong operating results and working capital efficiencies.
Net cash provided by operating activities was $37 million in the third quarter driven by net income.
And working capital efficiencies, mostly related to inventory reductions.
I'm, sorry entry level decreased by $11 million from a profit quarter, mostly driven by supply chain efficiencies and timing of shipments.
Accounts receivable days sales outstanding of 82 days for the third quarter declined by five days from the prior quarter and was flat from the third quarter and 2019.
As we mentioned earlier in the call. We are pleased to see that a hospital health system customers are investing in a transformational strategic capability that only sell provides though.
As we translate the momentum of the business and sales pipeline.
Thanks to backlog and that's a revenue.
We are making.
Assessments to support future growth improve customer experience generate until efficiencies and scale the business ever making these investments in a number of areas first.
Increasing the momentum off the shift to cloud based products and services.
Second.
We're continuing that's not professional services capability that we announced in December last year.
Herds as Randall this customer harming implementation of customer facing teams.
Fourth we're speeding up the simplification speed and efficiencies of quote to cash processes and lastly, we are continuing to drive to virtualize and digitize commercial.
Implementation and engineering processes.
During the first half of the year, we took action actions to manage cost and streamline the business to ensure we were operating as efficiently as possible.
I see it accelerate a transformation towards coupon as pharmacy.
I'm pleased with the efforts I'm pleased across the company to prudently manage expenses, which we sold in good operating expense management during the quarter.
Last quarter, we shared with you our attention to manage full year non-GAAP operating expenses stood at 310 $350 million range. We are maintaining this range for 2020, which now includes the operating expenses for the only fell to 40, B. acquisition, which we closed almost over.
First this year.
As we look forward based on our current disability and health of the mountain metrics, we intend to modestly increase.
These operating expenses in the fourth quarter to support market driven future growth.
Now moving to our guidance on revenue and non-GAAP EPS.
Please note going forward our guidance for all periods will include results from only sold two point of view.
Also please note that while we are aware of the recent increase in coal for cases in the United States. We believe so.
Speaking with our customers that they are well prepare and believe they will continue to issue more normal business conditions, However, our bookings or revenue in future periods could be impacted if hospitals need to materially change their operations in order to address the continued increasing call Tonight.
We are providing the following guidance for the fourth quarter 2020.
We expect total revenue to be between $238 million and $244 million.
Product revenue to be between 165 nanometer and $70 million, we expect service revenue to be between 73.
Any forward Dollarss.
Non-GAAP earnings per share to be between.
Two cents, a share and 77 cents per share.
We are providing the following guidance for the full year of.
2020.
A solid year to date the company performance has enabled us to reinstate the product bookings guidance, which we expect to range between 865 and $900 million.
The year over year growth in second half is largely driven by.
Timing of expected bookings that moved from the first half to the second half as well as healthy demand.
Customers returned to more normal business operations.
We expect total revenue to be between $881 million and $887 million.
We expect product revenue to be between 626 and $631 million.
We expect service revenue to be between $255 million.
$6 million.
We expect non-GAAP earnings per share to be between $2 to 35 cents.
Got 40 cents.
Please note that we are encouraged by the current strength to boot and our ability to grow our backlog and at this point, we are reconfirming, our long term objectives for the business consisting off it.
10% to 12% organic revenue CAGR.
An 18% non-GAAP operating margin goal.
And lastly, not a free cash flow conversion of 90, 210% as a percentage of GAAP net income.
Given the dynamics in 2020, and a commercial momentum that we have discussed earlier.
We have decided to accelerate a planning process for 2020 more.
And as a result, we're now able to provide a preliminary full year 2021 revenue guidance. This is earlier than we would have normally done in ordinary course of business and reflects our assumption for more normalized business continues business conditions to continue.
We expect 2021 preliminary revenue to range between $1.015 billion to 1 billion a $45 million.
Which is above our long term guidance range of revenue CAGR of 10% to 12%.
This is primarily result of the covert driven timing dynamics of bookings or revenue that we discussed earlier.
In summary, I'm very very pleased with our strong financial and operational results. This quarter, we exceeded the high end of our guidance guidance ranges, we executed well in a cost control initiatives, we delivered strong cash flow and.
Strengthens our capital structure.
With that he would like to open the call for your questions operator, before we get to the questions I need to make a correction.
Our 143rd long term sole source contract is a 10 year partnership with Allegheny Health network in Pittsburgh, Pennsylvania. So I think I said aligner, which is already a customer of ours in Minnesota. So.
They need and re announced that one so thank you for letting me put that end. So operator, if we have questions. We can start the questions. Please.
Certainly certainly ladies and gentleman to ask a question Unix crowds star one on your telephone. Our first question comes from Steve Halper with Cantor your.
Your line is open.
Yeah. So.
So congrats.
Congrats on a great quarter.
Guidance for the revenue guidance for next year. So question on 340 be link acquisition, obviously, it's in a it's in the guidance for Q4 could you tell us what you're assuming in that number and what the assumption is for next.
Next year.
Yes for the fourth quarter, approximately both in bookings and revenue.
Four to be approximately $10 million.
And that's from a profitability perspective, after the incurrence off or integration costs. It's a couple of pennies who was yes.
And then you should think about that but roughly a 20, 25% growth rate for next year on the revenue base and I think we gave a.
LTL revenue per 632.
This year $35 million or they got 10 million in the fourth quarter. So the math.
Before they get to the math here for next year is there will there be any deferred revenue.
Just men often.
Of.
Oh from that acquisition.
No there will not be Steve probably.
Pretty minor maybe on a $200000 the first of all.
And and and 10 million is that in bookings also.
Yes, Okay. So it's 10 million in revenue in the fourth quarter and implied in that bookings guidance is 10 million from from 340 be debt free.
Great.
Yep.
Thank you.
Right.
Hi, Steve.
Thank you and our next question comes from Bill Sutherland with benchmark. Your line is open.
Thank you Hello, guys.
Great quarter, the Threeforty be I'm curious what the overlap is with your.
Core sole source client base.
Yes.
Yes. The 240 B. is a it's very strategic because we believe what we understand from our customer base.
There is some overlap, but there are there meaningful growth to be had.
Specifically, even into having a 43 long term sole source contracts that either have a.
Not a few 40 B program with the supporting software or do you have enough capacity to see 40 B. sulfur.
Okay.
[noise] and you said.
I think Randall did that the 340 be capability was a must have.
So you went out and got.
So you got one.
It's would you guys put in that category at this point going forward.
Well I think things are connected and associated with supply chain and.
In pharmacy is really key or key operational pieces of supply chain and a lot of these full.
Solutions, if you will are probably bit more toward tech enabled our software enabled service of some sort.
So it can plug off the platform and yield a.
Either a reduction in work or do the work for.
These institutions have pharmacies, and doe or could be reporting of some sort that is to meet regulatory.
Compliance so.
Most most of these are not all but most are heavily software oriented that we're looking at.
Great. Thanks the.
The bookings number.
Traditionally just been product.
Does that.
Changing a bit now with 340 be Peter.
No. This is this is probably the product because it's still product bookings, but or for Q4 to be a the revenue and the cornerstones of bookings in the second quarter.
Turning the corner if you will.
Oh, that's right. It does Mr product bookings number okay. Okay. That's only a thanks Greg.
And then last one from me is on the omni. So one can you kind of characterize what an implementation.
Kind of involves perhaps some sense of the size range.
Particularly from a revenue perspective, Im curious about the revenue correct.
That develops software.
<unk> [noise].
Oh that Peter do the Rev Rec piece.
For us, it's really connecting into many of our systems off the platform.
And aggregating the data and then constantly optimizing it so that.
It's not like running a report at a single moment in time, it's constantly evaluating.
What are the best approach is to optimizing the inventory moving forward and then it takes the further step of once it it calculates a a must do action. It flows a work flow test down to a technician who's given that on a particular app to actually go do it. So there is minimal there is some analysts.
Ration necessary.
Course, integrating into our own systems is pretty easy, but sometimes there are some other additional steps necessary to integrate into the hospital systems, but I wouldn't I wouldn't call the major but.
It does have to be set up right to start out.
Okay and.
And then on the on the revenue model Bill the revenue model is essentially a fee per month per per bag. If you will discover why.
I only saw one and Thats done revenue is recognized as periods revenue.
Okay and these are.
I see a multiyear.
Oh, yes, sorry, Okay, yes, yes, okay recurring.
Recurring high visibility.
Second is excellent so right.
One.
Thanks, Thank you about thank.
Thank you.
Next question please.
Certainly ladies and gentlemen, our next question comes from the line of Craig Hallum or pardon me. The next question comes from the line of Matt Hewitt with Craig Hallum Capital. Your line is open.
Thanks for taking the questions and congratulations on the strong quarter. A couple from me first off regarding that the hospital budgets. Obviously, the headlines are pretty mixed right now.
As far as some hospitals faring better than others, you clearly have found a sweet spot if you will within that top 300.
What kind of visibility do they have given that we're now seeing another spike in the in cases and hospitals are talking about getting back to barrels being near capacity. Yet. We're also hearing that they're going to continue to do elective procedures.
What kind of visibility do they have into their budgets going out two quarters four quarters from now.
Well I think that we're very tied into all of our customers on a almost daily basis, particularly the top 300 up just if there's any kind of delays or concerns going for it and I think the strong confidence coming back in Q3 or do you think that if people were a little bit scared.
Yes, they would have maybe not come back and maybe they come back at 80% of what they were looking at pre co that but they've all come back very strong and very quickly and while there I'm sure. There are hot spots, where does that may develop I feel like a after we've gone through the first and technically.
The second wave is really you know after New York and then this is really the third wave people are really prepared on on what they need what to do and how to handle this and so I think there. They are very confident in understanding what they have in at different levels of covidien there what to expect.
Act and so.
This morning, we did a double check on all of our installations.
For the quarter and there wasn't one single play to second quarter.
From any place across the country that we were involved and so it just was a reconfirmation that we don't see the slowdown now what.
What I would add maybe not as well is that said, it's important to remember that hospitals and health systems.
Our setup to run their operations with a 90% plus occupation level. So they need to be in the 90% plus range. If you will right. So it.
There's some articles in the press on that as well so.
That's good to know whats understood understood there and then as far as looking at next year, how should we be thinking about the cadence are you expecting it to continue to lift from here or you know I mean, even from a bookings per se prospect normally Q to Q4, your big quarters should we expect a return to a more normal.
Well pattern from that perspective.
Yes, so that's a great question, Matt the of course, Randall and I, both talked to the dynamic within the year right off of a recovery of the first half bookings here in the second half both in the third quarter and then expected in the fourth quarter, but really strong momentum, but it means that bookings are a in our.
Our coming in.
Later, if you will rise so that's kind of a total year revenue impact but.
But also installations during the year were were delayed so what I would say that not necessarily be would have to the fourth quarter.
Huh.
I've done a reduction to the first quarter revenue that might be.
More more flattish or maybe down a tiny bit.
You know a big step down, but that's for a very preliminary.
Well go into the backlog and timelines, if you will and amount, but the dynamics is that to your question. The dynamics are different this year going into next year then.
A normal transition between counties.
Okay, and then one last one for me I think Randy or no actually Peter I think you mentioned that you are going to be bringing some expenses back as revenues are starting to come back as well how should we be thinking about that through next year. I mean are you is have you found efficiencies because of what has happened here.
Past couple of quarters, so that when we're looking at December of 21, maybe you haven't gotten back to the Q4 of 19 levels or with the 340 B. acquisition, you kind of get back there, but you're back to that level versus being above it if that makes sense yeah.
Well, what we've said on the last call was that you know the the cost reduction side for US is the original guidance that about half of that we expect to want to come back next year, because a lot of that.
Travel that marketing and hiring delay side and so some of that's coming back we don't want to at this point in October commit to you.
Hi, accessible Navy Opex number at this point, but we are we are hiring berard testing on a modest basis, well through a quarter through the fourth quarter and I think I laid out in the prepared remarks, the areas, where we are testing.
But you know the bookings pipeline backlog, that's all very very strong and market position as well so we're being prudent but we got to make sure that we still as well support our customers.
Got it great. Thank you.
Thank you. Our next question comes from Gene Mannheimer.
Colliers Security your line is open.
Thanks, Good afternoon, congrats on the great quarter guys.
I wanted to ask you about your in live in offering which I think you formerly called population health can you just refresh us what is what are the products that contribute to that I know a mid synchronization is one of them.
How how does that contribute to bookings or revenue and how would how should we think about walgreens and Walmart contributing and ramping over time. Thank you.
Good question. This is still a SAS business that is still emerging so but it is a totally.
Totally a cloud based system that drops index to the pharmacy system on the retail pharmacy.
Evaluates patients.
In their database that would fit a med synchronization.
Workflow and there's a lot of pieces to it it's just not a one time thing instead of ongoing.
Fee that we had that manages these patients going forward, because we want to keep them synchronizing keep make sure they're getting their meds, but that platform is been.
Tested by you know our customers, who are very concerned about security and how it works and we're expanding it to.
To do more software activities.
That were offering, particularly on the communications side getting linked up with a patient was the right time to call. It was the right time to text and what's their preferred mode of conversation. These are all additional services, we want to build into that platform to build it into a much more substantial business and so we've done the first thing which is.
You know get connected to a very large customers, who we can build.
Build a platform off of and build a a really successful business going forward. So I would say we're still in the early days there, but it is making great progress and we hope that there might be even some functionality and parts of for the covert vaccine that if you have an off site, where you need to.
Do some quick vaccinations that that that platform makes a better approach than trying to use legacy systems in that case, so a lot of opportunity there still.
Still needed to build out some more pieces of the platform to really make it into what I would call a significant business for four omni so, but yeah, we love it because that's where.
Where pharmacy is going is going to the home and that it's where healthcare is going and we need to be connected in there and it's a product we believe that more than retail will eventually use we think maybe even institutional and you need a big providers will eventually be engaged in this kind of product.
That's good that's that's really interesting thanks, Randy and I just wanted to circle back on.
Maybe some of the more tangible items around the XP product cycle in the XR too could you provide an update on where we stand in that in that evolution. Thanks.
Yes for the next three Akcea upgrade cycle of you'd be posted the uptick there to move the program in the investor deck that we just posted a we are at 30% now it's a three zero program today.
And what kind of going in kind of the you know the end of the third thing and going into the fourth inning here bookings five revenue follows five year backlog, so it's going well there so we.
Getting to the full points, Oh, Oh, great bookings with the installed base.
So that's XT and then we settled the prior call that from a central pharmacy perspective that proportionately kinds of delays because of coffee.
The central pharmacy was slightly heavier impact that and point of care and retail and we see that coming back as well for us and bookings in backlog than.
Data revenue as well so that's also trending up.
Thank you.
Excellent line of Scott.
Sure now Stephens your line is now open.
Scott.
Hey, Hi, Peter I, Randy Hi, Hi team how are you guys again, congrats on the results and progress.
I guess I want to follow up I know, we've Belabored Street 40, B., but based on your guidance, you said, 25% growth rate off that 35 million on the top line.
It's kind of as a follow up question a question the other analysts about the cadence, but as you grow those revenue streams I'm, assuming you get more and more momentum as you have these cross selling opportunities on your installed base so that would.
Go with your comments about being more back half that have heavy but also we got to think about the margin accretion in EPS accretion.
Given the 80 per 75, or 80% gross margin profile and a healthy.
Healthy EBITDA margins on this software service business do you expect your earnings in the cadence of earnings to be significantly accelerated throughout the course of fiscal 21.
Well I would say of course, it's a it's a high gross margin business high visibility highly recurring right. So from a the first point on cross selling so we we close the transaction about two weeks ago. Now so were we are aggressively starting.
Two landscape and prepare for for cross selling opportunities fight and and again that will take a little bit of time to close or cross selling deals rather than they need to kind of life and then there will be a.
Recurring SaaS revenue right and that probably the first instances probably will be directionally in the second half of next year from a cross selling perspective, that's probably what you. What you would expect the acquisition is immediately accretive from a non-GAAP, yes perspective for the fourth quarter.
We are aggressively and very constructive manner, a integrating the acquisition as well from a systems people process perspective. So there are some cost there.
So it will be accretive we expect of course also to earnings and.
In 2021, I think is a little bit too early to tell to kind of give a you know a directional if you know what impact that will be on a.
Operating margin or EBITDA.
Yeah, No that's that's <unk>.
Yes.
Huh.
No I understand I appreciate that color, Peter and I guess, Randy you mentioned, but I guess this is a question for both you Peter and Randy, but you mentioned you're going to be focusing on the M&A front on more services or software or tech businesses can you give us more color there on the pipeline I mean, you have very strong cash.
Cash conversion and obviously these net proceeds from the recent convertible debt offering gives you a lot of dry powder. So help us think about where your next near term opportunities lie.
No nothing really has changed to the comments, we made on M&A strategy in the past. So we have a dedicated M&A strategy team that throughout the year looks at a number of deals a number of deals we take a look at number of deals we do the diligence that and so we make.
At all then.
You know and that's what we call aside if it fits and decide to Jean if it fits and and the growth profile that fits into the platform.
And as we also liked it to be accretive on a non-GAAP, yes perspective so.
Nothing really has changed there I think the new what's your capital structure gives us more ability that is true but from an M&A perspective.
Nothing has changed of course, there's nothing to announce at this point, we'll get eliminated.
We look at we look at it through the lens that I just discussed right. So.
Pretty rigorously.
No great. Thank you guys very much and congrats on the results.
Hey, Scott.
Thank you next caller.
Question comes from the line of Sean Wieland Piper Farmer.
Your line is open.
Hi, guys, Thanks, and let me add my congrats on an impressive quarter.
To be clear I think what you're saying is that the the revenue acceleration that you're guiding for 21 is primarily related to the timing of the 22020 bookings.
And so my question is we're.
We're back that were like kinda back in business at the bookings level with your original guide, but still about $100 million short on revenue for the year, how much of that $100 million.
Rolls forward to 21, how much of that is lost because of the passage of time.
Well that's it out we said on the prior call Sean is that nothing as loss, so but by and large we haven't lost any significant.
I expect the deals from that perspective, and so they are the revenue is coming it's just going to be at a later point. If you will so I'll just I think we think what John saying is not this year as loss. This year. So yes, yes, so and I think that yeah, obviously in our 10 to 12 long term growth.
Next years.
The above that and so I think you know.
It's kinda like we were delayed six months this year.
And it takes a while.
Another six months to get that end, so I think it will flow and one of the reasons. We are hiring people is.
We don't have enough people in place to do all the implementations and get them trained up.
For next year without the hiring so that's part of the program.
Okay. So it sounds like 21 is going to be a bit of a taking the python here if you will.
And I'm sorry to ask you. This but you know for are you, saying that the test they tend to 12%. You think you can grow off of that 21 number into 22.
So we talk about the 10% to 12% as an organic revenue CAGR right, so by and large and.
No the fast majority of the next a number of years.
Okay.
And then separate topic, the 143 top clients that you have.
What percent on average penetrated are you within each of those.
As far as that's covered or like Oh like.
Let's see if there was 143 clients like whats the white space remaining to sell into in those in that segment.
10%.
Well, it's probably less than 50% because most of them still have XT ahead, and XT is just for.
Not only just replacing what they have but for expansions and so and then you have the XR too and.
Our other product lines, the Ivy workflow systems.
And of course, the other products on top of that so I think I think we feel like.
There is quite a bit left to go just because we're probably on the early.
Cycles, with Ivy station, and I'd be work flow and XR to an XR twos, gaining momentum we've had some good uptick.
In those product lines and as the as the technology moves forward, there that become more plug and play on the platform very easier to to install easier to put up and as well.
You know one feeds into the other so I never many of these we had a fast majority of these we have multi year medication management.
Automation plants.
[noise] that we're driving together Cody fellows.
To go to the next level that he thought as pharmacies yeah.
It's quite a bit of growth to be had.
Thank you and our next question comes from the line of Mitra.
I'm good ball.
Your line is open.
Yes, hi, good afternoon, thanks for taking the questions.
Just wanted to get a sense just as you look at we look at the guidance and commentary on the U.S. market things are starting to normalize here and I was just curious from the international aside.
What you're seeing there and as we look out to the guidance for 2021 is it pretty much all gonna be domestic.
Yeah, I think on the last call. We also had a question on the on international growth. So.
Possible massive an international from a platform perspective, we see a.
Obviously, the math for for multi product platform type of deals while multi location right. So.
There's more to come there, but it looks like the adoption of the technology medication management automation.
Hard to pick up there as well and international and by a largest growth growing.
Now they are at a higher rate.
Domestic business.
On the longer term.
Okay, Yeah and on the long term I think in the past you've said you expect you know between point of care Central pharmacy and retail they should all be going north these double digits.
Should we expect any acceleration potentially coming out of coal but on that.
Not necessarily I mean could go if it's mostly timing if you just look at it from a from a year perspective, what is different though is that you know what Randall said earlier in his script is that automation and also specifically medication management automation.
Yes, absolutely critical and that is what health systems have realized now and that is murder and testing and strategically and that is why we're able to provide guidance for the whole year.
That is also why I recall, a defining preliminary revenue guidance for next year.
But that is a change because the coker.
Okay, No that's great. Thanks for taking the questions.
Yes.
Thank you I'm not showing any further questions at this time I would now like to turn the conference back to Mr. Randall Lipps for any further remarks.
Okay, well, thanks for joining us today, and it's very satisfying to get through the last.
Six months with a a lot of change and get back to focusing on.
The long term strategies that our customers need and I want to thank again, the omnicell employees for.
Just doing a outstanding job and moving forward and hanging in there and all those in calls and doing the work in a different way, but still achieving great results. So thanks for joining US we'll see you next time.
Cheers.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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