Q3 2021 Omnicell Inc Earnings Call
Yeah.
Ladies and gentlemen.
Thank you for standing by and welcome to the Omnicell Q3, 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assistance. Please.
Press Star Zero I would now like to hand, the conference over to your speaker today, Kathleen Nemeth, Vice President of Investor Relations. Thank you. Please go ahead ma'am.
Good morning, and welcome to the Omnicell third quarter 2021 financial results conference call on the call with me today are Randall Lipps, Omnicell, Chairman, President CEO and founder.
Chad Lane Executive Vice President and Chief Commercial Officer, and Peter Kuipers, Executive Vice President and Chief Financial Officer.
So joining us today is Roxanne Turner, Vice President of corporate responsibility, who will share an update on our ESG initiatives.
This call will contain forward looking statements, including statements related to financial projections or other statements regarding omnicell plans objectives expectations targets or outlook.
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 in our press release issued today in the Omnicell annual report on Form 10-K filed with the SEC on February 24th 2021.
And in 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 is November 2021, and all forward looking statements made on this call are being strong beliefs of Omnicell as of this date only.
Future events or simply the passage of time may cause equal needs to change and we undertake no obligation to update these forward looking statements, except as may be required by law.
Finally, this conference call is the property of Omnicell, and then taping other duplication or rebroadcast without the express written consent of Omnicell is prohibited.
Our results were released earlier this morning and are posted in the Investor Relations section of our website at Omnicell Dot com.
Additionally, we'd like to remind you that during this call we will discuss some non-GAAP financial measure reconciled.
A reconciliation of these non-GAAP measures.
The most comparable GAAP financial measures are included in our financial results press release.
With respect to forward looking non-GAAP measures such as guidance and targets. We do not provide a reconciliation of forward looking non-GAAP measures to the comparable GAAP measures on a forward looking basis. As these items are inherently uncertain and difficult to estimate and cannot be predicted without unreasonable.
Right.
I will now turn the call over to Randall.
Good morning, and thank you for joining us today.
On today's call I will walk through the drivers of our strong performance this quarter and our continued progress toward our 2025 growth targets, but also like to briefly discuss our corporate responsibility initiatives.
Before handing the call to Roxanne Turner.
President of corporate responsibility to provide additional color on all the great work. The team is doing in this important area.
Beginning with our financials, we delivered strong third quarter results, reflecting the continued momentum in our business as well as solid execution.
Overall, we exceeded the top end of our guidance ranges for revenue.
Non-GAAP EBITDA and non-GAAP EPS.
Our third quarter results included record revenues of 296 million.
Record non-GAAP EBITDA of $66 million and record non-GAAP earnings per share of $1.08.
I'd also like to highlight that we closed the acquisition of F. D. S. Applecare in early September.
This is a major milestone and I would like to extend a warm welcome to the employees.
Yes.
As a reminder of our previously stated five year outlook, we are targeting a revenue CAGR of 14% to 15% from 'twenty to 'twenty, one to 2020 five.
To reach one 9 billion to 2 billion of revenue in 2025.
Additionally, we are targeting a non-GAAP operating margin of 21% and a non-GAAP EBITDA margin of 25% by 2025.
We believe we are making good progress toward achieving these long term objectives.
We are mindful that we are not immune to current inflationary pressures in the market.
Underlying customer demand for our products and solutions continued to be robust and we are confident in our ability to successfully navigate this economic cycle.
I'd like to discuss a few of the current health care trends that we believe omnicell is well positioned to address.
Particularly with our advanced services portfolio.
First we believe medication management and adherence is a critical area within health care infrastructure.
Our view of the pandemic has highlighted the pressing need to invest and intelligent infrastructure.
Migrate legacy data systems to the cloud and elevate the role of the pharmacist quite simply the health care delivery model is undergoing an historic transformation, we find that the challenges of medication management require automated and intelligent solutions now more than ever before.
Many health care systems were already looking for ways to improve their care management and delivery. We believe the pandemic has accelerated these trends by five to 10 years based on our experience.
Omnicell is leading the way and it is clear to us that our customers recognize the benefits of moving their data and workloads to cloud based systems. We believe omnicell is uniquely positioned to enable critical advancements in transforming pharmacy care delivery model and importantly, improving.
<unk> experiences for care teams and driving better patient outcomes.
Another trend that our health care system partners and retail customers appear to be facing as the looming labor constraints within health care.
Particularly for nursing and pharmacy staff.
At last month's meeting of the autonomous Pharmacy Advisory Board nearly all of the Chief Pharmacy officers on the board reported they were facing staff shortages of pharmacy technicians like.
Likewise, a nationwide survey conducted in late May by the National Community Pharmacists Association found that nearly 90% of the surveys 207 to eight respondents said they were having trouble hiring enough pharmacy technicians.
And it's a similar story with nursing staff.
As the category creator of automated medication management Omnicell solutions are designed to reduce manual and administrative tasks. So commissions time can be optimized and devoted more toward patient care.
As a result of these trends, we're seeing continued strength in advanced services.
This quarter, we saw increased adoption of Omnicell, one a technology enabled service delivered through the cloud.
He said one enables enterprise wide optimization for medications spend reduction in medication waste and an improvement in pharmacy labor productivity and also supports identifying potential diversion activity.
We are pleased to report that we now have multiple customers and live deployment.
Also this quarter, we were pleased to note that the V. A tucson will be implementing our central pharmacy dispensing system.
The VA is the nations largest integrated health care system, and we are proud to support their mission of providing care for our veterans and their families.
In life and health also had a very strong quarter with the flu season now in full swing and the COVID-19 booster shots approved for millions of patients nationwide. Many pharmacies are grappling with how to manage this increased patient demand.
Enlighten health care scheduler was built for these pharmacy challenges and opportunities here.
Care scheduler automates, the scheduling patient communications and the reporting of administering vaccines and point of care testing.
In the third quarter of 2021.
<unk> closed a major deal to provide care scheduler to its longtime partner Publix, a leading regional chain of grocery stores and pharmacies, serving seven south eastern states.
Public plans to deploy Kerr scheduler to manage its offsite vaccination clinics.
Another advance services highlight was the strong performance this quarter.
Our 340 B service solution.
Our teams continue to make excellent progress toward developing cross selling opportunities within our channel and successfully closed on several large deals during the quarter.
Turning to our health system partners.
We signed three net new long term sole source agreements, bringing our total to 151 health system partners.
With these latest signings all of our top 10 largest customers have now agreed to partner with us in long term agreements. We believe this is a testament to our innovation roadmap led by our advanced services portfolio, our consultative approach to redesigning pharmacy workflows and.
Our customers' confidence in our ability to help them advance towards a zero or zero waste and highly efficient pharmacy delivery model.
We are humbled by their reliance on us and are motivated by our mission to be the clinicians most trusted partner for medication management and adherence.
Now as I noted I'm joined today by our Vice President of corporate responsibility, Roxanne Turner, who will speak to our commitment and approach to corporate responsibility.
We're excited to have convened an executive steering committee of operational leaders, who are accountable for developing strategies and setting targets to achieve our ESG objectives.
I'll now hand, it over to Roxanne to discuss these initiatives in a bit more detail.
Okay.
Thank you Randy.
I'm happy to share our progress since we published our first corporate responsibility report in April of this year.
As you may be aware, we began to implement our formal ESG program over the past two years, even though omnicell has a longer history of contributing to the wellbeing of our communities, where we live and work.
We recently completed our materiality assessment of issues that impact our business.
The results indicate we have four categories of significance for our stakeholders.
Diversity.
Equity and inclusion.
Retention and recruiting.
Ethics and data privacy.
With about a dozen areas of focus within each of those four categories.
Our assessment process included interviews with both internal and external stakeholders.
Including our executive team and functional leaders as well as customers and individuals who serve on boards of different companies, including our own.
We have also been actively soliciting input from the investment community. Each time, we have the opportunity to talk about our ESG program.
Executive Steering Committee, Randy mentioned consistent leaders in several operational areas, including supply chain product quality, HR finance risk management and customer slash sales, who are accountable for targeting strategies in the areas of focus for us.
This will help ensure that the ESG program can be operationalized across the organization.
We also have a cross functional working group undergoing target setting exercises referencing our materiality assessment with the aim to set short medium and long term smart objectives for overall operational improvements.
We expect this team to also set goals intended to contribute towards global efforts to reduce greenhouse gases, including reductions in scope, one two and three emissions by 2030 CT.
Responsibility is a long term focus for Omnicell and we look forward to keeping you updated on our progress.
Now I'll hand, it over to Scott settlement to discuss our innovation pipeline and key customer highlights Scott.
Thank you Roxanne.
Last quarter I provided an overview of our progress toward our long term strategy and some areas of opportunity for innovation.
The pandemic has highlighted what omnicell has recognized since our founding 29 years ago pharmacy requires innovation now more than ever health care system pharmacies need solutions that will enable them to safely and efficiently address complexity in medication management.
In early October we welcomed more than 1100 pharmacy nursing executives and C suite leaders for our second annual Omnicell eliminate 2021 digital medication management event.
This is the largest industry event of its kind and we believe that the interest and participation that it attracts underscores the growing need for an entirely new digital medication management infrastructure.
The three day virtual gathering featured more than 30 sessions and more than 50 speakers sharing insights and best practices for tackling the biggest challenges in medication management and health care more generally.
Randall hosted an opening keynote discussion with representatives from leading health systems discussing their digital transformation experiences. They shared stories highlighting the benefits of digital infrastructure in ways that it has positively impacted patient outcomes improve the experience of the care team and lowered costs.
Attendees had the opportunity to see our technology in action and chat live with Omnicell experts and virtual chat rooms, new to the agenda. This year were two sessions focused on specific industry challenges, including mental health support for health care workers and women and health care leadership, we also specifically highlighted on the cells.
<unk> commitment to improving the customer experience, our cloud infrastructure and packaging technology is true services that deliver real customer outcomes.
Overall, we are pleased by the industry response to this event and look forward to continuing these important conversations and helping our customers realize the industry vision of the autonomous pharmacy.
Now, let's turn to some of the key business highlights this quarter.
The sales products and solutions are currently installed in the majority of the top U S Health systems as Randall mentioned, we added three net new long term sole source customers this quarter, bringing the total to 151 of the top 300 health systems. We are very pleased to be the medication management partner of choice for these three.
Very prestigious health care providers are major northeastern health system, our current omnicell customer and one of the nation's leading children's hospitals and a Texas based health system.
Each of these customers has selected omnicell because of our singular focus on medication management, our comprehensive platform of products and solutions and our commitment to investing in innovation.
The third quarter was an exceptionally strong quarter for Omnicell. One we now have multiple live deployments Omnicell, one, which we launched in July of 2020 is a cloud based service that combines software analytics and expertise to optimize medication inventory improve employee efficiency and reduce compliance.
Risks COVID-19.
Covid not only highlighted the need to better manage medication inventory, but also exacerbated labor shortages.
I'm Michelle one directly addresses these challenges and as a result is a significant differentiator for omnicell generally.
Our central Pharmacy dispensing service is also resonating well with the market today, we announced that Tucson, VA Medical center will expand their omnicell platform with the implementation of our central Pharmacy dispensing service, which includes the XR to robotic pharmacy dispensing technology operational staff mainly.
Support at analytics for real time optimization.
Central Pharmacy is labor intensive and error prone, we launched central pharmacy dispense service two years ago, because we knew that we could help health systems overcome these challenges and improve outcomes and lower costs.
This is an important element of our advanced services portfolio and we are pleased with the positive market reception.
Turning to 340 B as we have commented in prior calls we believe there are very strong cross selling opportunities for our 340 <unk> solution.
90% of the top 300 health systems or $3 40 would be eligible and optimization of the $3 40 B program is a key component for realization of the autonomous pharmacy vision.
Our $3 40 be advanced service is well received by the market had strong performance in the third quarter and is tracking well against our expectations.
During the third quarter, we announced that we completed the acquisition of pharmacy technology provider Fts ample care. This is a strategic addition to our life and health solution F. D S anthem.
<unk> of comprehensive and complimentary SaaS technology solutions, and a national network of more than 15000 independent retail pharmacies. So far the integration is going well and we are excited by the positive market reaction.
And as Randall noted earlier, the community pharmacist needs more support now than ever.
The recent approval of booster shots the anticipated approval of vaccination for children ages five through 12 and the start of the flu vaccination season will put enormous pressures on community pharmacists.
Enlivens care schedule. There was built for these type of pharmacy challenges care scheduler automates, the scheduling patient communications and reporting for vaccinations and F. D. S enables pharmacies to Bill Medicare for these services and live and in Fts are well positioned to help pharmacists address their upcoming challenges.
Our recent publix relationship highlights this demand and the power of our recent combination.
In summary, Omnicell is uniquely positioned to drive the transformation of the pharmacy care delivery model, our innovative cloud based services approach will enable improvements in quality provider efficiency and financial performance. We are solely focused on this transformation, we have considerable domain expertise and we are.
Passionate about the opportunity ahead now.
Now I'd like to turn the call over to Peter to discuss our third quarter financial and operational results the fourth quarter and full year 2021 outlook Peter.
Thank you Scott.
Pleased with the strong third quarter momentum in our long term sole source partnership strategy.
Our commercial pipeline product bookings and revenue, which we feel demonstrates that our strategy is working and that our products and solutions are resonating with our customers.
Our health care system in retail pharmacy customers continue to turn to old Michelle to realize sufficient of the fully autonomous pharmacy and the overall demand metrics for all Michele remained strong.
We are making good progress towards the five year outlook. We provided earlier this year and I'm proud of the solid execution that are over 3000 only shall team members continue to consistently deliver.
During the quarter, we welcomed over 200 F. D S. <unk> employees to the Omnicell family. In addition to adding around 100, new employees, mainly in the customer product and software engineering teams.
Turning now to our financial results.
Third quarter of 2021, GAAP and non-GAAP revenues were $296 million, an increase of $24 million over the prior quarter.
Up 39% over the third quarter of 2020.
And above the top end of our guidance range.
Third quarter, GAAP and non-GAAP revenue reflects the timing of certain customer implementations initially expected to occur in the fourth quarter of 2021, as well as GAAP and non-GAAP revenues from FDA simply care, Yeah acquisition that we closed on September 19 2021.
The sequential revenue increase of $24 million reflects.
Strong demand for AUM yourselves medication management and adherence automation solutions.
As a reminder, the year over year increase was partially attribute it to the lower than typical third quarter, GAAP and non-GAAP revenue levels in 2020 due.
Due to the COVID-19 pandemic.
Our third quarter 2021 earnings per share in accordance with GAAP was 61 per share compared to 43 cents per share in the second quarter of 2021 and.
At 20 cents per share in the third quarter of last year.
A full reconciliation of our GAAP to non-GAAP results is included in our third quarter earnings press release and is posted on our website.
Third quarter 2021, non-GAAP earnings per share were $1.08 compared to 97 cents per share in the previous quarter and 60 in the same period last year.
The year over year increase was mostly driven by higher revenue and gross margin leverage.
Non-GAAP gross margin for the third quarter in 2021 was 51, 1%.
A decrease of 60 basis points from the previous quarter, primarily due to increased inflationary costs related to semiconductors, our components raw materials and freight.
We delivered record non-GAAP EBITDA of $66 million from the third quarter of 2021.
The non-GAAP EBITDA margin for the third quarter of 2021 was 22, 2%.
Compared to 22, 4% for the previous quarter.
19, 3% in the prior year period.
Moving to cash flow.
Year to date free cash flow of $130 million reflects the overall increase demand in the business better collections and strong working capital management.
At the end of the third quarter of 2021, our cash balance was $482 million down from $614 million as of June 32021.
The other than $32 million decrease in cash is the result of financing activities related to our recently completed acquisition of MTS aftercare, partially offset the operating cash flow in the quarter.
Free cash flow during the third quarter of 2021 was $27 million compared to $58 million from the previous quarter and $27 million from the prior year period.
In terms of accounts receivable days sales outstanding for the third quarter of 2021 were 73 days, an increase of three days over the last quarter and a decrease of nine days from the third quarter of 2020.
Inventories as of September 32021 were $104 million, a slight increase from the prior quarter and a slight increase compared to the third quarter of 2020.
The increase was due primarily to defence purchase of semiconductors that we believe are reasonably secure supply for future customer implementation timelines.
We continue to execute well on our global supply chain process improvements in inventory management initiatives.
We've built a company that we find is able to adapt that skill fairly well and we believe that we're well positioned to deliver all of 2025 targets driven by a number of factors, including growing at fab services revenue benefits from long term sole source customer partnerships increased average deal size.
Yes.
Manufacturing savings of process efficiencies.
As we continue to scale the business in the coming years, we expect to invest or redeploy some of these savings into fairly creating growth and innovation initiatives.
Now moving onto our full year outlook and fourth quarter guidance.
<unk> guidance includes Fts applecare.
For context, the last 12 months revenue for Afghanistan for care for September 32021 was $30 million going forward, we anticipate ample care to have an annual revenue growth rate between 15 and 20%.
As we noted last quarter, we are experiencing the impact of inflationary headwinds.
This continues to be primarily due to semiconductor and auto component cost and to a somewhat lesser extent freight and raw materials costs.
As discussed in our previous call. The measures were taken to generally offset the majority of the impact of inflationary cost in the second half of 2021 includes.
First higher revenue from strong commercial momentum customer demand and a healthy backlog and.
To prove.
Prudent and targeted expense reductions, while maintaining our investment in research and development areas like customer experience teams to support our long term growth strategy at scale, our business to meet customer demands.
Third Jean the initial benefits from pricing refinement actions.
In line with the comments you made on the last quarters call. We have high confidence that we have secured supply for semiconductor are critical components through 2022 in order to deliver our mission critical systems and connected devices to our health care customers.
Our supply chain, our procurement teams have done a great job of addressing these challenges.
Minimizing disruptions to our customers.
We're very pleased with the continued momentum in market demand for defence surfaces, and we are increasing our full year 2021 product bookings guidance.
Strong commercial and in particular at Fad services momentum, which includes now U S. D S anthem care business.
Product bookings are now expected to range between $1 billion $130 million and $1 billion or so.
$70 million.
We are increasing our 2021 revenue guidance.
We now expect total 2021, GAAP and non-GAAP revenues to be between $1.129 billion and $1 billion $134 million. We expect total 2021, GAAP and non-GAAP product revenue to range between $888 million and $811 million.
And we expect total 2021, GAAP and non-GAAP service revenue to be between $321 million and $323 million.
We are also increasing our 2021 non-GAAP EBITDA guidance, we now expect full year 2021, non-GAAP EBITDA to be between $235 million and $238 million, which includes an anticipated $2 million to $3 million or non-GAAP EBITDA.
From the F D S M for care.
Our full year guidance includes additional cost for semiconductors freight and steel given global market conditions.
Using the midpoint of the updated revenue and non-GAAP EBITDA guidance ranges. This represents approximately 21% non-GAAP EBITDA margin for 2021.
For full year 2021, we are assuming an effective blended tax rate of approximately 7% and our non-GAAP EPS guidance, which is a reduction from 9% for five within our July 2021 earnings call.
The change in the tax rate includes additional expected tax benefits from stock option activity in the second half of 2021.
The company also recognized a discrete tax benefit related to the release of a net tax benefit of $6 $2 million as a result of an effective settlement with tax authorities for the nine months ended September 32021.
This one time tax benefit was excluded from the third quarter of 2021 non-GAAP results.
Lastly, we're also increasing our guidance for non-GAAP earnings and now expect full year 2021, non-GAAP earnings per share to range between $2.80 or $3.85 per share.
Based on the totally of guidance provided earlier in this call for the fourth quarter of 2021, we are providing the following guidance.
As we noted last quarter, we continue to invest in scaling our business to support the expected increase in revenue and the timing of customer implementations.
Fourth quarter guidance includes additional cost for semiconductors trade in steel given global market conditions, We expect total fourth quarter 2021, GAAP and non-GAAP revenues to be between three eight and $313 million with GAAP and non-GAAP product revenues to range between $290 million.
And $222 million and GAAP and non-GAAP service revenue.
Range between 89 and $91 million.
Okay.
We expect fourth quarter, 2021, non-GAAP EBITDA of $58 million to $61 million we.
Fourth quarter non-GAAP earnings to be between 90, and 95 cents per share.
This outlook includes <unk>, which is expected to contribute approximately $10 million in revenue and $2 million or non-GAAP EBITDA.
Please note that the fourth calendar quarter is typically a seasonally strong quarter for <unk>.
As I mentioned, a moment ago, we continue to have high confidence in our supply of semiconductors and other key components through 2020 to support our health system customers that are critical to health care.
We are anticipating supplier challenges and inflationary cost impacts to continue through at least the middle of 2022.
And at the same time, we continue to refine our pricing actions and expect a favorable impact from these actions to offset more inflationary cost as we progress throughout 2022.
We remain confident in our five year long term outlook and expect to deliver.
Organic revenue growth CAGR between 11, and 12% through 2025.
Total revenue growth CAGR between 14, and 15% through 2025.
Growth of advanced services revenues totaling between 20, and 30% of total revenue by 2025.
Non-GAAP operating margin expansion to 21% for 2025.
And lastly, non-GAAP EBITDA margin expansion to 25% by 2025.
In summary, we're very pleased with our commercial operational and financial results for the third quarter of 2021, we are taking steps to address inflationary headwinds in the market and we remain confident in our long term outlook. We look forward to updating you on our progress in the coming quarters.
With that we would like to open the call for your questions.
At this time, ladies and gentlemen, I would like to remind everyone.
Your question. Please press Star then the number one on your telephone keypad. Once again that I started the day number one for any audio questions. We will pause for just a moment to compile the Q&A roster.
And your first question comes from the line of just got Tucson with Piper Sandler. Please go ahead with your question Hi.
Hi, Thank you so much for taking my question and congratulations on quarter.
Maybe it Randall in your prepared remarks, you mentioned some takeaways from the autonomous Pharmacy Advisory Board can you just remind us of when and why reform that board.
Yes.
Maybe just how it's contributing to your thought leadership and contract wins.
The thing in new acute care customers. Thanks.
Yeah, the time to finally pay board as an industry led board.
Led by Chief Pharmacy Officer is interested in the future of pharmacy and raising the level of pharmacists out of the administrative work because the more clinical pieces.
Pharmacy.
Disciplines that really are what pharmacist.
Into the career for and so as they are looking for into the future and what's driving the future. It's.
Totally cloud based technologies and particularly these technologies.
Last board meeting.
Emphasizing the labor shortage component that we continue to see and a lot of industries, but particularly in the pharmacy technician area.
But we're excited about it because they are not only just.
Helping to lead the industry to this next level of pharmacy.
Understanding of what's needed and how the technologies will enable the autonomous pharmacy, but maybe.
Maybe most importantly, what are the steps along the way to get there. So it's a real privilege to be part of the tenancy.
Our board is as an industry movement.
Yeah.
And maybe just a quick unrelated follow up.
Can you just help us understand the impact of supply chain in place and Roxanne on Q Q3 results and then on your guidance for Q4.
I think again.
Yeah.
Hello, Jessica this is Peter.
Yes, so we see increased inflationary costs from.
From the third to the fourth quarter, it was about $2 million to $3 million incremental quarter over quarter.
Additional inflationary costs.
It said in the prepared remarks, as well we have high confidence in the surety of supply for semiconductors.
We've done pre buys for your stock.
Semiconductor inventory as well as for the prepared remarks that said I'm afraid.
Feel a more of a spot market.
We expect some more volatility in that going forward.
Thank you.
Your next question will come from the line of Scott.
In the house with Stephens. Please go ahead with your question.
Hi team congrats on the quarter.
Can you hear me okay.
Yes.
Okay. So my first question is around the third quarter and fourth quarter moving parts. It looks like you saw some nice demand pull through this quarter, especially on the software side service revenues grew over 32% that led to a nice operating leverage Peter you mentioned some of the pull forward from earlier customer implementations.
Which you expected to actually hit in the fourth quarter.
Can you give us a sense of how much of this pull forward was on the product side versus software side and then just to confirm that your all your software platforms, whether it be $3 40 be cross selling success you mentioned the omnicell, one the new fts and ample care, they're all recognized as recurring staffed.
Revenues off of the strong revenue increase that we saw in third quarter.
Thank you Scott. Thank you packed in the three or four questions there, but I'll answer the last one first yes, that's all recurring revenue.
Timing I would call it timing not necessarily the pool and the timing of revenue.
Between the fourth and the third quarter, it's about $6 million.
$6 million or so.
Revenue, mostly in product revenue.
Current exiting the third quarter than we had originally planned for that in the fourth quarter.
Okay great.
And then a follow up to your margin question.
But you know we.
We talked about the gross margin pressures from additional semiconductor cost freight steel costs that you continue to expect throughout the remainder of the year.
But anything on the operating expense side, we should be aware of obviously labor costs are helping you probably on the demand side, but are you having to pay more for Europe your specific labor at Omnicell.
Well, we think that we refer you attractive company to work out.
Sure that'd be innovation doesn't drive.
Like we haven't earmarked as well we hired over 140000 new employees.
So I would say, maybe we see some pressure from a cost.
Perspective.
But let's not forget.
Yeah.
Okay, great congrats on the strong quarter.
Sure.
Your next question will come from the line of ARAS long bearing Berg. Please go ahead with your question.
Hi team. Thanks for taking my question. So I guess first one on Omnicell. One I'm wondering if you can talk about how many customers are either using or have signed up for the platform. And then can you also talk about the implementation process a little bit what is that process like and how much time.
Does it take for you to implement this system.
Hey, Chris It's Scott Solomon I'll. The first question you asked which was really how many omnicell one customers. We now have live the good news is the demand is incredibly strong and we're seeing that demand tied to.
Really the entire portfolio is held in other words customers are interested not only in Q1, but certainly how that as it relates to point of care in some of our other products. So that's really good news as far as number of live implementations, we now have.
Well and are tracking well to plan I didn't hear the second part of your question, which I apologize for it.
Yeah, it's about implementation I'm, just wondering what that process of fly again like roughly how much time does it take you to implement it.
Yeah.
Yeah, I mean, it is implementing a data driven project inside health systems, which is always complicated because you have to find the data to connect the data and so that takes some time, but nothing unusual relative to implementing any other piece of software inside of the health system as far as timing, but the largest tends to Nicole so to speak it's simply the fact that.
Awesome.
One if you think about it is really lighting up data that exists in other forms of automation and so huge implementation, it's not necessarily that SD Wan implementation takes time, it's simply that there's really no point in implementing it until the large portion of the automation is done because there's no data to be generated from tier one to optimize and so when we look at implement.
Patient for Oc, one and as you should think about it in terms of the lag that might occur I think gets implemented it.
Really just a function of it's really well designed for large health systems that are all in on Omnicell products and so that implementation systems, just take a while to implement it so.
Okay I appreciate that and then another question on the Tucson The hospital deal.
Belief that the press release said that this hospital is actually the first one deploying a C. P T S and.
The amount of VA Hospital I'm, just wondering was it more difficult to sell into a V. A hospital and then do they do they kind of make the purchase decision.
Service is a little bit differently than the other hospitals, if you can talk about the.
The dynamics that would be helpful. Thank you.
The key point on the Tucson, VA announcement, and frankly, the really exciting part of it is that it's the first time that a V. A at least from an Omnicell perspective has had has purchased a true service, where we're not only combining the hardware, but we're combining that with the optimization ongoing services analytics et cetera.
So that was that was a really important milestone and what that means is this.
In terms of go forward with other he as it certainly I think selling into any large system. It's certainly helpful. On one VA has made this decision to go in and reference that VA with other VA, but it's by no means.
Any kind of large enterprise wide VA deal.
Thank you so much appreciate it.
Okay.
Your next question will come from the line of David Larsen with BTG. Please go ahead with your question.
Hi, congratulations on a very good quarter can you talk a little bit about the pipeline for Omnicell one Scott Please and what what is the difference between and live in Fts ample care and and maybe 340 B and how can all of these different solutions sort of work together to change.
Sure on the retail side. Thanks.
So pipeline for Oc one.
We're very bullish on we're excited about as I said.
Where oc one drives the most value is really think about it.
Large enterprises that are all in on Omnicell products and so when we're all in on the platform Omnicell one ties. It all together helps you optimize that data and so where we're seeing omnicell. One is a great differentiator for us as a company is those large health systems and so it's not surprising that you know.
Oftentimes in the $1 51, and those relationships I would say one is part of that.
That's sort of your comments on the pipeline I think your question, which is around and lives.
340, B and how all these pieces parts might come together and live in Fts as a portfolio was really focused on the retail outpatient pharmacy, so not really the health system, but the large <unk>.
60000, retail pharmacies, and really helping that community pharmacists.
Deliver value added services beyond filling vials Omnicell 340, B and Omnicell. One are really focused on the acute care of the health system sector, and helping those health systems optimize inventory labor compliance events in the case of up to one and then the 340 <unk> program in the case of most of the $3 40.
The vision of how it all comes together, which is really exciting is that as health systems increasingly move from inpatient acute managing into treating patients in the ambulatory environment and at the home, they're now going to need the same tools and capabilities that are retail pharmacist path and so we're really excited about.
The prospects of pulling the whole platform together and really engaging with health systems to manage the entire continuum of care and so that that's really how they'll ultimately all come together.
Congratulations I think that's exactly the right strategy and then just Peter how much revenue came from FTR scan for care in the quarter and was that part of the <unk> Guide was fts in the <unk> Guide.
Yes.
The third quarter Fps Applecare revenue was about $1 million does not.
Not included in the guide.
Okay. So there was a there was a huge beat there even if we back out the fts applecare, okay. Thanks very much.
Yeah.
Thank you.
Your next question will come from the line of Steve Halper with Cantor. Please go ahead with your question.
Hi, good morning.
I appreciate the comments around the inflationary headwinds and some of the steps you're taking.
To offset that but you know on a go forward basis does the company have any ability to pass that along to customers.
In order to.
You'll make up that you know that margin that it's costing you.
Thank you Steve This is Peter.
Like we said in our prepared remarks, we are refining pricing actions and we have some ability to just price so.
What we said I think in the last call.
Have increased a little.
Prices.
Big Fish service surprised as well and we've increased margin deal thresholds approval levels.
Also good to point out for context that was also in the prepared remarks is that of course these pricing actions the impact of those will start to increase as we go through the quarters into next year as well so looking at next year preliminary look.
First half next year, you can assume that the inflationary costs are greater than the impact of the pricing actions and then throughout the year.
Leave at this point that.
And then it will catch up now that said semiconductors.
Done pre buys.
Taken inventory fans as well as you can see in the balance sheet.
Yeah, Hi, coffers their surety of supply.
That said freight.
Feel a more of a spot market.
More expected volatility there and we manage it on a day to day.
Right and you feel as though you have enough supply.
Of chips for the foreseeable.
Future given the actions you've taken.
That's correct throughout 2022 calendar year, Okay, and then just do me a favor and just walk me through the pull forward commentary again for <unk>.
That occurred in Q3.
Just reiterate I just want to make sure a $6 million of product.
That was accelerated.
Yeah. So.
Compared to your original guide, we've got about $6 million of revenue that we initially anticipated to occur in the fourth quarter dose implementations were actually completed early in the third quarter.
Great. Thank you.
Our next question will come from the line of Matt Hewitt with Craig Hallum Capital. Please go ahead with your question.
Good morning, and congratulations on the strong quarter.
First question now that the Fts Applecare transactions closed do you have any plans to add sales reps on the retail pharmacy side as you've kind of broaden your.
Your.
Capacity and in your <unk>.
<unk> set for that market.
Short answer is given the growth and the demand.
Being so positive I think we will continue to invest there on the sell side for sure.
Okay, and then maybe a follow up question.
Youre seeing the challenges that some of your customers are having hiring employees and getting up to full staff as you start to add more and more services into these customers as they acquire those services from you are you able to find the talent required to meet their needs or has that been a source of pressure. Thank you.
I think labor pressures labor pressure and regardless of who the employee employer. It that said I think that our services on the cells up pretty compelling employer and so were really interesting place to work for a lot of this technology sometimes.
So as of now we feel is a good strong pipeline of candidates, we're not seeing undue pressures there and I think frankly the candidates.
One of the things that we can offer is that training and certifications and advanced robotics, and so I think that's a pretty.
Writing career prospects for our pharmacy technology labor.
Understood. Thank you.
At this time there are no further questions.
I'll now turn it back over to Mr. Phillips for any closing remarks.
Well I want to thank everyone on the Omnicell team and including the over 300, new employees that we added this quarter welcomed me Phil Thank you for <unk>.
Getting on the road with us to the autonomous pharmacy.
And making a difference in health care for everyone.
Sure.
Yeah.
Ladies and gentlemen, this does conclude today's conference call. Thank you for participating you may now disconnect.
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