Q1 2022 Omnicell Inc Earnings Call
Please standby were about to begin.
Good afternoon, ladies and gentlemen, and welcome to the Omnicell first quarter 2022 earnings conference call. At this time all participants are in a listen only mode and please be advised that this call is being recorded after the speakers' prepared remarks, there will be a question and answer session. If you would like to ask a question. During this time.
Press Star one on your telephone keypad, if you would like to withdraw your question Press Star One again and now at this time I'd like to turn the call over to MS. Kathleen Nemeth, Vice President Investor Relations.
Good afternoon, and welcome to the Omnicell first quarter financial results conference call on the call with me today are Randall Lipps, Omnicell, Chairman, President and CEO and Scott.
Scott Seidelman Executive Vice President and Chief Commercial Officer, and Peter Piper Executive Vice President and Chief Financial Officer. This call will contain forward looking statements, including statements related to financial projections or other statements regarding on yourself plans objective expectations targets.
Our outlook that are 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 and the.
Omnicell annual report on Form 10-K filed with the SEC on February 27 2022.
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. Our results were released this afternoon and are posted in the Investor Relations section of our website at IR Dot Omnicell Dot com.
Additionally, we'd like to remind you that during this call we will discuss some non-GAAP financial measures reconciliation of these non-GAAP measures to 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 measure to the.
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 effort.
I will now turn the call over to Randall.
Thank you Kathleen and good afternoon, and thank you for joining US today, we've had a solid start to 2022.
Fight headwinds due to inflationary pressure and geopolitical unrest.
We continue to work to advance the industry.
The autonomous pharmacy with a focus on creating a single cloud based platform that is designed to enable fast and tech enabled pharmacy operations.
Our comprehensive medication management solutions, which we believe are transforming the pharmacy care delivery model continues to resonate strongly with our health system partners and retail customers.
We saw continued strong customer demand this quarter for our central pharmacy dispensing services and Omnicell, one SaaS platform.
It is clear to us that our customers recognize the pressing need to modernize and expand their medication management capabilities.
Our strategy is generating results.
We delivered strong first quarter results and continuing to build on our momentum from last year.
Overall, we exceeded our first quarter 2022 guidance ranges for total revenues.
non-GAAP EBITDA.
non-GAAP EPS.
Our first quarter results include total revenues of 319 million.
non-GAAP EBITDA of 50 million.
non-GAAP earnings per share of <unk> 83.
I'd also like to highlight that last month, we launched a new generation of our.
Our IV compounding robot.
Yes.
That will power, our IV compounding service.
The innovative solution designed for scale the benefits of IV robotic technology.
And make it accessible to the broader market.
We find that compounding is extremely labor intensive area of medication management.
And we believe the IV station provides a differentiated approach to enable IV compounding at scale, while reducing errors associated with manual processes and reducing the high cost of outsourcing labor constraints as well as the higher cost of labor.
Continue to be a challenge for health care systems and retail customers we.
We believe these labor issues highlight the pressing need to automate and modernize medication management processes.
With the launch of IV station among many other products and solutions, we're able to assist our customers to address the staff shortages.
In summary, I'm very pleased with our overall execution this quarter and that we are maintaining our solid outlook for the year.
With that let me turn the call over to Scott for some more details on our first quarter Scott.
Thank you Randall.
We believe our strategy is working and today I will provide some additional color around some of the macro market trends and how we think our portfolio of medication management products software and technology enabled services address these trends.
The labor market continues to be an area of concern for our health system and retail customers, particularly with regard to pharmacy technicians, who are responsible for many of the manual tasks associated with medication management. According to a recent survey from the National Community Pharmacists Association nearly 70% of.
The pharmacies are having a difficult time filling staff positions health systems face similar if not worse conditions. These industry staffing issues have been exacerbated by the COVID-19, pandemic, which increase the already daunting workload of pharmacies leaning to staff burnout and retention challenges.
We believe that Omnicell solutions can help our customers mitigate the labor issues, they're facing in several ways, but to highlight a few specific examples.
IV compounding service and central Pharmacy, dispensing service use robots analytics and experts to automate extremely labor intensive areas of the pharmacy.
Digitally central pharmacy dispensing services reduces the time that a pharmacist required to check prescriptions by up to 90% Omnicell. One uses analytics to automate what is otherwise a very manual task for several people and the workflow software notifies pharmacy staff went to perform key tasks such as a cabinet <unk>.
Doc, which should improve the efficiency of a critical labor force in the hospital.
And in life and health SaaS platform automates, many manual tasks for the pharmacists and the beta version of our new personalized Interactive voice response solution has shown the potential to reduce the number of calls that a pharmacist needs to handle by at least 15%.
These are just a few examples of how we believe our solutions help providers mitigate the labor challenges that they face, but more importantly, the concept of using technology to increase labor efficiency is a key part of the industry station of the autonomous pharmacy and as such was a key design tenant for our product management team does.
Signing current and future solutions.
Now I will comment on some of our recent customer highlights first a leading health system in the South East selected Omnicell Central pharmacy dispensing service to help them streamline inventory management and enhanced safety and at Central Pharmacy operations. This comprehensive solution combines the XR too.
Robotic dispensing system with experts and certified technicians in an effort to improve central pharmacy outcomes and should enable pharmacy staff to focus on higher value clinical activities.
This is the largest <unk> relationship for Omnicell to date and represents an extension of an existing long term sole source relationship.
Second a leading northeast health system selected Omnicell, one to enhance the health system's medication visibility and optimize its pharmacy supply chain and resources across its 13 hospitals.
This is the largest omnicell one relationship for Omnicell to date and represents an extension of an existing long term sole source relationship.
Michelle has built strong partnerships with our customers and we have long term sole source agreements with more than 50% of the top 300 health systems in the country.
During the first quarter, we extended our agreement with a leading health system in Illinois, and a leading health system in South Eastern Massachusetts, both for another five years.
I would also like to highlight that on March 29, more than 50 pharmacy health system leaders joined us in person.
Along with more than 700, others virtually for illuminate lives at this event, we formally launched our new IV station robot along with numerous other features and enhancements in our winter 2022 release.
The IV station will be available through our IV compounding service, which combines our IV X robot with analytics expertise and certified technicians.
This as a service approach to IV compounding is expected to enable providers to reduce the high cost of outsource medications.
Reduced dependence on medications shortages reduced manual errors and improve staff efficiency.
Additionally, during the first quarter and life and health continued to advance its mission of building and orchestrating one of the most innovative SaaS technology solutions that helps enable retail pharmacies of all sizes and types to grow and thrive in this new era of digital driven health care.
A particular focus of the quarter was alive and health continued integration of F. D S Applecare and market touch media, which Omnicell acquired in 2021 in life and health is already seeing good progress in cross selling solutions between the acquired companies and then live and helps customer base.
With the launch of IV station, which like all of our other devices will ultimately be powered by our cloud platform.
Along with the ongoing enhancements to Omnicell, one and life and health in our other services. We believe we are getting closer to our vision of a fully integrated intelligent infrastructure that will help make pharmacy care smarter and safer for everyone.
Now a few comments on our 340 <unk> solution.
340, <unk> drug pricing program, which supports safety net in rural health care providers is designed to enable those providers to ensure access to retail and specialty medications for at risk populations as well as provide care for uninsured patients offer free vaccines provide services and mental health clinics.
Implement medication management and community health programs.
Omnicell 340, <unk> solution has deep expertise in supporting health systems on administering in complying with the $3 40 b programs requirements.
Despite the significant value that this program creates for patients and providers recent manufacturer actions have limited provider utilization of the program.
As such our 340 <unk> solution will experience headwinds while the industry works out. These changes. However, we expect our 340 <unk> solution to continue to play an important role in our overall strategy to provide health system and our retail partners with the tools and services they need to help deliver the best patient outcomes in <unk>.
Summary, we believe omnicell is uniquely positioned to deliver intelligent infrastructure and services and ultimately help enable our customers to transform a significant part of the health care system. We are excited by our progress to date and look forward to continuing to build on our positive momentum.
With that I will turn the call over to Peter.
Thank you Scott.
I am pleased with the strong results for our first quarter of 2022.
Our performance demonstrates to us that our strategy is working and we are executing well on our innovation roadmap designed to further the industry vision of the autonomous pharmacy.
I'm, especially proud of the solid execution that are approximately 3900 omnicell team members.
We need to consistently deliver particularly during the current dynamic macro environments.
Turning now to our financial results, our first quarter 2022, GAAP and non-GAAP revenues were a record $319 million, an increase of $7 million over the prior quarter.
On a non-GAAP basis and up 27% over the first quarter of 2021.
The year over year increase reflects continued strong demand for only sells medication management solutions as well as the contribution of revenue from recent acquisitions.
Total revenue in the quarter was slightly above our guidance range.
Flexing strengthen implementations of our connected devices and was partially offset by lower than expected service revenue number of 340, B solutions and delayed timing of certain maintenance renewals within the first quarter.
On organic basis, our first quarter of 2022, GAAP and non-GAAP revenues increased 19% year over year.
The acquisitions of <unk> care.
Reset in markets, such media are performing well and modestly exceeded our plan in the first quarter for commercial momentum revenue and profitability non-GAAP gross margin for the first quarter of 2022 was $48 9%.
Included in the first quarter gross margin as the impact of approximately $5 million of inflationary costs compared to cost paid for semiconductors auto materials and freight in 2020.
Excluding the approximately $5 million in inflationary costs. The gross margin percentage would have been 160 basis points higher.
Our first quarter 2022 earnings per share in accordance with GAAP or <unk> 17 per share compared to 28 cents per share in the fourth quarter of 2021, and <unk> 30 per share in the first quarter of 2021.
Full reconciliation of our GAAP to non-GAAP results is included in our first quarter 2022 earnings press release and is posted on our website. The first quarter of 2022 non-GAAP earnings per share were <unk> <unk>.
<unk> 290 per cent per share in the previous quarter and 82 per share in the same period last year.
First quarter non-GAAP earnings per share exceeded our expectations due to the strength until the revenue as well as the impact of a favorable tax benefit from stock.
Compensation of six cents per share, we delivered non-GAAP EBITDA of $50 million in the first quarter of 2022, which is $1 million above our guidance range and reflects a 15, 8% non-GAAP EBITDA margin.
At the end of the first quarter of 2022, our cash balance was $265 million down from $349 million as of December 31, 2021. During the first quarter, we repurchased approximately 389000 shares of our common stock at a cost of $52 million, reflecting an average.
Stock price of approximately $134 per share.
Free cash flow during the first quarter of 2022 reflected a $31 million use of cash due to seasonal timing of cash collections.
Additional semiconductor inventory receipts.
Inventory increases for second quarter customer implementations.
Employee compensation payments in the quarter.
We expect positive free cash flow in the second quarter of 2022.
And free cash flow to continue to improve as we progress through the year.
In terms of accounts receivable days sales outstanding for the first quarter of 2022 for 84 days.
Day sales outstanding reflects an increase of 14 days over last quarter, primarily from the timing of invoicing, but in the quarter.
Inventories as of March 31, 2022 were $137 million, an increase of $17 million from the prior quarter, an increase of $41 million from the first quarter in 2021.
It is important to note that the inventories as of March 31, 2022 include approximately $18 million of purchases and receipts of semiconductors that we believe will help reasonably secure supply for future customer implementation timelines.
We continue to execute very well on a global supply chain process improvements in inventory management initiatives.
Now moving onto our full year and second quarter of 2022 guidance.
As we look to the rest of the year, we continue to expect strong revenue growth in customer demand and a healthy backlog.
We continue to have high confidence that we have secured the necessary supply for semiconductor and critical components through 2022 in order to deliver our mission critical systems that connected devices to our health care customers.
Our global supply chain and procurement teams are continuing to do a great job addressing these challenges of minimizing disruptions to our customers and importantly, the pricing actions. We've recently taken are being well received by our customers, which we believe demonstrates the strength of only sells value proposition. We are pleased with the continued momentum.
Customer demand for key offense surfaces, and <unk> been hiring in support of customer implementation time lines consistent with our previous guidance of full year of 2022 product bookings are expected to range between $1.370 billion and $1 billion and $413 million and we.
<unk> full year, 2022, GAAP and non-GAAP revenues to be between $1 billion.
$85 million and $1 billion for more than a $10 million.
As a result of market dynamics, we're modifying the mix of our revenues for 2022.
We now expect GAAP and non-GAAP product revenues to range between $975 million and $990 million.
GAAP and non-GAAP service revenues to be between $410 million in Florida, and then $20 million. The updated mix of revenues reflects connectivity pfizer's implementation timelines and a healthy backlog offset by the service revenue Hasnt been seen at 340, b market and timing of maintenance renewals a prior generation equipments within the <unk>.
Year.
We expect the timing impact of maintenance renewals.
Solve and for technical services revenue to be at the original expected revenue run rate towards the end of the year.
We now expect deferred services revenue as a percentage of total revenue to be approximately 14% to 15% in 2022 factoring in April sort of approach to a 340 <unk> business. We continue to expect total year 2022, non-GAAP EBITDA to be between 243.
$255 million, reflecting the strength in our business model and our commitment to prudent expense management and operational excellence initiatives.
We now expect fully or non-GAAP EPS to be between $2 85 per share and $4 <unk> per share.
Presenting an increase of <unk> <unk> per share to both the bottom and top ends of the guidance range based primarily on lower expected diluted shares outstanding which includes the impact of the repurchase of approximately 389000 shares of common stock in the first quarter of 2022.
As we noted in previous quarters, we are experiencing the impact of inflationary headwinds.
This continues to be primarily due to semiconductor and auto component cost and to a lesser extent trade in steel and other raw material costs.
The supply chain team continues to manage inflation, well, while ensuring continuity of supply with no shortages to date totally or non-GAAP EBITDA guidance includes the impact of approximately 30 million to $35 million of cost inflation in 2022 as compared to cost paid for semiconductor auto materials and freight.
In 2020 and remains also unchanged from last quarter's outlook.
As discussed in the prior quarter. The full year 2022, non-GAAP EBITDA guidance also includes around $8 million of integration costs for the <unk>.
Yes, <unk> care reset in markets such media acquisitions.
As a reminder, we expect that the pricing actions that we have put in place will begin to have a greater impact on gross margins and non-GAAP EBITDA margins near the end of 2022 and as we move into 2023.
Including in our non-GAAP EBITDA guidance.
As the favorable impact of these pricing actions.
We expect gross margin percentage commodity expense in the second half of 2022 as compared to the first half of 2022.
For full year 2022, we continue to assume an effective blended tax rate of approximately 6%.
non-GAAP EPS guidance.
For the second quarter of 2022, we are providing the following guidance.
Total second quarter, 2022, GAAP and non-GAAP revenues.
Between $337 million.
$43 million with GAAP, and non-GAAP product revenues to be between $241 million and $244 million.
GAAP and non-GAAP service revenues to be between 96 and $99 million.
We expect second quarter, 2022, non-GAAP EBITDA to be between $54 million and $58 million and we expect second quarter of 2022 non-GAAP earnings per share to be between 82 per share an 89 per share.
Now turning to our long term outlook.
We continue to believe that we have built the company that is able to adapt and scale very well and we believe it is well positioned to deliver on the 2025% total revenue growth targets driven by a number of factors, including growing our defense services revenue the benefits from long term sole source customer partnerships multiyear coded.
Hello plans and increased average deal sizes.
We continue to have line of sight and are committed to our 2025 profitability targets. However, it's important to reiterate our notes that we issued these targets prior to the current deflationary environment.
We continue to execute pricing actions and manufacturing savings programs.
As we continue to scale the business in the coming years, we expect to invest to redeploy some of these savings into value, creating growth and innovation initiatives.
Similarly, we are pleased with our results for the first quarter of 2022 and believe we are executing well in what continues to be challenging and dynamic environment. We remain confident in our long term outlook as we continue to take steps to address inflationary headwinds and supply chain disruptions in the market.
We are committed to delivering durable value for all of our stakeholders and look forward to updating you on our progress in the coming quarters.
With that we would like to open the call for your questions.
Thank you Mr drivers, ladies and gentlemen at this time did you have any questions or comments.
Press Star one and can you find that your question has been answered you can remove yourself from the queue by pressing star one and subsequent time first we go to Scott Schoenhof's at Stephens.
Hi, Randy Peter Scott and Kathleen hoped the team is doing well.
Yes.
Just wanted to start off your so your guidance implies some reduced growth in services and software. This year you outlined the delayed $33 40 b opportunity.
But I just wanted to ask where you are seeing the most growth in software in the near term is it on the institutional side with Omnicell. One is it on the retail side within life and health or is it now with your advanced services portfolio.
Yes. This is said this is Peter in his call will probably add as well so.
Clearly there is a lot of momentum from a customer demand perspective on the on <unk> and also on <unk> and that will be powered by by the next generation of robots. We see also really great uptake in only so long and then also on the retail software pharmacy side.
She also really solid and strong growth. So we would take both.
And the only thing I'd add to that is on the and live inside as Peter mentioned on the retail side is that in the last year, we acquired Fts and market touch and now as we've combined those offerings in the market at least from a commercial front and we're seeing really nice positive reception from customers.
For that combined offering so that gives us enthusiasm.
Great.
As a follow up just trying to get a sense on how much revenue contribution could potentially come from the launch of new IV compounding robot. If there's any numbers you could provide on maybe pricing upside for this replacement cycle. Firstly and then assuming this new equipment also is embedded with.
More software did you guys talked about it.
Briefly but is there. This is also a potentially a way to unlock more software and service revenue streams going forward I'm assuming thanks.
Yeah, No I think it's a great question I think that the number one thing that we're so excited about this launch is that this is a greenfield market opportunity, where we believe that there is a lot of demand for this type of technology to improve IV and so this is really unlocking a new growth market.
For us we are delivering it as part of a service.
Like our CPD ads. So this will be part of IV compounding service and so.
This will be both.
B product opportunity, but also <unk>.
Software and tech enabled services kind of a recurring component as well.
But in terms of timing I mean this year is really it's early we have customer demand and feedback is great, but it's it's really going to be quite limited in 'twenty two in terms of revenue but.
Again, something we're excited about in 'twenty three and beyond.
Thanks, guys congrats on the quarter.
Thanks, Scott Scott Scott.
Thank you we'll go next naturally Jessica to Sam at Piper Piper Sandler.
Hi, Thank you so much for taking my question.
So maybe you can follow up on Scott's question around the IV combat.
Can you help us understand or just frame what the what the market opportunity is there.
Hospitals, and what size are viable candidates for the debt service.
And is the opportunity.
Big and broad AG and the cabinet opportunity and then just what are the key considerations that a hospital might weigh in when they are deciding to endorse our outside counsel.
Thanks.
Sure.
I think starting with the second part of your question makes it easier I mean, right now for hospitals, obviously IV compounded drugs are critical to care delivery.
And hospitals have a couple of choices on where to get those drugs predominantly they are getting them through five years of III B outsourcers, which is expensive ironically, even though it's outsourcing. Its also certainly theres historically been quality issues, but that also makes them subject to the risk of shortage.
Alternative to outsourcing it today is compounding them internally and that that's a very manual process with well known <unk>.
Quality and safety issues and so the.
The demand has been around for quite a long time for using robotics to essentially in source the compounding of those drugs, which obviously reduces errors, but also the value proposition very much is avoid shortages and most importantly, a very.
Demonstratable ROI of invoicing the high cost of outsourcing those drugs. The challenge for a long time is that robotics is really failed to live up to being able to meet the throughput and reliability standards that the market has been frankly desperately needed and so the reason we're so excited about this technology is not because.
We have to create demand, but because finally, we're optimistic that this robot can meet those throughput and reliability demands and so that's really the value proposition as far as the size of this market again, given that robotics and use in hospitals in the U S has been quite limited its been really single digits penetration.
But we are very excited that it tends to be larger hospitals, but it's a very large portion of the U S Hospital market that this technology will unlock so in terms of magnitude.
I don't think we've disclosed that but it's meaningful.
And I think it's appropriate to say that many hospitals will take multiple robots not a single robot right.
A single place I think we've identified the central pharmacy Tam as being 15 billion. So with the IV robot, obviously has a significant portion of that.
It's just a fantastic opportunity to really.
Be a centerpiece of transforming the pharmacy I think it's not just another product another generation. It is a game changer and the other note I'd make on.
The robotic pieces is if youre going to do it manually in house to save money you have to have the most experienced.
Technicians.
And pharmacist handling these process and they just can't get these people.
Could do the process theyre not there so.
The robotics provides a path for actually getting the job done in house, which many many hospitals would prefer.
And not meeting the labor, we're going to supply the labor to help manage the robot process.
Yes.
Really helpful. Thank you and just one quick follow up.
On <unk> I think some of these issues.
Around the manufacturing process.
Around contract pharmacy for finding out there at the time of the acquisition I guess blended teams or gotten.
What has changed and has it has it changed your view on that.
Peter.
Relative.
Thank you.
Yes, Thanks, Jessica for the question. So what has changed really is in the latter part of the first quarter. The number of additional manufacturers are removed certain of the mats from the discount program, Brian So that impacted the volume.
Customer base and therefore also are falling from a revenue perspective.
We're taking a conservative approach to divest we forecast is included in our outlook and our guide.
We believe that the 240 <unk> program is a very essential and strategic part of the U S health care system.
Got it thank you guys.
Thanks, Jeff.
Thank you we'll go next <unk> and Daniel <unk> at Jpmorgan.
Hi, guys congrats on the quarter and thanks for the question.
Just you talked about higher inflationary pressures since you provided your guidance last but you were actually able to maintain your bottom line guidance for the year. So I was just wondering were there any offsets from cost savings that you were able to achieve or is maybe pricing helping.
Helping you sooner than you anticipated.
Thank you for the thank you for the question. So a couple of components. There maybe first I can touch upon the inflationary costs. So we're able to manage that very well.
Yes, you've seen probably in the markets as well as freight and steel are inherently spot markets.
There are some headwinds there from a cost perspective, we also.
We are experiencing the ads, however, we're able to offset that within.
With lower inflation on semiconductors, and as you can see in the prepared remarks, we have a significant amount of those semiconductors needed for supplier to our customers and our connected devices already in previously so we have a balance where we can offset it.
Given the slightly lower service revenue, we were able to offset that with product revenue strength from customer demand and from the backlog.
We also did some additional.
Cost management from a prudent perspective as well so we're able to continue to guide to the to the original EBITDA range.
Great. Thank you.
Thank you we'll go next to Matt Hewitt at Craig Hallum.
Good afternoon, congratulations to the good start to the year.
First question and I realize it's still relatively early days, but.
What has been the reception from customers regarding their Recept acquisition.
Are there any cross selling opportunities that you can speak to so far.
Yeah, I'd say that the reception has been <unk> been very very positive I think we really you know.
At this point haven't fully integrated that into our sales processes and communication, but that being said I think that.
Sort of the customer feedback that we've gotten is really validated the thesis that yes. This is a part of the medication management process. It makes sense that it's part of the overall omnicell platform.
<unk>.
Certainly they would expect and like Omnicell to deliver a service like this.
And I think the other thing which.
When you combine.
The manufacturer actions on the $3 40 beside with with.
With the notion of operating specialty pharmacy, better I mean, one very positive thing, which is interesting and very helpful. For us is that at this point most of the other major ppas and frankly, even competitive msos are owned by entities that are competitive to the health system.
Or at least perceived as competitive to the health systems or aligned with a payer or a PBF.
So that puts us in a very unique position with these services.
That's very helpful. Thank you and then maybe separately.
There's obviously a lot of talk and you touched on some of your prepared remarks regarding one hiring challenges at your customers and to inflationary pressures both in the form of wages and just higher costs in general.
When you're talking to your customers and they're coming to you kind of with their problems.
What are the maybe the one two and three top priorities that they're coming to you for solutions on and maybe how how quickly are you able to implement those to help the customer. Thank you.
I think that probably would vary by by service or product, but I think generally speaking on the on the acute care side or in the health systems. It's very much right now it's labor and it's helped me.
Continue to deliver the right med to the right location at the right time in my increasingly complex geographically distributed health system with.
The fact that I'm underwhelmed with labor and so I think thats certainly feeds into the CBD asset ECS, even with point of care I think we're number two in order to manage and mitigate your labor issues you have to have visibility as to where the meds are in your health system at <unk>.
Anytime and more importantly, being able to direct where those merger should go and then thats driving real interest and demand and Omnicell one because omnicell. One provides that visibility and then which is a direct benefit on the labor side can direct a task to a pharmacy tech on ongoing and restocking of cabinet. So that's.
That's helping to offset that.
I think on the retail side, it's very similar which is simply that I know is a retail pharmacy I need to I need to grow I need to engage patients I need to do more for patients than I have historically done such as scheduled vaccination schedule testing, even just schedule an appointment to talk about Mrs. Smith met the problem is is <unk>.
That.
I am struggling with labor shortage I'm overwhelmed to begin with and so it gives me tools and technologies that helps automate that and so that's where and alive and SaaS platform is so helpful, which is to provide workflow tools to automate a lot of those and so the themes are exactly the same which is free up the pharmacists to deliver better.
Clinical care and that's the heart of everything that we're doing.
That's great. Thanks, Thank you very much for the color.
Yep.
And ladies and gentlemen, just a reminder, star one for any questions. We go next now to David Larsen at DTE.
Hi, there hi, congratulations hi, congrats on a very good quarter.
Can you talk a little bit about.
Your pricing power. So there's a lot going on at hospitals Covid had very high rates very high prevalence rates in January they abated in February and March.
Like how are your hospital clients responding to these price increases that you're you're taking.
Are they okay with them are they pushing back or not just any color there would be helpful.
Hey, David This is Peter so in the prepared remarks, we also call material pricing and think in my section so the pricing.
<unk> generally been well received by customers and well understood as well.
Not the only ones I think also in the industry.
And it really shows also the value of our solutions and Scott.
Earlier on the earlier question really answered really the importance of our solution. So that it helps health systems with labor shortages with safety and efficiencies.
So as we see these are the latest.
Orders coming in the backlog we see.
The healthy price increase price increases or than the average cost of it.
Average prices are higher.
So we can see a complete in bookings and backlog.
Okay. So it sounds like the hospital clients of yours are getting the value for what they are buying and ultimately it improves the quality of care and enables them to grow revenue on their own hospitals, and ultimately reduce their own internal costs.
Because we have wage inflation that youre dealing with as well so those price increases are being well received it sounds like okay.
And then in terms of inflation are you pretty much are you set for 2022 do you have enough semiconductors in stocking inventory now to bring you through 2022.
As we progress through April how is inflation looking for semiconductors as we think about 2023 and are you protected from China in particular and Taiwan.
Yes. So thank you for that question. So overall, we're able to manage total inflationary cost pretty well in balance.
Freight and still are inherently spot market. So there is some pressure there and mostly probably the what we see in the second half of the year. However, given the substantial core parts of the semiconductors that we need for.
For this year you already have in stock and already they are fixed from a pricing perspective and cost perspective.
We were able to manage that within our range.
Dependency on Taiwan, and China as you know there is some commentary I would say we're managing.
To really get our supplies from Oems directly from brokers et cetera. So you feel I know, we have high high confidence of surety of supply.
Okay. Thanks, very much congrats on a good quarter.
Thank you.
Thank you we'll go next now to debt, where Syria at Barrington capital.
Yeah, Hey, thanks for taking my question.
And great quarter ticking off 2022 here.
Just wanted to talk a little bit about the IV compounding patient the new Ibs D.
Does that when you are in conversations with.
Clients around that and central pharmacy does that provide an opportunity to drive.
The automation that.
And a second level robotics, such as ex XR too.
And then kind of it's not it seems like this is the.
The current dynamics in the end market at hospitals are perfectly suited to kind of incentivize hospitals to drive maximum automation.
It's not kind of know what is.
Really.
Sure.
What's really needed to jive customers too.
Get on to something like an extra two thank.
Thank you.
Yeah I think your first question is that.
It's really our discussions around the IV compounding service are they related or contemporary.
Contemporary with conversations around central pharmacy to spend service and the short answer is absolutely. There are timing may not be the same for them. They may have different initiatives going on et cetera, but the conversation frankly for those <unk> and even point of care is very much around look your health system, you've got to deliver these meds in the right location at the right time.
Want to grow Youre struggling with labor and.
And we can help automate automate away a number of those tasks in the conversation then would lend itself to the sales cycle lends itself to where you're seeing those problems today and frankly, I think IV compounding service more often than not has a very clear ROI and we work with the customer depending on what drug.
They are compounding central pharmacy dispense service.
Roy is is is there its related to labor, but it's also very much about unlocking delivery model options for them and so do they want to manage how they distribute their meds across systems certainly it reduces the reliance on pharmacy tax so it's very very similar and we.
We are seeing a lot of very strong demand on the CBD side of things as well.
Okay, great and kind of on the second question.
If this is not kind of the perfect market to drive further adoption there.
What really.
It would be.
What's kind of holding back the adoption day is what I'm really getting at.
On the CPD side with XR too.
Yes, that's right.
Yeah, I mean honestly I think time I think process right I think it is.
More often than not what we're competing against is continuing to do things the way that they've always done them, which is manual and people in a bit of this is just the learning curve coming up to speed finding the right time with the health system, but I would say that the demand is strong and.
So I think that we're optimistic and bullish around <unk> I don't think Theres, a big regulatory change I don't think theres. Some theres no. Some silver bullet out there that needs to drop that suddenly unlocks the market I think that it really bodes boils down to.
Maybe it's the labor inflation, but it really does boil down to you simply can't operate in the central pharmacy with 500 people in the basement picking madoff of care ourselves and sending them wherever it's just simply not sustainable over time and so.
That need is apparent to the customer it's just about finding the right time that makes sense for them to to build a new location or do whatever that.
But bottom line is we're really bullish about the opportunity there.
Okay, great. Thank you.
And it appears we have no further questions today, Mr listen I'll hand things back to you for any closing comments.
Yes, thanks for joining us today I have couple of comments here to close us out turning to an update on omni sales commitment to corporate responsibility earlier. This month, we published our 2021 corporate responsibility report.
And in that report we highlighted the significant strides we've made in advancing environmental social governance, and innovation initiatives and so I hope youll avail yourself to that go to our website and find them find out more about that.
And lastly, I'd really like to send a big congratulations to the Omnicell team, which is almost every department in our company around the launch of the IDEXX station.
Our engineering hardware and software product management.
Our launching people training.
Everybody in the company has done.
<unk> been working on this huge project for several years and congratulations to you all because.
Pharmacy will never be the same.
Thanks to everyone. We'll see you next time.
Thank you again that does conclude todays omnicell first quarter 2022 earnings call, we'd like to thank you all for joining us and wish you all a great remainder of your day Goodbye.
Yeah.
[music].
Okay.
Okay.
[music].
Okay.
[music].
Sure.