Q2 2022 Omnicell Inc Earnings Call

And cannot be predicted without unreasonable effort.

In addition, we do expect to host an Investor day on September 20th 2022 additional details regarding this event will be provided at a later date and we hope to see many of you there with that I will turn the call over to Randy.

Thank you Kathleen.

Good afternoon, and thank you for joining us today.

We continued to see strength in our overall business in the second quarter.

With good customer demand and excellent work by our team.

<unk> ongoing navigation of inflationary pressure and other macroeconomic headwinds as well as our response to the ransomware incident that we disclosed in may.

Our health care system partners and retail customers continue to recognize the value of Omnicell provides modernizing and expanding medication management capability.

And this is helping to drive our results.

Omni sales comprehensive medication management solutions continue to resonate strongly with our customers and we believe that together we are transforming the pharmacy care delivery model.

To further advance this model, we continue to work toward creating a single cloud based platform designed to enable SaaS.

Tech enabled pharmacy operations.

We remain committed to advancing our strategy to transform the pharmacy care delivery model and meeting the needs of our partners and customers.

But the second quarter 2022, we delivered total revenues of $331 million.

non-GAAP EBITDA of <unk>.

56 million and non-GAAP earnings of 84 cents per share.

As Peter will discuss in more detail, we experienced some delays in implementations during the second quarter as a result of the ransomware incident.

Although we now expect these implementations to occur in the second half of this year.

Without the impact of the Ransomware incident, we believe we would have achieved if not exceeded the top end of our revenue guidance range in the second quarter.

As we noted in our form 8-K filed with the SEC. This afternoon. There were no known disruptions to the operation of our customers' medications devices as a result of the ransomware incident.

And there is no ongoing impact on our capability to provide on these health products and services.

Security is a top priority for Omnicell and we are taking a series of measures designed to safeguard the integrity of our systems.

We have greatly appreciated the continued support of our customers and employees as we worked through the incident.

As we look at the broader macroeconomic landscape, we are monitoring acute care capex in the operating expense budgets carefully.

Overall, we continue to see resiliency and demand for omni sales products and services due to what we believe is the mission critical role they play in improving patient care.

Coming out of the COVID-19 pandemic health care system personnel are facing higher levels of the tea at.

At the same time health care systems are operating in an uncertain economic environment.

COVID-19 played a big part and highlighting what we view as the need for more automation of an investment by hospitals and medication management as a way to optimize that.

Increase efficiency and reduce labor gaps.

Although we're hearing there are some signs of labor costs, beginning to ease for our customers.

The ability to source labor continues to be a challenge for many.

We believe that Omnicell with our unparalleled long term customer relationships is uniquely positioned to understand and address these pain points to help our customers mitigate ongoing labor challenges.

Generally demand for medication management infrastructure is resilient, especially in the areas that it appeared to drive value for our customers and help to mitigate challenges such as labor shortages.

Specifically, we are experiencing strong demand for our newly launched IV station.

Which provides a differentiated approach that is designed to enable IV compounding at scale.

Reduced errors associated with manual processes and reduce the high cost about sourcing.

Omnicell has been through many different market cycles since our founding over 30 years ago.

As a company we have navigated each of those cycles and have evolved our business to ensure we continue to meet our customers' needs.

I confidently believe that we are well positioned to navigate the current business cycle.

Omnicell has a long standing close relationships with our customers and our solutions are tightly integrated with their systems.

We believe that our customers have come to realize.

They not only want our products, but also our services.

They therefore appear more willing to partner with us.

We also believe that we have learned to recognize early signs of shifts in the industry landscape.

Better able to leverage our relationships to have open conversations with our customers. So that we can orient our solutions and our support within their frameworks.

Before I wrap up I also want to highlight the continued enhancement of our corporate responsibility and ESG efforts.

As part of our omni cell cares program.

This quarter, we launched your costs.

We're giving and volunteering platform that allows omnicell to focus and increase our social impact.

We also introduced paid volunteer time off as well as omni sales matching program.

Maximizes our employees charitable impact on our communities.

I'm proud of omni sales ranking among the top most transparent companies in the world as a result of our 2021 corporate responsibility report.

And we are committed to the continuous improvement of our ESG program and efforts.

To conclude we delivered solid results through the first half of this year.

We appear to have commercial momentum, we have a healthy backlog and we are seeing good demand, which.

Which we believe supports us reaffirming our outlook for the full fiscal year.

As we look ahead, we think omni sale continues to be uniquely positioned to enable the digital transformation across the entire medication management continuum.

Which we expect will continue to drive profitable growth.

Long term value creation.

Now with that I'd like to turn it over to Scott.

Thank you Randall health care professionals have an incredibly difficult job.

Fundamentally they need to deliver good outcomes to patients at appropriate costs and they must accomplish this with antiquated systems and poor processes across a myriad of care settings, including physician offices retail pharmacies emergency rooms, operating rooms, ICU skilled nursing facilities retail settings and the home.

It is a well known issue in health care that one of the biggest drivers of poor outcomes and high costs is the inability for providers to seamlessly manage a patient across these care settings.

And that is where omnicell comes in.

Medication management is one of the if not the most important part of the overall care delivery model is medications impact patients in every setting of care.

And today there is no single medication management infrastructure enables a care provider to manage the patient's medication management journey across care settings in order to improve outcomes and lower costs. We believe this is unacceptable the demand and the technology exists to solve that problem omnicell is uniquely positioned to deliver.

For a single smart medication management infrastructure that enables the care provider to efficiently manage the patient's journey from the home to the retail pharmacy to the emergency room to the ICU to the skilled nursing facility and back to the home.

At Omnicell, our vision is to deliver technology enabled services built on a single cloud platform that improve outcomes lower drug spend increased labor efficiency increase revenue improve safety and enabled a pharmacist to better engage the patient directly at the point of care in the central pharmacy upon discharge.

And in the retail pharmacy and at home.

In the second quarter, we continued to see strong adoption within our advanced services portfolio, which is made up of central pharmacy dispense service IV compounding service Omnicell, one 340, b receptor and enlightened health.

We believe this strong adoption is due to three main drivers.

First reach depth and expertise of our channel second our strong long term contractual partnerships and strategic engagement with our customers and third the clinical and financial value of our differentiated intelligent infrastructure that automates manual processes and enables providers to focus on delivering care.

Turning to enliven health and our progress there <unk>.

During the quarter and life and health announced a major enhancement to its patient engagement offering with the launch of personalized communications. This breakthrough patient engagement solution Leverages AI, driven conversational technology that creates a human like phone experience for patients, which means that pharmacists can spend less time answering the phones.

And spend more time on direct patient care.

The acquisition of <unk> at the end of 2021 significantly expanded in life and health National footprint with the addition of thousands of independent pharmacy customers located throughout the U S medical.

Medicare match, one of Fts ample cares most innovative technology solutions is now a cornerstone to the life and health expanding suite of industry, leading pharmacy solutions.

Medicare match enables pharmacist to help their patients select the Medicare plan that best fits their healthcare needs and financial requirements, which ultimately helps the pharmacist to retain the patient as a customer.

Medicare match is now a key capability available on <unk> health platform, which includes four primary modules patient engagement clinical services financial optimization and pharmacy analytics.

The breadth and depth of the <unk> platform enabled it in Q2 to win two leading regional pharmacy chains. These new wins demonstrate the value of Omnicell <unk> acquisition of Fts ample care end market touch during the past year in.

In life and health now offers the industry's most comprehensive platform of technology solutions designed to help pharmacies grow and thrive in this new era of digital driven health care.

Turning next to 340, <unk>, which we acquired in late 2020.

A key part of our vision and long term strategy at the integration of 340 <unk> into our core Omnicell channel and portfolio of products and services.

I am pleased to share we are making significant progress on this integration.

340, <unk> adds critical capabilities to our existing pharmacy inventory management solution and when the 340 <unk> capabilities are fully integrated we will be able to deliver a complete perpetual inventory management solution to health system that enables enterprise level ordering purchasing and visibility across the continuum of care.

Now I'd like to comment on some of our key customer highlights this quarter.

And existing Idc's customer on the east coast will upgrade its existing older generation of IV robots with our recently announced <unk> station sterile compounding robotic system. While this customer already have a successful <unk> program. It believes that it will significantly increase the value its program by upgrading the robot which is a <unk>.

Great Testament to the value of our new technology.

We continue to see customers convert to omnicell as more organizations adopt the XT automated dispensing system this quarter and the whole system in the Midwest contracted for a cloud hosted on the center and the XT system across 20 locations to support safety and efficiency at the point of care.

And finally, recognizing the benefits of operating in the cloud a leading health system in the northwest has selected cloud hosted on the center to enhance inventory visibility and management. They also invested and the XT series automated dispensing system, including anesthesia workstation to streamline workflows and clinical care and surgical area.

<unk>.

This is also a competitive conversion will be a great partner committed to transforming the pharmacy care delivery model.

The COVID-19 pandemic and the current macro environment has increased demand for our smart medication management infrastructure as it directly impacts top priorities like labor efficiency and outpatient services.

As a result.

We feel confident about the demand for our services in both the short and long term and believe that we are uniquely positioned to not only help health care providers, whether they are current challenges, but ultimately enable them to transform health care for the better.

Now I'll turn it over to Peter Peter.

Thank you Scott.

Delivered sequential revenue and profit growth quarter over quarter, and we continue to see strength in the overall business.

We are pleased to reaffirm our full year 2022 guidance for product bookings total revenue non-GAAP EPS and non-GAAP EBITDA.

Without the impact of the Ransomware incident, we believe we would have achieved if not exceeded the top end of our revenue guidance range in the second quarter.

Only employees across the company put our customers first and work tirelessly to restore our systems.

Quickly and safely as possible.

Nevertheless, yes, T system's outages did affect our ability to schedule customer implementations and collect receivables during the quarter.

I'm pleased with our team's diligent response to the ransomware incident during the quarter as well as the solid execution that all of our approximately 4000 Omnicell team members continue to consistently deliver amidst the macroeconomic environment that remains dynamic.

Turning now to a review of our results.

Our second quarter 2022, GAAP revenues were records.

$31 million and non-GAAP revenues were also a record $332 million.

Our non-GAAP revenues increased $12 million or 4% over the prior quarter and were up 22% over the second quarter of 2021.

The year over year revenue increase reflects continued strong demand for only sells mission critical medication management solutions as well as the contribution of revenue from recent acquisitions.

As I noted a moment ago total revenue of the quarter was slightly below our guidance range, primarily due to timing of expected customer implementations, which were delayed as a result of the ransomware incident.

However, we expect these implementations to occur in the second half of 2022 and as a result, we are reaffirming our previously announced total revenue outlook for the year.

On an organic basis, our second quarter, 2022, GAAP and non-GAAP revenues increased 14% year over year.

The acquisitions of <unk> receptor and markets such are performing well and we expect these recent acquisitions to support our long term growth objectives.

non-GAAP gross margin for the second quarter of 2022 was 49, 5% an increase of 60 basis points from the prior quarter, primarily as a result of scale from higher revenue, including strong sequential service revenue growth.

Included in the second quarter gross margin as the impact of approximately $8 million of inflationary costs.

Representing an increase of $3 million from the prior quarter.

Our second quarter 2022 earnings per share in accordance with GAAP were <unk> <unk> per share compared to 17 cents per share in the first quarter of 2022 and 43 per share in the second quarter of 2021.

As a reminder.

The second quarter of 2021, GAAP EPS and non-GAAP EPS included a stock excess tax benefit.

<unk> per share compared to a benefit of <unk> <unk> per share in the second quarter of 2022.

A full reconciliation of our GAAP to non-GAAP results is included in our second quarter 2022 financial results press release and is posted in the IR section of our website.

Our second quarter 2022, non-GAAP earnings per share were 84.

Within our guidance range, despite the events of incidents.

This compares to 82 per share in the previous quarter and 97 cents per share in the same period last year.

We delivered non-GAAP EBITDA of $56 million in the second quarter of 2022.

Compared to non-GAAP EBITDA of $50 million from the previous quarter.

$61 million in the same quarter last year.

The year over year decline in non-GAAP , EBITDA was primarily driven by the impact from inflationary cost and investments in value, creating growth and innovation initiatives.

The ransomware incident, and the timing of it should occur the fact that our balance sheet and cash flow.

The delay in customer implementations due to the ransomware incident led to slightly higher inventory balances and also resulted in invoicing occurring later in the quarter does impact in collections.

At the end of the second quarter of 2022, our cash balance was $245 million down from $265 million as of March 31 2022.

Free cash flow during the second quarter of 2022 was turning to million dollars use of cash.

We expect free cash flow levels to trend positively as we progress through the year.

In terms of accounts receivable days sales outstanding for the second quarter of 2020 to 86 days.

The days sales outstanding reflects an increase of two days over the last quarter, primarily from the timing of invoicing within the quarter as a result of the ransomware incident.

Inventories as of June 32022 were $150 million, an increase of $13 million in the prior quarter.

Increase of $49 million from the second quarter of 2021.

Important to note that the inventories as of June 32020 to include approximately $21 million of purchases and receipts.

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 third quarter of 2022 guidance.

We are pleased to reaffirm our full year 2022 guidance for product bookings total revenue non-GAAP , EPS and non-GAAP EBITDA, reflecting commercial momentum and healthy backlog our expectation for continued strong revenue growth in the second half of the year and prudent cost management.

Given the ongoing uncertainty in the macroeconomic environment, we are carefully managing expenses, while continuing to invest in our long term growth initiatives.

Confident that we have secured the necessary supply for semiconductor critical components through 2022 and through the first half of 2023 in order to deliver on mission critical systems and connected devices to our health care partners.

A global supplier to the procurement teams are continuing to do a great job of divesting these challenges and minimizing disruptions to our customers.

Importantly, we are also pleased with the pricing actions taken in 2021.

While we are beginning to see benefits from these pricing actions the positive impact to profitability.

We believe it will be realized upon implementation of these bookings as we approach the end of this year and more significantly as we move from 2023.

The demand for services is strong.

We're very pleased with your interest in our services portfolio from the top 300 yourself systems.

Consistent with our previous guidance, our full year 2022 product bookings are expected to range between $1.370 billion and $1 billion $430 million.

Also consistent with previous guidance, we expect full year, 2022, GAAP and non-GAAP revenues to be between $1.385 billion $1.410 billion.

We now expect GAAP and non-GAAP product revenues to range between $980 million and 909.

$95 million, we expect GAAP and non-GAAP service revenues to be between $405 million.

<unk> hundred $15 million.

Fact that mix of revenues reflects the strength in our product backlog and the refinement of service revenue estimates, including the timing of manufacturer actions on us before DB solutions revenue.

We now expect that services revenue as a percentage of total revenue to be approximately 13% to 14% in 2022.

And now a few comments on <unk>.

Higher through the recent manufacturer actions, we had been expecting full year $2 would it be revenue off approximately $50 million.

We now expect beef would it be your revenue for 2022 to range between 30 and $35 million.

Continue to expect total year 2022, non-GAAP EBITDA to be between $243 million to $255 million, reflecting strength in our business model and our commitment to prudent expense management and operational excellence initiatives.

We are also reaffirming our non-GAAP EPS guidance and continue to expect total year 2022, non-GAAP EPS to be between $3 85 per share and $4.05 per share.

As we noted in previous quarters, we are experiencing the impact of inflationary headwinds. This continues to be primarily due to semiconductor and other components costs.

To a lesser extent trade steel and other raw material costs.

Well, we have seen some favorability in semis trade cost and fuel pricing.

Overall supply chain environment continues to be challenging.

Therefore, we are maintaining our expectation for total inflationary costs.

Approximately $30 million to $35 million in 2022.

For the full year 2022, we are assuming an effective blended tax rate of approximately 9% non.

non-GAAP EPS guidance.

For the third quarter of 2022, we are providing the following guidance.

We expect total third quarter, 2022, GAAP and non-GAAP revenues to be between $360 million and $366 million.

GAAP and non-GAAP product revenues to be between.

$261 million and $264 million, and GAAP and non-GAAP service revenues to be between $99 million and $102 million.

We expect third quarter, 2020, non-GAAP EBITDA to be between $60 million $64 million.

Lastly, we expect third quarter 2022, non-GAAP earnings per share to be between <unk> 93 per share and $1 per share.

We continue to see momentum in the commercial business and believe our comprehensive medication management solutions.

<unk> advance services resonates strongly with our health system partners and retail customers.

In summary, we are pleased with our results for the second quarter of 2022 and believe we are executing well in what continues to be a challenging and dynamic environment.

We remain confident in our long term outlook.

You think steps to address inflationary headwinds 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.

At this time, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad to withdraw your question. Please press star one again, we'll pause for just a moment to compile the Q&A roster.

Our first question comes from Joy Zhang from SBB Securities. Please go ahead. Your line is open.

Okay.

Hi, guys. Thanks, so much for taking my question.

Hi, I just wanted to go back to your remarks, and that's usually the business I understand that you are taking down the guidance just.

Any outlook on where the industry is going.

The improvement there in the out years or is it something that you expect.

That could be impacted in the out years as well.

Yeah.

This is Scott seidelman, Thanks Joanne.

I think it's a bit too early to tell exactly how that's going to play out over the near term.

Longer term the 340 B program is here to stay and I think that covered entities will continue to be able to utilize the contract pharmacies and the demand for a tpa will continue I just think we've got to get through this period as the program works out the specifics around all of this and that's really an issue between the government and the manufacturers.

Got it that's very helpful.

John .

You mentioned that your EBITDA ramp at the utility.

And it's going to be more.

Concentrated.

Can you just give us some more detail on whether all of that ran that's coming from just the pricing increases or are you seeing some sort of price cost controls as well to drive that.

Thank you for the question Joe. This is Ed This is Peter nice to meet you.

So if you look at our quarterly profile should be given the.

Third quarter guidance, and then of course implies also the fourth quarter guidance.

Model skills really well so if you look at implied EBITDA for the fourth quarter.

Key to scaling there as well and the additional.

Gross margin EBITDA falling through if you will so the majority of scaling as we said in the prepared remarks, we are seeing the pricing actions flowing through in the pipeline and in bookings and then consequently in the backlog bookings coming into backlog are at higher prices. If you will higher margins than the core.

Current composition, and then we expect that to flow through to revenue as we install and implement.

And we see some of that in the second half with the majority of the profitability increases from the first half to the second half are driven by scale.

Volume leverage.

Okay very helpful.

And then one last question.

Maybe overall as you're thinking about the services component of your business.

How I guess, how do you approach. It is it do you see it mainly as a way to help with customer purchasing decisions.

Connected devices or is it and right now many of growth itself.

Sorry, John you are talking specifically about our advanced services business.

Exactly.

Yeah, absolutely very much an avenue for growth.

Significant expansion of our Tam, but more importantly.

It's not really about making it easier for customers to buy the reality is we're delivering an as a service because we believe that by combining technology with expertise and analytics that we can drive an outcome and in this particular case and in this environment that outcome is primarily focused on improving labor efficiency as well as safety and quality.

And so and advanced services are resonating, particularly well in this environment with customers and driving a lot of the growth for us over the long term.

Makes a lot of sense. Thank you so much for taking my question. Thank you.

Okay.

Our next question comes from Dan Bernstein from Wells Fargo. Please go ahead. Your line is open.

Hi, Thank you for taking my question I guess looking on guidance you reiterated your full year guidance.

And you said product implementations are slipping into the back half of the year.

Curious there is there.

Is that slippage will be driven just by human ransomware or is that <unk>.

Client decision that pushed back to the back half of the year and then I guess associated with that what's your visibility into not having any further slippage as we look into the back half of 2022.

Hey, Stan this is Peter yes the.

The vast vast majority of the of the delayed customer implementation timelines.

Because of the ransomware incident.

We have very high visibility and the timelines for implementations also because we have a very healthy.

And large backlog.

Adobe install from.

And we're also ramping up of course our teams.

Customer experience and in the implementation teams to support that revenue growth as we scale in the second half of this year and into next year and just adding to that I think to your question.

We don't really see any slippage in the scheduling.

It's.

It's pretty locked in and if there was something to happen at a particular accounts. There's another account we can slot back and generally so feel.

Feel very confident about the going forward from this point to the end of the year.

Got it and then also on the bookings guidance. So obviously.

Reiterated that number.

But as we think about what comprises the bookings number.

There been any change in the mix of whats comprising long term bookings versus.

Next 12 month bookings or have those expectations remained pretty much unchanged.

Where you had them at the start of the year.

Okay. That's a that's a great question. So so overall of course in our long term framework that we're committed to and executing on.

The longer term portion because of the transition and transformation of the business too.

Two more attach surfaces the longer term part of bookings and also implied backlog will increase like we said in our prepared remarks, we see particular strength in our central offices.

And for US that's really the proof that we are going through this digital transformation that people are booking.

Most of all of our products and with the exception of the automated dispensing systems. Our advanced services. So this is the future of the business in.

And it's really important that.

People aren't just deploying the automated systems, but they are there.

They are getting into these more advanced systems and services that really require us to partner together as Scott said drive an outcome.

So we want to see that happen and it is happening in.

In our bookings and our backlog.

Got it and just to crystallize is that increasing at a faster rate than where you anticipated at the start of the year or is that pretty much in line with your expectations.

I think it's in line with our expectations, maybe slightly better yes.

Okay. Thank you.

Our next question comes from Jessica <unk> from Piper Sandler. Please go ahead. Your line is open.

Hi, Thank you so much for taking my question.

So I wanted to just kind of understand a little better than.

The <unk> product revenue mix.

Our understanding with the ransomware attack with kind of confined to the $3 40 D Link software and then it was our understanding that there was kind of very little overlap between omnicell sole sourced hardware customers and the $3 40 D link covered entity base.

Just curious.

Curious if you could just explain exactly how the attack with yourself.

Yes, just to be clear there was no impact to our customer systems.

But it was a lot of impact omni sales internal systems, which are driving manufacturing.

Being able to deliver quotes being able to collect from accounts payable being able to issue invoices. So that was the entire company that was not just focused on.

340, <unk> so it had quite an impact on our ability to schedule and install equipment as we had planned at the beginning of the quarter prior to the ransomware attack.

But you know as we've stated in the K and now that we have worked through those issues and all of our systems and all the capabilities up and running but we wanted to be really clear that we did not have any impact to our customer systems. These are only internal operating systems.

That were impacted by the ransomware attack.

Got it.

Helpful, But I guess and I apologize.

But can.

Can you just help us understand kind of how long between when the attack with identified and then.

Complete resolution, assuming and I imagine thats completely resolved at that point.

Yes, so we felt too this is Peter Jeff. So we fell to 8-K regarding the ransomware incident. So you can see in the first one in May that we quickly responded as you could expect the initiative of course our.

Business continuity plans have worked on restoring our internal systems.

Maybe just to help quantify the impact both in the prepared remarks, we talked about that excluding if we had not had that event survey incident than we would have been on the very top end or slightly exceeding the top end of revenue guidance. So if you look at our guidance.

That we issued in the April call.

We ended five below.

The low end of the guidance and $11 million below the high end of the guidance. So that gives you a benchmark of kind of the impact on revenue.

Got it.

That's helpful and and and when you make that Robert just two quick things when you make that reference I assume that that's referring to product revenue.

And then just more broadly Mike.

My question would just be I think at the hospital level can you give us a sense of how large the ADC budget and relative to the rest of the hardware or the pharmacy hardware budget.

So for example, if you're spending like $10 million on an ADC fleet, what would the some of the rest of your pharmacy hardware purchases.

And that's it for me thanks.

Yes, Jeff This is Peter I'll answer the first part of the question most of the majority.

It's entirely product revenue the ransomware incident, the impact if you will.

As far as customer budgets.

It really depends on the on what health system, where the health system is in their path to Tom's pharmacy in automating and depending on what automation that currently have in their facilities. So it's kind of events as you know the.

Fast vast majority of our long term sole source customer partners and the top 300 U S health systems have a co developed plan that we have developed with them with investments in automation every single year.

It really depends by customer.

I would just add that.

Pharmacy automation, but ADC in particular has been consistently a top three priority overall capital spend.

For for.

For health systems number two behind imaging.

But a lot of our.

Other offerings like Cps and <unk> are very.

Labor saving intensive so they particularly have.

Features that health systems need help with right now, which is I can't get experienced pharmacy techs to do my compounding can do it with a robot so.

Those kinds of things set us up well for non.

System purchases other types of purchases.

Sure.

Got it thank you so much.

Next question comes from Matt Hewitt from Craig Hallum. Please go ahead. Your line is open.

This is Lucas on for Matt My.

My first question is you know in recent quarters, you've been training your sales force on how to sell resets.

Do you feel like most reps are comfortable with that offering now and what is the pipeline for it looking like.

Actually we're relatively early on in that process Recept had a dedicated sales force occupancy the broader sales force is aware of the recept offering, but where we are in kind of early stages of more broadly training and integrating the quota and commission plans et cetera et cetera.

That being said I think.

Going into the acquisition of <unk>, which is certainly a thesis but post that we're seeing really strong demand for those services and some of that is macro industry trends, but but I think it's resonating with our customer base that this is part of the Omnicell platform.

It makes a lot of sense of where we're really bullish and excited about the pipeline.

Thanks, and then you've also been starting to market the <unk> market touch offerings together to retail pharmacy customers have you seen any early instances of customers buying both of those products together.

Yeah, I think in the.

The script, what we outlined was that two large regional chains.

Recently.

Subscribe to and live in and as part of those those new customer ads. They subscribed to multiple modules of the <unk> platform, which is now <unk>.

Clinical financial and two other modules, but but it's really the most comprehensive platform in the pharmacy space now.

So bottom line is it's resonating.

Okay that was all I had thank you very much.

Thank you.

Our next question comes from Devon.

We are a ceria from Bahrenburg capital markets. Please go ahead. Your line is open.

Hi, there thanks for taking my question.

Peter I just wanted to clarify the H two.

Yes, Hi can you hear me.

Okay, great yes.

Doing well thanks.

I just wanted to clarify the guidance for <unk>.

Just reconsidering our comments around kind of the $11 million impact on product revenue.

It seems like the eight two guidance now includes $11 million of kind of implementations that were supposed to be done in Q2 here.

Just want to clarify that and I have one follow up.

That's correct yes.

Okay. Thanks.

I wanted to also visit.

Yes, I wanted to visit the kind of long term sole source agreements from Q3 'twenty to Q3 'twenty. One you guys added about eight of them.

Expecting to see a couple of kind of get to the first part of this year.

Should we expect some sort of cadence on that.

Any reason why it may have kind of stagnated over the last three quarters.

Just any color around the dynamics that would be helpful. Thanks.

I think we're getting competitive wins they are not all in the top 150 plus category.

And I think that will continue and then theres a lot of morphing, that's still going on in the top 300.

Rogers and acquisitions and so.

Actually sometimes hard to identify which ones are in the top 300, because sometimes merge together, but I would say no that the from a competitive standpoint, the business is strong and that it's just kind of lumpy the way they come.

I wouldn't read anything negatively into it.

Sure and then I guess, that's not too also read into the fact that you may be.

Focusing more on kind of the down market.

That's right.

I wouldn't say that I think we have.

Our go to market plans of segment that market and certainly we're still going after.

The bigger.

The bigger groups out there and we'll continue to have success.

Yeah.

Great. Thank you.

You bet. Thanks Pat.

We have no further questions in queue I'd like to turn the call back over to Randall Lipps for closing remarks.

Well Im just wondering especially reach out and thank the omnicell team the omnichannel customers.

Who will walk through this difficult ransomware with us and we've come out of the other end of this and I think and then it's made US a better company and better partners with our customers and it's funded all of US together to always do the right thing to win and make it work.

And be successful and transform us.

Pharmacy delivery model.

And.

We also hope to see as many of you September 20th at our Investor Day look forward to seeing you. There until next time. Thank you Jason and thanks, everyone. Thank you.

This concludes today's conference call. Thank you for your participation you may now disconnect.

[music].