Q1 2023 Omnicell Inc Earnings Call
Speaker 2: Good afternoon. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the OmniCell first quarter 2023 financial results conference call. All lines have been placed on mute to prevent any background noise.
Speaker 3: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.
Speaker 4: If you would like to withdraw your question, again, press star 1. Thank you.
Speaker 5: Ms. Kathleen Nemus, Senior Vice President of Investor Relations, you may begin your conference.
Speaker 6: Good afternoon and welcome to the OmniCell first quarter 2023 financial results conference call. On the call with me today are Randall Libs, OmniCell chairman, president, CEO and founder, Scott Seidelman, executive vice president and chief commercial officer, and Peter Kuipers.
Speaker 7: 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 on our press release issued today.
Speaker 8: in the OmniCell Annual Report on Form 10-K filed with the SEC on March 1, 2023, 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. All forward-looking statements speak only as of the date hereof or the date...
Speaker 9: section of our website at ir.omnisell.com. Additionally, we would like to remind you that during this call we will discuss some non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are included in our Financial Results Press Release issued today.
Speaker 10: With respect to forward-looking non-GAAP measures, 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 effort.
Speaker 11: With that, I will turn the call over to Randall. Randall?
Speaker 12: Good afternoon and thank you for joining us today. Our team had a solid start to the year and we continue to advance our strategy to transform the pharmacy care delivery model.
Speaker 13: deliver mission-critical medication management solutions for our customers.
Speaker 14: I'd like to begin with an update on what we are currently seeing in the overall healthcare industry and medication management space.
Speaker 15: And then walk through our high-level financial results and key highlights from the first quarter.
Speaker 16: Starting with the market environment, our customers are continuing to face challenges due to labor constraints, and they remain mindful of their capital budgets.
Speaker 17: While we are seeing some stabilization throughout the industry, we expect the labor and salary cost pressures that hospitals saw in 2022 to continue throughout this year.
Speaker 18: In our view, these trends underscore the need to automate and modernize the medication management process.
Speaker 19: And as the industry continues to navigate these challenges, we believe OmniCell is an important part of the solution.
Speaker 20: As discussed last quarter, we remain focused on taking what we think is a cautious approach to managing the business and have taken decisive action in line with this approach.
Speaker 21: In February , we announced plans to reduce our workforce across many of our functions in order to lower our cost structure.
Speaker 22: We have also reduced our real estate footprint to align with our broader hybrid work strategy and in an effort to further reduce costs.
Speaker 23: We continue to execute on our expense containment efforts and in the first quarter we incurred approximately $14 million of non-reoccurring restructuring in related charges including $8 million of impairment and abandonment charges of operating lease.
Speaker 24: right of use assets, and other assets and five million dollars of employee restructuring.
Speaker 25: Since the inception of our cost containment plan in November of 2022, we brought our office space square footage down by 21% and our headcount reduction is tracking to our plan, which was originally announced in November 2022.
Speaker 26: and updated in February 2023. We also continue to anticipate that the annualized savings from operating expenses will be around $50 million for 2023, which does not include the expected volume-based reductions within our cost of sales.
Speaker 27: Now, turning to our high-level financial results for the first quarter.
Speaker 28: We think our results reflect our teens operational execution and financial discipline as we navigated another quarter of macroeconomic uncertainty.
Speaker 29: We exceeded our first quarter, 2023 guidance ranges for total product and service revenues.
Speaker 30: Non-Gap EBITDA and Non-Gap EPS.
Speaker 31: We generated total revenues of $291 million.
Speaker 32: Non-Gafty Bidav of $27 million.
and non-GAP earnings per share of 39 cents.
Our solid first quarter performance was primarily driven by the timing, impact of revenue, cost, and expense within the year.
And we expect to continue executing through the uncertain macroeconomic environment as we progress through 2023.
Peter will speak to the key drivers of the quarter and his remarks.
and provide further details on our financial performance.
Moving on to the current customer landscape.
Quarter to quarter becomes increasingly clear to us that despite a challenging macroeconomic environment, customers continue to choose Amiselle.
We are pleased to note a new central pharmacy dispensing service win, which includes the XR2 robot with the University of Iowa to support central pharmacy operations.
Additionally, a Southern California based non-proper-applied health care system signed up for CPDS, including the XR2 robot.
A New York State Healthcare Enterprise plans confirmed for automated dispensing system footprint across the four hospitals system to AmiCell XD cabinets.
while also upgrading to Central Pharmacy Dispensing Service and a major Illinois Health System along with a Texas-based Medical Center chose to partner with ONLYCEL to establish a new specialty pharmacy services program.
We have also made meaningful progress on integrating our recent acquisitions.
and the pipeline for our advanced services portfolio remains strong. Scott will speak about these integrations shortly, and we are confident OmniSail is well positioned for growth in the future.
Now I'd like to briefly discuss our strategic alliance with Long Island University.
and the opening of the Center for Innovation Medication Management, or CEM, that we announced recently. As we continuously discuss, we find there is a significant burden put upon nurses and pharmacists to handle the bulk of the administrative work.
This strategic alliance is intended to modernize and standardize pharmacy education as health systems start to embrace automation in order to foster a safer and more efficient pharmacy.
The Sim is a state-of-the-art laboratory with a working fleet of Ami-Sel devices.
and is designed to provide an immersive pharmacy technology and analytics experience for LIU pharmacy students.
Through the SIM, LIU pharmacy students have early access and exposure to OmniCell devices and should enter the workforce with a competitive edge.
as well as hands-on experience with Army Sales Innovative Technology.
The Sam will also host Army Cell customers for product demonstrations and diligence.
and we'll serve as a training facility for our advanced services operational teams.
We will then go to implement this technology at customer sites.
We're excited to invest in the future of OmniCell through this important initiative with LIU. And we believe it will bring increased awareness to OmniCell's devices. I also want to highlight that in April we published our 2022 ESG report.
which many of you have hopefully had the chance to see. If you have not yet read it, I encourage you to take a look at the full report on our website.
As noted in the report, we have taken steps to bolster our internal systems in order to protect patient data.
Execute critical efforts to further harden our identity computing environments. An implement various human capital initiatives to foster a culture of inclusivity, well-being, and belonging.
As we strive to build a healthier world, we are dedicated to furthering our ESG journey through purposeful action.
Before I turn it over to Scott, I want to touch on our search for ArmyCells NextCFO.
As mentioned on last quarter's call, the Peter will be stepping down at the beginning of July , and a national search for our next CFO is well underway.
I want to reiterate my thanks to Peter for the significant contribution he has made to Ami-Cell, as well as his commitment to making this a seamless transition process.
We'll provide additional updates as appropriate. Now with that, I'll turn it over to Scott.
Thank you, Randall. As Randall noted, with healthcare labor shortages persisting, our pipeline for automated and modernized medication management solutions is strong. Advanced services are a key part of our intelligent infrastructure which is intended to help customers address problems in their medication management processes.
from the inpatient bed and acute care setting to the home.
We are pleased to report that we have made notable progress integrating our recent acquisitions and expanding our advanced services solutions to ensure on-the-sell is well positioned to meet pharmacy and hospital needs.
Over the past few years, we have made three key acquisitions intended to enhance our advanced services offerings. Reset, a specialty pharmacy services management provider.
FDS AmpliCare, a leading pharmacy SaaS solutions provider, and Market Touch Media, a pharmacy technology solutions provider.
From an administrative perspective, the integration of all three acquisitions is largely complete.
and we are now actively executing our go-to-market commercial strategy. Recept has been rebranded as Omnicell Specialty Pharmacy Services and was introduced to the market in late 2022.
In 2023, we plan to focus on integrating customer success functions into our broader organizational structure.
FDS AmpliCare and Market Touch Media are now fully functionalized within Enlivened Health and we are currently working on merging the technology platforms of all three companies into one connected experience.
340B is now part of on-the-sales inventory optimization service. We continue to further integrate the solution to provide our customers better visibility into ordering, procurement, and medication analytics at an enterprise level.
We now have a look but portfolio that we believe is uniquely positioned to support pharmacy care across the entire care continuum. Now.
Let's walk through a few of our recent wins that we believe highlight the power of our offerings.
First, a New York Health System with four hospitals plans to convert its automated dispensing system footprint across its four hospital system to Omnicell XT cabinets while also upgrading Decentral Pharmacy Dispensing Service in an effort to support enhanced patient safety and dispensing accuracy.
Combining these offerings is anticipated to drive visibility and efficiency for dispensing medications across the health system.
We find that health systems are choosing central pharmacy dispensing service to optimize pharmacy labor and workflows through robotics and optimization tools.
that are intended to help reduce the amount of time pharmacists spend on drug distribution tasks.
This technology is designed to support a variety of health system pharmacy settings as evidenced by being chosen to support central pharmacy operations for a comprehensive academic health system in Iowa, as well as a Southern California based not for profit health system.
Our specialty pharmacy service also continues to gain market traction and health systems seem to be recognizing the value of launching an entity-owned specialty pharmacy operation.
In the first quarter, a major Illinois health system and a Texas-based medical center engaged on the cell to establish new specialty pharmacy programs, citing our strong infrastructure and expertise and delivering speed to market for clinical and revenue goals as key drivers for their decisions. As we continue to build strong relationships in the retail pharmacy market, we are working
of Pharmacy and Health Sciences for the grand opening of the Center for Innovative Medication Management.
On the cell, it's proud of the strategic alliance we've established with LIU to launch an immersive pharmacy technology and analytics experience that should provide the next generation of pharmacy leaders, early access and exposure to evolving aspects of pharmacy technology.
To conclude, we believe we have made significant strides this past quarter, and we are confident we are well positioned for the future.
I will now turn it over to Peter.
Thank you, Scott. As we navigate through the ongoing Mark Reek and all my challenges, please visit Results.
Then we delivered for the first quarter of 2023, which exceeded our guidance ranges.
A first quarter performance was driven by strong execution, discipline cost management, and revenue timing.
The product of our approximately 3,800 home-nissled team members.
to continue to deliver for our customers, particularly in this challenging, our economic and fire.
Turning now to our financial results. A first quarter, 2023, total gap revenues were $291 million. A decrease of $7 million or down 2%.
Over the prior quarter, on the decrease of $28 million, or down 9%, over the first quarter of 2022. The year-rear decrease reflects lower point-of-care revenues as a result of ongoing health systems, capital budgets constraints.
Services revenues for the first quarter were $155 million. An increase of 12% over the first quarter of 2022, and the scoring that our digital estimation strategy is working. Total revenues in the quarter were $8 million about the top end of a pre-efficiency disclosed first quarter.
a decrease of 50 base points from the prime quarter. I'm merely due to lower revenue volume leverage.
As we noted on our February 2023 earnings call, we expect to see the full benefit of recent cost actions as we move it to the second quarter of 2023 and volume leverage begins to return by the fourth quarter of 2023 as revenue is projected to grow throughout the year. A full reconciliation of our gap and non-gap results.
in the prior quarter, an income of 70 cents per share in the first quarter of 2022.
Our first quarter of 2022 GAAP earnings per share includes the impact of $5 million for separate related expenses and the impact of $8 million for the impairment and the ban of the charges of operating lease, private use and other assets that we continue to rationalize our office space as part of our efforts.
to align with our broader hybrid work strategy and to further reduce cost. Our first quarter of 2020 non-gabbering for share for 39th test per share compared to 33th test per share in the Friday quarter and 83th test per share in the same period last year.
First quarter, I'm not a Gaffee, but that was $27 million.
An increase of $1 million compared to the previous quarter and a decrease of $24 million compared to the same period last year.
First quarter of 2023, non-GAPI data and non-GAP earnings to share exceeded their expectations due to revenue timing, payable product and services mix.
Steads timing and solid execution.
At the end of the first quarter of 2023, our cash balance was $340 million up from $330 million as of December 31st, 2022.
As of March 31, 2023, we have $500 million of affordability under our following credit facility.
The amount of credit availability is dependent on certain financial confidence that just total leverage ratio and secured net leverage ratio.
Free cash flow during the first quarter of 2023 was a $1 million use of cash as a result of timing of cash collections and we start to regulate it and employee compensation payments.
We expect free cash flow levels to return positive as we progress through the year.
In terms of the count of the C-fables, Day Seal stopped standing. For the first quarter of the 23 was 100 and 2 days.
An increase of 9 days over the pride quarter, primarily due to the timing of enforcing within the quarter.
Incentories as of March 31, 2023 were $141 million, a decrease of $6 million from the private quarter reflecting strong inventory management. This is in part due to the strong efforts of our team as they continue to execute and make progress on our global supply chain process improvements.
and the Infatorial Advice with initiatives.
Now moving on to our full year and second quarter 2020 guidance. As Randall mentioned earlier, we remain focused.
or take on what relievers a cautious approach to managing the business.
We are pleased to refer a full year to the 22 guidance for bookings.
I am pleased to reaffirm our full year 2020 peak items for bookings, revenues, and
Non-gap EBITDA and non-gap EPS.
We're reflecting our view of a healthy backlog and our expectations for sequential revenue growth from the first half to the second half of the year and Cruted cost management
from the reason Reduces and Fores and other expensive efforts. This one functions included in SDNA. The expected 2023 operating expense annual savings will be large for your set by the impact of the year-for-year inflation, interpolice salaries, and increases in expected.
performance-based compensation, friendly cost increases, and investments in research and development.
We expect non-gap operating expenses in total to be flat to down year-to-year with non-gap SDNA down.
Modesty offset by slight increase in non-GAB R&D.
which reflects our focus on cost savings while continuing to invest in a growth agenda.
For the full year of 2023, we are assuming an effective blended tax rate of approximately 6% in our non-get-run-ex-for-share guidelines.
For the SEC report of 2023, we are providing the following guide. We expect total SEC report of 2023 revenues to be between $278 million and $288 million. Your product revenues to be between $181 million and $186 million.
The second quarter of revenues guidance reflects a moderate decrease.
from the first quarter performance due to the timing shift or reducing to the first quarter. And non-liquid or I of M-SW benefit to the first quarter of 2023.
We expect sequential revenue growth from the first half to the second half of the year. We expect the second quarter of 2023. None got EBITDA's, the EBITDA's, the $22 million and $28 million.
And we expect second quarter with us on 23 non-gabber owners per share to be between 25 cents per share, 35 cents per share.
In summary, we are pleased with our results for the first quarter of 2023 and believe we are executing well with what continues to be a challenging market with the Novick environment. We remain confident in the opportunities we see ahead as we aim to deliver long-term value for all of our stakeholders.
We look forward to updating you on our progress in the coming quarters.
With that, we would like to open the call for questions. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad.
We'll pause for just a moment to compile the question and answer roster.
Your first question comes from the line of Stan Berenstein from Wells Fargo. Your line is open.
Hi, thanks so much for taking my questions. First of all, to maybe start with your point of care at Steve product line, it seems like you're still kind of in the same replacement cycle-friendly life product.
I'm just wondering if we're thinking about demand from end-of-life upgrades, you know, over the next couple of years, we just think about that cohort of just end-of-life. Do you expect any choppiness in that demand over the next couple of years that maybe could create demand surges or demand slowdowns from these upgrades? Thanks.
Hey, status is Peter. So for the Yoke Rit Cycle for the XT series, we are in the second half of the Yoke Rit Cycle. We have some chalk in us during the pandemic in the Man's Football Kings.
But we expect going forward to relatively stable continuation of your critical. Okay, and then maybe a quick follow up here. So you've implemented cost cuts. It's in your, you're still doing that, but going forward, is there any change in your infamous loss, if your in terms of
of course, it's about adding permanent headcount as we move forward. We want to be careful about that. But I think we have used some flexible workforces as we add on for demand, particularly in the implementation area. We'll continue to use those where they fit best.
But I think for the most part, we're not seeing a big increase in our workforce for this year.
the most part, we're not seeing a big increase in our workforce for this year. Thank you. Thank you.
Your next question comes from the line of Scott Schoenhoff from KeyBank. Your line is open.
Hi, team. Congrats on the strong quarter. So you had really nice growth in services revenue this quarter. Can you talk about what the biggest contribution was? Was it mostly from the XR2 robot? Thank you.
Okay, Scott, it's Peter. Both variety of nor drivers will be in the services, pleasant services, not necessarily specifically only the access through World Laws War, CPDS as we marketed now.
I think as I mentioned, this is Scott, as I mentioned in my script, we're seeing very nice demand from health systems regarding
setting up and operating in house specialty pharmacies and that's been driving some nice growth for our specialty pharmacy service.
Great, thanks. And then just as a follow-up, what are you seeing in your live and health platform? Are you seeing any areas of strength or weaknesses versus last quarter or prior expectations? Thanks. Sure, it's got again. I think we are very enthusiastic about in live and the demand there, the general thesis.
that as healthcare shifts outside of the hospital to the home and the importance of managing the total cost of care, the pharmacist has to get much more engaged and they're going to need tools regarding digital engagement and they're going to need tools around medical building and the in live and platform is very uniquely positioned with full.
full, well, complemented those tools to really enable pharmacists to deliver care and that type of setting. So we're really, really excited about the demand there.
Thank you. Thanks Scott. Your next question comes from the line of Matt Hewitt from Craig Hall. Your line is open.
So we closed the reset acquisition at the very end of 2021 and spent 2022 really focused on integrating that acquisition. Rebanded the product or the platform is on the cell specialty service. And in addition to the back office types of things around integration, the real key there was integrating it into our go-to-market and channel functions because the real demand is coming from health systems and hospitals that given some of the changes that manufacturers have put in place regarding use of contract pharmacies, that's created a nice tailwind of demand for hospitals and health systems too.
want to stand up and operate specialty pharmacies. The challenge for them is doing so is a very different skill set and it's difficult to do. So it's a natural fit for us given the sort of comprehensive nature of the medication management infrastructure that we provide to offer that as a service. And so we really got that integrated in 22 and now we're seeing a really healthy growth in top of the funnel pipeline and demand. So we're really excited there. Great and then maybe a follow up regarding the large retail win, congratulations on that. So it's a five year agreement. Maybe walk us through the process, the courting if you will with that customer and.
Is this more of a hunting license or is this entire chain going to be adopting the platform? Thank you. Yes, in general within Liven, I'll talk generally within Liven, those relationships are not hunting licenses. These are, in Liven, is a SaaS platform that has various modules and the business model for that is...
Generally speaking, you pay for each of those modules $X per store per month like a very traditional SaaS. And so when a customer enters into that level of contract, they're committing for utilization of the platform across X number of stores. In this particular case, it is a commitment to deploy.
some of the modules across the breadth of their source.
some of the modules across the breadth of their source. Well, congratulations. Thank you.
Thanks, Matt. Your next question comes from the line of Jessica Casson from Piper Sandler. Your line is open. Hi. Thank you guys so much. I appreciate the questions, and congratulations on the quarter. So I think, first off, we were just interested if you could help us understand the implied sequential decline and adjusted EBITDA margins.
The first quarter of the second quarter combined on revenue, that is mostly revenue timing. On a profitability basis, about 2-3rd, about 60% of the third of the favorable EBITDA, also revenue timing within the year. And a big part of that, favorable revenue timing, came from at least buyouts.
which flows through the 100% margin to EBITDA. As you know, we think we have at least portfolio. In point of care, most of the government, at the time we see buy-out or renewals.
of these leases and the remaining favorability was in the 10 services and higher technical services revenue. So from a total revenue perspective, yeah, there is a decline from the first quarter to the second quarter guide, but the vast, vast majority of that is revenue timing. Okay, that makes a lot of sense. And then just our quick follow up.
forward products revenue guidance in 2023 versus 2022. Thanks so much. Yeah, so I think one of the things that we've seen in the profile of our customer base is the steep reduction.
and Kepvery Nursing Health or Contract Nursing Health to moving back to more full-time permanent nursing. So we've seen some of the pressures and labor.
We think that the ability to schedule and secure those slots and timing with customers has improved and has given us a much better sense that the backup we have can be scheduled and customers can compete with those days. And I think last year at the height of that, customers just didn't have the people even to be on site when to receive the equipment and assist in the installation and doing their part. And for the most part, we've seen that dissipate as well as customers agreeing and making their firm commitments on our plans.
your BINIT OPEN.
Hey guys, congrats on the quarter and thanks for taking my questions. I was hoping you can give us some updates from the field since we've been getting some mixed data points this earnings season on HospitalSend.
Are we seeing frozen budgets start to saw as all these labor had when to begin to ease or is it still many quarters away just given their priorities? Well, I think it's slow, air-conditionally improving. You see some people, particularly the public, providers, maybe a little ahead of the game. But we really feel that there's small, air-condmental improvements.
and every bit helps, but no major shifts or changes. I understand, with that in mind, is there an opportunity outside of retail pharmacies for in live and health become much bigger, just given engagement and outpatient foot traffic are now becoming just that much more important for the off.
of there are a lot of folks in health care and constituents that are are engaging around that and I think given the importance of medication management and more importantly the impact of taking the right meds, taking them correctly, etc. on managing health care but more importantly managing downstream
I think the pharmacist is going to get increasingly important in sort of this next evolution of healthcare, which is why you've seen some of the acquisitions you've seen recently with the larger public retail pharmacies. But what does that mean for the thisDamn
In live and it's an incredibly well-positioned to enable pharmacists to transform and start to provide different types of care and that the participants there could be retail pharmacies, could be hospitals, and containers, etc. So again, early days, but we feel excited about where the business is positioned.
incredibly well positioned to enable pharmacists to transform and start to provide different types of care and that the participants there could be retail pharmacies, could be hospitals, and containers, etc. So again early days, but we feel excited about where the business is positioned. Super helpful. Thanks folks.
Thank you. Next question, please. Your next question comes from the line of Alan Lutz from Bank of America. Your line is open.
Thanks for taking the questions. One for Peter, EBITDAx, give it the guide by more than 15 million at the midpoint. I guess how much of the EBITDAx contribution was from lease buyouts in one queue and then how much was from timing?
Yeah, so we consider the vast majority of the revenue actually to be timing in the year. So from time to time we do have lease buyouts, so we're contemplating that in the full year, so that is timing as well. I would say on the EBITDA side about 60% of the EBITDA actually is driven by revenue timing and the remaining 40% is driven by revenue timing.
You have a mostly by expense signing. Great. And then one for Scott. Guy, you talked about building relationships with retail pharmacies. And the service and business had a really good sequential quarter, especially versus where the guide was. Can you talk about what part of in live and is resonating the most with retail pharmacies? Basically, is there?
A specific solution that you guys are leading with to get your foot in the door. Thanks. Sure, sure, sure, sure. So patient engagement in general, sort of how do these retail pharmacies engage patients outside? And they're really sort of focused on the chronic patient, the polymeds. At your hand, so.
You know, simply using a telephone to contact them is not the most efficient way, particularly given, and I'm sure you've experienced it, you go to any retail pharmacy and now the pharmacist has a two-hour lunch break, etc. So anything that a pharmacy can do ultimately to provide more leverage to its pharmacist to actually start to engage patients.
to make sure they're on the right meds, make sure they're following up, making sure that they're getting, they're following through med adherence regimens and they're on the right meds, et cetera. So that really resonates. And also increasingly, I would say that that pharmacist in many states now is starting to provide different types of care. And...
Now what you're doing is you're really talking about medical billing and so that's really a greenfield opportunity and that's exciting because they're really today the retail pharmacies don't have great solutions for or talked about.
what you're doing is you're really talking about medical billing. And so that's really a green field opportunity and that's exciting because they're really today the retail pharmacies don't have great solutions for rev cycles for pharmacies.
Thanks, Allen. Next question, please. Your next question comes from the line of David Larson from BTIG. Your line is open. Hi. Can you talk a little bit about your expectation for inflation trends in 2023? I think you had $18 million of semiconductors in inventory at 1231. Is that enough to get you through the year? And then I think there was like a $26 million inflation impact in 22. What sort of headwind might there be in 23 and how are you thinking about that? Thank you. Yeah, thank you, David, for the question. So there's two parts there, right? The $18 million of semiconductor inventory P-Buy in previous heat will cover most of the year for 23. So we feel very confident in the ability to have some of the conductors on hand for mostly our connected devices. From an inflation perspective, what we said in earlier earnings calls is that
We do expect the pricing impact on the year for an actual perspective. To see the inflation, and we're talking to the debt as well, it's slightly favorable in the quarter on the net basis. Okay, great, thanks. And then you've mentioned a couple of times in the call, revenue timing.
how much revenue impact was there in one queue from, I guess, this timing least buyout activity. And then related to that, how is your backlog trending as we head into like almost mid-year is your...
Just any more color there will be very helpful. I would expect your op-x to decline by a pretty significant amount. Yeah, the underlying as the testervizate back, as the cost comes off, aero, if you will. We see that impact in the second quarter, from the first quarter to the second quarter, the second smaller risk that we announced in February , last quarter, also that cost is coming off, roughly in the middle of the second quarter. So we see definitely see.
to step down in operating expenses going from the first quarter to the second quarter, and from the second quarter going through the third quarter. An offset though we have is the inflation that we have ourselves for our own employee costs on payroll, and that we're modestly investing in R&D as we discussed prior as well to support our innovation roadmap. Okay, great. Appreciate it. Thank you very much. Yeah. Thanks, David. Next question? Your final question comes from the line of Anne Samuel from JP Morgan. Your line is open.
Hi, thanks for taking the question. I had maybe one follow-up on the prior inflation question. You know, you had spoken previously to pricing as a key inflation offset. So I was just hoping maybe you could speak to how much pricing contributed to margin performance in the quarter or how much it's upsetting. Yeah, so the first quarter...
Very helpful. Thank you. There are no further questions at this time. Mr. Randall Lipp, I turn the call back over to you. Thank you for joining us for the call today. It's been an interesting last two years. I want to really thank our employees for working hard, getting us through these times, and arriving to a new year and a new go forward. I'm really looking forward to continuing to work with all of you as we move forward. I'd be remiss not to thank Peter Kipers for the many years of great service.
And value add, he has done what this company over his tenure to make his from a kind of one horsepower company to an enterprise, go to market, powerhouse. So thank you, Peter, and best of luck in your next adventure. Cheers.
he has done for this company over his tenure to make his from a one-horse tower company to an enterprise go-to-market powerhouse so thank you Peter and best of love in your next adventure. Cheers.
for this company over his tenure to make us from a kind of one horsepower company to an enterprise go-to-market powerhouse. So thank you Peter and best of luck in your next adventure. Cheers. Thank you.
This includes today's conference call. You may now disconnect.