This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk05: Stand by, we're about to begin. Good afternoon, ladies and gentlemen, and welcome to the Omnicale 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 speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, just press star 1 on your telephone keypad. If you call over to Ms. Kathleen Nemeth, Senior Vice President, Investor Relations.
spk01: Kathleen Nemeth 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, CEO and Founder, Scott Seidelman, Executive Vice President and Chief Commercial Officer, and Peter Kuypers, Executive Vice President and Chief Financial Officer. This call will contain forward-looking statements, including statements related to financial projections or other statements regarding AMISO's plans, objectives, expectations, targets, or 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 in the OmniCell Annual Report on Form 10-K filed with the SEC on February 25, 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.omnicel.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 measures to the comparable GAAP measures on a forward-looking basis that 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.
spk03: Thank you, Kathleen, and good afternoon, and thank you for joining us today. We've had a solid start to 2022. despite headwinds due to inflationary pressure and geopolitical unrest. We continue to work to advance the industry vision of the autonomous pharmacy with our focus on creating a single cloud-based platform that is designed to enable SAS and tech-enabled pharmacy operations. Our comprehensive medication management solutions which we believe are transforming the pharmacy care delivery model, continue 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, and our strategy is generating results. We delivered strong first quarter results and continued to build on our momentum from last year. Overall, we exceeded our first quarter 2022 guidance ranges for total revenues, non-GAAP EBITDA, and non-GAAP EPS. Our first quarter results include total revenues of 319 million, non-GAAP EBITDA of 50 million, and non-GAAP earnings per share of 83 cents. I'd also like to highlight that last month we launched a new generation of our IV compounding robot, IVX, that will power our IV compounding service an innovative solution designed to scale the benefits of IV robotic technology and make it accessible to the broader market. We find that compounding is an extremely labor-intensive area of medication management, and we believe the IVX station provides a differentiated approach to enable IV compounding at scale by 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 healthcare systems and retail customers. And modernized medication management processes. Other products and solutions, we're able to assist our customers to address the staff shortages.
spk07: In summary, I'm very pleased with our overall execution and a solid outlook for the year. I'll turn it over to Scott for some more details on our first quarter. Scott?
spk06: Thank you, Randall. We believe our strategy is working, and today I will provide some additional color around some of the macro market trends in innovation management products, software, and technology-enabled service
spk07: address these trends.
spk06: 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 community pharmacies are having a difficult These industry staffing issues have been exacerbated by the COVID-19 pandemic, which increased the already daunting workload of pharmacies, leading to staff burnout and retention challenges.
spk07: We believe that OmniCell solutions in several ways, but to highlight a few specific examples, IV compound dispensing service use robots, analytics, and experts
spk06: to automate extremely labor-intensive areas of the pharmacy.
spk07: Additionally, central pharmacy dispensing services reduces the time that a pharmacist requires to check prescriptions by up to 90%.
spk06: Omnicel One uses analytics to automate what is otherwise a very manual task for several people and the labor force in the hospital.
spk07: SAS platform automates many manual tasks for the pharmacist. 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%.
spk06: 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's vision of the autonomous pharmacy, and as such is a key design tenet for our product management team that is designing current and future solutions. Now I will comment on some of our recent customer highlights. First, a leading health system in the Southeast selected OmniCell central pharmacy dispensing service to help it streamline inventory management and enhance safety in its central pharmacy operations. This comprehensive solution combines the XR2 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 CPDS relationship for Omnicel to date and represents an extension of an existing long-term sole source relationship. Second, a leading Northeast health system selected Omnicel 1 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. OmniCell 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 agreements with a leading health system in Illinois and a leading health system in southeastern Massachusetts, both for another five years. I would also like to highlight that on March 29th, more than 50 pharmacy health system leaders joined us in person along with more than 700 others virtually for Illuminate Live. At this event, we formally launched our new IVX station robot along with numerous other features and enhancements in our winter 2022 release. The IVX station will be available through our IV compounding service, which combines our IVX 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 outsourced medications, reduce dependence on medication shortages, reduce manual errors, and improve staff efficiency. Additionally, during the first quarter, Enliven Health continued to advance its mission of building and orchestrating one of the most innovative fast technology solutions that helps enable retail pharmacies of all sizes and types to grow and thrive in this new era of digital-driven healthcare. A particular focus of the quarter was Enliven Health's continued integration of SDS AmpliCare and Market Touch Media, which Omnicel acquired in 2021. Enliven Health is already seeing good progress in cross-selling solutions between the acquired companies and Enliven Health's customer base. With the launch of IVX Station, which, like all of our other devices, will ultimately be powered by our cloud platform, along with the ongoing enhancements to OmniCell One, Enliven Health, and 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 340B solution. The federal 340B drug pricing program, which supports safety net and 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 in mental health clinics, and implement medication management and community health programs. OmniCell's 340B solution has deep expertise in supporting health systems on administering and complying with the 340B program's 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 340B solution will experience headwinds while the industry works out these changes. However, we expect our 340B solution to continue to play an important role in our overall strategy to provide health system and retail partners with the tools and services they need to help deliver the best patient outcomes. In 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 healthcare 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.
spk03: Thank you, Scott. I'm 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 our approximately 3,900 OmniCell team members continue to consistently deliver, particularly during the current dynamic macro environment. Turning now to our financial results, our first quarter of 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 OmniCell's medication management solutions as well as the contribution of revenue from recent acquisitions. Total revenue in the quarter was slightly above our guidance range. reflecting strength and implementations of our connected devices, and was partially offset by lower than expected service revenue from our 340B solutions and delay timing of certain maintenance renewals within the first quarter. On an organic basis, our first quarter of 2022 gap and non-gap revenues increased 19% year over year. The acquisitions of SDS AmpleCare, Reset, and Market Touch Media are performing well and moderately 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 is the impact of approximately $5 million of inflationary costs compared to costs paid for semiconductors, other materials, and freight in 2020. excluding the approximately $5 million in inflationary costs because margin percentage would have been 160 basis points higher. Our first quarter of 2022, earnings per share in a quarter's gap were $0.17 per share compared to $0.28 per share in the fourth quarter of 2021 and $0.30 per share in the first quarter of 2021. The full reconciliation of our gaps and non-gap results is included in our first quarter of 2022 earnings press release and is posted on our website. Our first quarter of 2022 non-GAAP earnings per share were $0.83, compared to $0.92 per share in the previous quarter and $0.83 per share in the same period last year. First quarter non-GAAP earnings per share exceeded our expectations due to the strength in total revenue as well as the impact of a favorable tax benefit and stock compensation of $0.06 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 31st, 2021. During the first quarter, we repurchased approximately 389,000 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, and 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, day sales outstanding for the first quarter of 2022 were 84 days. The day sales outstanding reflects an increase of 14 days over last quarter, primarily from the timing of inflation within the quarter. Incentories as of March 31st, 2022 were $137 million, an increase of $17 million from the prior quarter, and 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 advanced 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 our global supply chain process improvements and inventory management initiatives. Now moving on to our full year and second quarter 2022 guidance. As we look to the rest of the year, we continue to expect strong revenue growth and 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 and connected devices to our healthcare customers. Our global supply chain and procurement teams are continuing to do a great job addressing these challenges and 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 OmniCell's value proposition. We are pleased with the continued momentum in customer demand for key advanced services and have been hiring in support of customer implementation timelines. Consistent with our previous guidance, our full-year 2022 product bookings are expected to range between $1,370,000,000 and $1,430,000,000. And we expect full-year 2022 GAAP and non-GAAP revenues to be between $1 billion, $385 million, and $1 billion, $410 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. We expect GAAP and non-GAAP service revenues to be between $410 million and $420 million. The updated mix of revenues reflects connected devices implementation timelines and a healthy backlog offset by the service revenue happening in the T40B market and timing of maintenance renewals of prior generation equipment within the year. We expect the timing impact of maintenance renewals to resolve and for technical services revenue to be at the original expected revenue run rate towards the end of the year. We now expect advanced services revenue as a percentage of total revenue to be approximately 14% to 15% in 2022, factoring in a conservative approach to our 340B business. We continue to expect total year 2022 non-GAAP EBITDA to be between $243 million and $255 million, reflecting the strength in our business model and our commitment to prudent expense management and operational excellence initiatives. We now expect fully and non-GAAP EPS to be between $3.85 per share and $4.15 of the guidance range shares outstanding, which includes the impact of the repurchase of approximately 389,000 shares of common stock in the first quarter of 2022.
spk07: As we noted in previous quarters, we are experiencing the impact of inflationary headwinds.
spk03: This continues to be primarily due to semiconductor and other component costs, and to a lesser extent, freight and steel and other raw material costs. The supply chain team continues to manage inflation well, while ensuring continuity, $30 million to $35 million by 2022, as compared to in 2020 and remains also unchanged from last quarter's outlook. As discussed in the prior quarter, the full-year 2022 non-GAAP receiver deck items also includes around $8 million in integration costs for the SDS AmpliCare, Recept, and MarketTouch 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, too, and as we move into 2023, including this is the favorable angle.
spk07: We expect gross margins in the second half of 2022 as compared to the first half of 2022.
spk03: For full year 2022, we continue to assume an effective blended tax rate of approximately 6% you know, non-GAAP EPS guidance. For the second quarter of 2022, we are providing the following guidance. We expect total for the second quarter of 2022 GAAP and non-GAAP revenues $37 million and $243 million, with GAAP and non-GAAP product revenues to be between $241 million and $244 million, and GAAP and non-GAAP service revenues to be between $96 million in $99 million. We expect second quarter 2022 non-GAAP EBITDA to be between $54 million and $58 million. And we expect second quarter 2022 non-GAAP earnings per share to be between $0.82 per share and $0.89 per share.
spk07: Now turning to our long-term outlook.
spk03: We continue to believe that we have built a company that is able to adapt and scale very well. And we believe it's in all position to deliver on the 2025 total revenue growth targets, driven by a number of factors, including growing advanced services revenue, the benefits from long-term. We continue to have line of sight and are committed to our 2025 profitability targets. We issue these targets prior to.
spk07: We continue to execute.
spk03: pricing actions, and manufacturing savings programs. As we continue to scale the business in the coming years, we expect to invest and redeploy some of these savings into value-creating growth and innovation initiatives. In summary, we are pleased with our results for the first quarter of 2022 and believe we are executing well and will continue to be challenging in the dynamic environment. We remain confident in our long-term outlook as we continue to take steps to address inflationary headwinds and supply chain disruptions and value for all of our stakeholders and look forward to updating you. With that, we would like to open the call for your questions.
spk05: Thank you, Mr. Kuypers. Ladies and gentlemen, at this time, if you do have any questions or comments, simply press star 1. And if you do find that your question has been answered, you can remove yourself from the queue.
spk07: by pressing star one a subsequent time.
spk05: First, we go through Scott Schoenhaus at Stevens. Hi, Randy, Peter, Scott, and Kathleen. Hope the team is doing well. I just wanted to start off here. So your guidance implies some reduced growth in services and software this year. You outlined the delayed 340B opportunity. But I just wanted to ask where you're seeing the most growth in software in the near term. Is it on the institutional side with OmniCell 1?
spk07: Is it on the retail side with Enliven Health?
spk05: Or is it now with your advanced services portfolio?
spk03: Yeah, this is Peter, and it's Karl from VIA as well. So clearly there is a lot of momentum from a customer demand perspective on CPDS and also on IPCS that now will be powered by the next generation of IP robots. We see also really great uptake in OmniCell 1, and then also on the retail software climate side, we see also really solid and strong growth.
spk06: And live inside, as Peter mentioned, on the retail side is that it In the last year, we acquired FDS and Market Touch. And now as we've combined those offerings in the market, at least from a commercial front end, we're seeing really nice positive reception from customers for that combined offering. So that gives us some enthusiasm.
spk05: Great. Thanks. As a follow-up, just trying to get a sense on how much revenue contribution could potentially come from the launch of this new ID 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. I think you guys talked about it. But is there – this is also a potentially way to unlock more software and service revenue streams going forward, I'm assuming. Thanks.
spk06: 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 of market opportunity. 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 CPDF, so this will be part of IV compounding service, and so this will be both product opportunity but also software 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 really going to be quite limited in 22 in terms of revenue. But, you know, again, something we're excited about in 23 and beyond.
spk05: Thanks, guys. Congrats on the good quarter. Thanks, guys. Thank you, Scott. Thanks, Scott. Thank you. We go next now to Jessica Tassam at Piper Sandler.
spk10: Hi, thank you so much for taking the question. So maybe to follow up on Scott's question around what the market opportunity is there, so hospitals of what size are viable candidates for this kind of service, or is the opportunity sort of as big and broad as the cabinet opportunity? And then just what are the key considerations that a hospital might weigh when they're deciding to insource or outsource sterile compounding? Thanks.
spk06: 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're getting them through 503 outsourcers, which is expensive, ironically, even though it's outsourcing. It's also certainly there's historically been quality issues, but that also makes them subject to the risk of shortage. The alternative to outsourcing it today is compounding them internally, and that's a very manual process with well-known quality and safety issues. The demand has been around for quite a long time for using robotics, most importantly, a very demonstrable ROI of avoiding the high cost of outsourcing those drugs. The challenge for a long time is that robotics has really failed to live up to being able to meet the throughput and reliability standards that the market has been, frankly, desperately needed. 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 goals in the U.S. has been quite limited. It's been really single-digit penetration. But we're very excited that a very large portion of this technology will unlock.
spk07: In terms of magnitude, you know, I don't think we've disclosed that, but it's meaningful. And I think that many hospitals would take multiple patients in a single place.
spk03: I think we've identified the central pharmacy TAM as being $15 billion, so the IV robot obviously has a significant portion of that. And it's just a fantastic opportunity to really – be a centerpiece of transforming the pharmacy. I think it's not just another product and another generation. It is a game changer. And the robotic pieces, if you're going to do it manually in-house, most experienced technicians and pharmacists handling these people to do the process. They're not there. So the robotics provides a path for actually getting the job that people would prefer and not needing the labor. We're going to supply the labor to help manage the robot process.
spk10: That's really helpful. Thank you. On 340B, I think some of these issues around the manufacturer of prototypes around contract pharmacies were kind of out there at the time of the acquisition. So I guess what has changed or gotten, what has changed and has it changed your view on that, the future growth prospects for that business relative to the time of the acquisition? Thank you.
spk03: Yeah, thanks, Jessica, for the question. So what has changed really is in the latter part of the first quarter, the number of additional manufacturers removed certain of their mats from the discount program. So that impacted the volume at our customer base and therefore also our volume from a revenue perspective. We're taking a conservative approach to the revenue forecast that's included in our outlook. In our guide, that said, we believe that the C40P program is a very essential strategic part of the U.S. health care system.
spk10: Got it. Thank you, guys. Thanks, Jeff.
spk05: Thank you. We go next now to Anne Samuel at J.P. Morgan.
spk09: Hi, guys. Congrats on the quarter, and thanks for the question. Despite, you know, you talked about higher inflationary pressures since you provided your guidance last, but you were actually able to, you know, maintain your bottom line guidance for the year. So I was just wondering, you know, were there any offsets from cost savings that you were able to achieve, or is maybe pricing helping you sooner than you anticipated?
spk03: Yeah. Thank you for the question. So a couple of components there. Maybe first I can touch upon the inflationary costs. So we were able to manage that very well. You've seen probably in the markets as well, freight and steel are inherently spot markets. There are some headwinds there from a cost perspective. We also are experiencing that. However, we're able to offset that with lower inflation on semiconductors. And as you can see in the pair of remarks, we have a significant amount of those semiconductors needed for supply to our customers and our connected devices already in PVC. So we have a balance there 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 original EBITDA range.
spk10: Great. Thank you.
spk05: Thank you. We'll go next now to Matthew at Craig Hallam.
spk08: Good afternoon. Congratulations to the good start to the year. Maybe first question, and I realize it's still relatively early days, but what has been the reception from customers regarding the RECEPT acquisition? Are there any cross-selling opportunities that you can speak to so far?
spk06: Yeah, I'd say that the reception has been very, very positive. I think we really, you know, at this point haven't fully integrated that into our sales processing communication. But that being said, I think that sort of the customer feedback that we've gotten has really validated the thesis that, yes, this is part of the medication management process. It makes sense that it's part of the overall Omnicel platform. that certainly they would expect and like Omnicel to deliver a service like this. And I think the other thing, which when you combine some of the manufacturer actions on the 340B side 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 TPAs and, frankly, even competitive MSOs are owned by entities that are competitive to the health systems or at least perceived as competitive to the health systems or aligned with a payer or a PBM. So that puts us in a very unique position with these services.
spk08: That's very helpful. Thank you. And then maybe separately, there's obviously a lot of talk and you touched on some of the prepared remarks regarding one, hiring challenges at your customers and two, 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 maybe the one, two, and three top priorities that they're coming to you for solutions on, and maybe how quickly are you able to implement those to help the customer? Thank you.
spk06: I think that probably would vary by service or product, but I think generally speaking 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 that certainly feeds into the need for CBDS and IVCS, even with the point of care. I think where 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 any time, and more importantly, being able to direct where those meds should go, and then that's driving real interest and demand in Omnicel 1, because Omnicel 1 provides that visibility and then, which is a direct benefit on the labor side, can direct a task to a pharmacy tech on going and restocking a cabinet. That's helping to offset that. I think on the retail side, it's very similar, which is simply that I know as a retail pharmacy, I need to grow. I need to engage patients. I need to do more for patients than I have historically done, such as schedule vaccinations, schedule testing, even just schedule an appointment to talk about Mrs. Smith's meds. The problem is that I am struggling with labor shortage. I'm overwhelmed to begin with. And so give me tools and technologies that help automate that. And so that's where an Alive and Fast 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 pharmacist to deliver better clinical care. And that's the heart of everything that we're doing.
spk08: That's great. Thank you very much for the call.
spk05: Yep. And ladies and gentlemen, just a reminder, star one for any questions. We go next now to David Larson at DTIG.
spk04: Hi, David. 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, you know, 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.
spk03: Yeah, David, it's Peter. So in the prepared remarks, we also commented on pricing and think of my section. So the pricing increases have generally been well-received by customers and well-understood as well. And we're not the only ones, I think, also in the industry. And it really shows also the value of our solution, which Scott just earlier on the earlier question really answered really the importance of the solutions right it helps health systems with labor shortages for safety and efficiencies yeah and so as we see these uh the latest orders coming in the backlog we see you know uh the health team price increase price increases are and the average cost or average prices are higher yeah so we can see it coming here in bookings and backlogs
spk04: Okay, so it sounds like the hospital clients of yours are getting the value for what they're buying, and ultimately it improves the quality of care. It enables them to grow revenue in their own hospitals and ultimately reduce their own internal costs because they have wage inflation that they're 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 stock in inventory now to bring you through 2022? And 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?
spk03: Yeah, so thank you for that question. So overall, we're able to manage total inflationary costs very well in balance. Freight and steel are inherently spot markets, so there's some pressure there in mostly probably what we see in the second half of the year. However, given that the substantial part of the semiconductors that we need for this year already have in stock and they're already in their fixed pricing perspective and cost perspective, we think we're able to manage that within the range. The dependency on Taiwan and China, there is some dependency, I would say. We're managing to really get our supplies from OEMs directly, from brokers, et cetera. So we feel, you know, we have high confidence to share your supply.
spk04: Okay. Thanks very much. Congrats on a good quarter.
spk05: Thank you. Thank you. We go next now to Dad, we're in Syria at Beringer Capital.
spk00: Yeah, hey, thanks for taking my question. And great quarter to kick off 2022 here. I just want to talk a little bit about the IV compounding station, the new IVX. Does that, you know, when you're in conversations with the clients around that in central pharmacy, does that provide an opportunity to drive, you know, further automation with kind of second-level robotics such as XR2 and And then kind of if not, you know, it seems like this is the current dynamics in the end market at hospitals are perfectly suited to kind of incentivize hospitals to drive maximum automation. So, you know, if not kind of now, what is really, you know, what's really needed to drive customers to, you know, get on to something like an XR2? Thank you.
spk06: Yeah, I think your first question is that, is really our discussions around the IV compounding service. Are they related or contemporaries with conversations around central pharmacy dispense service? The short answer is absolutely. Their timing may not be the same for them. They may have different initiatives going on, et cetera. The conversation, you know, frankly, for those and OC1 and even point of care is very much around, look, your health system, you've got to deliver these meds to the right location at the right time. You want to grow. You're struggling with labor. and we can help automate away a number of those tasks. And the conversation then would lend itself to the sales cycle, lend itself to where are you seeing those problems today. And, frankly, I think, you know, IV compounding service more often than not has a very clear ROI, and we work with the customer depending on what drugs they're compounding. Central pharmacy dispense service, the ROI is there. It's 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 techs. So it's very, very similar, and we are seeing a lot of very strong demand on the CBDS side of things as well.
spk00: okay great and kind of on the second question just you know if if this is not kind of the perfect market to drive for that option there you know what what really you know would be uh you know what's kind of holding back for the adoption days is what i'm really getting at on the cpdf side with xr2 yes that's right
spk06: Yeah. Honestly, I think time. I think process. 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. A bit of this is just
Disclaimer