Omnicell Inc (OMCL) 2008 Q4 法說會逐字稿

Good afternoon. My name is Ellie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Omnicell fourth quarter earnings conference call.

(OPERATOR INSTRUCTIONS)

I would now like to turn the call over to Rob Seim, CFO of Omnicell. Sir, you may begin your conference.

Thank you. And good afternoon, and welcome to the Omnicell 2008 fourth quarter results conference call. Joining me today is Randall Lipps, Omnicell Chairman, President and CEO. You can find our results in the Omnicell fourth quarter press release posted in the Investor Relations section of our website, at www.omnicell.com.

This call will include forward-looking statements 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 under the heading Risk Factors and under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations in the Omnicell Annual Report on Form 10-K filed with the SEC on March 14, 2008, as well as more recent filings with the SEC.

Please be aware that you should not place undue reliance on any forward-looking statements made today. The date of this conference call is January 29, 2009, and all forward-looking statements made on this call are made based on the beliefs of Omnicell as of this date only. Future events or simply the passage of time may cause these beliefs to change.

Finally, this conference call is the property of Omnicell, Inc., and any taping, other duplication or rebroadcast without the express written consent of Omnicell is prohibited.

During the call today I'll start with an overview of the financial results for the quarter and for the full year of 2008, followed by Randy, who will cover some of the quarter's business highlights. I will then discuss our guidance for 2009, and after that we'll open the call for your questions.

Fourth quarter revenue met objectives, and profit exceeded expectations. However, order volume was less than expected, as the global economic conditions caused major new customers to slow their acquisition processes. Backlog, which consists of firm orders due to completion, due to complete installation within one year, was $110 million, considerably short of our expectations.

While two large contracts and orders with the Duke University Health System and with Emory Healthcare were received in January, we believe the economic environment that is causing our customers to postpone their acquisition decisions will continue well into 2009, and we will experience delays in closing contracts. We do not see our competitive position changing. We do not see a loss of market share. And we do not see fewer greenfield or competitive swap-out opportunities in our pipeline of potential orders for 2009.

In the fourth quarter, 30% of our orders came from new customers. New customers are comprised of a combination of competitive conversions and greenfield accounts, or accounts installing automation for the first time. The split between greenfield and competitive conversions was about 50/50. The new customer volume continues to be broad-based and was not driven by any one particular new customer. Orders from new customers comprised 33% of our total orders for all of 2008.

We continue to see development in our international business, with orders from Europe, Asia and the Middle East in Q4. We believe international opportunities are a good source in growth for us and expect international orders to increase to be up to 5% of our orders in 2009.

The credit markets were challenging for some of our leasing partners during the quarter, but we continued to shift our business to other leasing partners that are not as challenged by the current market. We were able to obtain financing for all customers that were ready to place an order with us in the fourth quarter and needed credit. Providing financing alternatives to our customers remains an important part of our business and one that we have so far been able to manage with no disruptions to the sales process.

We did see a delay in collections in the fourth quarter due to the transition to new leasing partners. This drove our receivables balance higher than it has historically been. This is mostly a paperwork transition from customers who signed leasing documents with one partner at the time of placing an order and are now signing documents with a new leasing partner at the time of installation. We expect this receivable issue to work itself through in Q1 of 2009.

Now I'd like to discuss our fourth quarter financial performance. I will first discuss our financial performance in accordance with generally accepted accounting principles with year-to-year comparisons.

Revenue for the fourth quarter of fiscal 2008 was $62.1 million, up 7% year over year but down $2.3 million, or 4%, from the third quarter of 2008. Revenue for the full year of 2008 was $252 million, an 18% increase from 2007 revenue of $213 million and consistent with our guidance. Net earnings after taxes were $3.3 million, or $0.10 per share, which compares to $14.3 million, or $0.39 per share, in Q4 2007. Net earnings for the full year of 2008 were $12.7 million, or $0.38 per share, which compares to $43.3 million, or $1.28 per share, in 2007.

Now, there are several one-time tax impacts affecting both 2008 and the prior year. In 2007 the results were positively affected by a one-time benefit associated with the partial release of an allowance against our deferred tax assets that totaled $7.2 million, or $0.20 per share, in Q4 '07, and $20 million, or $0.59 per share, for the full year of 2007.

2007 results were also positively affected by an overall effective tax rate, excluding the one-time benefits, of 4%, driven by utilization of net operating loss carryforward. In 2008, Omnicell no longer has the benefit of net operating loss carryforward and is fully taxed at statutory rates. However, results did include a benefit from a study of our utilization of tax credits, which concluded in Q4 '08. The study produced favorable results, which cut our full year 2008 effective tax rate to 39% and produced an additional one-time tax benefit of $0.02 per share. We do believe the availability of tax credits will continue through 2009 and now expect our effective tax rate in 2009 to be between 40% and 42%.

Now I'd like to cover our non-GAAP results. The only adjustments to GAAP results are the exclusion of stock compensation expense, the exclusion of one-time tax benefits in 2008 and the exclusion of one-time tax benefits in 2007 related to the partial release of our reserve on deferred tax assets.

Stock compensation expense includes the future estimated value of employee stock options, restricted stock and our employee stock purchase plan. Since stock compensation expense is a noncash expense, and we use financial statements internally that exclude stock-based compensation expense in order to measure some of our operating results, we use these statements in addition to GAAP financial statements, and we feel it is useful for investors to understand the noncash stock compensation expenses that are a component of our reported results. A full reconciliation of our GAAP to non-GAAP results is included in our press release and will be posted to our website.

Our Q4 '08 non-GAAP net income was $5.5 million, or $0.17 per share, which exceeded analyst consensus by $0.01 per share. Our Q4 2008 non-GAAP net income was down $4.8 million, or $0.11 per share, year to year, from Q4 '07 non-GAAP income of $10.2 million, or $0.28 per share, driven primarily by becoming fully taxed in 2008. Full-year 2008 non-GAAP net income was $0.71 per share, compared to $1.02 per share in 2007, driven again by the effective tax rate. These results for 2008 exceeded our guidance range of $0.65 to $0.70.

EBITDA, or earnings before interest, taxes, depreciation and amortization, was $7.9 million for the fourth quarter of 2008, down $2 million, or 20%, from the fourth quarter of 2007. For the full year of 2008, EBITDA was $36.9 million, an increase of 9% from 2007.

Our balance sheet remained strong. Our cash and short-term investments were $120 million at the end of Q4 2008, a decrease of $5 million from last quarter. Our days sales outstanding were 86, an increase of 16 days, driven by the transition to new leasing partners I mentioned earlier. Our receivables are very current, and we view the receivable increase as short term. All other results from operations outside of receivables generated $5 million in cash flow, partially offsetting the increase in accounts receivable. And our inventories were $11.8 million, down $1.9 million from Q3 '08.

Now I'd like to turn the call over to Randy to provide an update on the business.

Thanks, Rob.

I'd like to start by commenting on some of our recent customer wins. We continue to close significant new orders for some of the best healthcare facilities in the world. The Duke University Health System recently signed a contract for a full suite of medication automation products, which includes our new SinglePointe solution, operating room systems and automated dispensing systems. In addition, Emory Healthcare signed a system-wide contract for a wide range of products, from special pharmacy to automated dispensing systems, with our highest security technology. We now count 10 of the US News & World Report's 15 top-ranked hospitals in the United States as customers.

Earlier this week we announced that the University of Florida/Shands HealthCare will be utilizing our operating room supply products, which is a complete physician preference card system and perpetual inventory management system for the operating room, which significantly improves charge capture. Customers such as Duke, Emory and Shands go through lengthy decision processes where all the competitive solutions are examined in detail, and we are very pleased to be chosen as the supplier of their medication and surgical supply management solutions.

Over the last 60 days, we've announced new products in our continued steps toward increased customer intimacy that will drive growth in Omnicell once the economic environment improves. We're disappointed with the order volume in Q4 2008, but we continue to position our company to take advantage of the available market when the economy recovers.

In December, we announced further extensions for our product line with the Version 14.0 of our software. 14.0 provides significant enhancements to our operating room systems for anesthesiologists, including a case management solution that significantly reduces the workflow steps in managing drugs in the operating room setting, allowing increased flexibility that improves patient safety while maintaining the controls needed.

Also included in the release is [Anywhere RN], a solution that allows our automated dispensing systems to be managed from any computer station within the hospital. Among other benefits, this feature's facility significantly improves controls in dispensing of our drugs.

Looking forward, we continue to see a pipeline that is robust, including excellent opportunities at large multihospital organizations and new opportunities in the international market. We don't have a lot of clarity on the speed that these opportunities will close, so we've set the operating level of the company consistent with the order volume we might expect. Earlier this week we reduced our workforce to 744 regular employees. We also significantly reduced our temporary workforce. We did so with particular attention to minimize the direct impact on our customer-facing field team, in an effort to maintain continued high levels of customer satisfaction. While these are difficult decisions, we believe we are at the right level to maintain service to our customers and remain profitable and cash-flow positive in these challenging times.

We believe our solutions are important components of safety and healthcare today, and regulatory agencies continue to impose increased safety requirements that drive broader adoption of medication management technology. We continue to believe that the majority of the hospitals in the United States have only partially implemented these types of medication management solutions, and I'm very confident in the long-range prospects for Omnicell.

Rob?

Guidance for 2009 remains at the levels we discussed last week. We expect 2009 revenue to be between $200 million and $210 million for the full year of 2009. We expect to take a one-time charge associated with our reduction in workforce completed this week of approximately $2.5 million. We expect $0.30 to $0.35 non-GAAP EPS, excluding stock compensation expense and excluding the one-time charge, for the full year of 2008. We will only see a partial benefit from the staff reduction in Q1 and expect Q1 profit to be in the range of $0.04 to $0.06 per share, excluding stock compensation and the one-time charge.

We see a strong order pipeline, with several larger purchases in process, but we do not yet know how the current economic conditions may affect the timing of those and other orders. At this point, we expect this revenue level to maintain backlog at the $110 million level by the end of 2009. We expect to operate through the year with backlog within our stated objectives of six to nine months of forward revenue.

Now I'd like to open the call to your questions. Operator, if you could open the line?

Yes, sir.

(OPERATOR INSTRUCTIONS)

Your first question comes from the line of Steven Crowley, of Craig-Hallum Capital.

Good afternoon, gentlemen. Thanks for taking my questions. In terms of the two deals that you put on the news wire yesterday or in recent days, Emory and Duke, you referenced them earlier in your prepared commentary about them being January deals. From what we can gather, they look like they were competitive swap-outs. First of all, could you confirm that, and maybe tell us just a little bit about the impression that these deals slipped from Q4 and the kind of things that led them to slip and led them to close, I guess, somewhat surprisingly, again, in January?

Well, I don't know if there's any surprises about this. You know, these are large transactions for us, large deals. We were very pleased to win both of them. They were competitive swaps. You know, deals like this are in the works for a long time. Our sales cycle, as we've mentioned before, can range anywhere from several quarters up to a couple of years, and these deals have been in the works for many quarters. Like I said before, at any one quarter, we're typically working on five to 10 relatively large deals. They don't all close in the quarter.

There are many, many things that can make a deal slip from one quarter to another. They're big decisions for these institutions that a lot of people are involved. That's one of the reasons why we're so pleased to win these, because you really have to get many people in the organization to be in agreement about moving to our systems, and clearly they were in these cases. But, you know, there's contracts to complete, there are their own assessments of the various vendors, their own appropriations process for the capital. So there's many things that the hospital has to think about and go through before they can complete a transaction like this that can easily make it move from one quarter to another and even to a second quarter. We're just very happy to have won these two deals, and we are very pleased that they chose Omnicell.

Does the fact that you were able to get these deals closed in January give us any indication, I guess there certainly is capital out there for some players early in calendar '09, because typically the capital has been gathered to consummate a deal like that, or like these? That's a question, I guess, in the form of a statement.

Well, there are certainly still capital dollars available. The hospitals are not closing down, and they're not stopping their purchases entirely. They have had to step back and reassess where they're spending their capital, because typically they have a little bit less in an economy like this, or a lot less in an economy like this. Our systems are important from a patient safety perspective. They typically fall pretty high on the capital appropriations list. Customers may have to stop and reassess how much they have to spend, but very frequently after they've done that we're still on the list. But we have to go -- they have to go through that process of reassessing. I do believe, and we all believe, that there will be capital dollars in our customers' budgets for our systems, but it's just a little unclear how long it'll take these deals to close.

Great. Second topic, lost in the reset of financial expectations here has been a discussion of Rioux and your strategy for the mobile cart and the integration with your medication management system software. Has the plan changed to any degree? And maybe you could just update us on the prospects for Rioux as we move through 2009.

The prospects for Rioux are the same as they have been. We, as you recall, we bought the Rioux company as a mobile cart with an integrated computer on it, and our intention is to put our medication management control software onto that cart and have it fully integrated with our OmniRx systems with SinglePointe. We're still on that process. We still expect to make that system available in 2009. It's not the easiest thing in the world to do, but we're on track to get it done. We still believe that that's a -- that can be a fairly robust market, and we still see it as a potential significant part of our revenue stream in the future.

So I'd like to know if you could give us some indication about international, in terms of Rioux. Does it have a shot at being -- approaching 10% of your business in 2009 at the new levels, or what kind of indication can you give us in terms of its prospects?

Well, we do believe that that product line could be 10% of our revenue stream at some point in the future, but the product doesn't come out until well into 2009, and there is the typical sales cycle. So we're really not expecting a lot of material sales and shipment and revenue of that system in 2009.

Thanks. Hop back in the queue.

Okay.

Your next question is from the line of Sean Wieland, of Piper Jaffray.

Hi. Thanks. Rob, just a modeling question on 2009. If I look at the breakdown of revenue between automation and service, is that going to be roughly like $150 million, $50 million?

Services -- service and other revenues, which include some one-time -- or, excuse me, not one-time, month-to-month charges that we get from customers that are at the end of their lease streams and a few other miscellaneous revenue categories, services are running about $10 million per quarter now. Services have been growing with the install base, and we continue -- we expect it to continue to grow. So it'll stay in that range, between $10 million and $11 million per quarter, through the year.

Okay. So the balance, of course, coming from automation revenue, and you said that you wanted to end the year in 2009 with roughly the same level of backlog, at around $110 million, if I heard you correctly, which would mean you need to put in -- you need to sell $150 million, $160 million in 2009 in order for all those statements to add up. Something I think you said a couple of weeks ago was you expect -- your guidance is based on a sales number in 2009 kind of as Q4 annualized, Q4 '08 annualized. Did I get that right? So my question is this, is are you expecting an inflection point or an increase in sales at some point during 2009 in order to make your guidance?

Yes, actually, our guidance was for $200 million to $210 million in 2009, which would be an average of $50 million to $53 million per quarter. We just ended Q4 '08 at $62 million, so there will be a decrease in the quarterly run rate in 2009.

Okay. I'm thinking, though, about in terms of total dollar value of contracts signed, a bookings equivalent, if you will. Do you expect a -- I know you don't disclose bookings, but do you expect the bookings number to increase throughout 2009?

You know, so right now we don't -- let me give you the answer in terms of backlog -- we don't expect there to be substantial fluctuations in the backlog as we go through the year. We tend to -- our stated range is between six to nine months, which is a pretty broad range, but we do intend to keep the backlog in kind of the two-and-a-half-quarter range, which seems to be what our customers are comfortable with, unless, of course, there's a real big increase in new customers, and then the backlog tends to go up a bit, because they take longer to install. But we really expect the backlog to stay in that range that our customers find comfortable throughout the year.

Okay. One other quick question, international business, do you invoice in local currencies or in US currencies?

All of our distributors buy from us in US dollars, and in Canada we go direct and we do sell in Canadian dollars in Canada.

Okay. So other than Canadian foreign currency exchange, you're not exposed.

[That's right.]

Okay, great. Thanks a lot.

Your next question comes from the line of Newton Juhng, of BB&T Capital Markets.

Afternoon, guys. I had a couple of questions here. One, just, Rob, I appreciated that number on the cash flow front. Do you have what the CapEx was in the quarter, as well?

CapEx was about $4 million in the quarter as we finished up the installations of our new systems that we put in place. I believe I've mentioned that before in previous quarters, that we were implementing new IT systems inside our company, new infrastructure.

Right. And then, kind of as we look out to 2009, I'm just -- you kind of gave us some color on the expectations of positive cash flow, but we're looking for -- I'm just looking to kind of get a baseline for what your base CapEx is versus that one-time spend.

We typically spend between $3 million and $4 million a year on CapEx, mainly just keeping our IT systems up to speed and anything we need to do on facilities.

Got you. And with the head count reduction here, can you give us a bit of a breakdown, I guess, of where you're deciding to cut back? I mean, is it just straight across the board, or are there particular areas where you thought you could go a little deeper?

Well, the important thing that we felt about this head count reduction is that we kept our customer relationships intact as much as possible, and so there's very minimal changes to our sales organization, to our actual salespeople in the company, and to our field service organization. Other than that, we cut in all areas of the company in all geographies in all our sites.

Oh, okay. Great. And then just one last question here before I let you guys go and I'll jump back in the queue, with the pipeline continuing to be strong but sales definitely falling short, I guess, of prior expectations, I think it's safe to assume that your close rate on your contracts in your pipeline is not what it's been in the past. So what I'm wondering about is what kind of plan do you have to try and improve that close rate in the future, or are we really just looking at these more of a macro trend and there's really not much you can do to kind of improve your situation?

Well, there is a macro trend here, but keep in mind that we continue to come out with new versions of our products with some pretty compelling solutions embedded in those new versions. SinglePointe was a big one last year. Randy talked about some improvements we're making to the anesthesia workstation and the Anywhere RN future. Those type of things make it more and more compelling for our customers to put in the systems to meet patient safety needs.

And we continue to make it as easy as possible for customers to buy from us. We've done a lot of work, as I've mentioned over the last couple of quarters, making sure that we transition to new leasing partners that have the capability to keep financing customers while other financial institutions have been having difficulty. So those were the things that we're doing much as we can in the short term. We also have put a big emphasis in the company on training, making sure that all of our staff has a good understanding of the features and benefits of our systems, not just the patient safety, the cost-saving features, cost-saving benefits of our systems, also. And so that is more and more a part of what we talk about, even though the decision still is typically a clinical decision based on patient safety.

I see, Rob. All right. Well, I have a few more questions, but I'll take them offline and jump back in the queue. Thanks.

Your next question comes from the line of Glenn Garmont, of ThinkEquity.

Thanks. Good afternoon. Just two quick ones. Rob, appreciate the additional guidance on the first quarter earnings expectation. I was wondering, can you provide some color on how you see sort of the revenue progression coming out throughout the year? Should we be modeling sort of a stepdown in revenue in the first quarter and then maybe a modest sequential improvement from there, or will it be a bit lumpier than that? And then my second question, I didn't see specifically in the Duke press release that that was a sole source contract. Can you verify that that was the case? It sounds like it was. Thanks.

After our pretty substantial success in Q3 last year with new customers, those customers scheduled in a lot of their installations in Q1, Q2 and Q3. And so at this point in time we really expect the revenue stream to be relatively consistent through the year. And as far as Duke, Duke has -- for automated dispensing systems is utilizing Omnicell at this point in time, and Duke is a very large institution and has contracts with many different vendors, and I'm sure there are other contracts that are not canceled. But for automated dispensing systems they've decided to put in Omnicell.

Okay. That's helpful. Thank you.

Your next question comes from the line of Gene Mannheimer, of Auriga Securities.

Thanks. Congrats on Duke and Emory, two obviously prestigious academic medical centers. Can you distinguish for us at least your view on the financial health of the academics versus community hospitals, for-profit chains and government-owned facilities, and can you characterize what your exposure is to each of those? Thanks.

It's good to hear from you, Gene. This is Randy Lipps. I think these academic centers have tended to have better financial situations, obviously, because they have sort of a large donor group and they tend to be sort of a premium healthcare group that people go to when they have unique issues and problems, and I think they will continue to attract those kinds of patients and bring in those kinds of -- but they, in the same light, have been hit with slowdowns in donations from their endowments, as well. But they tend to be some of the healthiest, I think, out there, from my perspective. And I think we have a leading-edge product in the marketplace today, and these type of institutions, like I said in the call, 10 out of the 15 best hospitals, according to US News & Report, have moved to Omnicell in the past, and I think more are going to continue to do that, because they want to be on the best technology available to help them drive safety and cost-effectiveness. And so certainly we've always been positioned that way, but our SinglePointe solution really helps us get there.

I think as far as the government's concerned, we saw good sales last year, and I think that while they're probably less impacted than maybe your general community hospitals, but that's kind of a mixed bag all over the place. We're strong in the government, so I think that -- we're looking for good results from that sector again this year, but maybe not quite as good as last year. And the community hospitals is really a mixed bag. Some are very healthy, some are not quite as healthy and some have slowed down altogether. So I think that's probably the right picture there for us looking forward.

Okay. Thank you.

Your next question comes from the line of Leo Carpio, of Caris & Company.

Hi. Good afternoon, gentlemen. I have a couple of questions. First, regarding these cuts you're making in terms of staffing, if we were to hit that inflection point later on in the year that bookings and order flow seems to be coming -- improving, how quickly can you ramp up to meet the demand?

Well, I think we've demonstrated in the past that we are able to ramp up in order to meet installation demand. Remember that if we hit that quote, unquote, inflection point that you're talking about and the economy improves and customers start ordering really rapidly, they still have an installation cycle. And so they wouldn't be looking for those orders to be installed instantaneously. And that gives us some time to get more staff on board and trained up to do the installation.

Okay. And then turning next to Obama's healthcare IT program and the incentives he's going to be providing for the hospitals, is there any way your product could be able to be qualified as part of that program in terms of some loophole or perhaps some funding that is being provided to the community hospitals, I mean to the community clinics or to Indian healthcare facilities?

Well, that's unclear as to exactly how that might directly impact our ability to sell our particular product to hospitals. But any help that hospitals typically get and any type of incentive to get premium dollars from the government for IT helps the hospitals financially and then in turn helps us get our products in because they're so high on the capital list. But it's really unclear at this point as to how it might impact us directly. But indirectly we know what's good for hospitals is good for us.

Okay. And then my last question, regarding the international markets, how much presence do you have in China? Because last week China announced their expectation to spend about $100 billion plus on their healthcare reform program, and since their healthcare system is very centric and financed by the sale of drugs to patients, it seems like your cabinets would be a nice natural fit for that country.

Yes, this is Randy. I think the China market is certainly an opportunity, and it's emerging. And we don't have anything significantly going there, and we'll just have to see as that market progresses.

Okay. Thank you.

[You bet.]

Your next question comes from the line of Alan Fishman, of Thomas Weisel Partners.

Hi, guys. I just have one question for Rob, I guess. We saw the DSOs pick up again this quarter. When you say it's going to work through in the first quarter, where can the DSOs settle from here -- in the 70s or 60s range? Where should we be -- where would we be able to consider it a success there?

Well, so first of all we do have this transition issue going to some of the new leasing partners, as I mentioned, and the paperwork issue that has caused the DSOs to pick up. We do expect that to work through in the first quarter. But on top of that, you've got to realize that our forecast for revenue is down, and so the base that the DSO will be calculated against is actually smaller, and we're still working through the collections from prior quarters that were based on a higher level of revenue. So the actual DSOs will step down through the year, and we will get back, we anticipate, to the mid-60s level that we had been operating at, and that will probably be in the second half of the year.

Okay. Thank you.

I have no further questions at this time.

Mr. Lipps, do you have further remarks?

Well, operator, could you just make one more call for questions, and then we'll go into the closing remarks?

Yes, sir.

(OPERATOR INSTRUCTIONS)

And you do have a question from the line of Steven Crowley, of Craig-Hallum Capital.

Yes, Rob, one follow-up question. In the conference call we had a week or so ago, you made some reference to long-term operating margins and what you were trying to reconstruct here. Could you talk to us about some of your operating margin objectives maybe over the near term 2009 and then -- that's implied by your guidance, obviously, but as we look out, what kind of recovery and where can we get back to, and what are the key components to getting back to that target level?

Steve, we have not abandoned our goal to be at 15% operating margins. We've been there before, and we will be there again. You know, with our revenue levels at $200 million to $210 million, we won't be quite at that operating margin level, of course, over the near-term future within our guidance range. We do expect the market to recover, to come back after we get through this economic turmoil, and we do expect our revenues to be able to climb again to where we had been through the 2008 level. And certainly once we get back up to that level we'll have a -- we'll be in much better position to hit 15% operating margin. When exactly that will be kind of depends upon how the economy goes.

Implied by that response is that there's been no real significant change to competitive dynamics, deal dynamics. Question I'm getting on a somewhat regular basis, are we seeing this environment cultivate anything strange or different on the pricing front? You've just had some recent deals you've announced, so you've got an ongoing experience set. Has pricing -- have you seen anything strange there or anything strange out in the marketplace?

Pricing is pretty consistent in our industry. There's quite a bit of software value in these systems, and the customers recognize it. There isn't a lot of odd or strange competitive dynamics going on in the industry. The deals are competitive. They're all competitive. And they've been competitive for multiple years. So nothing's really changed there.

Thanks for taking the follow-up.

I'm showing no further questions.

Well, this is Randy Lipps. I'd like to just summarize the call by reiterating we believe demand for our products will eventually return to the levels we have seen previously. We're profitable now and expect to continue to be profitable and cash-flow positive in 2009. And we are making the tough decisions to manage our expenses and making sure our leasing partners are intact. And we continue to bring new, innovative products to the market.

Thanks for joining us today.

This concludes today's Omnicell fourth quarter earnings call. You may now disconnect.