Omnicell Inc (OMCL) 2009 Q1 法說會逐字稿

Good afternoon. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Omnicell first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. (Operator instructions)

I would now like to turn the call over to Rob Seim, Chief Financial Officer. Thank you, sir -- you may begin your conference.

Thank you. Good afternoon, and welcome to the Omnicell 2009 first quarter results conference call. Joining me here today is Randall Lipps, Omnicell President and CEO.

You can find our results in the Omnicell first 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 February 24, 2009. Please be aware that you should not place undue reliance on any forward-looking statements made today.

The date of this conference call is April 30, 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, Incorporated and any taping, other duplication or rebroadcast without the express written consent of Omnicell is prohibited.

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

First quarter revenue met objectives, and profit exceeded expectations. Order volume met our expectations, and was anchored by the two large contract wins we reported earlier in the year, with the Duke University Health System, and with Emory Healthcare. In addition to these orders, our competitive position remains strong. In the first quarter, 48% of our orders came from new customers, which are comprised of a combination of competitive conversions and greenfield accounts, or accounts that are installing automation for the first time.

This quarter was more heavily weighted with competitive conversions, which were driven by the Duke and Emory orders, as well as other conversions. The overall number of new customer wins we saw in Q1 was consistent with the volume we had seen over the past year.

The development of our international business continued, as expected, with orders from Europe and Asia, including the second order from the National Health Group in Singapore, which we recently announced. While international is still a small part of our business, we are on track for international bookings to grow to up to 5% of our orders in 2009.

Consistent with last quarter, we were able to obtain financing for any credit-worthy customers that were ready to place an order with us in the first quarter who needed credit. We continued to shift to new leasing partners during the quarter, and the paperwork issues that kept us from collecting from some of our leasing partners in Q4 were resolved.

During the quarter, we made two important operational changes to our business. First, we installed a new corporate manufacturing and finance software system to run the Company records. During the transition, we experienced a delay in invoicing that resulted in an increase in our accounts receivables by $3 million. That delay is behind us now, and we expect the receivables balance to decrease.

Second, we completed a staff reduction previously announced, which reduced our regular headcount from 844 in December to 756 in March. We also reduced a number of temporary positions for a total staff reduction of 125 positions.

The one-time costs associated with these reductions were $2.5 million, and are fully reflected in our GAAP results for Q1.

Now I'd like to discuss the first quarter financial performance. I'll first discuss our financial performance in accordance with Generally Accepted Accounting Principles, with year to year comparisons.

Revenue for the first quarter of fiscal 2009 was $52.2 million, down $9.9 million, or 16%, year-over-year, and down the same amounts from the fourth quarter of 2008. The reduction year to year and sequentially is consistent with the guidance we gave in January, and we believe is a result of general economic conditions affecting hospital capital purchasing. We further believe our continued wins of new accounts demonstrates that our solutions are very competitively positioned.

Net loss after taxes was $1.9 million, or $0.06 per share, which compares to net earnings of $3.7 million, or $0.10 per share in Q1 2008. Our net loss in Q1 includes a charge of $0.05 per share for the restructuring, and a charge of $0.08 for stock compensation.

Our annual tax rate projection remains at 40%. Our GAAP loss in Q1 generated a tax benefit in the quarter. We expect to be profitable in subsequent quarters during 2009 and for the full year, and we expect our tax provision to be an expense in those quarters, and an expense for the full year. We do have some discrete tax charges this quarter, which had the effect of lowering the benefit in Q1.

Now I'd like to cover our non-GAAP results. The only adjustments to the GAAP results are the exclusion of stock compensation expense, and the exclusion of one-time restructuring charges taken in Q1. Stock compensation expense includes the estimated future value of employee stock options, restricted stock, and our employee stock purchase plan. Since stock compensation expense is a non-cash expense, we use financial statements internally that excludes stock based compensation expense in order to measure some of our operating results.

We also review our measurements excluding the one-time restructuring charge to understand our ongoing financial performance. And we use the adjusted statements in addition to GAAP financial statements, and we feel it is useful for investors to understand the non-cash 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 Q1 '09 non-GAAP net income was $2.1 million, or $0.07 per share, which exceeded analysts' consensus by $0.01 per share. Our Q1 2009 non-GAAP net income was down, $4.7 million, or $0.12 per share year to year from Q1 2008 non-GAAP income of $6.8 million, or $0.19 per share, driven primarily by a reduction in revenues.

EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $4.5 million for the first quarter of 2009, down $5.6 million from the first quarter of 2008.

Our balance sheet remains strong. Our cash and short-term investments were $119 million at the end of Q1 2009, a decrease of $2 million from last quarter. Our days sales outstanding were 107 days, an increase of 21 days, driven by delayed invoicing during the transition to new IT systems I mentioned earlier. Our receivables are very current, and we view our ability to return to DSOs in the 60 to 75 day range as achievable during 2009. And I'd like to reiterate that the problem we had transitioning to new leasing partners that caused DSOs to increase in Q4 was not an issue for Q1.

Our inventories were $11 million, down $2 million from Q4 2008. Our deferred gross profit, which is the value of goods that have been shipped to customers but are awaiting installation, decreased consistent with the reduction of revenue. Deferred gross profit is roughly the same percentage of revenue that it has been in the past, and it is a component of our backlog that is consistent with our guidance.

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

Thanks, Rob. I'm very pleased this quarter with our continued performance and new accounts. The first quarter started strong, with large orders from the Duke University Health System, which ordered a full suite of medication automation products, including our SinglePointe solution and operating room systems. And, an order from Emory Healthcare for a system-wide installation of a wide range of products, from Central Pharmacy, to automated dispensing systems.

I'm particularly happy that despite challenging economic conditions, we continued our new account momentum throughout the quarter, in addition to the wins at Duke and Emory. This includes a new placement of our systems in Singapore, where the NHG hospital system is in the process of bringing one hospital live, and is scheduled to bring installations of Omnicell medication control solutions at a second facility. We also experienced continued momentum with orders in Europe and Canada.

In March, we announced an integrated tissue tracking system. Today, there are 1,600 hospitals in the US, where 7 million bone and tissue replacement procedures are done annually with a growth rate of nearly 10% a year. The FDA, the Joint Commission, and the Association of Operating Room Nurses, has created regulatory standards to help increase safety for donor tissue recipients by reducing the instances of tissue-borne infections. All hospitals with operating rooms must adhere to these new standards.

Our Omnicell Tissue Center is a unique, sophisticated tissue tracking software system that interfaces with our market-leading operating room solution. This Tissue Center enables surgical personnel to keep tissue specimens secure, and maintains detailed records, including the procurement, processing, and preserving of the tissue.

Looking forward, we continue to see a pipeline that is robust, including excellent opportunities at large multi-hospital organizations, and new opportunities in the international market. We see ourselves positioned well competitively in a market where differentiation is based on products and service.

As always, we face intense competition for large accounts. We continue to see a cautious economic environment, and our large sales moving very slow, but we still see customers continuing their acquisition process.

We continue to maintain high levels of customer satisfaction, and we believe our solutions are important components of safety and healthcare today. Regulatory agencies continue to impose increased safety requirements to drive broader adoption of medication management technology. While economic conditions will remain challenging in 2009, I'm very confident in the long-term range prospects for Omnicell.

I'll turn it back over to Rob for some guidance.

Thanks. The first quarter results support that we're on track to deliver the guidance we established at the beginning of the year. We expect 2009 revenue to be between $200 million and $210 million. We expect $0.30 to $0.35 non-GAAP EPS, excluding stock compensation expense and excluding the one-time charge we booked in Q1 of $2.5 million.

We saw only a partial benefit from the staff reduction in Q1, and expect profit to increase from Q1 levels in subsequent quarters. We see a strong order pipeline with several larger purchases in process, but we don't know yet 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 $110 million at the end of 2009. We expect to operate through the year with backlog within our stated object of six to nine months of forward revenue.

Operator, I'd like to now open the call to questions.

Thank you. (Operator instructions) Your first question is from the line of Glenn Garmont, ThinkEquity.

Thanks. Good afternoon, and congrats -- looks like things are starting to thaw a little bit. Rob, I was just wondering if -- and Randy, if you could give us a comment on how you're viewing the stimulus plan. And what I mean by that is, are you concerned at all that that's going to drive a shift over the next several quarters from hardware toward clinical software? And then secondarily, just a numbers question, Rob. If you could -- could you provide us with a finer breakout of the 48% between the greenfield and the competitive takeaways?

Yes, let me start, Glenn, with just a view of the stimulus package. I think, kind of consistent with many of the views of the other vendors out there, it's a little unclear as to exactly how it's going to impact us directly, but we do think it is positive overall in the long term, because hospitals, I think, will be able to get more automation in place, and many times, what helps our customers ends up helping us.

I don't think we see any displacements of our product due to HIT priorities. Our pipelines don't seem to shrink -- they only seem to get delayed.

And I think overall, the general consensus in the -- you know, as healthcare reform moves forward, is that with some type of universal coverage that's being proposed, it will always help hospitals, particularly, cover more of their costs that aren't being covered today.

So exactly how that plays out, I'm sure we'll see, but I think stimulus money, as well as healthcare reform, are positive movements for our industry and our customers, and we look forward to seeing what happens there.

Yes, and Glenn, the percentage of competitive conversions versus greenfield, this quarter was one of the most heavily weighted towards competitive conversions we've had -- greater than three quarters of the bookings were from competitive conversions.

Okay, great. Thanks for the comments, guys.

Your next question is from the line of Steven Crowley with Craig-Hallum Capital.

Hi, Steve.

Steven, your line is open.

Oh, sorry about that. Good afternoon, gentlemen. A couple questions. In terms of the visibility you've been able to garner for your customers' 2009 budgets, I know you mentioned things are moving at a deliberate pace. But have you received a feel for what budget changes happened at a lot of your customers, and what kind of hurdles do you have there?

Well, that's kind of a mixed bag. There's certainly some of our customers who have had budget reductions, and other customers that are in markets that are still expanding in terms of population, or university and academic centers who haven't really cut their budgets, so it varies, depending upon the area of the country and the type of customer.

Generally, we have seen customers that have cut their budgets go into a pause and reprioritize what they're going to do with their budgets. The good news is, we found that typically, we're still in the budget after that reprioritization takes place. The bad news is, that process could take anywhere from 90 days to several quarters.

So that's what we're seeing in the market.

I guess part of my question was whether or not you were just seeing a reluctance to spend budget dollars early in the budget year, or whether or not those budget dollars were significantly decreased. So I think you answered the latter part of that question. How big a phenomenon do you think it is that customers are just reticent to spend early in the year? Do you think that's a landscape item?

Well, I think that's just part of that decision process that they're going through. It's not that folks are saying, gee, we're just pushing everything out. They're saying, we're going through a reprioritization process and rethinking what we're going to spend.

Okay. And then in terms of a product-specific question, could you give us an update on RIO, both in terms of your progress and marching down the product plans there and the release plans? And also, how your customers are approaching your mobile cart business these days?

So we are still marching down the process of having a solution that's fully integrated with the Anywhere RN product that we announced earlier, and that is shipping in the summer, and some of the capabilities that are in the SinglePointe product. We're still excited about that product, and think that's a good market.

The overall market for the existing cart that we sell, which doesn't have a lot of those features that we will be bringing to market later, and I think that market has been affected by the economic downturn and people are trying to make their computers last as long as possible. So I think that's pretty consistent with what everyone's seeing in the market.

Okay, and then just one numbers question, Rob. In terms of seeing the impact, the full impact of your restructuring and cost-cutting, what kind of feel can you give to us for magnitude that we should see the in second quarter, and where that will come into play? I assume most of it will be down in the SG&A line, but how should we think about working that into our models?

Well, Steve, last quarter, when we announced the restructuring -- or, during last quarter when we announced it, we said that it would save us approximately $12 million relative to the cost and expenses we had from last year. And we still think that that's the course and speed that we're on.

The restructuring was executed as planned, implemented as planned, and we're on that path. We only got part of that benefit in Q1, because the restructuring happened part way through the quarter.

Now, you might notice from the restructuring expenses, about half of the one-time charges is in cost of sales line, and about half is in the OpEx line, and that's about the mix of where the savings come.

And I guess the implication of those cost savings up at the cost of good line is that even though revenues are off significantly, gross margin is hanging in there relatively well, at least on the product side?

Yes, that's true. And a lot of the reductions we took were consistent with the revenue changes year to year.

Your next question is from the line of Newton Juhng with BB&T Capital Markets.

Oh, hey, thanks, guys. Just wanted to ask you, actually, about the service gross margin. Obviously, 30% this quarter, a little bit down. Should we be expecting that to kind of rebound as we push out over the course of the year, or is this kind of more of a new level that we should be modeling at this point?

Yes, we do expect the service margins to rebound. We did have a little bit of an unexpected transition during the quarter. We went through an End of Life of one of the products that we've had in the marketplace for about ten years -- actually, a product that we had acquired from Baxter way back in 1999. And we took it off of service maintenance contracts, and historically, when we've done that with other products, the units that are still in the field tend to backfill revenue with time and material charges, and that didn't happen with this transition. There were almost no time and material charges on that product.

We do expect there will be time and material charges over time, and then also, in the Service and Other line, there's a few things that -- as I've mentioned before, do fluctuate quarter to quarter. Not only the time and material charges, but also the month to month rental for customers that have come to the end of their lease period but have not yet renewed. We tend to book those when the cash is received, as opposed to when we invoice, and so we do have some quarter to quarter fluctuations. Q4 last year was kind of a high quarter for that sort of activity -- Q1 this year was sort of a low quarter for that sort of activity. And we do expect to see some more of that during the year.

Okay, definitely helpful, Rob. And then, just on the AR front, you know, understanding that the DSOs end up getting inflated quite a bit when the revenue comes down. But just trying to get an idea of what you're working on there. Is this more of a function of the new software coming in, and that's what's going to help drive that AR back down into that range you were talking -- 60 to 75 days, I think you said? Or is it just a function of collections, just doing a little bit better job of blocking and tackling on the collections front?

No, it's a function of the new software. I'd like to say that all software installations are without problems, but that's typically not the case. And we've had --

Except yours, right?

Yes, we had some issues that did affect our invoicing. We did get the invoicing done, but it was pretty late in the quarter, and not really collectible inside the quarter, and that's what caused the DSOs to balloon. We do expect that -- to collect all that in a reasonable amount of time. In fact, our DSOs are very, very current right now. And so, I don't anticipate a problem.

I haven't really seen that hospitals have been pushing out their payments any significant amount. And in this type of economy, you'd expect that to happen, and it may happen, but I haven't seen it yet.

Okay, so that hasn't been incorporated into kind of where your AR is at now? Okay.

Right.

And then, in terms of your partners on the financing front and so on, just -- could you let us know how many you're at right now? Because it sounds like there's been some fluctuation there. How many guys you're using on a general basis, and -- or, how much, I guess, turnover there's been, at this point.

Generally, with our volume of business, most of the business will go to a couple partners. We usually have more than that that are doing work with us, but this quarter is no exception -- most of the business went to a couple partners.

Okay. And just -- I guess you're not providing any guidance for Q2 at this point right now, really?

Right.

So just trying to think of it in terms of -- if we're looking at going forward, just removing out the charges that we're seeing in this quarter, and kind of run-rating the business from there? Is that kind of a fair assessment of the situation?

Well, I've given the annual guidance.

All right, Rob, that's good -- that's cool. Thanks.

Your next question is from the line of Gene Mannheimer with Auriga.

Thank you. Nice quarter, guys. Question on the new business that, I guess, remains in the pipeline. Duke, Emory, obviously two great wins this quarter. I guess, how many other big elephants are out there, so to speak, that you're working on? And what percent of them are part of, say, corporate health systems where centralized approval is required? And what are the sales cycles involved there? Thanks.

Yes, thanks, Gene, and it's good to have you back with us. Yes, I think our pipeline is robust, and never -- it's never been bigger, in those terms. And I think, as we have forecasted our year, we've taken that into account, because really, the larger deals are very difficult to put any significant reliance on in the forecast.

So I think when we look at our business as a consistent business, we look to the smaller, more existing customers as making up most of our totals, and not relying on the large accounts -- not because we don't think we're going to win our fair share of those. It's just that the timing on those tends to be more delayed and more unpredictable.

But we feel like we're in a very good competitive position with our product. And generally, these larger deals have -- they haven't just come on the radar in the last month or two. These are deals that we've been working over the last year or two. So they still remain in the pipeline, and we feel comfortable about those.

Good, Randy. Thanks. And then, second question. As you think about growth going forward, you're obviously making a play internationally, which is one strategy that seems to be paying off. Have you thought about whether your products and services are transferrable into other avenues like long-term care and alternative sites? Can you elaborate on that? Thanks.

Yes. I think we constantly look at those, and we are looking at -- as I have said, I believe at the previous call, we've brought on some new folks. Our VP of Marketing, Marga Ortigas-Wedekind, is actually -- has a background in international, to particularly help us drive that market for us. And Nhat Ngo is now on our team to help us look at the business development and next adjacent markets that make sense for us, and kind of plan our investments. And again, because there's going to be a lot of growth in healthcare, obviously, over the next five years, and so we want to make sure investments and returns are good in those markets, and we feel very good about those prospects.

But we haven't made probably any conclusions on those yet, maybe except that we feel best about the international opportunities that we have, which is selling the product we have today into more markets. It's a lot easier than developing new products in new markets. And it's the most obvious step and investment we ought to make.

Okay, great. Thank you.

Your next question comes from the line of Sean Wieland with Piper Jaffray.

Hi, thanks. Was Duke and Emory recognized as revenue in the quarter?

No. They both started their installation cycles, but the revenue was not recognized in the quarter.

Okay. So if I think about the trajectory of revenue, right now, your -- the Q1, obviously annualized, is about where your guidance is. Is that just a -- I mean, should we really be modeling flat sequential revenue throughout the year, or do you think that guidance might be conservative?

I -- it's certainly optimistic that we might be able to do something better. I would hope that, but the guidance that we put in place is consistent with what we see in the pipeline and the current conditions that we're seeing in the marketplace. If the conditions pick up, then -- and we start seeing more business falling through at a faster pace, then we'll change the guidance accordingly.

Okay. The large accounts that you were talking about, moving a little bit slowly, more slowly, are they included in the guidance? Or were they -- might be upside?

Well, the pipeline has actually got quite a few large accounts in it, but it's very hard to tell what pace they're on, and what pace they'll actually close on. As we mentioned, I think, with Duke and Emory, we had been working on those for quite some time, and expected them to actually close much earlier than they did.

And that's what we're seeing pretty consistently with the large accounts, so in our guidance, we have only included the large accounts in our forecast that are very near completion.

Okay. And then, last question. You said that you intend to maintain backlog of $110 million, so can I read between the lines there, that the backlog, as it stands right now at the end of Q1, is $110 million? Or was that in reference back to Q4?

That's in reference from Q4 of last year to our year-end guidance for this year.

Got it. Okay, thanks a lot. I appreciate it.

(Operator instructions) Your next question is from the line of Leo Carpio with Caris & Company.

Good afternoon, gentlemen. I had a couple of quick questions. Regarding the hospital capital spending environment, what exactly do the hospitals tell you in terms of that's holding up your deals? Is it just concerns over their local economy, is it concerns over Medicare and patient PPS rule, or is it just basic conservatism, and if so, what would cause them -- or what would be the catalyst for them to change their decision on cap spending by year-end?

Well, I think most hospitals are looking at -- really, moreover, really shocked by Q4, which I think, in some cases, I've heard was a low point, and did a little bit better in Q1. And I think they're most concerned about the payer mix -- a little bit about the volume, but the payer mix particularly, which drives a lot of their margins, commercial versus government payer reimbursements, or taking care of indigent care, which is no reimbursement.

And so, with that uncertainty, and the unemployment rates, and how it impacts their hospitals, they're moving very slow. The other big impact is the cutback in income from endowment funds, which, in many of the larger not-for-profits, is a significant driver of capital spend. A lot of their capital spending is driven through their endowment income. And with that being down significant or near zero, a lot of folks have clamped down their capital spending to pretty much zero, unless it's absolutely necessary for operating the business.

Now, the good thing is, in many cases, you've got to have our systems in place in order to operate your business and meet regulatory requirements, so we stay pretty close to the highest point on the list of the hospital, and in many cases, have gotten exceptions to that spending in the hospital -- the capital freeze in the hospital, they've given us exceptions, because they need these systems. Now, you won't find hospitals spending money on new radiology systems, or systems that don't really make -- meet regulatory requirements, or drive new sources of revenue.

So I think a lot of hospitals are still in the wait and see mode, unless they're just in a -- there are some hot spots in the area. Universities and academic centers seem to be kind of holding their own, and places where they have population shifts or changes, and they've got demand that they've got to fill by opening up new places, you see those continue even in the down economy.

So I think it's a very regional thing. I think hospitals are still very cautious, but I don't think -- I think -- I don't think a lot of them think their situation is going to get a lot worse sooner, which I think is important. It doesn't mean they're going to run out and spend capital, but it probably means they're not going to be quite as conservative as I've seen them at the end of last year.

And in terms of the comparative environment, what drove your great rate of success this quarter? I mean, was it just a lot of replacements on the Pixis models? Just trying to get some more color there.

Well, the competitive conversions are from all of our competitors. Both Duke and Emory were both competitive conversions and very large systems, and so those were substantive orders in the quarter.

There were, as I said, several other orders that were competitive conversions. I think that products fare very well in the marketplace when we're compared product to product, feature to feature. I think our Company fares very well. We have focused very heavily over the last three years on a concept we call customer intimacy, and this very high touch service sales and installation process on end. The customers said -- that we sell to, appreciates that a lot, it's a partnership sale and relationship over time. And those things continue to play to our benefit.

Okay, and then lastly, in terms of pricing, has it held firm so far?

Well, the big deals are always very competitive, but the rest of the market seems to be holding pretty consistent.

All right, thank you.

(Operator instructions) Your next question is from the line of Gary Schwab with Valley Forge Capital.

Yes, hi. Thanks for the call. Thanks for letting me in. My question was sort of a follow up on the last question. I realize conversion is very expensive, it's time-consuming, there's a learning curve, there's training, there's concern that workflow is going to be interrupted. With a 75% conversion this quarter, in the sales process, what are hospital administrators telling you is the key solution that you have that's making it worthwhile?

Well -- so just to clarify the numbers, there was -- 48% of our orders were from new customers, and more than three quarters of those orders were competitive conversions.

Okay, sorry about that. Yes.

Well, it is the combination of the whole package, the whole solution that we deliver. We do have a number of very unique features in the marketplace. Our SinglePointe solution that started shipping last year is a wonderful feature that allows pharmacist to get all of the drugs under the control of these automated systems, and makes all the drugs available to the nurse so they don't have to spend a lot of time searching around the hospital, and they're not coming up with missing doses.

Even if a hospital is not implementing that immediately, we're finding a lot of customers that are buying our systems based on the fact that we have that capability, and they're interested in evolving their workflow to take advantage of it over time.

We also have a wonderful suite of products through both supply and medication automation, products that combine both of them, excellent products for the operating room, and for the central pharmacy. And so, it's a good suite of products. But we also deliver the solution with a mind to make sure that the customer has that transition go as easily as possible. We've done a number of them. They haven't all gone great, of course, but we have learned a lot in doing them, and I think we deliver a pretty good solution to the customers to make those switching costs as minimal as possible.

How long does it take to do a conversion? A medium-sized hospital?

Well, that depends upon exactly what the hospital is installing. A medium-sized hospital may install many, many of these solutions, or just a few, depending upon what their workflow is. But it could take a few weeks, and preparation might even take up to a month to two months.

Okay. All right, thanks very much.

(Operator instructions) There are no further questions at this time. Mr. Lipps, your closing remarks, please.

Yes, I'd just like to say that demand for our products, we believe, will eventually return to the levels we have seen previously, expect to continue our product innovation, and focus on creating the best customer experience in the marketplace, differentiating us over the long run. And we appreciate you listening to our call today.

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