Omnicell Inc (OMCL) 2010 Q4 法說會逐字稿

Good afternoon. My name is Patrick 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. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Thank you. I would now like to turn the call over to CFO Rob Seim to begin the conference.

Good afternoon and welcome to the Omnicell 2010 First-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 Forward-Looking Statements in our press release today and under the headings Risk Factors and Management's Discussion and Analysis of Financial Conditions and Results of Operations, in the Omnicell Annual Report on Form 10K filed with the SEC on February 24th, 2010, as well as more recent reports filed 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 27th, 2011. 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 expressed written consent of Omnicell is prohibited.

Randy is going to start the call today with an update on the market. I will then cover the results for the quarter and the year, followed by our guidance for 2011. And following that, we will take questions. Randy?

Good afternoon and thank you for joining us today. The fourth-quarter finished up a good year where we returned to growth and another year of strong order volume from new customers and continued to refresh our product line. Last month at the American Society of Health System Pharmacists Annual Midyear Conference we announced and showcased several new products and partnerships that maintain a tradition of keeping Omnicell solutions at the technological forefront. Announcements included our new Savvy mobile medication system, a solution that integrates the functionality of our medication dispensing management cabinets into a mobile platform, providing not only the tracking but also the physical control of medications from the doctor to patient. At the conference we demonstrated how Savvy expands our solution for current customers and provides a platform for integrating management of Omnicell dispensing cabinets with an electronic healthcare record.

We also announced PandoraVIA 2.0 which expands our new reporting platform with compliant safety monitoring, virtualization, and an enhanced user interface. We announced WorkflowRx 7.0 which introduces a new high performance unit dose packager to increase packaging efficiency and accuracy. A completely redesigned narcotics management solution replacing our Secure Vault system was also previewed in December.

In addition to these products we announced several partnerships including a partnership with Cardinal Health that makes Omnicell one of only two vendors to participate in the Cardinal Assist program for replenishment of automated dispensing cabinets directly from the medication wholesaler. We also announced a partnership with RxScan to enhance our controls with additional bar code checking capabilities and the central pharmaceutical to help prevent medication errors.

These product and partnership announcements are just the latest in a long history of innovation and product leadership at Omnicell. We're proud of our reputation in the marketplace and of the awards we have won. In December, our OmniLinkRx prescription workflow solution was awarded with the Category Leader distinction for medication order management systems by class, a prestigious third-party healthcare evaluation firm. This is the second consecutive year that OmniLinkRx received this award and comes after several other awards given to our automated dispensing cabinet at central pharmaceutical solutions.

We're also very happy to announce renewals of single source contracts with major hospital systems. Catholic Healthcare West, one of our largest customers recently renewed and expanded this single source contract with Omnicell. The Mountain State Health System, a 13 hospital IDN in Tennessee and Virginia also renewed their single-source agreement with us. Omnicell now counts nearly 2,300 customers utilizing at least one of our products and of those we now have over 1,600 acute care facilities utilizing our automated dispensing cabinets, related software, or central pharmacy automation solutions.

We're proud of our accomplishments and are well prepared to keep the momentum going. In the fourth-quarter we expanded our sales force by 30%, an investment to increase coverage of our growing install base of customers and to expand our reach to more new customers. All of our new sales personnel are onboard, have gone through initial training, and are starting to sell in their new territories. I'm optimistic about the combination of our new products and partnerships and our expanded sales force, all of which I believe will add to shareholder value. Combined with our expanded base of new customers, I believe there is good reason to look forward to 2011.

I'd like to turn the call back over to Rob for our 2010 results and of course our 2011 guidance. Rob?

Thanks. As Randy said, the fourth-quarter of 2010 capped off a good year for Omnicell and we finished off the year within or above all of our guidance ranges. Customer orders continued to be strong with large customers and new customers. 33% of our orders this quarter came from customers who had never automated before or from competitive conversions. About three-quarters of the new accounts were from competitive conversions and the remainder was from green sale accounts. New and competitive conversion customers comprised 38% of the orders for the full year of 2010, making 2010 the sixth consecutive year of business from new customers and competitive conversions and exceeded one-third of our orders.

Product backlog or the value of the product that has been ordered but not yet fully installed and counted as revenue was $127 million at the end of 2010, up about 11% from $114 million at the end of 2009. Year end backlog of $127 million was above our guidance range of $118 million to $125 million. Revenue for the fourth-quarter of fiscal 2010 was $57.3 million, up 2% from the third-quarter of 2010 and up 5% from the fourth-quarter of a year ago. Net earnings after taxes for the fourth-quarter were $0.7 million or $0.02 per share for the Q4 2010. This compares to $1.3 million or $0.04 per share for Q3 2010 and $0.6 million or $0.02 per share in Q4 of 2009.

For the full year of 2010, revenue was $222 million, up 4%. Net earnings after taxes for 2010 were $4.9 million or $0.15 per share, up from $0.4 million or $0.01 per share in 2009. Our GAAP results for 2010 do include an effective tax rate of 51%, higher than we expected due to further taxes on repatriation of our profits from India associated with the consolidation of our development offices and some other one-time adjustments to our tax provision.

Our headcount at the end of the quarter was 753, up about 20 from last quarter following the addition of the new sales staff. 753 is equal to our headcount at the end of 2009. During the year we gained efficiency through office consolidations and other organizational changes that allowed the expansion of our sales teams without any overall addition to our headcount.

Now I'd like to cover our non-GAAP results. The adjustment to GAAP results are the exclusion of stock compensation expenses, the exclusion of restructuring costs and related charges incurred in the consolidation of our development facilities in the second half of 2010 and also excluded are the benefits from the settlement of patent litigation during Q3 2010.

Stock compensation expense includes the estimated future value of employee stock options, restricted stock, and our employee stock purchase plan. And since stock compensation expense is a non-cash expense, we use financial statements internally that exclude stock compensation expense in order to measure some of our operating results. We use these 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.

We also measure our business excluding infrequent events such as the restructuring charge nd the litigation settlement benefit. 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 2010 non-GAAP net income was $3.6 million or $0.11 per share. Our Q4 2010 non-GAAP income was up $0.2 million from Q4 2009. Earnings per share for the quarter were equal to Q4 of last year. For the full year 2010, non-GAAP net income was $14.5 million or $0.43 per share, up $2.3 million or $0.05 per share from 2009, an increase of 19%.

In addition to the revenue growth in 2010, we posted gross margin increases driven by material cost and efficiency improvement in both our manufacturing and our service organizations as well as favorable product mix. Adjusted earnings before interest, taxes, depreciation, and amortization which also excludes stock compensation and amortization, restructuring, and related charges and the litigation benefit were $6.3 million for the fourth-quarter of 2010 and $26.4 million for the full year of 2010. The full year is up $4.2 million or 19% year to year. Adjusted EBITDA is a good measure of the operational results for the Company and we're happy to have continued growing this measure much faster than revenue growth.

Cash and short-term investments were $184 million at the end of Q4 2010, up $5 million quarter to quarter and up $14 million from 2009. During 2010 we generated $23 million from normal operations of the Company and used $8 million for the acquisition of Pandora Data Systems and for litigation settlement. Accounts receivable days sales outstanding were 69, down five days from last quarter and on the low end of our expected range of DSO. Inventories were $10 million, consistent with the previous quarter.

For 2010 we net or exceeded all the guidance we provided at the beginning of the year. For 2011 we expect to continue growing the business. We expect product backlog at the end of 2011 to be between $138 million and $144 million. Our backlog gives us good visibility to the revenues to be installed in the next two quarters and beyond. We expect 2011 revenue to be between $240 million and $245 million. Achievement of our revenue goals is dependent upon the volume of our order rates in the first half of 2011. It can be installed within the year.

Our guidance for non-GAAP earnings, excluding stock compensation expenses in 2011 is between $0.51 and $0.56 per share. These profit expectations assume an effective tax rate of 40% and GAAP earnings and no material change in interest rates. Our annual guidance includes approximately $3 million of revenue from the Pandora acquisition and a small profit accretion. For Q1 we expect most of the Pandora revenue to be differed because of some unfulfilled product promotions and we expect the profit contribution to be $0.01 dilutive. In addition we do typically experience some higher expenses in Q1 of any year and it makes our first-quarter seasonally weaker than the other quarters. With these seasonally higher expense and the Q1 Pandora dilution we expect Q1 2011 non-GAAP earnings per share to be $0.09 to $0.10 on revenues roughly equal to Q4 2010 revenues.

With that I'd like to open the call to questions.

(Operator Instructions) Our first question comes from the line of Steven Crowley from Craig-Hallum Capital.

Good afternoon, gentlemen.

Good afternoon.

Hi, Steve.

Couple questions for you. First of all, the jump we saw in SG&A, can you tell us how much was due to Pandora and how much was due to the significant addition in the sales force?

Yes. Pandora is adding roughly $600,000 a quarter to the expense stream. $600,000 to $700,000 per quarter to the expense stream. With the addition of the sales team, which were pretty much onboard by the beginning of the first-quarter and then there are always more fluctuations in expenses quarter to quarter. Those two comprised most of the increase.

Was that category a little more beefier than expected or did that pretty much track the way you guys had it dialed in internally?

I think the overall earnings in the quarter and the overall profitability is just about where we expected.

In terms of revenue contribution related to Pandora and then also related to Pandora and then I'll hop back in the queue, there's some amortization expense, it looks to be rather modest but it's noticeable nonetheless that are related to that deal. It doesn't look like you've added that back in your translation to non-GAAP. Is that correct?

We have not. The amortization of intangibles for Pandora are relatively minor compared to the overall P&L, in the range of $100,000 a quarter and consistent with other smaller acquisitions we've done we have not done any pro forma adjustments for that small amount.

And then the sales contribution from Pandora and the market reaction I guess to Pandora being under your wing?

The sales contribution of Pandora is approximately $3 million per year. There was a promotion that was in place when we acquired Pandora that allowed for an upgrade from an older version to a newer version. That promotion expires in June. But until that promotion expires, most of the revenues from Pandora will be deferred and that's why I said on our previous call we didn't expect much revenue contribution from Pandora in Q4 and there wasn't a lot. We don't expect much in Q1 of 2011. There will be a catch up in Q2 of 2011.

Are we talking a couple $100,000? Or not even that much?

No, it's about two quarters worth of revenue that we should see catch up.

I meant more in the fourth-quarter than the first-quarter? Are you literally talking about nominal amounts, less than $50,000? Or are you talking a couple $100,000 is what's been able to flow in fourth-quarter and likely able to flow in the first-quarter?

Yes. A couple $100,000 is the range that's been flowing we expect the rest that's been deferred to come through in Q2 of next year, catch up for the two quarters. As far as the market reaction to Pandora, it's been very good. We've got a lot of very positive response from our existing customers about the Pandora acquisition and the capabilities that Pandora brings. Of course there were a few of our existing customers that were already using Pandora. And we're seeing -- we're happy with the sale opportunities we're seeing from the Pandora customer set and the sales opportunities for Pandora from our own customer set.

Have you had success cross selling? And thanks for taking my questions. I'll hop back in the queue.

It's a pretty long sales cycle for all of our products, of course. It's early in the Pandora story for Omnicell right now. Pandora's only been in our fold for about three months.

Our next question comes from Glenn Garmont from ThinkEquity.

Thanks. Good afternoon. First, Randy, in your prepared remarks you mentioned Catholic Healthcare West, that it was a renewal and an expansion. I just wondering if you could provide a little bit more detail about what's included in the new contract? And then, Rob, on the product gross margins, it seems strong. I'm wondering if there's some influence of Pandora in there or was there a favorable mix in the quarter? Just wondering what's beneath that.

Yes. This is Randy. Catholic Healthcare West has been a great customer of ours, one of the initial large IDNs we started grabbing momentum with capturing market share five years ago. Those initial products that we had signed up with them were on the medication automated dispensing pieces. As they've added new hospitals to the IDN we've had continued opportunities to expand those lines but particularly in the central pharmacy area, we expanded the contract again and extended it out for another five years. So, we're real happy with that. As well as what was interesting that came out of the Catholic Healthcare West was they are a big Pandora customer and now are a preferred Pandora customer because of the combination of the two products, particularly that we can provide the kinds of systems that meet large IDN needs.

As far as the product gross margins, yes, they have steadily increased through the year. In fact they were about 50% in the fourth-quarter of 2009 and they're up to about 55% in fourth-quarter of 2010. Combination of several things there; we are seeing our customers buying a little bit richer mix of products. We do have more software content now with our Anywhere RN single point solutions that get added on to our existing customer base and add on to new orders. We have also been working as we also do, steadily on costs and have established several opportunities that brought lower cost of production into the mix. So, we've been kind of working on our cost structure from all angles and it's worked well for us.

Just a quick follow-up, Rob, on the cash -- I think you look at your cash balance certainly relative to the past couple of acquisitions that you've done, you continue to carry an outsized cash balance and I'm just wondering as we look forward to M&A opportunities should we maybe expect a succession of smaller deals not unlike Pandora or are you maintaining that cash balance because there's potentially a larger deal that might be contemplated at some point?

We are maintaining the cash balance primarily to expand our business through acquisition. As I said before, we do have a good pipeline of potential acquisitions that range in size. Pandora would certainly be on the smaller end of that range. There are plenty of technologies in the industry that would be beneficial to our customers added to ours that are businesses that are in revenue and generating value and would be larger acquisitions.

Okay. Thanks, Rob.

Our next question comes from Newton Juhng from FBR Capital Markets.

Good afternoon, guys. I did have a quick question on the sales force ramp up and specifically how long it takes for them to be a full quota carrying rep? Is that something that we could see happen in the first half of 2011? You did point out about the need for sales in the first half to help on the revenue side in the back half of the year so I was just kind of curious on that.

I think our sales force has two things going on. One, it takes new people awhile to get seated in their territory and then it takes nine to 12 months to build a pipeline. So, the impact from additional sales force folks in reality probably doesn't hit as much until the back half of 2011. And it will take -- all these people will not have an immediate impact in 2011. It will be 2011, 2012, as they build their pipelines and get more experienced and are able to produce.

Got you, Randy. And then just with regard to the -- your pipeline and your visibility, one of the things I'm kind of wondering about, has there been any change to your close rates? Or the rationale behind trying to add a little bit more bodies in the sales force and trying to maximize on the opportunities there? Has there been any change in terms of close rates and-or just increased demand? We've talked about before the small end of the market still being a wait and see approach on that. Has there been any change there?

No. Not really. Two things. We didn't really add to the sales force last year so we're doing a little catch up there as well as we've rolled out a lot of products, Savvy being one of those, that we're really excited about which really fits in with our current customer. It's an opportunity to go back to current customers and sell some more products to get deeper into accounts. And expanding the sales force really allows us a platform where sales folks have fewer customers so they can concentrate on both the new and existing customers with the product line. It's more of a strategy, a little bit of a catch up strategy and a way to promote more of our products to current customers.

Great. Are the sales guys -- do you have Savvy specialists at this point right now? Or is it more of the changing around the clients to be able to add --?

We have local territory reps and then we have specialist, pharmacy and supply specialists who help the sales reps out. They help the sales reps translate the products into the market.

Got you. Okay. Thank you very much, guys.

Our next question comes from Leo Carpio from Caris and Company.

Hello. Can you hear me, gentlemen?

You bet.

Yes. Couple quick questions. First regarding the hospital capital spending environment. Are you seeing like you've seen in prior quarters where a large hospital continues to be driving the demand with possibly -- I think in last quarter you indicated that the Veterans Administration was in a catch up mode. And lastly that the small hospitals were still on the sidelines. Is that the situation we're seeing in the end of 2010 and heading into 2011 or has it become incrementally positive?

Each quarter through 2010, that situation became a little bit more positive. But there isn't a huge overall change. The small hospitals are still a little financially challenged and not buying at the rates that they were buying at back in 2008. I don't see that--it's surely changing but I do see an incremental improvement in the quarter sum total in 2011. And as far as the US government, yes. They did have a strong order quarter with us in Q3 and Q3 typically is the strong order quarter for the US government because their year end. Q4 was a pretty normal quarter for the US government which is good. We see both Q3 and Q4 as a rebound to normal sorts of activity levels that we've seen in the past with the government.

Okay. And then turning to the competitive environment, how have you see competition? Is it still pretty much you and Pyxis facing off? How about McKesson? Are they still in the fray for new deals?

Yes. I think the majority of the time CareFusion is a good strong competitor. We meet them in most market situations when there are new accounts, green field accounts. And occasionally we see McKesson but not as much as we see CareFusion and particularly we see McKesson has their own IT shops where they have a bigger presence in those hospitals.

And in terms of prices, are there any new pricing pressure? Or pretty much pricing is holding firm?

Pricing is pretty much what it's always been? A lot more competitive on new accounts and very stable on current customer accounts.

Thank you.

You bet.

Your next question comes from the line of Brad Hoover from Sidoti and Company.

Hi. Good afternoon. Just first, did you give a booking growth expectation for 2011?

We did not. We typically give our guidance on revenue, profit, and the backlog. We did give the guidance on the backlog being up about 10%.

Okay. And then just wondering if you can kind of talk about it in terms of the guidance and your visibility into revenue for 2011 today compared to a year ago when you gave 2010 full year guidance, maybe if you could talk about visibility and if that's any better than say a year ago? If that's a fair statement, maybe any additional color on that would be great.

Sure. That's a good question about the backlog. The backlog does represent typically between two and three quarters of forward revenue and our customers' installation cycles is what determines how much of our product backlog or how much of our revenue would be in product backlog. New customers tend to cause there to be more backlog because they take longer through the installation cycle and existing customers, their orders tend to not be in backlog as long. This year's ending backlog amount is pretty consistent with the amount of revenue that we saw last year. We don't see a big mix change between new customers or existing customers, big versus small customers, and in fact we also see that in the new customer numbers that I gave. This year it was 38% of our orders from new and competitive conversion customers and 2009 was 38% also and a lot of that ends up in the backlog at the end of the year.

Okay. Great, Rob. And then just lastly, I don't think you mentioned international at all. I know it's still lumpy and your sales are in a variety of different regions and countries. Any comments on the quarter or your expectations for 2011 as far as international success and geographical strength would be great. Thank you.

We're still very optimistic about the international market and you're right, it is -- it's kind of young and it is lumpy, deal by deal. As we said before we could see the international market growing to be about 20% of our business over time and we're looking to take steps towards that in 2011. So, we still feel very optimistic about the international market. Despite the economic conditions that exist in Europe and a few other geographies.

Our next question comes from Sean Wieland from Piper Jaffray.

Hi. Thanks. Most of my questions have been asked. A little deeper on the competitive landscape, have you seen any impact from Cerner's deal with CareFusion in the market?

There's still pretty minimal activity from that standpoint. And it just depends on customers and customer cycles that we're in and how many of those might be customers where they're already both in place. But we've seen a couple customers, maybe two, talk about or have an impact on our pipeline. It's still pretty minimal.

Okay. That's helpful. And then just a quick question. 2011 tax rate. Did you tell us what you thought that would be?

Yes. 40% is the assumption in all of our guidance.

Alright. Versus what was the assumption in the guidance for the full year for 2010 was 42% so it came in a bit higher than that. Biased to the upside or the downside on that 40%?

The differences we had in the 2010 tax rate were mostly driven by the one-time activities we did in restructuring and we don't have any of that really on the horizon for 2011. So, I would expect us to be pretty close to the normal rate we gave for 2011. Plus some aspects of the tax laws have been settled for 2011 where they weren't going into 2010 and for instance the R&D tax credit is defined now for 2011. So, we've got a little bit more clarity on 2011.

Okay. In the past you guys have talked about targets for operating margins in the long-term -- you used to talk about a 15% goal for operating margins. The guidance for '11 is going in the right direction but doesn't quite get us there. Do we still have that target for a long-term operating margin? Or how do we think about your ability to get back to the operating margins and EBITDA margins that -- particularly EBITDA margins that you were once hitting?

Yes. 15% operating margin excluding stock comp is our goal. That has been our goal for quite awhile. We were there as you know in 2007. It's our goal to go back. We see a clear path to get there. Last quarter's operating margin was -- margins through 2010 were 78%. And we expect some pretty healthy growth on that during 2011 and growth through the year and we expect to exit the year much closer to the 15% goal and continue working to that goal through 2012.

Okay. Interesting. Thanks a lot.

Our next question comes from Gene Mannheimer from Auriga.

Thanks for taking the questions, guys. Nice quarter. Couple quick ones. If we look at the midpoint of your backlog guidance, it looks to be up 11% over the prior year. Can you tell us how much of that or how much of the Savvy opportunity is built into that backlog guidance?

Gene, you know the sale cycle for our products as we said before is pretty long and we anticipate Savvy -- customers now, we anticipate shipping it in the middle of year in volume. But it will take some sales cycle to get that worked into the work flow of our customers. We're really expecting Savvy to have more revenue impact in 2012 than it would have in 2011 and so there will -- some of the orders we get in second half of 2011 will be in backlog. We don't give a breakdown on our product forecast through the year. We certainly expect it to contribute and be in the backlog at the end of the year.

Sure. Sounds like a fairly minimal amount though based on your comments. And then with respect to the sales force additions, what was the sales count at the end of the year versus the prior quarter. In other words what is the net increase in the sales force net of any attrition from the existing -- our legacy sales force. Thanks.

We had 45 sales positions in the Company prior to this expansion. There were a few of them open. We have 58 sales positions after the expansion and all of them are filled now.

Okay. Great. And then lastly on the government business, for 2010 what percent of revenues came from government business? Thank you.

We don't normally disclose the percentage of our revenues from any one customer. The government tends to be -- collectively tends to be one of the largest groups of customers, but we haven't really disclosed that in the past. What I can tell you is that the government, large IDNs, large customers like Carolinas Health and New York Presbyterians and Mountain State and so forth are always a substantial part of our business. But the mix of that business is pretty typical of the overall mix of hospitals in the country and they're still over 50% of the hospitals that are community based and are run on their own, single entities, and we have about 50% of our business there about from those sort of customers.

And, Gene, just going back on the sales force. I did give you the figures for the direct sales people, territory based, carrying the course of the territory. As Randy mentioned earlier we do augment our direct sales team with specialists, typically former pharmacists or former materials managers from health systems to help them with the technical part of the sale and we have some inside sales people and managers and so forth. So, the overall sales team is larger than the 58.

Our final question in the queue is a follow-up from Steven Crowley.

Hey, guys. Thanks for taking my follow-up. In terms of the SG&A expense number in the quarter, was there anything extraneous in that number kind of like last quarter related to M&A that makes the run rate or makes that number not a run rate going forward?

So, we are assessing -- as I said many times we are assessing a pipeline of M&A candidates and that usually does mean that we're expending some funds and doing those assessments and that is lumpy. So, we did have some large M&A related expenses for Pandora and other assessments in Q3 and we did have some in Q4 also.

What I'm struggling with a little bit is explain the 12% year over year growth in SG&A expense in the context of the revenue increase in the greater context of a general story that for a period of time here you shouldn't have to add a whole lot of infrastructure expense. Can you help me connect those dots a little bit? Was there something a little strange about Q4? Or not so much?

Sure. Let me talk about some of our strategies that we've discussed previously. During the year we initiated a branding campaign and if you were in the trade publications and going to some of the trade shows you would've seen that. We decided that we would assess our awareness of our brand in the marketplace and we felt there could be some improvement made to that. Marga Ortigas-Wedekind who leads our marketing effort has been doing that through the year and that was an investment in our presence in the market. We also have invested -- we just talked about an M&A assessment. We invested in our sales team in the last part of the year and the sales team, as I said, were all onboard by the time -- pretty much all onboard by the time the fourth-quarter started.

And of course we expended some efforts to bring those folks onboard. That was a pretty good recruiting effort for us. And finally we've got some of our market presence activity in fourth-quarter, the largest tradeshow of the year, the American Society of Health System Pharmacists show takes place in December. So, those are all activities that can cause spending to be lumpy, a little bit up, a little bit down quarter to quarter but the overall theme there is that we are continuing to invest in our business because we see quite a bit of opportunity for our products in the further penetration of the market and with how many new customers we're bringing in. So, we were mindful to manage to the numbers, but we're also mindful to manage to take advantage of those opportunities.

That's helpful. In terms of atrophy, one of the things we picked up is that there was quite a bit of interest in the Savvy cart and even some surprising interest in the regular cart business. Have you been able to queue up orders for Savvy cart? And maybe the more important question related to Savvy is should that business conceptionally be a little higher velocity conversion backlog to installation and revenues given the form factor of that product? And is that a little bit of a wild card? A positive wild card potentially?

The Savvy product is a new product in the marketplace. There's really nothing there like it today. It integrates the medication management from the automated dispensing --

Rob?

We lost him.

I hear you, Randy.

Hello? Okay. Great. Sorry, sir. I was saying the Savvy platform is a new cart to the marketplace that is really nothing like it. It integrates the full aspects of an automated dispensing system like we normally sell into a mobile platform, it takes that control down to the bedside, both physical and the record keeping control.

So, the reason I bring this up is since it is a new product in the marketplace, we don't really have experience on how long the sales cycles are going to be. Yes, I think intuitively, both Randy and I think -- and our sales team thinks the velocity could be a little bit faster. But it is a workflow enhancer. But it also means it's a workflow change for our customers. So, I think after we have a couple quarters under our belt, we'll have a better idea on how long those orders will stay in backlog. We have taken the first orders on Savvy. So, we're happy about that. But like I said, it's still in beta test and beta customers and it will be hitting full production in a few months.

Great. Thanks for the additional color.

Thank you. At this time I would now like to turn the call over to Randall Lipps for final remarks.

Thanks for joining us today. To recap, we had a good year in a tough economy hitting all of our guidance from the beginning of the year. I'd personally like to thank each and every one of the 753 dedicated Omnicell employees who are instrumental in creating the best products in the marketplace and delivering the absolute best experience for our customers. Thanks again.

This concludes today's conference call. You may now disconnect.