Omnicell Inc (OMCL) 2013 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Omnicell second 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).

It is now my pleasure to turn today's conference over to Mr. Rob Seim, CFO. Please go ahead, sir.

Thank you. Good afternoon, and welcome to the Omnicell 2013 second quarter results conference call. Joining me today is Randall Lipps, Omnicell Chairman, President, and CEO.

You can find our results in the Omnicell second quarter earnings 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 other information regarding risks in the Omnicell annual report on form 10-K filed with the SEC on March 11th, 2013, 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 August 1st, 2013, 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.

Today Randy will first cover an update on our business, and then I'll cover our results for Q2, and our guidance for the remainder of 2013. Following our prepared remarks, we'll take your questions.

Thanks, Rob. Good afternoon. Q2 was a great quarter for Omnicell. We had record revenues that are growing faster than the industry, earnings higher than expectations, and continued momentum with new customers that keep us right on plan. Topping all this off, we were recognized as the best overall pharmacy automation leader by KLAS.

Our 3-leg strategy continues to drive our success. Those strategies are market expansion through the delivery of differentiated, innovative solutions, expansion into new markets primarily outside the US, and expansion through strategic partnerships and acquisitions of new technologies. We continue to make investments in all three of these areas, and we believe these are investments that are paying off by distinguishing Omnicell with our customers.

Our first leg of differentiating are products is bringing us into some great new opportunities, such as medication adherence solutions. International adoption of multi-med adherence packages, which is more advanced than in the US, continues to grow by double digits, and we now count the top-3 retail pharmacy chains in the UK as customers. In addition, we are beginning to see early adoption of multi-med adherence solutions in the US, in both retail and in assisted-living facilities.

While our second leg of expanding into new markets is still primarily focused on international, we are also seeing increasing demand for our automated dispensing solutions in the non-acute care setting.

In our acquisition and partnership leg of our strategy, development with the Cerner iBus continues. We signed an expanded agreement with Codonics to resell an important specialized barcode safety solution for the operating room that anesthesiologists utilize to help assure that we have the right medication.

In the acute care market, we announced some exciting new accounts including Baptist Memorial Healthcare of Memphis and ProHealth Care, both competitive conversions. Baptist Memorial Health of Memphis is a 14-hospital network with over 2,300 beds in and around Memphis, Tennessee. Baptist currently utilizes products from 2 of our competitors to run both centralized and decentralized medication distribution processes. They chose Omnicell because of our flexibility in supporting both medication distribution models and our interoperability with their Epic electronic healthcare record system. They are implementing our OmniRx automated dispensing systems, our controlled substance management system, our anesthesia workstations for the operating room, and our Pandora analytic solution.

ProHealth Care is a regional integrated health network with more than 30 sites across southeast Wisconsin, which is anchored by 2 acute care hospitals with 400 beds. The health network offers a full range of services, including home and hospice care, rehabilitation care, primary care and specialty care. ProHealth chose to replace their existing systems because the Omnicell G4 Unity platform's ease of use, low cost of ownership, and capabilities across the continuum of care. They were impressed with the greater control of medication distribution that the G4 platform gives clinicians, which is particularly important in facilities without an onsite pharmacy, such as their inpatient hospice. ProHealth is implementing a wide selection of Omnicell solutions.

At the heart of all these new customer decisions is our OmniRx Automated Medication Control solution, which we are proud to say has just won the top award from the prestigious third-party rating firm KLAS, for the eighth consecutive year. Omnicell also won top honors for our Central Pharmacy Carousel, our unit dose packager, and our controlled substance management system. Capping it all off, this year KLAS added recognition for the top vendors in broad categories. And, of course, Omnicell won the honor of top Overall Pharmacy Automation Equipment Vendor, which encompasses not just automated dispensing, but a wide range of equipment and software solutions used by hospital pharmacists.

We continue to innovate our G4 platform, which now includes Omnicell Cloud Connect, software that allows health systems to connect Omnicell automated dispensing solutions located at remote locations to the Omnicenter server through the cloud. The solution makes it easier to deploy into non-acute care facilities. We also have enhanced our award-winning Controlled Substance Management system to handle a wider variety of healthcare settings.

Since we announced and began installing the G4 platform 2 years ago, over 1,000 healthcare facilities have ordered the system, including both our current customers upgrading their equipment and hundreds of competitive conversions, as well as first-time accounts.

All of this continues to generate good business results. I think a great measure is EBITDA, which is up 36% from 2012.

Before I turn the call back over to Rob to cover our financial results and guidance, I'd like to comment on our partnership with our customers. They are going through unprecedented change, and we coordinate many forums to assure we are aligned with their concerns and priorities. Our solutions help to improve clinical outcomes, maintain regulatory compliance, and, of course, save money, all critical measures for our customers, as healthcare reform continues the planned adoption cycle.

With the benefits of our systems, I believe we are well positioned for continued success. Rob?

Thanks, Randy. So we are really happy with our results in Q2, and we are well on track to our annual guidance. Revenues of $93.7 million were up 24% from Q2 of 2012, primarily due to the acquisition of MTS. Omnicell branded products, or the products we sold prior to the acquisition of MTS, grew 11% year-to-year. And sequentially, total revenue was up 8% from Q1 2013.

30% of our automated dispensing system orders were from new and competitive conversion customers in Q2, with the bulk of that coming from competitive conversions and a small amount this quarter from Greenfield customers who had never purchased automation before.

Rounding out the highlights of the quarter, our Q2 non-GAAP EPS exceeded analyst expectations by $0.02, and cash grew $17 million during the quarter, to $87 million, one of our largest single-quarter increases.

GAAP earnings per share were $0.17, significantly up from $0.04 in Q2 2012, when we posted several one-time expenses associated with the acquisition of MTS. Our Q2 results this year contain no unusual charges or benefits. In addition to GAAP financial results, we report our results on a non-GAAP basis, which excludes stock compensation expense, amortization of intangible assets associated with acquisitions, and any one-time costs or benefits.

We use non-GAAP financial statements in addition to GAAP financial statements, because we believe it is useful for investors to understand acquisition-related costs and non-cash stock compensation expenses that are a component of our reported results and the results from our on-going operations, excluding one-time events. A full reconciliation of our GAAP to non-GAAP results is included in our second quarter earnings press release and is posted on our website.

On a non-GAAP basis, earnings per share was $0.27 in Q2, up 35% from $0.20 in Q2 of 2012, and, as I said, $0.02 over analyst expectations. Non-GAAP EPS was up sequentially 29%, from $0.21 in Q1 2013. Non-GAAP operating margins were 14%, consistent with our expectations.

Adjusted earnings before interest, taxes, depreciation and amortization, which also excludes stock compensation amortization and the amortization of acquisition-related costs, was $16.9 million for the second quarter of 2013, up 36% from Q2 last year and up 39% from Q1 of 2013.

Our Acute Care segment, which includes everything we sell to hospitals, contributed $68.1 million in revenue, and $9.6 million of non-GAAP operating income in Q2 2013, or roughly 75% of the total non-GAAP operating income of the company. Operating margin in the Acute Care segment was 14.1%.

Our Non-Acute Care business consists of solutions sold outside the hospital setting, including equipment and consumables that manage medications through adherence packages and dispensing systems sold to institutions serving long term care needs. About 80% of the Non-Acute segment revenue is comprised of consumables used by pharmacists to make blister cards that are at the center of medication control in most non-acute care settings.

The Non-Acute segment contributed $25.6 million of revenue to the quarter, and $3.5 million of non-GAAP operating income, or 25% of the total non-GAAP operating income of the company. Operating margin in the Non-Acute segment was 13.6%.

We do continue to refine these segments, and you will notice in our financial statements that we made a year-to-date adjustment to allocate approximately $0.7 million of costs and expenses from Acute to Non-Acute.

We had an outstanding balance sheet performance this quarter. Cash was $87 million, up 17 million from Q1 2013, driven by our strong profitability, good collections, and the exercise of employee stock options. Accounts receivable days sales outstanding were 63, down from 69 last quarter. Inventories were $26 million, and headcount was 1,093, both roughly flat with last quarter.

Looking forward, we believe we are right on track to the growth guidance we gave in January, and the increased EPS guidance we gave last quarter. We expect revenue to be between $370 million and $380 million for the full year, an increase of 18% to 21%. We expect revenue growth for the Acute Care segment, which is all organic, to be up 10% to 12%, from 2012 to 2013.

Revenue for the Non-Acute segment is expected to be up 60% to 70%, primarily reflecting the full year of the MTS product line. We expect non-GAAP earnings to be $0.99 to $1.07 per share, up 14% to 22% year-to-year. Earnings per share estimates assume an annual tax rate of 37% on GAAP earnings. We expect steady revenue and earnings growth through the year, and to finish with an average annual non-GAAP operating income in the 14% to 16% range.

We expect 2013 year-end product backlog to be between $160 million and $165 million, and product bookings to be between $305 million and $315 million. This guidance is consistent with our expectations that we continue to grow faster than the industry, and is the same guidance that we provided previously.

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

Certainly. (Operator Instructions) Your first question comes from the line of Matt Hewitt with Craig-Hallum Capital.

Congratulations on a record quarter. Couple questions. First, hospital spending, some of the other industry participants have run into issues this quarter, and you seem to have navigated particularly well, given your performance. What are you seeing from hospitals from a spending standpoint? And what do you see happening, I guess, over the remainder of this year?

We know that some other participants in the healthcare industry have reported some slowdowns in hospital spending. So far, we really haven't seen that ourselves. Our order rates are strong, and the pipeline looks good.

As we talked about before, we're cautious because there are certainly a lot of changes coming in healthcare. But I think we've also demonstrated fairly well the value of our systems, not only from the patient safety perspective, but we actually do save money for anybody that installs our systems. And so demand continues to be strong at this point.

Good. Good. Secondly, you mentioned your progress on the G4 upgrade. In 2 years, I think you mentioned 1,000 hospitals. Where do you sit? Initially, that was supposed to be a 5-year, $250 million incremental opportunity for you. Where do you think you sit today? Do you think you're a little bit ahead of plan or right inline with expectations?

Well, if we kind of just roughly look at the numbers, Matt, we're about 20% through our current install base on the upgrade schedule. So we have 80% of our customers still to be upgraded. And I think that, as time goes on, that will accelerate, as people want to deploy more sophisticated systems, particularly for Win 7 and some of the feature sets that we have to offer. So we've got a lot more to go on that.

Okay, very good. Maybe one for me, and I'll jump back in the queue. International, I believe you were installing a large hospital in the Middle East starting this quarter. Have there been any new developments, either in the Middle East or in China, that you could provide some color on?

I think you're probably referring to Sidra, which is the new hospital in Qatar. We do have installations going on in the Middle East all the time. But that particular hospital is still under construction, and we don't expect the installation to start until later in the year. But all that product has been made and shipped to them. It's onsite, ready to go when they are.

Other new developments, I think international is still, as we said, sort of developing markets. We still believe, absolutely, the Middle East is a great market for us, and we're doing well there. We have quite a few installations now in China, that they're all, as I described before, more of the beginning installations, trying it in a ward. We don't have a hospital that's gone to a full implementation there yet. And we do have, as you know, good relationships with a number of healthcare institutions in many other countries. And in any one quarter, we have sales between 8 and 12 different countries.

Okay. Thank you.

Your next question comes from the line of Jamie Stockton of Wells Fargo.

I guess maybe the first one, to follow up on Matt's question about the G4 upgrade cycle, you've got 80%, it sounds like, of the prior legacy solution install base that still could look at an upgrade. Is there any catalyst when you guys sit around and look out over the next year or 2, that you think could trigger a number of hospitals to want to push forward with an upgrade? Obviously, there's been a huge focus on the government EHR incentives for the last few years, and that work is starting to wind down. But then we've got ICD10 on the horizon. Just curious if there's any event that you guys are kind of looking out toward.

Well, I think, as I've said before, a lot of hospitals are upgrading to HIT systems to be more secure, more relevant. And so just from the HIF side of the house, at their perspective, they want everything to be on the latest operating system. So Win 7 is the only way that you can get that is through our G4 upgrade, because it's designed for that operating system.

And the other thing that tends to happen is, people roll in their upgrades with usually a major expansion of some other area of the hospital or the acquisition of other hospitals so they can do it all at once. And so, as hospitals consolidate, that is actually a driving force for us to see a catalyst for hospitals to get on the same standard and move quickly. But we have quite a few unique features on G4, and, particularly, the label printer is really helpful in a lot of ways in implementing new [lean] functions that they couldn't really implement without.

So as hospitals look to deploy cheaper processes that are still safe and regulatory compliant, they can do that with the G4. So I just think there's more and more pressure. And so what we've seen in the past is probably going to accelerate as we move forward in the adoption of the G4.

Okay. And then just maybe quickly on the MTS business. There was the write-off of some technology last quarter. Is there just any update you can give us as far as how the original plan for that business has evolved, how you plan to try to capitalize on its technology, either in the inpatient setting or in a broader, non-inpatient setting going forward?

Well, we've actually -- Europe is going quite well for us, double digits, and we've recently acquired 2 retail pharmacies in the UK. So we've got strong growth there, and continue to see that.

We've got early adoption here, United States, with some med adherence. But I'd say it's still early adoption. And then we put into the roadmap some great products to help accelerate that, that are in the, I'd say fairly near-term, less than a year, that we think will really drive some growth.

But really, the great news story out of the MTS acquisition is our ability to expand and grow our automated dispensing system through the non-acute care account list that they had. And so that's been a big win for us. And we're doing really well on that side of the house. So we've been really happy with the MTS acquisition. And we made the right decisions in the roadmap to get us there even faster. So it's nothing but good feelings all the way around.

Okay. Thank you.

Your next question comes from the line of Steve Halper with Lazard Capital Markets.

Just a couple of housekeeping questions on the numbers. This is all on a GAAP basis. R&D declined sequentially, your SG&A was down just a tad. But, clearly, as a percent of revenues, they were both down, driving the margin improvement. Can you speak to some of the leverage that you might be getting there? Or was there one-time stuff that we need to know about that drove the margin lower?

Well, in Q1, of course, we had all sorts of one-time charges, particularly the $1.8 million software impairment that we took that drove the R&D down quarter-to-quarter, because we didn't have that repeat.

Overall, our strategy has been, in the past, to get as much leverage as possible from our fixed cost base, until we got to the 15% operating margin range. We're essentially there now. So our intent is to manage to the 15% operating margin over time. And when we have the opportunity, if prices are stable and gross margins are stable or improving, we'll invest I areas that we believe will drive top-line growth. And that's no different from what we said before.

Right. And so, again, the $8 million in Q1, had that charge in it, that's fair. And then it sounds like on the SG&A side, you're simply getting that leverage that you're talking about?

Right.

Okay. And then just checking my math, based on the historical numbers, if you account for some of the historical business from Omnicell that was sold into the non-acute setting, I'm showing that the acute revenues were $68 million, and that would compare to something like $64 million or $64.5 million, in the second quarter. Is that accurate?

That's right. The business sold in the hospitals is up about 6%, from in Q2 2013, relative to Q2 2012.

Right. And you're going to -- and what was the statement that you made relative to the acute outlook for the year?

So the organic business of Omnicell, all those products that were branded Omnicell before we bought MTS, is expected to be up 10% to 12%.

Okay. But that includes some of the cabinets that are sold into the non-acute setting?

That's right.

Okay. And you didn't really specify acute, right?

I'm sorry. Say again.

You're talking about Omnicell-branded products. You're not --

Right.

-- specifying -- or acute is up 10% to 12%?

Correct, the Omnicell-branded products. I'm trying to give a -- since we're in a transition period, we had a partial year of MTS last year, I'm trying to give an apples-to-apples comparison on the organic Omnicell, prior to the acquisition.

Yes.

And that business is up, we expect 10% to 12% for the year, and it's up 11% in the quarter.

Right. And just to clarify from my notes, the non-acute revenue in the quarter was $25.6 million?

Yes. And again, that's the segment. Sorry for the little bit of confusion here. But that's the segment. And that includes everything that we sell to healthcare institutions, outside of hospitals.

Right. And that would compare to $21 million in the first quarter?

That's correct.

Okay. So what accounts for that uptick? Is it more sales of the core MTS product offering? Or is it more cabinets going into the non-acute setting?

Yes, it's both. So we are seeing growth in the non-acute care products used to create the blister cards. We're seeing growth, quite a bit of growth in the multi-med products, which is good. As Randy talked, we're double-digit growth in Europe for those products. And we're seeing early adoption in the United States now, which is actually great. We have new products that are coming, as we talked about, that will aid pharmacists to make those packages faster. But those products aren't in the market yet. So it's our existing products that are being sold in the US, and seeing adoption.

Then we also have quite a bit of, I call it sales synergy from the acquisition, where the relationships that MTS had with long-term care providers, long-term pharmacy care providers, institutional pharmacies, those relationships are being leveraged to sell our automated dispensing systems. And that business is growing well.

Great. Thank you so much.

Your next question comes from the line of Neil Chatterji with Sidoti.

First question, in terms of, and I think kind of as a customer, but in terms of the acquisition of Vanguard, is there any impact on that, the conversion of the Vanguard hospitals this year, versus the next 2 years?

So both [Hannett] and Vanguard are customers. Now, what we expect is that, like in any acquisition, there's going to be distraction and there's going to be a lot of work for those guys, and they're going to have a lot to think about. So we have no indication if the overall volume of business with Vanguard would be any different. We do expect that it would slow down a bit.

Okay.

I should add, that that doesn't really change any of our forecasts for the year. We've got quite a bit of business going on, and most of Vanguard [will have been] likely installed next year, and revenue next year anyway.

Okay. But would that maybe affect some of the, as far as the conversion rate that you typically report, that might impact that?

Yes, I don't -- well, we're not seeing that the overall business is going to be any less. But just how quickly they convert from their existing installations to us, we expect would probably be impacted.

Okay. I guess secondly, you touched on kind of the China rollout and penetrating with smaller deals in say a hospital ward. Are there any specific hurdles or barriers there to getting kind of a full hospital implementation, that are [used in] China?

I would say our systems are somewhat complex, because they handle a very complex business process. And so whenever you're changing a business process, there's always all sorts of hurdles. And we are kind of working through those 1-by-1, and we're learning a lot and the customers are learning a lot in those initial ward installations.

I don't think that that's any different from any other geography that we've gone into or what we've experienced in the US, when we bring new products into the market. And we just have to work through that, and get it all worked out. And I'm sure there'll be house-wide implementations once everybody's comfortable.

Okay, that's helpful. That's it for me. Thanks.

(Operator Instructions) Your next question comes from the line of Gene Mannheimer with B. Riley.

Congrats on a great quarter, guys. This relates to the prior question. But can we quantify the revenue from medication systems that were sold into the non-acute care setting? Is that about $2 million?

I'm going to give some general number, because we don't usually break down our revenue into a bunch of line pieces. But generally, that business is going to [see] couple million dollars a quarter, and it's been growing. Last quarter, it was more than $5 million. So I think there's going to be institutions that decide to do some more extensive installations of our vacation control systems that are not hospitals, outside the hospital setting. I don't know that those will necessarily be consistent every quarter. But we're certainly seeing some larger sales coming into the pipeline, where they're interested in gaining that sort of medication control.

Thanks. And I think Randy mentioned that the multi-med opportunity in the US was still early innings. Do you have a thought for when that might heat up here domestically? And what would be the catalyst to drive that adoption?

Okay. So the implementation of multi-med in the United States will be dependent on a few different things. As everybody knows, one of the keys here is somebody has to figure out or we all have to figure out who pays the pharmacist to do it. From the pure retail pharmacist standpoint, it's a little bit more expensive from a time standpoint for them to do it.

Now, we have products in development that Randy talked about that will ease that burden that'll automate the filling of a multi-med blister card. We believe that the implementation of multi-med comes from a number of different areas, including a rollout in, actually, the acute care setting, where there's a strong desire to send people home with a medication adherence package that helps assure that they take the medications and don't return to the hospital, but also in the retail setting where there will just be, and there is now, a demand coming from the users.

Interestingly enough, we're also seeing some demand in the, more like the assisted-living setting. So I think everyplace medications are used, there is interest in the multi-med adherence package.

Rob, and just going back to your guidance. You said Sidra was still under construction. Is the installation or the revenue from that part of your guidance for the current year? And are you contemplating any Vanguard business in your current-year backlog?

Minimal amount of Vanguard in the current year. And we are expecting the Sidra installation to start this year. We're not expecting it to finish. And so that will go in some phases. As I mentioned before, it was a very large, single hospital installation, and it will certainly rollout in phases, and we're expecting some of those to complete.

Okay, great. And last thing, just quickly on the Cerner relationship. Is that taking the form of a reseller relationship, as well as a interoperability agreement? How's that -- what's the plan for that?

It is not a reseller relationship. It is an interoperability relationship.

Okay. Thank you.

Your next question comes from the line of Charles Rhyee with Cowen and Company.

Want to continue sort of talking about the multi-med opportunity. And Rob and Randy, you both kind of talked about assisted living. Can you go into that a little bit more and talk about how that would actually work? Is that only really useful for assisted-living facilities that have their own pharmacy? And really, how many have that versus --? Because I was under the understanding that assistant living, really residents just kind of went on to their own pharmacy, like a Walgreens or CVS, to get their meds filled. So, and then --

Well, all --

I'm sorry. Go ahead.

Well, I was just going to say, assisted living has a menu of things that people can purchase, and one is medication adherence. And so they could get that through one of our institutional pharmacies who are serving traditional skilled nursing facilities. And so they have an operation there, and they're looking to expand their business, the institutional pharmacy, as well as the assisted living, to charge an up-charge for medication adherence packaging for their med.

So that's something that I think assisted-living folks have figured out is something that people want, and they want to offer that as a service. And several of our (inaudible) pharmacies who are nearby can fulfill that need. And so the assisted living, by definition, does not have a pharmacy onsite, traditionally does not, unless it's just a retail store of some sort.

And I think what we're seeing is caregivers who have relatives in assisted living, know that medication management is a big issue. And there's no one there to help with medication management. But getting the meds in a med adherence packaging, helps ensure that those that people are caring for, do take their meds. And they can tell if they're taking their meds when they come and actually visit, by just inspecting the packaging.

No, certainly, that makes sense. Can you talk about sort of the up-take you've seen in the UK so far? You talked about having the 3 largest retailers, and it sounds like you just signed up numbers 2 and 3 recently. Maybe at least with your first pharmacy chain there, can you talk about, do you have a sense on what type of volume you're seeing relative to sort of the average daily volume, and sort of what the growth has been so far?

So we have about 350,000 patients in the UK that are getting their medications every week through multi-med packaging. And a lot of that is going through these large retail chains. One of them has been with us for a while now, and quite a bit of our volume's been going through there. And that is growing double digits. So we're adding 10s of 1,000s of patients every year.

The unfortunate thing is that a lot of those medication packages are actually filled by hand right now. And so the development and delivery of more software and advanced automation for that market, is important, as it is in all markets, to really kind of kick start the growth.

Maybe just going back to an earlier question, talking about, Rob, you're talking about the real impediment being reimbursement. Any movement at all, at least maybe at the Medicaid level where states could really sort of enact and push a higher dispensing fee for medication management? Is that possible? Or because of most seniors on Medicaid, [are deductibles] during Medicare Part D, are we really relying on Part D plans to come to the realization that this makes sense?

Well, Charles, this is Randy. And you're right. Anyone that bears the risk, in other words, insurance program, government group, they are very interested in making sure med adherence takes place, because they pay for it if it doesn't happen. And so, as you start to see markets develop, you can generally go to the entity that's going to bear the risk, will be highly interested, because they're willing to pay for it, because if they don't take the medications on time and in a timely manner, it's going to cost them a lot more.

So as we see healthcare reform take place and these new risk-associated groups develop, those are optimal candidates for us to go after and put together an adherence packaging program for them.

So, but is there any type -- I mean, are you part of any type of lobbying group to -- how are you -- how do you communicate to the payor community to let them really understand that, yes, medication adherence, generally speaking, is important, but we have a very great solution that can improvement that for you?

Yes --

How are you out there in the market?

Well, we're actually talking to a lot of people. But we're involved in a lot of studies right now. There are some basic, really good, solid studies out there, actually, one really good government study that was done, I believe at a VA. And we're actually putting together some additional studies to actually prove those points out. And I think, as we're armed with that, that gives us the leverage to go to both government and these risk takers to put our case forward.

Okay, great. Thanks a lot.

Your next question comes from the line of Matt Hewitt with Craig-Hallum Capital.

Thank you for taking the follow-up. Just one for me. One of your competitors has announced and is transitioning out of the medication management business. And I'm curious if that has created any opportunities, either given their distraction, for you to take share, or is it something that could be an appealing entity for you to acquire.

Well, an event like that always will create some opportunities for us, and we'll certainly take advantage of those.

We look at, as I'd said before, we look at many potential acquisitions. It's one of our 3 key strategies. We don't comment on any particular one. So just as a policy, I wouldn't comment on this one. But certainly, that event happened last quarter, and we're tracking it and taking every opportunity where we can.

Is there risk that -- I don't want to ask you to say more than you'd like to. But is there risk if it falls into somebody else's hands? Does that change the market landscape in a way that maybe isn't advantageous to you?

Well, I tell you, what we do is we focus all of our efforts on getting the best products for our customers that we can, and that served us well. We bring great solutions to the marketplace, have competed against much larger corporations for our entire existence. And we're staying on that strategy. We're continuing to do that, and I think our products will do just fine, regardless of who we're competing against.

Okay, great. Thank you.

This does conclude the Q&A session for today's conference. I would now like to turn the conference back over to Mr. Randy Lipps, for any closing remarks.

Well, thanks for joining us today. Another great quarter, solid performance by the team, both in the non-acute and acute areas. It's really good to see some synergies we're getting out of having both sets of products that we're cross-selling. A lot of great momentum in the marketplace. And we'll see you guys next time.

Thank you. This does conclude today's conference. You may now disconnect.