Randall Lipps - Chairman, President, CEO, Founder Scott Seidelmann - Executive Vice President, Chief Commercial Officer Peter Kuipers - Executive Vice President, Chief Financial Officer Kathleen Nemeth - Head of Investor Relations

Ladies and gentlemen, thank you for standing by, and welcome to the Omnicell Inc., Fourth Quarter Fiscal 2021 Earnings 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. Kathleen Nemeth, Head of Investor Relations, you may begin your conference.

Good afternoon, and welcome to the Omnicell Fourth Quarter and Full Year 2021 Financial Results Conference Call. On the call with me today are Randall Lipps, Omnicell Chairman, President, CEO and Founder; Scott Seidelmann, Executive Vice President and Chief Commercial Officer; and Peter Kuipers, Executive Vice President and Chief Financial Officer. This call will contain forward-looking statements, including statements related to financial projections or other statements regarding Omnicell's plans, objectives, expectations, targets or outlook that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied. For a more detailed description of the risks that impact these forward-looking statements, please refer to the information in our press release issued today, in the Omnicell Annual Report on Form 10-K filed with the SEC on February 24, 2021, and in other more recent reports filed with the SEC. Please be aware that you should not place undue reliance on any forward-looking statements made today. Our results were released this afternoon and are posted in the Investor Relations section of our website at Omnicell.com. Additionally, we'd like to remind you that during this call we will discuss some non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are included in our financial results press release. With respect to forward-looking non-GAAP measures, such as guidance and targets, we do not provide a reconciliation for forward-looking non-GAAP measures to the comparable GAAP measures on a forward-looking basis, as these items are inherently uncertain and difficult to estimate and cannot be predicted without unreasonable effort. I will now turn the call over to Randall.

Good afternoon, and thank you for joining us today. 2021 was another outstanding year for Omnicell as strong customer demand for our differentiated technical enabled and cloud based medication management products and enhanced solutions exceeded our expectations across all metrics. We believe our business is resilient and our innovation growth strategy is delivering results. We delivered a record $1.22 billion in bookings for the full year compared to $1.0 billion for 2020. This was a year-over-year increase of 21%, exceeding the top end of our guidance by $47 million. Demand for our advanced services portfolio was exceptionally strong and exceeded our plan for the year. As a reminder advanced services includes our SaaS, subscription software and tech-enabled services. Our 2021 non-GAAP revenues of $1.13 billion were also a record for the company, increasing $241 million or 27% from 2020. Now we are entering 2022 with a record backlog of $1.25 billion. We increased our total number of long term Sole-Source partnerships to 151 of the top 300 U.S. Health Systems, an increase of six from 2020. Many of these were competitive conversions. In addition to increasing the number of Sole-Source partnerships, we're seeing an increase in average booking size. In fact we booked three of the largest deals in our history in 2021. As a trusted partner, we develop solutions that we believe will continue to elevate our critical role in the pharmacy health system. To that end, we're excited to announce that Omnicell is partnering with Long Island University to launch pharmacy simulation centers that prepare the next generation of pharmacy leaders. This immersive experience goes live later this year, and will provide the opportunity for more than 200 pharmacy residents and technicians to become certified in the innovative technologies, systems and workflows that will help them navigate the…

Thank you, Randall. As Randall stated, in our review our results demonstrate that our strategy is working. Our shift in 2018 toward tech-enabled services and cloud based services which we shared with you and 2019 is gaining traction and delivering initial results. We made this shift back in 2018, because we recognized the significant need and large opportunity to transform the Pharmacy Care Delivery model and we recognize the unique position that Omnicell had because of its high quality brand, significant customer base, and the large channel to successfully execute a land and expand strategy. In 2018, the primary reason that the pharmacy care delivery model struggled with quality and cost problems was that its labor force was overwhelmed, overworked and under supported. COVID significantly exacerbated this people problem and in 2022 we feel better about our market opportunity than we did three years ago. We find the need to automate and digitize manual processes within pharmacy workflows is now even more pronounced. We offer our customers an intelligent medication management infrastructure that equips and empowers pharmacists and caregivers to focus on clinical care rather than administrative tasks. This infrastructure is a comprehensive cloud based platform that combines automation, analytics and expert services. Our intelligent infrastructure provides the foundations for realizing the industry's vision of the autonomous pharmacy, a vision defined by pharmacy leaders from proving operational efficiencies and ultimately targeting zero error medication management. Ultimately our intelligent infrastructure will enable pharmacists and caregivers to improve patient outcomes, reduce costs and reduce provider burnout. Now, I would like to comment on some of the recent customer wins. Our Intelligent Infrastructure Platform clearly resonates with customers. For example, we are excited to announce today that we signed a long term Sole-Sourced contract with UMC Health System in Lubbock, Texas. Omnicell was…

Thank you, Scott. I’m pleased with the strong results for the fourth quarter and full year 2021. Our Healthcare System and Retail Pharmacy customers continue to partner with Omnicell to realize the industry vision of the fully Autonomous Pharmacy and the overall demand metrics for Omnicell remained strong. I'm especially proud with the solid execution that our over 3,000 Omnicell team members continue to consistently deliver. During the quarter we welcomed 429 employees to the Omnicell family, 93 of whom were with the Reset and MarkeTouch acquisitions. Throughout the pandemic Omnicell employees have demonstrated their unwavering commitment to ensuring our frontline healthcare heroes received the critical medication automation management systems, and expertise they need to deliver the best patient care possible. Before I dive into the specifics of our financial results, I would like to highlight that despite the challenges from the pandemic, 2021 was a record year for bookings, backlog, revenue non-GAAP EBITDA, non GAAP EPS and free cash flow generation. Record product bookings for full year 2021 were $1.270 billion compared to $1,002 billion for the full year 2020, and were $67 million above the mid-point of our full year guidance range, an increase of 21% over the prior year. Total product backlog at the end of 2021 was $1.254 billion, compared to $924 million at the end of 2020, a significant increase of 36% year-over-year. Of the $1.264 billion in ending product backlog, $439 million or 35% is considered long term. This percentage is up from 33% at the end of 2020. The year-over-year percentage increase primarily reflects the growth in Advanced Services. We believe the strong 2021 product bookings are an indication that our healthcare system and retail pharmacy customers continue to turn to Omnicell to realize the industry vision of the Autonomous Pharmacy. We saw…

[Operator Instructions] Your first question comes from Jessica Tassan with Piper Sandler. Your line is open.

Hi! Thank you so much and congratulations on a great 2021. So I think we were just curious if you could maybe help us understand how the price increases worked within the context of either GPO contracts or under your Sole-Source contract and specifically is price flexibility baked into the Sole-Source contracts or do you have to negotiate each of those on a kind of one-on-one, customer-by-customer basis. Thank you.

Thanks. Hey! It’s Scott Seidelmann. So I think a couple of questions there. Your first one was really how did GPO price impact long term Sole-Source agreement. It has pricing in the long term Sole-Source agreement. I think to the latter point, typically the Sole-Source agreement will have a price lock of maybe first couple of years, one or two years and then after the fact pricing can adjust, sometimes drive the CPI, etc., but after that initial price lock, it can adjust. GPO pricing really doesn't come into any kind of factor in that long term Sole-Source Agreement, it’s outside of that. So long term Sole-Source Agreement should negotiate directly. I think – I’m sorry, you had a second one.

No, I think that's actually helpful on that and I guess this one is for Peter. Just what explains the improvement and adjusted EBITDA margin expansion over the course of the year? Is that mostly owing to cross the goods or is that integration cost concentrated in the first half? Any color there would be helpful. Thanks again.

Yeah, great question Jessica. I’m going to go back to the additional pricing action. We do have flexibility on the service pricing. That was a pricing action that we talked about in the last earnings call, so that has started to build up and flow through as well, and we've also talked about in the prepared remarks, the last call that we have increased the margin approval levels as well. So then to your question around the improvement in gross margins through the year, we delineated in the prepared remarks between the first half and the second half. So the way to look at this, there's really two factors there. One is the pricing action, so the majority of our product backlog is also a portion of our quotes are going to be for pricing actions, right. So the pricing actions kicked in in the quoted profit, sales process and we expect that to go into the backlog into revenue and to offset a larger portion of the inflation near the end of 2022 and as we move into 2023. Now we expect now that pricing actions will fully offset inflation beginning in the first half of 2022, [inaudible] and then from an inflation perspective, we had initiated pre-buys initially via brokers, and then directly also a few OEMs and should we see that pricing in the cost easing over time, starting probably really near the end of 2022 and then flowing into ’23. So that – those two factors provide along the gross margin, margin improvement of currency from the first half or second half of ‘22.

Got it. Thank you.

Your next question comes from the line of [inaudible] with Wells Fargo. Your line is open.

Hi! Thanks for taking my questions. Maybe a couple on bookings. I guess first, how much of the bookings guidance is coming from M&A. Could you quantify that number for us?

Yeah, so the bookings guidance and also revenues, a couple of points from the full year impact of M&A compared to last year.

Okay. I guess one thing I looked at just in the context of your bookings guidance, can we have some insight into the conversations you're having with sales reps? You know are Sole-Source clients expressing any notable changes, maybe in the product or services roadmaps that they are contemplating or perhaps in the pacing of product implementations over the coming year? Can you comment on anything along those lines?

Well we'll probably comment here, but... So what we see is really a couple of factors as we said in the prepared remarks. So first, we really see the strong momentum in advanced services and that is a clear differentiator and fairly often the vast majority of all deals are really that makes the choice for us for Omnicell; Omnicell to be the partner. We have not seen any change in implementation, timelines related to COVID or change in demand is a fairly strong from our perspective of what we see in the field. Maybe Scott, you want to comment as well.

We're not seeing from an implementation perspective, we’re not seeing any impact from COVID.

Yeah.

Okay, okay.

You had a second part? Did you have a second part of question as all, unless we fully answered it.

No, I think that gives me some color. I guess my decision here is, I’d like to maybe ask a question on the 340B sales that you are generating. You know qualified hospitals already have point solutions in place. I'm trying to understand what's really driving incremental growth for that business? Is it mainly technical services or are you also displacing existing point solutions as you're generating these incremental sales?

Right, so our existing Omnicell 340B business, it’s a technique and service. It’s a TPA that includes the billing software and expert services advised at the hospital on how the management 340B program and how to optimize it. It does – we are displacing other vendors and we are doing that, because as part of the portfolio is an element of the portfolio that helps us in engaging us on a much broader relationship. The 340B solution is only one of many services and products that that health system is requiring from us and we've got a thoughtful vision for how you can integrate the 340B software into other aspects of our software and synergies between 340B and opportunities such as IPN, so that’s something that our health systems are keenly aware of. And again, I’ll point you back to the health system that we recently announced; the Sole-Source Agreement with EMC in Lubbock, Texas, which engaged us, both the 340B central pharmacy point of care and derive it. The general impetus there was not only from a health system, which I think is a great example of health systems generally, focusing on optimizing in-patient, but also this health system might most is very much engaged and focused on optimizing ambulatory and outpatients, and when you start to see that, then services like 340B and patient engagement programs like in [inaudible] become incredibly important to health.

Got it, got it. And then on, can you comment at all on the trajectory of growth in that segment?

Yes, this is Peter and I would say that is in line with the general growth of the business.

Yeah, and just that reset of course allows us to have a different angle. Our current 340B product uses contracted pharmacies. Reset would use the pharmacies of our provider. And so that allows an additional option for 340B customers in the provider world to use either one. So we are really happy with that acquisition and it really broadens our specialty pharma offering and really allows us to – we having both the demands of providers and pharma.

Okay. And then maybe just a clarifying question. I think as Jess was asking earlier on the pricing adjustment. So as when you are commenting that towards the end of 2022 you're going to see everything kind of back to normal pricing standpoint. Are we thinking about from the perspective of the now bookings at the end of 2022 will be priced accordingly or is the mix of booking still going to have some kind of a drag, where when we're thinking about next year you're still going to have a margin impact coming from what inflationary pressures, maybe not as much as you're seeing now, but we should still factor some kind of an impact going into next year, because not the entire full year bookings have that out pricing adjustment, is that the correct way to think about?

Yeah, I think there's actually two questions there I think. So form a ledger impact perspective, for the financial results we estimate that the pricing actions will offset a larger force of the inflection towards the end of 2022 and into 2023 and we expect these pricing actions to fully offset the inflation starting in the first half of ’23. So that's the way you to think about that. And then we have of course analyzed, estimated our quotes in the pipeline, a portion of those are of course pre-pricing actions and when they book if you will, they'll become a net negative from a inflation pricing action perspective, but more and more of course newer quotes since we started the pricing action. And it’s still affordable and will offset most of the inflationary costs. Now they continue to manage of course inflation as well, reduce fee and what we see in the industry and what we also are looking at, industry repots we see inflation continuing also through an extend into 2023 but to a lower extent.

Got it, thanks so much.

Your next question comes from the line of Scott Schoenhaus with Stephens. Your line is open.

Hi team! Happy Valentine's Day. So Peter, I think you said there is a $35 million impact to margins from inflationary cost pressures and then was it $15 million from integration costs? What was the second number you provided for the bridge?

Yeah so, thank you for the question. So inflationary costs we estimate to be in the range of $30 million to $35 million and then the size of the market remains in the margin. $8 million of acquisition integration costs, with the copier there that most of integration costs must be modeled and then execute on integration of strategic acquisitions is in the first year. So in 2023 that number, it should be significantly lower if you will. One other element, talking about acquisitions is that the acquisitions that we've done, the three acquisitions in general or in total are over the average lower EBITDA percentage than the core total business, right. So that’s also a headway in ’22 which you can also factor.

That was actually what I was getting to and where you really see leverage on the SG&A side I'm assuming.

Over time we can still integrate yes, yeah over multiple years.

Well that helps me get to the bridge. So just another question, so services revenue, you guided to about 31% of your total overall mix for 2022. That’s a healthy increase from the end of even this past year. Should we expect that kind of momentum to continue annually going forward, Peter?

Yeah, if you – the answer is we should not expect that absent any additional acquisitions. The most of the difference between the organic revenue growth and core revenue growth is of course inorganic and most of the acquisitions, most of the revenue of the three acquisitions we did in the last year are actually being recording as a service revenue, so there is quite a bit of growth there in organic basis as well.

Thank you.

Got it.

Your next question comes the line of Anne Samuel with J.P. Morgan Chase. Your line is open.

Hi guys! Thanks for taking the question. You spoke to increase booking size and was hoping maybe you could talk a little bit about what you would attribute that to. And are you seeing any benefit yet in those numbers from some of the labor shortages that you know noted?

Well, most of the booking size is because people have under invested in infrastructure, particularly around medication management. And as the real desire as these large providers, wan tot created standard and make a strategic investment. Just not answer some of the problems, but put an entire platform to digitize their whole network. And so once that sort of presentation gets to the right level, usually the C Suite, people want to investor strategically over many years to automate and deliver on the relief of not only labor shortages, which have become even more acute these days, but also accuracy and some of that labor shortages have to do with some of the most difficult people to find, like an experience pharmacy technician who is compounding IVs. While moving to an automated robot that Compound IVs really just doesn't relieve some headcount, but relieves some headcount that are the most difficult to find and also in an area that is a problem there, could be problem and danger if you're not doing it properly. So, it really means that you take a strategic approach to the total partnership with Omnicell in a broader spectrum.

Add to that, the strategy has been explicit on two fronts, which is one focused on the large health systems and engage those large health systems with a comprehensive portfolio, namely the advanced services, and where that's been really working for us over the last couple years and mainly last year is that we have been winning with large health systems on the strength of the differentiation provided by the advanced services, and I think what we're seeing is that over the last 14 large competitive conversion, 11 of the those have had at least one advanced service in addition to the point of care. So these health systems are engaging, because the strength, they are engaging quite heavily with us.

That's really helpful, thank you. And then maybe just one, I apologize if I missed it, but I was wondering given some of these near term inflationary headwinds that you're seeing, does that impact your 2025 profitability targets at 400 basis point expansion that you had called out.

Yeah, it’s also a great question. In the prepared remarks, we called out on the 2025 framework. So from a revenue perspective we feel very confident on being able to achieve that. From a profitability perspective, there is a cope on inflation. However we have line of sight and fee execution of pricing actions, productivity, process improvement and cost synergies and leverage.

Great! Thanks very much.

Your next question comes from the line of David Larsen with BTIG. Your line is open.

Hi! Can you provide a little more detail around the $30 million to $35 million in inflation pressure for next year? Like what portion of that is coming from semiconductors versus freight versus steel? And then it sounds to me like quotes were provided, but then after those quotes were provided the prices of the materials increased, which is why there's a margin headwind. I mean why can't you just sort of go back to the customers and be like, ‘hey! Inflation popped up, we got to adjust the quote.’ Is that possible to do or not? Thanks.

So, great question. So on the first part of the question, so the $30 million to $35 million of inflationary costs, you should think about roughly half of that is semiconductor related and the second half is roughly, equally divided between freight cost inflation and steel cost inflation. The on the second part of the question of going back to customers with quotes in half or orders and backlog, there is limited flexibility to do so. In terms of not to do that, again we’re focused on the long term, focused on the customers. Part of that’s also for a pre-buy or semiconductors which gives us a high level of confidence that we can supply our end customers. But it does come at transitory inflation costs here in ’22 and which you see in ’23 as well.

Okay, that’s helpful. Thank you. And then assuming that prices do cover these inflationary costs in early ’23, then for your 2025 guidance for earnings, it seems to me like me like maybe worst case scenario, that could get pushed back by one year, right, because I mean the prices are going to offset the inflation a year from now. So maybe if you get pushed back a year, worst case scenario, is that reasonable or not?

Yeah I think that’s a great part of your question. So we're working with the inflation but there is uncertainty there and of course we have the already testing year, also incrementally year-over-year in your services and clould, given the strong demand. But that has like we said earlier in the call, we are executing on these pricing actions and we believe that those pricing actions will continue or stick if you will on an ongoing basis, also in the outer years and then we’re working cost productivity, manufacturing savings and leverage, so…

Yeah, leverage on the advanced services as well. Many of the advanced services are early stages where the margins aren’t as leveraged up as they will be as they gain scale. So certainly as we go on through 2023 to 2025 these will scale and deliver much better gross margins. Yeah.

Great! And then just one more if I can squeeze one in. For the $8 million integration costs, are those one time in nature or will they recur in 2023. And if they are one-time in nature, I mean can we think about them as being kind of one time in nature and exclude them from adjusted EBITDA or what are the $8 million, what’s the $8 million box?

That's a fair question. They are one time in nature and just to be clear we have not excluded those costs, we have not adjusted for that cost in our EBITDA guidance, alright. So they are a drag on EBITDA and earnings in 2022. For our integration plans and we like to integrate strategic acquisitions for the majority in the first year. So the integration cost in 2023 is significantly lower. So think about maybe $1 million or $2 million compared to the $8 million in ’22.

Okay, thanks very much. It sounds like it's a sort of a temporary headwind here that will be overcome in ’23. Thank you.

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

Good afternoon. Thank you for taking the questions. A couple of different fronts here, maybe first up and sorry to keep asking about the inflation, but Peter you specifically talked about the semiconductor, trade, steel. I'm curious, you're also seeing it on the wage side as well, particularly as get more and more engrained in the services business, are you seeing it on that side as well?

Yeah, that's a great question. We believe we were very an effective employer who’s been able to higher great talent. As you have seen in the last couple of questions, we haven’t seen quite any significant labor inflation. So it’s probably too early to tell. We do think our compensation is good compared to market.

Okay, great. And then separately, I'm curious – and this is maybe a little bit out there. But over the past couple of years with the pandemic, procedure volumes are down, patient visits to the doctors are down, all of that, unless it was tied to CVOID and I'm curious, how that is you know – that, if you want to call it a headwind has impacted like the 340B and some of the markets that you've moved into here recently and as we come through the pandemic, is it your expectation that you'll actually start to see increased growth in those markets which you will now be the beneficiary of.

Well, I think for sure as I said in my prepared remarks we do expect volumes of big providers particularly hospitals to go up, I think about 4%. Many of it was delayed and so – but, that really hasn't slowed down the buying from what we’ve seen. So I think it is just going to be more healthy for our customers as we move toward, because there will be more volume to go through. And I think it's, not just the acute care, but also in outpatient areas. So just like Scott’s talking about UMC. So I think people evolved and many of the attention to some items in the healthcare that they should have done in the pandemic. And I think as you say, as the Omicron is moving away, so the volumes should be increasing.

That's helpful. Thank you.

Your next question comes from the line of Dev Weerasuriya with Berenberg Capital Markets. Your line is open.

Dev are there? Can you hear us?

Hey! Good evening! Can you guys hear me?

Yeah, we can.

Okay great. Thanks for taking my question. So just to kick it off on this inflation, hopefully circle this out, I just want to confirm, I think you mentioned on wage inflation that it wasn't maybe considered in 2022 to 2023 in regards to your inflation $35 million impact. I just want to confirm that. I guess that doesn't include any kind of wage inflation there.

Well, we always – we always kind of correspond, we plan for good [inaudible] product inflation as well. Did you say $5 million in ’21?

Nothing extraordinary, how about that.

Okay great. And then maybe just jump in to kind of the top line. On the revenue side, just wanted to get some more color around you know this tech enabled SaaS services, and maybe you know disaggregated by the end market. Where are you may be seeing more momentum? For example I guess Omnicell One maybe kind of a easier sell with the Sole-Source agreement that you have, you know ADS. You know the worse is maybe going after new retail customers or payers. So just any color on kind of the momentum, more disaggregated on that side would be helpful. Thank you.

Yeah, I think – this is Scott. So in terms of market, I mean the focus of the business and the channel has largely been the large health systems and that’s not exclusively acute. The large health systems are increasingly (a) expanding through other hospitals and increasingly expanding in ambulatory outpatient and now even hospital at home or home healthcare. And I think when you look at that, I mean that’s driving a lot of demand to automate pharmacy not only to fill the acute care beds, but to support a large geographic enterprise. Omnicell One is linking that entire health system up to help them in effect access a air traffic control function to make sure that the right drugs are in the right locations, both inside the hospital and outside the hospital. Things like 340B, Reset now are helping that hospital grow the topline, whether that’s through retails meds management, the 340B business, that’s certainly the out-patient side, and then in Enliven as we mentioned with UMC Lubbock, we are seeing more and more demand from health systems to actually utilize tools and solutions, like the EnlivenHealth portfolio is not pretty comprehensive because we’ve added FDS Amplicare and MarkeTouch capabilities. That’s showing there’s real demand in the health systems. Again those, the primary market for those are the more traditional retail pharmacy. But we're certainly seeing the vision for the strategy with always – that the world would certainly start to intertwine and that we will be well positioned with a fully comprehensive solution, so...

Okay, that's helpful. I guess maybe taken like a customer for example on EnlivenHealth, you know Wal-Mart is an example. Just in regards to recurring revenue growth and also maybe also on like the gross margin side, a double edge question here. So on the revenue side after you do the implementation, on the SaaS side, what kind of growth drivers are there after you roll it out I guess widely? And then on a gross margin side, I would assume there's some interpretation cost in the first couple of years. Would you expect that to improve? I guess at what rate would be expect it to kind of improve on a unit economic basis per client. Just on the advanced services and tech side. Thank you.

First point, which is really around where its growth for an Enliven customer. So very traditional fact, really on two dimensions. One dimension is that the subscription product, that subscription is tied to – call it number of stores, number one; and then number two, what services are within that subscription. So any large Enliven customer revenue would scale in two dimensions, one of which is how many stores am I adding into the platform and then how many subscript services am I subscribing within the platform, right. And so the customer you mentioned maybe rolling out all the stores on one of the platform, one of the subscription or one of the services, call scheduling or IVR, etc. The growth comes really with that impact sale notion of engaging that customer to add more of the services. So maybe I started with IVR and now I want to add Medicine and financial analytics and scheduling and then ultimately participant in some of the payer market price and activity. So that’s how that, you can see that growth dimension. Gross margin, we really have never commented on a particular gross margin, it would more like a scale.

Okay, but I guess it's generally, would you expect to gross margin to kind of increase over time after you win a customer?

For sure, right, because there’s even a SaaS business. It has a fixed cost associated with a give a customer that would scale at the time as you add more volume to it, sure.

Okay, great. Thank you.

There are no further questions at this time. I'll turn the call back to Randall Lipps for closing remarks.

Hey! Look everyone, thank you so much for joining us today. I mean Omnicell has always been about growth over the last few years and yes, there are some headwinds in the inflationary places and some M&A costs and the integration costs. But we've got a good game plan and most importantly we're going to get the systems installed for our customers, so that they can improve healthcare for everyone and we'll get back to our normal gross margin as we go down the road. Thank you so much. We'll see you next time.

Thank you. This concludes today's conference call. Thank you for joining. You may now disconnect.