Robin G. Seim - Chief Financial Officer, Principal Accounting Officer and Executive Vice President of Finance, Administration & Manufacturing Randall A.

Lipps - Executive Chairman, Chief Executive Officer and President

Matthew G. Hewitt - Craig-Hallum Capital Group LLC, Research Division Mohan A.

Naidu - Stephens Inc., Research Division Jamie Stockton - Wells Fargo Securities, LLC, Research Division Charles Rhyee - Cowen and Company, LLC, Research Division Sean W. Wieland - Piper Jaffray Companies, Research Division Andrea Alfonso - FBR Capital Markets & Co., Research Division Eugene Mark Mannheimer - Topeka Capital Markets Inc., Research Division Gary Schwab

Thank you. Good afternoon, and welcome to the Omnicell 2014 Third Quarter Results Conference Call.

Joining me today is Randall Lipps, Omnicell's Chairman, President and CEO. You can find our results in the Omnicell third 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 in our press release today, in the Omnicell Annual Report on Form 10-K filed with the SEC on March 17, 2014, 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. The date of this conference call is October 30, 2014, 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 a property of Omnicell, Inc.

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.

Then I'll cover our results for Q3 and our guidance for the remainder of 2014. And following our prepared remarks, we'll take questions.

Thanks, Rob. Q3 was another great quarter for Omnicell.

We had record revenues while achieving operating margins in excess of 15%. We completed the acquisition of SurgiChem, expanding our medication adherence market presence in the U.K., and we saw a continued momentum with Greenfield and competitive converging customers.

Our investments in our 3-leg strategy of differentiated products, expansion into new markets and acquisition and partnerships continue to deliver results. Our differentiated product strategy is driving exciting new customer wins.

Year-to-date, 39% of our orders from Automation and Analytics products have come from new and competitive conversion customers, which is a wonderful testament to the competitive strength of our solutions in the market. One of those customers is Wake Forest Baptist Medical Center in North Carolina.

Wake Forest is a 3-hospital medical system of over 1100 beds centered around the Wake Forest University Hospital. After an extensive review of all available options, Wake Forest chose the Omnicell medication solutions suite to replace a competitor's products.

The installation will include the award-winning G4 OmniRx medication system and Anesthesia Workstations for the operating room; Pandora Analytics and central pharmacy automation utilizing WorkflowRx software; medication carousels and unit dose packagers in the main pharmacy, along with our new central pharmacy software product to manage their 45 satellite pharmacies. As hospitals consolidate into large systems, they face challenges managing multiple sites.

Our recently new released software for central pharmacy systems running on the Unity platform helps simplify their operations. Wake Forest highlighted the Unity platform, which allows the health system to run all of these dispensing systems from a single enterprise server as one of the major reasons for choosing Omnicell.

The hospital system was also drawn to Omnicell because of our long-standing practice of partnering with industry thought leaders to bring new innovation to the market. Other notable orders in the quarter included the upgrade of all of the Dignity Health Hospitals to G4.

Dignity has more than 40 hospitals and care centers operating in California, Nevada and Arizona that first started standardizing on Omnicell systems in 2005. We have now taken orders for 54% of our upgrade eligible install base to move to G4.

The product has been a great success. In our international business, which is part of our strategy to expand into new markets, we took orders from the King Faisal Specialist Hospital and Research Center for a house-wide implementation of supply dispensing automation and the new King Abdullah Center for Cancer and Liver Diseases.

King Faisal is a 985-bed marquee hospital in Riyadh, Saudi Arabia that had earlier implemented Omnicell's systems in their 37 operating rooms. We're happy to bring expanded value to the hospital with the addition of our supply systems to the new facilities.

These wins underscore the long-term value designed and built into every Omnicell system. Our Unity platform puts medication and supply management from central pharmacy to the nursing units and operating rooms into one comprehensive database for improved efficiency and patient safety.

Our modular system and practice of frequent software releases allow our customers the ultimate flexibility and configuration and the capability to keep their systems technologically current while protecting their investments. And our string of innovation continues with the announcement this quarter of OptiFlex 12.0.

OptiFlex is a supply management software solution focused on the procedural areas of the hospital such as operating room and cath labs. OptiFlex 12.0 is one of the first products to meet the new FDA requirement for unique device and identification capabilities to label and track implantable devices through distribution and use.

OptiFlex 12.0 allows for bar code scan of a device in communication of that information to the electronic health record for post-procedure and recall management. Another area where we are now seeing new products is our Medication Adherence segment.

Medication Adherence is a problem causing over $100 billion of annual avoidable healthcare cost in the United States alone. Today, we're announcing the first fully-automated multi-med packaging solution to assist pharmacists with improving their patient's medication adherence.

Over the past 2 years, we have studied the needs of the pharmacists who could make a meaningful change in medication adherence. After a rigorous development program, we are now seeing the Omnicell M5000, which is designed to automatically pack, seal, verify, and label multi-med blister cards, enabling pharmacists to deliver medication adherence efficiently and cost-effectively.

This new concept supports pharmacists in expanding the number of patients utilizing multi-medication adherence packages, and in the process, improve drug adherence. Beyond the primary focus of improving patient care, the Omnicell M5000 is intended to increase pharmacy profitability through improved practice workflow efficiencies.

The M5000 is designed for institutional pharmacies serving long-term care, retail pharmacies and hospital pharmacies serving ambulatory and discharged patients. We expect the product to enter the customer validation phase this quarter and to be generally available in early 2015.

Concurrent with the M5000 and following the acquisition of SurgiChem, we will be consolidating all of our Medication Adherence consumable products under the brand name Sure-Med. Also in the Medication Adherence segment and part of our strategy to expand through acquisition, we completed the acquisition of SurgiChem, a leading provider of medication adherence packaging to retail pharmacy in the U.K.

The acquisition complements Omnicell's strong position among national pharmacy chains in the U.K. with SurgiChem's reach to independent retail pharmacies.

The combined business establishes us as a market leader in medication adherence in the U.K., including the SurgiChem customer base, our counter patients using our Medication Adherence Solutions worldwide is approaching 1 million. To wrap it up, we believe the continued investment in our 3-leg strategy of differentiated products, expansion into new markets and acquisition and partnerships is driving profitable growth.

We're executing our growth strategy well, delivering state-of-the-art medication management and workflow efficiency to our customers, results for our investors and better healthcare for everyone. I believe we have all the ingredients for continued success.

Rob?

Thanks. So as Randy said, 39% of our Automation and Analytics orders year-to-date were from new and competitive conversion customers in Q3.

Coincidentally, 39% of the orders in Q3 were also from new and competitive customers around the globe. Approximately 3/4 of those orders came from competitive conversions and 1/4 from Greenfield customers who had never purchased automation before.

We go head-to-head with our competitors' products in most deals, and we're clearly doing very well. Our revenues of $112.5 million were up 7% from last quarter and up 20% from the same quarter last year.

GAAP earnings per share were $0.20, down $0.01 from both last quarter and Q3 of 2013. We had excellent year-to-year growth of 27% in our GAAP operating income that drove $0.06 increase in earnings per share year-to-year, but we had 2 unusual items that negatively affected earnings in the quarter and offset the earnings growth.

First, we experienced the foreign exchange currency hit on the purchase price of SurgiChem while the funds were in Escrow, which gave us and approximately $350,000 charge to the P&L that you'll see in other charges. Second, our tax rate in the quarter was 43.4%, much higher-than-expected due to the timing of non-deductible employee stock transactions.

The combination of the currency and tax impacts diluted our earnings approximately $0.04 per share in the third quarter of 2014. Now last year, we had some similar unusual tax effects associated with the disposition of employee stock that gave us a benefit of $0.03 in Q3 2013.

So the combination of unusual tax effects in both years and the currency decreased year-to-year earnings growth by $0.07 per share, which more than offset the earnings generated from our growth in operating income. These are somewhat unusual operating events that may happen from time to time, but we don't expect them to be a regular occurrence.

For the rest of 2014, we now expect our annual tax rate on GAAP earnings to be 41%. So in addition to GAAP financial results, we report our results on a non-GAAP basis, which excludes stock compensation expense and amortization of intangible assets associated with acquisitions.

We used non-GAAP financial statements in addition to GAAP financial statements because we believe it is useful for investors to understand acquisition-related costs and noncash stock compensation expenses. They are component of our reported results.

A full reconciliation of our GAAP to non-GAAP results is included in our third quarter earnings press release, and is posted on our website. On a non-GAAP basis, earnings per share were $0.30 in Q3, flat to last quarter and down $0.01 from Q3 2013.

And the explanation of the year-to-year decline is the same as I described earlier for GAAP results. Irrespective of the unusual tax and currency impacts of Q3, our non-GAAP operating margins were 15.9%, exceeding our long-standing goal of 15%.

Adjusted earnings before interest taxes, depreciation and amortization, which also excludes stock compensation amortization and the amortization of acquisition-related costs was 27 -- excuse me, $21.4 million for the third quarter of 2014, up 19% from $18 million a year ago, an increase consistent with the growth in revenue. On a segment basis, our Automation and Analytics segment contributed $89.5 million to revenue, up from $75.1 million in Q3 2013.

$12.5 million GAAP operating income this quarter compares to $9.8 million GAAP operating income last year, and $15.5 million of non-GAAP operating income in Q3 2014 compares to $12.7 million non-GAAP operating income last year. The Medication Adherence segment contributed $23 million of revenue to the quarter compared to $18.9 million in Q3 2013.

GAAP operating income of $1.1 million compares to $0.9 million a year ago, and $2.4 million of non-GAAP operating income compares to $1.9 million of non-GAAP operating income in Q3 a year ago. These Q3 2014 results include a partial quarter of contribution from SurgiChem.

We're very happy with the performance of both of our segments. Automation and Analytics revenue is up 19% year-to-year and contributing non-GAAP operating margins over 17%.

Medication Adherence revenue is up 22% year-to-year and contributing non-GAAP operating margins over 10%. We believe both businesses are growing substantially faster than the overall market.

In Q3, our cash decreased from $126 million to $104 million. During the quarter, we repurchased $16 million of our stock, of which $13 million was settled and reduced from our cash balance.

The total shares repurchased were approximately 575,000 and the average price was $27.06. We believe our stock is a good investment now and we intend to complete the remaining $9 million of our current authorization during Q4.

We also used $21 million of cash for the SurgiChem acquisition during Q3. All other operations of the company generated $12 million of positive cash flows.

Running out the balance sheet. Accounts receivable days sales outstanding were 78, up 6 days from last quarter.

Our increasing DSO can be a cause for concern, but in this case, the quality of our receivables has not changed. Neither our revenue recognition practices nor our exposure to bad debt have changed.

Instead, we are now seeing a lower percentage of our business from leasing customers. And since leasing partners that we sell our leases to tend to pay us very promptly at the beginning of a lease and hospitals that purchase tend to pay later, a mix shift towards purchase customers causes a higher DSO.

Our inventories were flat at $32 million and our headcount was 1,229, including the addition of 21 SurgiChem employees. So looking forward, we believe we're heading towards the upper end of our growth guidance ranges for both revenue and profit.

With the inclusion of SurgiChem, we previously expected revenue to be between $420 million and $430 million. We are increasing and narrowing that range to $430 million to $435 million, which is a 13% to 14% growth from 2013.

We previously expected non-GAAP earnings, including SurgiChem, to be $1.18 to $1.24 per share, and we are now narrowing that range to $1.21 to $1.24 per share, up 12% to 15% year-to-year. Again, EPS estimates reflect an effective annual tax rate of 41% on GAAP earnings by year end.

We expect to finish with an average annual operating income of approximately 15%. Our 2014 product bookings guidance is between $345 million and $355 million, which is consistent with our previous guidance.

So that concludes our prepared remarks, and now I'd like to open the call to take your questions.

First question, revenues came in nicely ahead of, I think, expectations, obviously, some of that is going to be SurgiChem. But was there anything abnormal?

Did anything get pulled into the quarter?

No. We had a little bit of contributions from SurgiChem, a little bit of $1 million, but the rest of it was is just the normal timing of our customer installations.

Okay. And then, I think some of this might be related to the adherence packaging business, but we've seen your gross margin kind of ticking down, ever so modestly the last 6 quarters.

Is some of that related to the adherence packaging? Or are you seeing maybe a little bit more competition on pricing?

What's causing that modest tick down?

It's a little bit on the adherence packaging, but really, what's happening is we are experiencing a higher mix of large competitive conversions. And whenever we have a competitive deal, pricing is always pretty competitive.

And so those deals tend to drive down the margin a little bit. But overall, our margins by type of customer, by geography, are pretty consistent with what they've been in the past.

So really what we just seen is mix differences.

Okay. Maybe then one last one for me, and I'll hop back in the queue.

On the competitive landscape, we've seen another announcement here, your direct competitor being acquired. What are your expectations, I guess, over the near term?

Is this going to create some opportunities for you to displace maybe them and some key accounts? Are there any that were up for renewal that you're looking at immediately saying, boy, this is a great chance, now is the time?

Or is it kind of status quo?

Well, it's a little bit of a status quo. I think, we haven't seen much changed at all, in either tactics or strategy.

Obviously, they haven't been combined yet, but we really don't believe that, them being part of a different organization or the fact that we don't need to be part of such of an organization to compete effectively in the marketplace. In other words, we think we're really well positioned with our positioning in the marketplace, where our company is today.

And I think we're going to continue to take advantage of that, as we've seen in the recent quarters.

And quickly on medication adherence. I'm just trying to figure out, are your Acute Care customers ready yet to jump in into that type of product?

Well, there's a lot of discussion in the press and the news about medication adherence and the problem that it causes. So Acute Care customers, the hospital customers, as we all know are doing a lot of business combinations, they're starting to manage a broader spectrum of healthcare.

And as they get into that, there is a lot more concern about managing medication adherence across the continuum of care. So I see a lot of -- we're seeing a lot of interest right now, and we just talked about this new M5000 product, which we've had a few initial conversations with customers about it in both institutional pharmacies and Acute Care setting and there's pretty broad-based interest.

So I think the company is nicely positioned at the beginning of this wave.

Yes. And just to extrapolate that.

Right now, you don't have much revenues in the Medication Adherence segment from Acute Care, right?

No. We don't have a lot of revenues from medication adherence in the Acute Care segment.

And we do have -- we do count all of the revenues based on products now instead of -- we're trying to do by customers, but the customers were getting all -- the customers were covering kind of the spectrum of healthcare and it's hard to break them apart. So we would count any of the sales of medication adherence packaging equipment or the consumables in the Medication Adherence segment of our business, even if they were sold to a hospital.

Right, got it. One housekeeping question on SurgiChem.

It was doing about $1 million a month, so the expectation of $3 million for the fourth quarter looks good?

Yes, that's right.

I guess, maybe just on the M5000, to follow up on Mohan's questions. I think the goal here was to try to introduce a higher volume solution into the marketplace.

Could you talk about the profile of this solution, maybe from a volume and a cost standpoint, and why you think it's going to be more attractive? And then maybe as a second question, I think you rattled off a few different end markets, the institutional pharmacies, retail and hospitals.

Is it that you think retail could be the most receptive to this? Or maybe institutional and really the hospitals would be a much longer-term opportunity?

Well, let me answer part of that. Randy and I will both answer some of your questions.

There's a lot of questions in there. So the M5000 is a product that automates more of the workflow in packaging, medication adherence cards.

And just a reminder, the medication adherence product has all of the medications to be taken at a particular dosing time in a particular pocket. It stores all of that for a week in a particular card.

So each one is custom-packed for the patient by the pharmacist, which can take some time to do that packing, make sure everything is in the right place, make sure it's labeled right and do the quality check. There's no system on the market today that automates all of that.

The M5000 is designed to do that, and so it's sort of a new class product in the marketplace. It's not a system that customer, pharmacist that's only packing for a couple patients a day wouldn't want to get into, it's more a volume product, as you mentioned.

And we do have the intent to fill out our multi-med product line with products that are appealing to pharmacists that are just entering the market, as well as pharmacists that are filling Medication Adherence packages for hundreds and thousands of patients. And this fits part of that spectrum.

Yes. So the first product is -- you're correct, is really designed to go into a hub, not an individual retail facility.

It will be designed to go into institutional pharmacy or a large outpatient facility in an Acute Care IDM setting. And its cost is well over $0.5 million, and depending on the size and configuration, it could approach $1 million.

So it's a big investment, and it's designed for high-volume. And the process of packing a card is very labor-intensive, both on the technician's side and particularly, on the pharmacists' side for checking.

And we have designed into the system the ability to really remove a lot of those costs and improve the accuracy to make it pretty much automatic. And so it's really creating a new market for pharmacies that have never had a market to deliver a product in the Med Adherence category to so many patients.

So it's a really big move for us.

Just a question on the revenue growth here. Obviously, very strong this quarter, the whole year has been doing very well.

When we think about the odd years, is it fair to think -- because Rob, I think, in the past, you've talked about trying to drive at least double-digit revenue growth, and when I usually hear that I think of sort of low teens growth. But given the success you've had, particularly in competitive replacements, the growth international, et cetera, should we start thinking about the revenue profile, this company being better than sort of low teens?

I mean, is this -- when you look at the third quarter results and sort of the year-to-date results as something sustainable as we think of the future?

Well, so this is an interesting question, right? The market is growing for both of our segments, sort of in the mid-single digit range, and we've been able to outperform that market growth pretty substantially for several quarters in a row now.

I think if you look in long-term because we don't really give any guidance specifically, but we're trying to maintain organically about a 10% growth range, yes, maybe 8% to 12%, call it, and then augment our growth through acquisition. And we think if we're able to obtain that over time, relative to what's happening in the market, that is very, very good.

There's certainly going to be quarters like the quarter we just had, when we were up 20% year-to-year, and there are probably be some quarters when we're not up quite as much. But I think in the long-term, we're still targeting that 8% to 12% organic and -- with augmenting those acquisitions up to 15% growth.

Okay. I mean, so is it sort of your view -- when you say you want to maintain sort of like this 8% to 12%, does that imply -- does that make an assumption in your models for some targeted percentage of the competitive replacements?

So right now, this quarter was 39%. Is there some internal number that you target that to get to, let's say, that 8% to 12% we need to be winning x percent of these replacement opportunities?

Well, competitive displacements has certainly been an element of our growth. And as we all know, there's probably a limit to how many years you can do that.

We have a presence in over 1/3 of the hospitals today, and we believe we've got some of the best products in the market. So we hope to continue to fair favorably when we compete against the other companies here in the marketplace.

But if you look at our overall strategies for growth, we really have 3, and having differentiated products is our first strategy and one of the things that helps us to displace competitors. But we also have a quite a few products in our product line that some of the competitors don't have at all, and help us with that growth strategy.

Growing into new markets is another part of that growth strategy, both internationally, and we've grown into the non-acute market pretty nicely. And then adding into our product line through acquisition, acquisitions like -- the SurgiChem acquisition, we expand our base and our products that we already have in the marketplace or acquisitions of new technologies.

So all of those 3 growth strategies are what's factored into us saying that we're trying to target growth faster than the industry.

So then not to put words in your mouth, it sounds, when I hear your description here, competitive displacements is not really a main factor, and that would represent potential upside to our revenue growth targets, is that fair?

Gaining share in the marketplace is a part of our growth strategy, it's just not one that we think will last forever.

Go back to the BD acquisition and care fusion. You really don't see any potential disruption in the market?

Or any changes to tactics or strategy to pick up some incremental share here?

Well, I think, anytime there's an acquisition, there's probably some disruption. But it's hard to plan for it.

It's been pretty quiet out there. We haven't seen anything yet that gives us a feeling, one way or the other.

But I think the long answer is, we compete very well against the other companies, larger companies, we have in the past and I think we'll continue to do so. But it does -- there's a lot of change out there going on in the marketplace and Omnicell isn't changing, so I think there is a note of consistency in our business and our ability to meet the market demand.

So it's just hard to put in the model.

Okay. I want to ask about the clinical study that you're doing on medication adherence.

I thought that was interesting. What's the goal here?

And is this something that you're seeing that needs to be done in order to drive sales in this segment?

Well, I think we want to go beyond just the obvious features of being able to easier -- more easily take meds. We want to actually demonstrate that you get clinically better outcomes through medication adherence.

What's going beyond just how well is it accepted in the market, do people take their meds more often. While it's a fact that people take their meds more often, can we actually prove their health can be better?

That's just one extra step. And you see, folks like the VA and some other institutions are really interested in understanding this on a much -- on a clinical perspective.

And I think it's the right move, and it makes sense. We see a lot of interest in these kinds of studies.

It's Andrea Alfonso in for Steve Halper with FBR. The first question that I had is regarding the M5000 multi-med product.

Do you currently have a beta customer for that? Or alternatively, when would you expect to get the first customer?

We do have a committed beta customer who's also purchasing the product, and we're in the midst of that validation process now.

Great. And then just any thoughts on plans for the Sure-Med brand name?

Well, the Sure-Med brand name is the brand name that we're going to use for all of the consumables. So we now have consumables from the MTS product line that's under a variety of brand names around the world, and we have consumables from the SurgiChem product line that we just acquired, and so we've got a few brands out there, and we're just consolidating them under this one brand.

I want to revert back to the first question regarding the spike in revenue we saw. I'm just curious, I know Q3 is historically a strong government quarter, so curious if that was a disproportionate part of the number, this Q.

Or the automation system sold to your long-term care facilities? Are you able to quantify that for us?

So Q3 is a traditionally strong quarter for the government in orders. The government have their fiscal year at the end of our Q3, at the end of September.

But that would be in orders, and then the government, along with all of the customers implements on schedule that is most advantageous for them. And so no, we didn't see in the revenue any particular high percentage of government orders being installed.

Really, if you go back over the year and think about some of the larger orders that we announced like Allina and Atlantic and Mafraq, over in United Arab Emirates and a number of other large orders that we were unable to announce, some of those customers had a pretty fast implementation schedule. And so we always try to implement on our customer schedule and Q3 just had more implementations scheduled.

Terrific. So speaking of specific installs, Wake Forest, great win in the quarter.

Do you expect the majority of that will convert to revenue next year? Or maybe see some in Q4?

I think the majority of that will be recorded as revenue next year.

Okay. And then with respect to the G4 upgrade, still your expectation, Rob, that 60% of the base will have migrated by year end.

When we think about beyond next quarter, any reason why say 90%, 95% of the base wouldn't have converted by next year?

Well, we're at 54% of the installed base that were eligible for a G4 upgrade have ordered at this point. Yes, we still think by the end of the year we'll be somewhere in the neighborhood of 60% -- I don't know if we expect exactly there or a little bit under or a little bit over, but it seems to be the right pace that customers are ordering, and we could see it in our pipeline.

We do think the pace of the G4 orders probably will start to trail off after a little while. We expect over the next couple of years to install -- take orders and install the rest of the eligible upgrade base.

But there's always late adopters that may call last-minute, right?

Good. And then last question for me.

International, I know you're in a number of markets. How would you rank those in terms of where you're seeing the most traction?

And any further comments or progress that you can make about China?

So we would ranked the Middle Eastern market is -- I assume you're talking about med adherence right now -- or excuse me, Automation and Analytics right now?

Right.

So we've ranked the Middle East market as probably our top market right now. The U.K.

is second and China, as we've talked about in the past, really still in development stage, we're still in very early installations there. Now medication adherence, U.K.

is our top market and Germany is our second market, and then we're in number of countries with smaller purchases of -- regular purchases of medication adherence consumables.

Question about the M5000 again. Just relating to personal experience, my mother is pretty sick and she takes a number of -- a lot of meds.

She takes different meds in the morning then she takes at night, and it's not such a problem as her taking the meds as it is her filling meds. Filling those plastic containers is a big problem and getting the right ones, the right days.

You were talking about the M5000 that it could possibly supply, you said, hundreds of thousands of patients. Is this something that you can set up in hub-and-spoke system with a retailer who could supply these to say, to Medicare patients?

Yes, absolutely. The M5000 is probably optimized for a hub-and-spoke sort of orientation because it's a relatively high volume product, meaning it will produce a lot of medication adherence cards that customized to each patient.

And you're right, a lot of times, the problem is not so much people remembering to take the meds, it's just getting them in the right order or the right sequence or the right place. So the M5000 will provide the capability to fill the individual medication adherence cards, label them, fill them and verify that's what's been put in them is correct, that's what it's designed to do, all in a completely automated way.

And so a pharmacist could run that in a hub and do quite a lot of volume, and then disperse those cards out to retail pharmacies that would serve people like your mother.

Have you discussed any of this with Medicare, where they would possibly [indiscernible]?

We've been involved in med adherence associations and groups that are pushing for this approach. But there are some Medicare advantage groups who are motivated on their own to get better outcomes.

And so we think we've got a lot to work with in the adoption phase, and specific Medicare groups are people who are -- who have their own constituencies in their own hospitals, they're both the provider and the insurer and the payer, so they makes the most sense. So we have a wide range of target to go after and a lot of motivations to get it done because it makes a lot of sense.

So we're just releasing it now, and we've got a lot of opportunities to look at and we're going to go explore them all.

A couple more questions on the M5000. First of all, the biggest impediment, at least as you've just talked about in the past for, I guess, North America has been who pays for the pharmacist time to fill that.

It sounds like this M5000 solves that problem, is that correct?

Well, I don't know it completely solves it, but it makes it a much, much smaller problem because it reduces the cost that a pharmacist would have in manual packing dramatically.

Okay. And then a couple more.

Regarding the clinical study, obviously, you're going to be -- Randy, you discussed the clinical outcomes and the benefits that should be seen there. But will there also be a component discussing the ROI, is it more than just, obviously, improving the patient's health, but there's also a cost of that.

So will you be able to incorporate that, maybe not directly in the study, but with some follow-up information?

Yes, for sure. There is an ROI for people who are already trying to fulfill manually filling cards and just buying the system, and they already have demand for patients, particularly in the system living in long-term care facilities that want these.

And so there's just a natural ROI where that fits. But the clinical study is all about the ROI, right, it's all about the $105 billion savings that we can get if we can get just get people to get their meds and take them appropriately, it's a great return.

And that's what we're shooting at, that $105 billion in the United States just to get folks to take their meds and get their meds.

Okay. And then one last one.

I think, early on, you had talked about the opportunity to maybe implement an RFID chip into that packaging, so that when that bubble is burst, it immediately updates the health record to notify the doctor that the patient has taken the meds on time. Is that going to be part of this M5000?

Or is that maybe a follow-on version?

No, that's part of not part of the M5000 product per se, that is a type of package certainly could be packaged with the M5000. We're actually doing some initial trials with those sort of packages in Europe, so that's something that'll probably evolve in the marketplace.

Well, I just like to give a shout out to the Omnicell employees, again, for a great quarter, delivering on some great new products. Certainly, the M5000, the OptiFlex 12.0, our new satellite pharmacy products, really receptive well in the market, and shout out to the engineering and sales and installation people who have made these so successful for us.

And the ability to meet our numbers on a continual basis, it's been great to deliver the numbers for the investors, as we continue to grow our company. We'll see you next time.