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Omnicell, inc (OMCL) Q3 2021 Earnings Call Transcript

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OMCL earnings call for the period ending November 2, 2021.

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Omnicell, inc (OMCL 3.12%)
Q3 2021 Earnings Call
Nov 2, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Omnicell Q3 2021 Earnings Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Kathleen Nemeth, Vice President of Investor Relations. Thank you, please go ahead, ma'am.

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Kathleen Nemeth -- Vice President of Investor Relations

Good morning, and welcome to the Omnicell 3rd Quarter 2021 Financial Results Conference Call. On the call with me, today are Randall Lipps; Omnicell's Chairman, President, CEO, and Founder, Scott Seidelmann; Executive Vice President, and Chief Commercial Officer, and Peter kuipurs; Executive Vice President and Chief Financial Officer. Also joining us today is Roxanne Turner, Vice President of Corporate Responsibility, who will share an update on our EFG initiatives.

This call will contain forward-looking statements, including statements related to financial projections or other statements regarding Omnicell's plans, objectives, expectations, targets are outlooked that subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied. For 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 24th, 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. The date of this conference call is November 2nd, 2021, and all forward-looking statements made on this call are 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 and we undertake no obligation to update these forward-looking statements except as may be required by law.

Finally, this conference call is the property of Omnicell, and then taping other duplication or rebroadcast without the expressive written consent of Omnicell is prohibited. Our results were released earlier this morning 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.

Reconciliation 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 of 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.

Randall Lipps -- CEO

Good morning, and thank you for joining us today. On today's call, I will walk through the drivers of our strong performance this quarter and our continued progress toward our 2025 growth targets. I would also like to briefly discuss our Corporate Responsibility initiatives, before handing the call to Roxane Turner, Vice President of Corporate Responsibility, to provide additional color on all the great work the team is doing in this important area.

Beginning with our financials, we delivered strong 3rd quarter results, reflecting the continued momentum in our business as well as solid execution. Overall, we exceeded the top end of our guidance ranges for revenue, non-GAAP EBITDA, and non-GAAP EPS. Our 3rd quarter results included record revenues of $296 million, record Non-GAAP EBITDA of $66 million, and record Non-GAAP earnings per share of $1.08.

I'd also like to highlight, that we closed the acquisition of FDS Amplicare in early September. This is a major milestone, and I would like to extend a warm welcome to the employees of FDS. As a reminder of our previously stated 5-year outlook, we are targeting a revenue CAGAR of 14% to 15% from 2021 to 2025. we expect to reach 1.9 billion to 2 billion of revenue in 2025.

Additionally, we are targeting a non-GAAP operating margin of 21% and a non-GAAP EBITDA margin of 25% by 2025. We believe we are making good progress toward achieving these long-term objectives, but we are mindful that we are not immune to current inflationary pressures in the market, the underlying customer demand for our products and solutions continue to be robust and we are confident in our ability to successfully navigate this economic cycle.

I'd like to discuss a few of the current healthcare trends that we believe Omnicell is well-positioned to address, particularly with our advanced services portfolio. First, we believe medication management and adherence is a critical area within healthcare infrastructure, in our view the pandemic has highlighted the pressing need to invest in intelligent infrastructure, migrate legacy data systems to the cloud, and elevate the role of the pharmacists.

Quite simply, the healthcare delivery model is undergoing an historic transformation. We find that the challenges of medication management require automated and intelligent solutions now more than ever before. While many healthcare systems were already looking for ways to improve their care management and delivery, we believe the pandemic has accelerated these trends by 5 to 10 years, based on our experience.

Omnicell is leading the way and it is clear to us that our customers recognize the benefits of moving their data and workflows to cloud-based systems. We believe Omnicell is uniquely positioned to enable critical advancements in transforming the pharmacy care delivery model, and importantly, improving experiences for care teams and driving better patient outcomes.

Another trend that our healthcare system partners and retail customers appear to be facing is the looming labor constraints within healthcare. Particularly for nursing, nearly all of the Chief Pharmacy Officers on the board, reported they were facing staff shortages of pharmacy technicians. Likewise, a nationwide survey conducted in late May by the National Community Pharmacists Association, found that nearly 90% of the surveys, 278 respondents said they were having trouble hiring enough pharmacy technicians, and it's a similar story with nursing staff.

As the category creator of automated medication management, Omnicell solutions are designed to reduce manual and administrative tasks, so commissions time can be optimized and devoted more toward patient care. As a result of these trends, we are seeing continued strength in advanced services. This quarter, we saw increased adoption of Omnicell One, a technology-enabled service delivered through the cloud.

Omnicell One enables enterprisewide optimization for medication spend, reduction in medication waste, and improvement in pharmacy labor productivity, and also supports identifying potential diversion activity. We are pleased to report that we now have multiple customers in live deployment. Also this quarter, we are pleased to note that the VA Tucson will be implementing our central pharmacy dispensing system.

The VA is the nation's largest integrated healthcare system and we are proud to support their mission of providing care for our veterans and their families. Enliven Health also had a very strong quarter. With the flu season now in full swing and the COVID-19 booster shots approved for millions of patients, nationwide, many pharmacies are grappling with how to manage this increased patient demand. Enliven Health's care scheduler was built for these pharmacy challenges and opportunities.

CareScheduler automates the scheduling patient communications and the reporting of administering vaccines and point of care testing. In the 3rd quarter of 2021, Enliven Health closed a major deal to provide CareScheduler to its long time partner Publix, a leading regional chain of grocery stores and pharmacies serving 7 southeastern states. Public plans to deploy CareScheduler to manage its offsite vaccination clinics. Another advanced services highlight was the strong performance this quarter from our 340B service solution. Our teams continue to make excellent progress toward developing cross-selling opportunities within our channel and successfully closed on several large deals, during the quarter. Turning to our health system partners, we signed three net new long-term sole-source agreements, bringing our total to 151 health system partners. With these latest signings, all of our top 10 largest customers have now agreed to partner with us in long-term agreements.

We believe this is a testament to our innovation roadmap led by our advanced services portfolio. Our consultative approach to redesigning pharmacy workflows and our customers' confidence in our ability to help them advance toward a zero error, zero waste, and highly efficient pharmacy delivery model. We are humbled by their reliance on us and are motivated by our mission to be the clinicians most trusted partner for medication management and adherence.

Now, as I noted, I'm joined today by our Vice President of Corporate Responsibility, Roxanne Turner, who will speak to our commitment and approach to corporate responsibility. We're excited to have convened an executive steering committee of operational leaders who are accountable for developing strategies and setting targets to achieve our ESG objectives. I'll now hand it over to Roxanne to discuss these initiatives in a bit more detail. Roxanne.

Roxanne Turner -- Vice President of Corporate Responsibility

Thank you, Randy. I'm happy to share our progress since we published our first Corporate Responsibility Report in April of this year. As you may be aware, we began to implement our formal ESG program over the past 2 years. Even though Omnicell has a longer history of contributing to the well-being of our communities where we live and work.

We recently completed our materiality assessment of issues that impact our business. The results indicate we have 4 categories of significance for our stakeholders. Diversity, equity, and inclusion, talent retention, and recruiting, business ethics, and data privacy. With about a dozen areas of focus within each of those core categories.

Our assessment process included interviews with both internal and external stakeholders, including our executive team and functional leaders, as well as customers and individuals who serve on boards of different companies, including our own. We have also been actively soliciting input from the investment community each time we have the opportunity to talk about our ESG program.

The Executive Steering Committee, Randy mentioned consists of leaders in several operational areas including supply chain, product, quality, HR, finance, risk management, and customer slash sales, who are accountable for targeting strategies in the areas of focus for us. This will help ensure that the ESD program can be operationalized across the organization.

We also have a cross-functional working group undergoing target setting exercises referencing our materiality assessment with the answer such short, medium, and long-term smart objectives overall operational improvements. We expect this team to also set goals intended to contribute toward global efforts to reduce greenhouse gases, including reductions in scope one, two, and three emissions by 2030.

Corporate responsibility is a long-term focus for Omnicell and we look forward to keeping you updated on our progress. I'll now hand it over to Scott Seidelmann to discuss our innovation pipeline and key customer highlights. Scott.

Scott Seidelmann -- Executive Vice President, and Chief Commercial Officer

Thank you, Roxanne. Last quarter, I provided an overview of our progress toward our long-term strategy and some areas of opportunity for innovation. The Pandemic has highlighted what Omnicell has recognized since our founding 29 years ago. Pharmacy requires innovation. Now more than ever, healthcare system pharmacies need solutions that will enable them to safely and efficiently address complexity in medication management.

In early October, we welcomed more than 1100 pharmacy nursing, IT executives, and C-suite leaders for our second annual Omnicell Illuminate 2021 digital medication management event. This is the largest industry event of its kind. And we believe that the interest in participation that it attracts underscores the growing need for an entirely new digital medication management infrastructure.

The 3-day Virtual gathering featured more than 30 sessions and more than 50 speakers sharing insights and best practices for tackling the biggest challenges in medication management and healthcare more generally. Randall hosted an opening keynote discussion with representatives from leading health systems discussing their digital transformation experiences.

They shared stories highlighting the benefits of digital infrastructure and ways that it is positively impacted patient outcomes, Improve the experience of the care team and lower costs. Attendees had the opportunity to see our technology in action and chat live with Omnicell experts in virtual chat rooms, new to the agenda this year were 2 sessions focused on specific industry challenges including mental health support for healthcare workers and women and healthcare leadership.

We also specifically highlighted investment and commitment to improving the customer experience, a cloud infrastructure, and packaging technology as true services that deliver real customer outcomes. Overall, we are pleased by the industry response to this event and look forward to continuing these important conversations and helping our customers realize the industry vision of the Autonomous Pharmacy.

Now let's turn to some of the key business highlights this quarter. Omnicell's products and solutions are currently installed in the majority of the top US health systems as Randall mentioned, we added 3 net new long-term sole source customers this quarter, bringing the total 251 of the top three hundred health systems. We are very pleased to be the medication management partner of choice for these three prestigious healthcare providers, a major Northeastern Health system of current Omnicell customer, and one of the nation's leading children's hospitals, and a Texas-based health system.

Each of these customers have selected Omnicell because of our singular focus on medication management, our comprehensive platform of products and solutions, and our commitment to investing in innovation. The 3rd quarter was an exceptionally strong quarter for Omnicell One, we now have multiple live deployments. Omnicell One, which we launched in July of 2020, is a cloud-based service that combines software, analytics and expertise, to optimize medication inventory, improve employee efficiency, and reduce compliance risks.

COVID not only highlighted the need to better manage medication inventory but also exacerbated labor shortages. Omnicell One directly addressing these challenges and as a result, there is a significant differentiator for Omnicell generally. Our Central Pharmacy Dispensing Service is also resonating well with the market. Today, we announced that Tucson VA Medical Center will expand their on the platform with the implementation of our Central Pharmacy Dispensing Service, which include the XR2 robotic pharmacy dispensing technology operational staff maintenance support, and analytics for real-time optimization.

Central pharmacy is labor-intensive and error-prone. We launched central pharmacy dispense service 2 years ago because we knew that we can help health systems overcome these challenges and improve outcomes and lower costs. This is an important element of our Advanced Services portfolio and we are pleased with the positive market reception. Turning to 340B, as we have commented in prior calls, we believe there are very strong cross-selling opportunities for our 340B solution.

90% of the top 3 hundred health systems are 340B eligible and optimization of the 340B program is a key component for realization of the autonomous pharmacy vision. our 340B advanced service is well received by the market and strong performance in the 3rd quarter and is tracking well against our expectations.

During the 3rd quarter, we announced that we completed the acquisition of pharmacy technology provider FPS Amplicare. This is a strategic addition to our Enliven Health solution. FPS has a suite of comprehensive and complementary SaaS technology solutions and a national network of more than 15,000 independent retail pharmacies. So far, the integration is going well and we are excited by the positive market reaction.

And as Randall noted earlier, the community pharmacist needs more support now than ever. The recent approval of booster shots, the anticipated approval of vaccination for children ages 5 through 12, and the start of the flu vaccination season will put enormous pressures on community pharmacists. Enliven's CareScheduler was built for these type of pharmacy challenges. CareScheduler automates the scheduling, patient communications, and reporting for vaccinations.

And FPS enables pharmacies to build Medicare for these services. Enliven and FPS are well-positioned to help pharmacists address their upcoming challenges. Our recent Publix relationship highlights this command and the power of our recent combination. In summary, Omnicell is uniquely positioned to drive the transformation of the pharmacy care delivery model our innovative cloud-based services approach will enable improvements in quality, provider efficiency, and financial performance. We are solely focused on this transformation. We have considerable domain expertise and we are passionate about the opportunity ahead.

Now I'd like to turn the call over to Peter to discuss our 3rd quarter financial and operational results, the 4th quarter, and full-year 2021 outlook. Peter.

Peter kuipurs -- Executive Vice President and Chief Financial Office

Thank you, Scott. I'm pleased with the strong 3rd quarter momentum in our long-term sole source partnership strategy. In our commercial pipeline, product bookings, and revenue, which we feel demonstrates that our strategy is working and that our products and solutions are resonating with our customers. Our healthcare system and retail pharmacy customers continue to turn to Omnicell to realize the vision of the fully Autonomous Pharmacy.

And the overall demand metrics for Omnicell remain strong. We are making good progress toward the 5-year outlook, with the file earlier this year. And I'm proud of the solid execution that are over 3,000 only sell team members continue to consistently deliver.During the quarter, we welcomed over 200 FPS Amplicare employees to the Omnicell family.

In addition to adding around 100 new employees, mainly in the customer product and software engineering teams. Turning now to our financial results. A 3rd quarter 2021, GAAP and non-GAAP revenues were $296 million, an increase of $24 million over the prior quarter, up 39% over the 3rd quarter of 2020, and above the top end of our guidance range. Our 3rd quarter GAAP and non-GAAP revenue reflects the timing of certain customer implementations initially expected to occur in the 4th quarter of 2021, as well as GAAP and non-GAAP revenues from FPS Amplicare, the acquisition that we closed on September 9th, 2021.

The sequential revenue increase of $24 million reflects continued strong demand for Omnicell's medication management and adherence automation solutions as a reminder, the year-over-year increase was partially attributed to the lower-than-typical 3rd quarter GAAP and non-GAAP revenue levels in 2020 due to the COVID-19 pandemic. A 3rd quarter 2021 earnings per share in accordance with GAAP was $0.61 per share compared to $0.43 per share in the second quarter of 2021 and $0.20 per share in the 3rd quarter of last year.

A full reconciliation of our GAAP to non-GAAP results. This included in our 3rd quarter earnings press release and is posted on our website. 3rd quarter 2021 non-GAAP earnings per share were $1.08 compared to $0.97 per share in the previous quarter and $0.60 in the same period last year. The year-over-year increase was mostly driven by higher revenue and gross margin leverage.

Non-GAAP gross margin for the 3rd quarter in 2021, was 51.1%, a decrease of 60 basis points from the previous quarter primarily due to increased inflationary costs related to semiconductors and components raw materials and freight. We delivered record Non-GAAP EBITDA of $66 million in the 3rd quarter of 2021, the non-GAAP EBITDA margin for the 3rd quarter of 2021 was 22.2% compared to 22.4% for the previous quarter and 19.3% in the prior-year period.

Moving to cash flow. Year-to-date free cash flow of $130 million reflects the overall increased demand in the business, better collections, and strong working capital management. At the end of the 3rd quarter of 2021, our cash balance was $482 million, down from $640 million as of June 30, 2021. Then $133 million decrease in cash is the result of financing activities related to our recently completed acquisition of FPS Amplicare, partially offset by operating cash flow in the quarter.

Free cash flow during the 3rd quarter of 2021 was $27 million compared to$58 million from the previous quarter and $27 million from the prior-year period. In terms of accounts receivable days sales outstanding for the 3rd quarter of 2021 were 73 days, an increase of 2 days over the last quarter and a decrease of 9 days from the 3rd quarter of 2020.

Inventories as of September 30, 2021, were $104 million, a slight increase in the prior quarter and a slight increase compared to the 3rd quarter of 2020. The increase was due primarily to the advanced purchase of semiconductors that we believe will reasonably secure supply for future customer implementation timelines. We continue to execute well on our global supply chain process improvements and inventory management initiatives.

We've built a company that we find is able to adapt the skill very well and we believe that we are well-positioned to deliver on our 2025 Targets driven by a number of factors, including growing advance services revenue, benefits from long-term sole source customer partnerships, increased average deal size, manufacturing savings of process efficiencies. As we continue to scale the business in the coming years, we expect to invest and redeploy some of these savings into value-creating growth manufacturing initiatives.

Now moving on to our full-year outlook and 4th quarter guidance. All guidance includes FPS Amplicare. For context, the last 12 months' revenue for FPS Amplicare for September 30, 2021, was $30 million. Going forward, we anticipate FPS Amplicare to have an annual revenue growth rate between 15% and 20%. As we noted last quarter, we are experiencing the impact of inflationary headwinds this continues to be primarily due to semiconductor and other component cost and to a somewhat lesser extent freight and raw materials costs.

As discussed in the previous call, the measures we are taking to generally offset the majority of the impact of inflationary cost in the second half of 2021 includes, first, higher revenue from strong commercial momentum, customer demand, and a healthy backlog. And 2, prudent and targeted expense reductions, while maintaining our investment in research and development areas customer experience teams to support our long-term growth strategy and scale our business to meet customer demand of 3rd gene initial benefits from pricing actions.

In line with the comments you made on the last quarter's call, we have high confidence that we have secured supply for semiconductor critical components through 2022 in order to deliver our mission-critical systems and connected devices to our healthcare customers. Our supply chain and procurement teams have done a great job addressing these challenges and minimizing disruptions to our customers.

We're very pleased with the continued momentum in market demand for its services and we are increasing our full-year 2021 product bookings guidance. There is a strong commercial and in particular extra-end services momentum, which includes now the FDA Amplicare business. Product bookings are now expected to range between $1 billion and 130 million, and $1 billion and 170 million, we are increasing our 2021 revenue guidance we now expect total 2021 GAAP and non-GAAP revenues to be between $1 billion and 129 million, and $1 billion and 134 million.

We expect total 2021 GAAP and non-GAAP product revenue to range between $808 million and $811 million and we expect total 2021 GAAP and non-GAAP service revenue to be between $321 million and $323 million. We are also increasing our 2021 non-GAAP EBITDA guidance, we now expect full-year 2021 non-GAAP EBITDA to be between $235 million in $238 million, which includes an anticipated $2 to $3 million of non-GAAP EBITDA from FDS Amplicare.

Our full year guidance includes additional cost for semiconductors freight and steel given global market conditions. Using the midpoint of the updated revenue and non-GAAP EBITDA guidance ranges, this represents approximately 20% non-GAAP EBITDA margin for 2021. For full-year 2021, we are assuming an effective blended tax rate of approximately 7% in our non-GAAP EPS guidance, which is a reduction from 9% to 5% within a July 2021 Earnings Call. The change in the tax rate additional expected tax benefits from stock option activity in the second half of 2021. The Company also recognized a discrete tax benefit related to the release of a net been certain tax benefit of $6.2 million as a result of an effective settlement, the tax authorities, for the 9 months ended September 30, 2021. This one-time tax benefit was excluded from the 3rd quarter 2021 non-GAAP results.

Lastly, we're also increasing our guidance for non-GAAP earnings and now expect full year 2021 non-GAAP earnings per share to range between $3.80 and $3.85 cents per share. Based on the affiliated guidance provided earlier in this call, for the 4th quarter of 2021, we are providing the following guidance. As we know, last quarter, we continue to invest in scaling our business to support the expected increase in revenue and the timing of customer implementations. A 4th quarter guidance includes additional costs for semiconductors, trade, and steel given global market conditions.

We expect total 4th quarter 2021 GAAP and non-GAAP revenues to be between $308 million and $330 million. With GAAP and non-GAAP product revenues to range between $219 million and $222 million. And GAAP and non-GAAP service revenue to range between $89 million and $91 million. We expect 4th quarter 2021 non-GAAP EBITDA of $58 million to $61 million. We expect 4th quarter non-GAAP earnings to be between $0.90 and $0.95 per share.

This outlook includes FDS Amplicare which is expected to contribute approximately $10 million in revenue and $2 million and non-GAAP EBITDA. Please note that the 4th calendar quarter is typically a seasonally strong quarter for FDS Amplicare. As I mentioned a moment ago, we continue to have high confidence in our supply of semiconductors and other key components through 2022 to support our health system customers that are critical to healthcare. We are anticipating supply chain challenges and inflationary cost impacts to continue through at least the middle of 2022.

And at the same time, we continue to refine our pricing actions and expect the favorable impact from these actions to offset more inflationary cost as we progress throughout 2022. We remain confident in our 5-year long-term outlook and expect to deliver organic revenue growth CAGAR between 11% and 12% through 2025. A total revenue growth CAGAR between 14% and 15% through 2025. Growth of advanced services revenues between 20% and 30% of total revenue by 2025.

Non-GAAP operating margin expansion to 21% by 2025. And lastly, non-GAAP EBITDA margin expansion to 25% by 2025. In summary, we're very pleased with our commercial operational and financial results for the 3rd quarter of 2021. We are taking steps to address inflationary headwinds in the market and we remain confident in our long-term outlook. We look forward to updating our progress in the coming quarters.

With that, we would like to open the call for your questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from [inaudible] with Piper Sandler. Please go ahead with your question.

Unidentified Participant

Hi, thank you so much for taking the question, and congratulations on a good quarter. So maybe Randall, in your prepared remarks, you mentioned some takeaways from the Autonomous Pharmacy Advisory Board. Can you just remind us of when and why formed that Board and who it consists of? And maybe just how it's contributing your fault leadership in contract wins at existing and new acute care customers. Thanks.

Randall Lipps -- CEO

Yeah, the Autonomous Pharmacy Advisory Board is an industry-led Board led by Chief Pharmacy officers interested in the future of pharmacy and raising the level of pharmacists out of the administrative work to the more clinical pieces of pharmacy disciplines that really are what pharmacies went into the career for. And so, as they are looking for, into the future and what's driving the future, it's really cloud-based technologies, in particular, these technologies and this last board meeting.

We're really emphasizing the labor shortage component that we continue to see in a lot of industries, but particularly in the pharmacy technician area, but we're excited about it, because they are not only just helping to leave the industry to this next level of Pharmacy, understanding of what's needed and how the technologies will enable the Autonomous Pharmacy but maybe most importantly what are the steps along the way to get there. So it's a real privilege to be part of the Pharmacy Board as an industry move up.

Unidentified Participant

Maybe it's a quick unrelated follow-up. Can you just help us understand the impact of dry chain inflation and disruption on Q3 results and then on your [Technical Issues] thanks again.

Randall Lipps -- CEO

Hello, just guided to said, Peter. Yeah. So we see increased inflationary cost from the 3rd to the 4th quarter as about $2 to $3 million incremental quarter-over-quarter additional inflationary costs. That said, I like it if you peer with remarks as well. We have high confidence in the surety of supply for semiconductors. We've done pre-buys via stock semiconductor inventory as well as part of fair remarks.

That said, freight and steel are more of a spot market and we expect some more volatility in that going forward.

Unidentified Participant

Thank you.

Operator

Your next question will come from the line of Scott, from [inaudible] Stephens, please go ahead with your question.

Unidentified Participant

Hi team. Congrats on the quarter. Can you hear me OK?

Randall Lipps -- CEO

Yeah.

Peter kuipurs -- Executive Vice President and Chief Financial Office

Yeah.

Unidentified Participant

Okay. So my first question is around the 3rd quarter and 4th quarter moving parts. It looks like you saw some nice demand pull through this quarter, especially on the software side, service revenues grew over 32%, by maximized operating leverage. Peter, you mentioned some of the pull-forward from earlier customer implementations, which you expected to actually get in the 4th quarter, can you give us a sense of how much of this pull forward was on the product side versus software side? And then just to confirm that your all your software platforms, whether it be 340B cross-selling that you mentioned Omnicell One, the new FPS Amplicare, they are all recognized as recurring SaaS revenues off of this strong revenue increase that we saw in the 3rd quarter.

Peter kuipurs -- Executive Vice President and Chief Financial Office

Thank you. I think you packed in 3 or 4 questions there, but I'll answer the last one first. Yes. That's all recurring revenue, the timing of the call. The timing on necessary pull in the timing of revenue between the 4th and the 3rd quarter. It's about $6 million, so $6 million of revenue, mostly in product revenue, the quarter, actually, the 3rd quarter and we had originally planned for that in the 4th quarter.

Unidentified Participant

Okay, great. And then, it's a follow-up to your margin question, but, we talked about the gross margin pressures from additional semiconductor cost freight, steel costs that you continue to expect throughout the remainder of the year, but anything on the operating expense side, we should be aware of? Obviously, labor costs are helping you probably on the demand side but are you having to pay more for your specific labor at Omnicell?

Peter kuipurs -- Executive Vice President and Chief Financial Office

So we think we're referring to the fact is, company to work at given our mission and the innovation that we drive, but we have a situated mark as well. We hired 130,000 new employees that we welcome to Omnicell. I would say thay may see some pressure from the cost perspective that was not significant.

Unidentified Participant

Okay, great. Congrats on the strong quarter.

Randall Lipps -- CEO

Thank you.

Peter kuipurs -- Executive Vice President and Chief Financial Office

Thank you, John.

Operator

Your next question comes from the line of Arash long with Berenberg. Please go ahead with your question.

Arash long -- Berenberg

Hi team. Thanks for taking my question. So I guess first one on Omnicell One. I'm wondering if you can talk about how many customers are either using or have signed up for the platform? And then can you also talk about the implementation process? A lot of that, what is that process like, and how much time does the take for you to implement this system?

Scott Seidelmann -- Executive Vice President, and Chief Commercial Officer

Hey, Arash. It's Scott Seidelmann, I mean I will first question you asked, which is really how many Omnicell One customers we now have live. The good news is the demand is incredibly strong and we're seeing that demand tied to really the entire portfolio is in other words, customers were are interested in knowing as but certainly have that as it relates to your point of care and some of our other products. So that's really good news. As far as number of live implementations, we now have several and are tracking well. I didn't hear the second part of your question though which I apologize for.

Arash long -- Berenberg

Yeah, It's about implementation. I'm just wondering what that process is like and again like roughly how much time does it take you to implement it?

Scott Seidelmann -- Executive Vice President, and Chief Commercial Officer

Yeah, I mean it's implementing a data-driven IT project inside health systems, which is always complicated because you have to find the data and connected and so that takes some time, but nothing unusual relative implementing any other piece of software, inside of the health system. As far as timing,the largest hence in the pulp and speak. It's simply the fact that oftentimes one if you think about it is really lighting update as it exists in other forms of automation. So huge implementations, it's not necessarily the Dokie one implementation takes time.

It's simply that, there's really no point in implementing it until the large portion of the automation is done because there is no data to be generated for optimize and so when we look at implementation and that you should think about it in terms of the lag that might occur they gets implemented. It's really just a function of, it's really well designed for large health systems that are all in an Omnicell products and so that implementation the systems just take a while, so.

Arash long -- Berenberg

Okay, I appreciate that. On another question on the Tucson. The hospital deal, I believe that the press release said that this hospital is actually the first one deploying CPTS in amount of the hospital. I'm just wondering what the Board that support to sell into a VA hospital, and then do they do kind of make the purchase decision for of that services a little bit differently than the other hospitals? If you can talk about the, the dynamics there would be helpful. Thank you.

Scott Seidelmann -- Executive Vice President, and Chief Commercial Officer

Yeah. The key point on the Tucson VA announcement and thankfully the really exciting part of it is that it's the first time that VA at least from an Omnicell perspective has purchased a true service where we're not only combining the hardware, but we're combining that with optimization ongoing services analytics, et cetera. So that was, that was a really important milestone and while no means is this what in terms of go forward with other NDAs. It certainly I think selling into any large system, it's certainly helpful when one maybe a to go in and reference that VA with other but it's by no means any kind of large enterprisewide VA deal.

Arash long -- Berenberg

Thank you so much. Appreciate it.

Operator

Your next question comes from the line of David Larsen with BTIG. Please go ahead with your question.

David Larsen -- BTIG

Hi, congratulations on a very good quarter. Can you talk a little bit about the pipeline for Omnicell One, Scott, please? And what is the difference between Enliven, FDS Amplicare, and maybe 340-B and how can all of these different solutions sort of work together to gain share on the retail side? Thanks.

Scott Seidelmann -- Executive Vice President, and Chief Commercial Officer

So pipeline for one, we're very bullish on. We're excited about. As I said where OC1 drives the most value. It's really, think about it, it's large enterprises they are all in on Omnicell products. And so when all in on the platform Omnicell One ties it all together, helps you optimize that data and so we are seeing Omnicell One is a great differentiator for us in the company is those large health systems and so it's not surprising that oftentimes in the 151 in those relationships. So OC1 is part of that. So that's sort of your comments on the pipeline. I think your question which is around Enliven, FDS, 340B, and how all these pieces' parts might come together?

Enliven and FDS as a portfolio, which really focused on the retail outpatient pharmacies, not really to health system but the large, the 60,000 retail pharmacies and really helping that community pharmacists deliver value-added services beyond filling vials Omnicell 340B and Omnicell One are really focused on the acute care to health systems sector and helping those health systems optimize inventory labor compliance events in the case of OC1 and then the 340B program in the case of those OC 340B.

The vision of how it all comes together, which is really exciting is that as health systems increasingly move from inpatient acute to managing into treating patients in the ambulatory environment into home, they are now going to need the same tools and capabilities that have retail pharmacies have and so we're really excited about the prospects of pulling the whole platform together and really engaging the health systems to manage the entire continuum of care.

And so that's really how they ultimately all come together.

David Larsen -- BTIG

Congragualtions. I think that's exactly the right strategy and then I guess, Peter, how much revenue came from FDS Amplicare in the quarter, and was that part of the 3Q guide was that the, in the 3Q guide?

Peter kuipurs -- Executive Vice President and Chief Financial Office

Yes. So the, the 3rd quarter FDS Amplicare revenue is about $1 million not included in the guide.

David Larsen -- BTIG

Okay. So there was, there was a huge peak there even if we back out the FDS Amplicare. Okay, thanks very much.

Peter kuipurs -- Executive Vice President and Chief Financial Office

Thank you.

Operator

Your next question comes from the line of Steve Halper with Cantor. Please go ahead with your question.

Steve Halper -- Cantor

Hi, good morning. I appreciate the comments around the inflationary headwinds and some of the steps you're taking to offset that. But on a go-forward basis. Does the company have any ability to pass that along to customers in order to make up that you know that margin that it's costing you? Thank you.

Peter kuipurs -- Executive Vice President and Chief Financial Office

Hi Steve, this is Peter. Like we said in our prepared remarks, we are refining pricing actions and we have some ability to just price. So what we said, I think in the last call that we have increased prices increase service as well. We've increased margin deal approval levels also good to point out for context was also in the prepared remarks is that of course these pricing actions. The impact of those will start to increase as we go through the quarters into next year as well. So looking at next year preliminary look the first half of next year.

You can assume that the inflationary cost are greater than the impact of the pricing actions and then throughout the year, we believe at this point, the whole catch up. Now that said semiconductors you've done pre buys and we have taken inventory in as well as you can see in the balance sheet, we are high confidence there surety of supply. That said, freight and fuel are more of a spot market. So there is more expected volatility there.

The management on the data right. And do you feel as though you have enough supply of chips for the foreseeable future. Given the actions you've taken yes, that's correct throughout 2022 calendar year.

Steve Halper -- Cantor

Okay and then just do me a favor and just walk me through the pull forward commentary again for that occurred in Q3 you just reiterate that I just want to make sure our $6 million of product that was accelerated.

Peter kuipurs -- Executive Vice President and Chief Financial Office

Yeah, so the, compared to the original guide. We got about $6 million of revenue that we initially anticipated to occur in the 4th quarter. Those implementation actually completed early in the 3rd quarter great.

Steve Halper -- Cantor

Thank you.

Peter kuipurs -- Executive Vice President and Chief Financial Office

Thank you.

Operator

Our next question will come from the line of Matt Hewitt with Craig-Hallum Capital. Please go ahead with your question.

Matt Hewitt -- Craig-Hallum Capital

Good morning and congratulations on the strong quarter. The first question. Now with the FDA sample care transactions closed. Do you have any plans to add sales reps on the retail pharmacy side as you've kind of broaden your capacity in your application set for that market?

Peter kuipurs -- Executive Vice President and Chief Financial Office

Short answer is, given the growth and the demand being so positive, I think we will continue to invest there. On the sales side for sure.

Matt Hewitt -- Craig-Hallum Capital

Okay. And then maybe a follow-up question. You're seeing the challenges that some of your customers are having hiring employees and getting up the full staff as you start to add more and more services into these customers as they acquire those services from you, are you able to find the talent required to meet their needs, or has that been a source of pressure? Thank you.

Peter kuipurs -- Executive Vice President and Chief Financial Office

I think labor pressure is labor pressure and regardless of who the employer. That said, I think that our services, Omnicell is a pretty compelling employer, and so we're really interested in place to work for a lot of these technology sometimes. And so as of now, we feel as a good, strong pipeline of candidates, we're not seeing undue pressures there and I think frankly the candidates end, one of the things that we can offer is that training and certifications in Advanced robotics. And so I think that's a pretty exciting career prospect for our pharmacy technology labor.

Matt Hewitt -- Craig-Hallum Capital

Understood, Thank you.

Operator

At this time there under further questions, I will now turn it back over to Mr. Lipps for any closing remarks.

Randall Lipps -- CEO

Well, I want to thank everyone on the Omnicell team and including the over 300 new employees that we added this quarter. Welcome to the Omnicell. Thank you for getting on the road with this through the autonomous pharmacy and making a difference and healthcare for everyone. See you next time, cheers.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Kathleen Nemeth -- Vice President of Investor Relations

Randall Lipps -- CEO

Roxanne Turner -- Vice President of Corporate Responsibility

Scott Seidelmann -- Executive Vice President, and Chief Commercial Officer

Peter kuipurs -- Executive Vice President and Chief Financial Office

Unidentified Participant

Arash long -- Berenberg

David Larsen -- BTIG

Steve Halper -- Cantor

Matt Hewitt -- Craig-Hallum Capital

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