Q3 2024 Omnicell Inc Earnings Call
Thank you for standing by my name is John and I'll be your conference. Operator today. Please note that today's meeting is being recorded all lives have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question Press Star one again. Thank you I would now like to turn the call over to couple of need It senior Vice President Investor Relations. Please go ahead.
Speaker Change: Good morning, and welcome to the Omnicell third quarter 2024 financial results conference call on the call with me today are Randall Lipps, Omnicell, Chairman, President CEO, and founder and Church, our executive Vice President and Chief Financial Officer. This call will contain forward looking.
Speaker Change: Statements, including statements related to financial projections or performance or other statements regarding omni sales plans strategy objectives goals expectations planned investments and expense management initiatives, the new Chief operating officer appointment products services or solutions our ability.
Alrighty to deliver more consistent performance and drive long term success or market or company outlook that are subject to risks uncertainties and other factors that could cause actual results to differ materially from those expressed or implied.
Speaker Change: For a more detailed description of the risks that impact. These forward looking statements. Please refer to the information in our press release issued this morning in the Omnicell annual report on Form 10-K filed with the SEC on February 28, 2024, and other more recent reports filed with the SEC.
Speaker Change: Please be aware that you should not place undue reliance on any forward looking statements made today all forward looking statements speak only as of the date hereof or the date specified on the call except as required by law, we do not assume any obligation to update or otherwise release publicly any revisions to our forward looking statements.
Speaker Change: Our results were released this morning are posted in the Investor Relations section of our website at IR Dot Omnicell Dot com. Additionally, we would 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 fee.
Speaker Change: Annual results press release is posted on our Investor Relations website with respect to forward looking non-GAAP measures. We do not provide a reconciliation of forward looking non-GAAP measures to the comparable GAAP measures on a forward looking basis.
Speaker Change: As these items are inherently uncertain and difficult to estimate and cannot be predicted without unreasonable effort.
Speaker Change: With that I will turn the call over to Randall Randall.
Randall: Thank you Kathleen and good morning, and thank you all for joining us to discuss our financial results for the third quarter of 2024, and our updated outlook for the remainder of the year.
Randall: Omnicell delivered another solid quarter, we remain focused on consistent execution, driving our business to generate more recurring and predictable revenues investing in and delivering outcomes centric innovation and empowering our people to support our customers not only where they are today, but where they.
Randall: It will be in the future.
Randall: We firmly believe the transforming pharmacy care delivery model will result in positive customer experiences and improved patient outcomes now before I get into the industry trends, we are seeing in our third quarter financials I would like to formally welcome Mandy Joku Tommy so.
Randall: During the quarter, we announced the appointment of 90 to the newly created role of Chief operating Officer.
Randall: As I've shared with you.
Randall: Over the last several quarters, we are working diligently to strengthen the company's financial performance and operational excellence, while taking a customer first approach to our strategy and business transformation.
Randall: As we scale our business, we believe that having nominally in this role to lead and drive our operational change management initiatives and the evolution of our culture of care will be vital and delivering enhanced shareholder returns.
Randall: Whether it be supporting our objective to deliver a consistent GAAP profitability or helping shift our company further towards a service and solutions based model. We believe a clear commitment to operational excellence will be essential to our long term success.
Randall: I know I speak for everyone here at Omnicell and welcoming 92, our team no.
Randall: Now, let's turn to a review of the macroeconomic landscape. We are pleased to note that we are seeing signs of continued stabilization in our end markets coupled with improving provider fundamentals. These market conditions are generally favorable for creating increased demand for capital projects.
Randall: And the system modernization through automation software and analytics.
Randall: We're continuing to invest in next generation upgrades and outcomes based solutions for XT fleet of automated medication dispensing systems as well as making investments in specialty pharmacy services.
Randall: We remain excited as we move forward on our multi year journey here at Hanmi cell and we believe our refreshed product portfolio, including XD amplify is resonating well with our customers and is addressing our customers' focus on the future of healthcare whether in the cute.
Randall: Or an outpatient setting.
Randall: Now turning to our quarterly financials, we are pleased to revise our full year outlook for 2024 as part of which we are raising our profitability guidance ranges as our global team continues to take what we believe our deliberate and disciplined actions on expense management.
Randall: While embracing our objective to streamline our internal processes and systems.
Randall: And while it is early this appears to be bearing fruit in terms of improved forecasting and business planning.
Randall: Turning to our third quarter results, we delivered solid results that were generally in line with or exceeded the upper end of our guidance ranges.
Randall: Which we believe reflects strong demand for omni sells products and services and sound execution by our global team.
Randall: Our third quarter 2024, total revenue was $282 million representing.
Randall: Representing a sequential increase of $6 million over the prior quarter and a decrease of $16 million over third quarter 2023.
Randall: Third quarter 2024 earnings per share in accordance with GAAP were a profit of <unk> 19 per share compared to a profit of eight cents per share in the prior quarter and profit of 12 cents per share in the third quarter 2023.
Randall: Our third quarter 2024, non-GAAP earnings per share were <unk> 56, compared with 51 cents per share in the prior quarter and 62 cents per share in the same period last year.
Randall: Third quarter 2024, non-GAAP EBITDA was $39 million, a decrease of $1 million compared to the previous quarter and a decrease of $2 million when compared to the same period last year.
Speaker Change: Chad will provide more details of the drivers for this quarters performance as well as further details regarding our outlook for the remainder of the year.
Speaker Change: I'll now highlight a few of the key customer wins in the third quarter.
Speaker Change: I am pleased with the team's achievements. This quarter, we are successfully positioning our full portfolio of solutions to address our customers' medication management needs across the care continuum.
Speaker Change: We are also seeing continued momentum from the XD amplify program and we're seeing some positive signs that this is resonating with the market.
Speaker Change: We are embracing an agile and innovative approach to foster more flexible and responsive engagement, which we believe will result in better customer experiences.
Speaker Change: Our multi year XT amplify innovation program that we announced earlier this year appears to be gaining market momentum with several new customers choosing these offerings in an effort to maximize value across their health systems.
Speaker Change: A Minnesota based nonprofit health system selected Omnicell as its long term partner to standardize medication management across 12 hospital campuses by upgrading their fleet of point of care solutions.
Speaker Change: Through XD NXP extend which is an integral part of our XC amplify innovation program. They seek to enhance the clinician experience as well as safety and security you may have seen in some of the reporting on the recent weather events that have production shutdown due to the hurricanes as result.
Speaker Change: Did in instances of IV fluid shortages.
Speaker Change: Signing a light on the need for health systems to have greater control of their IV supply chain and strategies to mitigate the potential impact of shortages.
Speaker Change: A nonprofit health system in Ohio signed a five year IV compounding service agreement.
Speaker Change: In an effort to help optimize IV compounding accuracy safety and importantly supply chain control than.
The health system also upgraded their existing point of care solutions across nine hospitals as it looks to enhance safety and security benefiting from innovations delivered through our XT amplify program.
Speaker Change: Wow automated dispensing cabinets at the standard of care on nursing floors adoption of automation in the operating room setting is often lagged.
Speaker Change: A leading academic medical center and Boston chose to extend his partnership with Omnicell <unk>.
Speaker Change: Spanning cause it's automation.
Speaker Change: And so all operating rooms across the system with our anesthesia workstation.
Speaker Change: This is in addition to the XT automated dispensing cabinet upgrades at <unk> amplifier products. They purchased our anesthesia workstation with an integrated label printer is intended to help the medical center enhance patient safety and medication security and perioperative settings.
Speaker Change: Advanced services delivered another quarter of solid performance.
Speaker Change: One highlight is a large health system in the southeast that selected Omnicell Central pharmacy dispensing service in an effort to enable improved medication dispensing operations.
Speaker Change: Adopting the XR to robot with an in central pharmacy as the standard of care should help to streamline medications storing picking and expensing. It is also intended to optimize inventory management, which should drive enhanced clinical and operational outcomes.
Speaker Change: Omni sales specialty services continues to help enable customers to enhance their in house specialty pharmacy programs to serve more patients optimize care and improved performance in the third quarter. We opened two new specialty pharmacies for health system customers.
Speaker Change: Our life and health brand part of our advanced services portfolio.
Speaker Change: <unk> to deliver SaaS solutions designed to help retail pharmacies and health systems optimize patient care and drive improved performance.
Speaker Change: Several of our health system customers, including large health systems in Georgia, and Michigan has selected alive wins patient engagement and clinical solutions as they seek to enhance medication management outcomes across the continuum of care. We believe these health systems are.
Speaker Change: <unk> the need for comprehensive solutions that extend beyond the four walls of the hospital and are choosing omnicell to support a better patient experience everywhere patients receive care.
Speaker Change: In summary on.
Speaker Change: Only sell delivered a strong third quarter.
Speaker Change: The team is stepping up and taking actions that are intended to improve our financial performance and operational excellence and deliver consistent results.
Speaker Change: I'm very proud of our team's enthusiasm and focus on outcomes centric innovation customer success.
Speaker Change: And our purpose to be the health providers, most trusted partner to enable the autonomous pharmacy transformation.
Speaker Change: Every day I see.
Speaker Change: Omnicell employees showing up for each other for our customers and for our communities.
Speaker Change: And it is this commitment and focus that is driving more consistent financial performance.
Speaker Change: We have work to do.
Speaker Change: But I'm confident we are on our way toward delivering long term consistent results as we progress along our multiyear growth journey.
Thank you for your support of Omni Phil as we work diligently to modernize and transform the pharmacy care delivery model.
Speaker Change: At this point.
Speaker Change: I'd like to turn the call over to our Chief Financial Officer Cha Cha EDA.
For a more detailed review of our third quarter financial performance and revised guidance.
Speaker Change: Thank you Randall.
Speaker Change: We delivered solid third quarter financial results generally in line with our previously stated guidance.
Speaker Change: We believe this reflects the stabilizing macroeconomic environment as well as our commitment to consistent execution.
Speaker Change: Our focus on expense control and process improvements.
Speaker Change: I am going to walk you through some of the drivers.
Speaker Change: Third quarter 2020 for performance as well as our updated 2020 for full year guidance.
Speaker Change: Although revenue came in at the upper end of our previously issued guidance range.
Speaker Change: non-GAAP earnings per share and non-GAAP Edyta I'd say that our previously provided third quarter guidance.
Speaker Change: I am proud of the Omnicell team, who continue to demonstrate their commitment to our promise, although our guiding principles on a daily basis.
Speaker Change: Third quarter 2024, total revenues were $282 million.
Speaker Change: Increase of $6 million over the prior quarter.
Speaker Change: The clean plus 16 million over the third quarter of 2023.
Speaker Change: Revenues in the third quarter aided by the strong performance of our advanced services, including alive, and health and specialty pharmacy services.
Speaker Change: Product revenues were 168 million.
Speaker Change: An increase of $4 million over the previous quarter.
Speaker Change: $30 million compared to the third quarter of 2023.
Speaker Change: Product revenues in the third quarter of 2020 decreased compared to the third quarter of 2023 alright.
Speaker Change: Primarily due to lower volumes from our automated dispensing systems business.
Speaker Change: Service revenues were $124 million.
Speaker Change: An increase of $4 million over the previous quarter and on.
Speaker Change: Increased $14 million over the third quarter of 2023.
Speaker Change: Similar to last quarter.
Speaker Change: Technical services and advanced services contributed to the growth compared to the third quarter of 2023.
Speaker Change: Reflecting the growing technical services installed base the impact of our pricing actions as well as strong customer demand for advanced services.
Speaker Change: non-GAAP gross margin for the third quarter of 2024 was 44, 5%.
Speaker Change: An increase of 30 basis points from the prior quarter.
Speaker Change: A full reconciliation of our GAAP to non-GAAP results are included in each of our second and third quarter 2024.
Speaker Change: Ultimately, adding spreads we.
Speaker Change: All of which are posted on our Investor Relations website.
Speaker Change: Third quarter 2024 earnings per share in.
Speaker Change: In accordance with GAAP.
Speaker Change: Profit dollars 19 per share.
Speaker Change: Compared to a profit of eight cents a share in the prior quarter.
Speaker Change: On a profit of <unk> 12 per share in the third quarter of 2020.
As we have mentioned previously and it management goal to return to GAAP profitability and we believe this is evidence of that progress.
Speaker Change: Third quarter 2024, non-GAAP earnings per share.
Speaker Change: It makes sense compared to 51 cents per share in the prior quarter.
Speaker Change: <unk> 62 per share in the same period last year.
Speaker Change: Third quarter, non-GAAP EBITDA was $39 million.
Speaker Change: A decrease of $1 million compared to the previous quarter.
Speaker Change: And a decrease of $2 million when compared to the same period last year.
Speaker Change: Third quarter, 2024, non-GAAP, EBITDA and non-GAAP earnings per share reflect a strong <unk>.
Speaker Change: On operating expense management.
Speaker Change: At the end of it.
Speaker Change: 2024.
Speaker Change: Cash and cash equivalents balance was $571 million up from $557 million as of June 32024.
Speaker Change: non-GAAP free cash flow during the third quarter of 2024 was $9 million.
Speaker Change: Free cash flow was lower in the third quarter compared to the prior quarter as a result of the timing of employee compensation and oil Merit increase.
Speaker Change: In terms of accounts receivable.
Speaker Change: Day sales outstanding for third quarter 2024 were 83 days.
Speaker Change: We are pleased with our continued strong quarterly collections have a working capital management.
Speaker Change: Inventory at September 32, within 24 were $95 million.
Speaker Change: An increase of $2 million from the prior quarter and a decrease of $21 million from September 30 at 2023.
Speaker Change: Now turning to guidance.
Speaker Change: Based on our third quarter 2024 results and our current visibility for the remainder of the year.
Speaker Change: We are updating our full year 2020 outlook.
Speaker Change: Clothing, including the bottom end of the guidance ranges for bookings in total revenues and.
Speaker Change: And increasing both the top and bottom end of the ranges for non-GAAP earnings per share and non-GAAP EBITDA.
Speaker Change: For full year 2024, we anticipate bookings to be in the range of 800 million to $875 million.
Speaker Change: Global revenues I expect that to be in the range of $1 1 billion to $1.110 billion.
Speaker Change: non-GAAP EBITDA is now expected to be in the range of $129 million to $134 million.
Speaker Change: non-GAAP earnings per share is now expected to be in the range of $1 65 to $1 72.
Speaker Change: We believe this increase in our full year 2020 guidance ranges reflect strength in our commercial momentum and a strong cost management culture of organization.
Speaker Change: For the fourth quarter of 2024, we are providing the following guidance.
Speaker Change: We expect total fourth quarter 2020 for revenue to be between $295 million and $305 million.
Speaker Change: <unk> product revenues to be between 177 million a $182 million.
And David since revenues to be between $118 million on the $123 million.
Speaker Change: The fourth quarter product revenue guidance reflects probably thinking 82 scheduled implementations.
Speaker Change: Overall strength, we are seeing in the commercial business.
Speaker Change: We expect our fourth quarter, 2024, and non-GAAP EBITDA to be between 40 million and $45 million.
Speaker Change: We expect the fourth quarter 2024, non-GAAP earnings per share to be between 55 per share and 62 cents per share.
Speaker Change: non-GAAP EBITDA and non-GAAP earnings per share for the fourth quarter include seasonal expenses and.
Speaker Change: Continued investment in innovation.
Speaker Change: For the full year 2024, we are continuing to assume an effective tax rate of approximately 19%.
Speaker Change: non-GAAP earnings per share guidance.
Speaker Change: As we announced on our last earnings call beginning in 2025, we plan to change that bookings metric that we provide.
Speaker Change: As a reminder.
Speaker Change: Currently includes connected devices and software licenses have been servicing and certain consumables.
Speaker Change: Beginning with our 2025 guidance, we plan to provide product bookings with concept of connected devices and software licenses.
Speaker Change: We also plan to provide a new metric.
Speaker Change: Our recurring revenue.
Speaker Change: Which will cost saves of advanced services technical services and consumables.
Speaker Change: We are planning to provide a 2020 for reconciliation utilizing the historical booking metrics.
Speaker Change: As well as the new product bookings.
Speaker Change: Metrics.
Speaker Change: So you will have a corresponding apples to apples comparison for 2025.
Speaker Change: We believe these new metrics will better reflect.
Speaker Change: How we manage the business internally.
Speaker Change: Particularly given our focus on growing recurring revenue.
Speaker Change: Should be helpful to you in understanding our modeling our company going forward.
Speaker Change: As we wrap up I want to reiterate that we are pleased with our solid results for the third quarter of 2024.
Speaker Change: A stronger outlook, we have provided in the form of updated guidance for the full year of 2024.
Speaker Change: I would also like to take a moment to thank the entire omnicell team for the commitment to improve execution and the cost of our first focus.
We would now like to open the call for questions.
Speaker Change: Thank you. It will now begin our question and answer session. If you have dialed in and would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star One again as a reminder, please limit yourself to one question and one follow up only thank you.
Speaker Change: I'll pause for a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Matt Hewitt from Craig Hallum Capital Group. Please go ahead.
Matt Hewitt: Good morning, and thank you for taking the questions.
Matt Hewitt: Maybe first up on the revenue side, obviously, another strong performance from the services side.
Speaker Change: The product side.
Matt Hewitt: Obviously, youre still dealing with a little bit of headwinds, but I'm. Just curious was there anything related to the hurricanes were there any delayed implementations or anything that maybe.
Matt Hewitt: Is leading to the better anticipated growth here in the Q4.
Speaker Change: Hey, Matt Good morning, Thank you for the question.
Speaker Change: Hurricane do not have any impact on tier three revenue.
Speaker Change: As you saw the revenue was in line with our expectations and we do also expect our Q4 revenue to increase.
Matt Hewitt: Got it and then product gross margins are very nice pop here in the third quarter I'm just curious.
Speaker Change: Yes.
Speaker Change: Do you see that continuing to trend higher or are you still working through some of the inventories purchased during the supply challenges of Covid and therefore, that's creating a little bit of a headwind in and when do you think or how long should it take to get back to maybe where you were just a couple of years ago, which is closer to 50% gross margin. Thank you.
Yes, Matt as you know we've been focused on improving our overall performance in.
Speaker Change: Gross margin continues to be a key focus of ours.
We do expect our gross margins improve over time as we continue to invest in advanced services as it scales.
Speaker Change: We are also in a position where we believe the feedback that we're getting from our customers with regards to the initial X.
Speaker Change: <unk> will continue on those should start contributing to having a positive impact.
Speaker Change: I imagine so about the USS it start contributing to meaningful revenue.
Speaker Change: And Matt It's Kathleen I'll jump in there and just you referenced the margins, 50% from two years ago.
Speaker Change: We do have a different mix of revenue streams now that youre seeing reflected strategy now we have specialty that's flowing through that.
Speaker Change: Scaling so the margins are a bit lower as we continue to progress. We'll continue we expect that to strengthen but bear in mind that the revenue mix is different than it was a few years ago.
Speaker Change: That's really helpful. Thank you and maybe one last one if you don't mind regarding the <unk> pipeline.
Speaker Change: Given that this is.
Speaker Change: A different type of upgrade cycle than you've experienced over the last few where it was.
Speaker Change: So in today's health care system.
Speaker Change: That's great. Thank you.
Speaker Change: Next question.
Speaker Change: Question comes from the line of Jessica <unk> from Piper Sandler. Please go ahead.
Speaker Change: Hi, guys. Thanks for taking my question and congrats on the quarter.
Jessica <unk>: I wanted to just ask kind of a directionally.
Speaker Change: Directionally about the cabinet contribution excluding amplify year over year in 2025, I know, we don't have guidance, yet, but just maybe.
Speaker Change: Thinking about the cabinet, there's been you know essentially stable through the end of the X C cycle or or will they continue to decline off of the 24 basis.
Speaker Change: Well, we have a couple of actions going on right. The cycle of the XT upgrades from the G series is cycling down. So there are less opportunities to do those upgrades and we have a large fleet now X T. Then are out in the market that have the opportunity to.
Speaker Change: Would you expand with the <unk> amplified so it looks differently, but as customers upgrade their G series <unk> C series or <unk> series.
Speaker Change: All of these.
Speaker Change: Providers are generally in the midst of expansion or adding on new hospitals and different accounts. So it allows several modes of expansion in and of course competitive wins as they come along.
Speaker Change: That's helpful. And then maybe Randy can you just provide some perspective on how we should be thinking about the cabinet lifecycle.
Speaker Change: Does this amplify refresh cycle kind of change the historical 10 year cadence of new product releases.
Speaker Change: Is it just a component of that that 10 year cycle, which is still intact and be helpful. If you could just offer some thoughts. Thank you.
Speaker Change: Yes, yes, that's a really good question no. This is this really extends.
Speaker Change: We've been working really hard to create great predictability based on the schedule of customer resources in our own resources.
Speaker Change: And being able to meet those and those schedules are very strong and set up even before we ended the quarter. So it gives us really high confidence that we can meet these ranges.
Speaker Change: And feel confident about getting the right balance of recurring revenue as well as product revenues.
Speaker Change: We did.
Speaker Change: Just to be clear we.
Speaker Change: Raised the bottom end of guidance for our technical service, our advanced services, our product revenues and our bookings. So I think we feel pretty good about fourth quarter.
Speaker Change: Thanks, Randy and then a follow up from a comment you made around the specialty pharmacy business.
Second up to in the quarter. It seems like there is continued momentum there as we think about the inflation reduction Act theres a lot of impact there to specialty drug pricing and 340, B and so it seems like the IRI is causing a lot of changes to that part of your customers business.
Speaker Change: Has that had any type of impact either positive or negative on your prospects or your conversations with these customers is it bringing them in as it bringing them to the table trying to understand if there's anything to read from those changes that we can.
Speaker Change: And next year. Thanks.
Speaker Change: Well I think specialty pharmacy was something in <unk>.
Speaker Change: Previous year. So it was focused mostly on very large entities.
Speaker Change: Now with the types of services and things that we can bring to the table even small.
Speaker Change: Hospital systems can take on.
Speaker Change: Inside specialty pharmacy on their site.
Speaker Change: So I think it's broadened the market. So the market has broadened its gotten more complex because you have to have the expertise to understand which drugs from kind of dropping off and which ones are coming onboard and the ability to.
Deal with a large.
Speaker Change: A larger catalog there and be the expert piece for these entities. So I'd say the demand is.
Speaker Change: Is increasing and strong there.
And particularly in the middle and smaller markets.
Speaker Change: Thank you.
Speaker Change: Thanks, Alan and team next question. Your next your next question comes from the line of Stephanie Davis from Barclays. Please go ahead.
Stephanie Davis: Hey, guys congrats on the quarter and thank you so much for taking my question.
Stephanie Davis: I was hoping we could revisit your cost optimization initiatives just given the magnitude that we can earnings beat.
Stephanie Davis: And the creation of a CLO.
Stephanie Davis: So how should we think about the initiatives taken to date has there been any major opportunities and Earth by your third party consultants.
Stephanie Davis: And acknowledging that it's only been a month is there any early color from Nam. The GOP line is a top priority.
Stephanie Davis: Thats into the CLO.
Speaker Change: Thank you for the question. So as you know over the last 12 months, we've taken quite a lot of functions or some actions to improve our.
Speaker Change: Hum.
Speaker Change: Tom.
Speaker Change: Im showing performance.
Some of the Ashland's, we've taken up where they've been driven by opportunities that we've seen across the company.
Speaker Change: We continue to explore further opportunities, where we can drive operational efficiency.
Speaker Change: Improve our overall financial results and.
Speaker Change: This has become really part of Omnicell.
Speaker Change: That is we wanted to make sure that we continue to fail.
Speaker Change: Investments in innovation and so you will see us continue to take actions as needed.
To improve our overall.
Speaker Change: Financial up to four months that is part of our company culture to the.
Speaker Change: Are there any broad strokes or buckets of initiatives you can talk about that can give us just maybe one level deeper on granularity.
Speaker Change: Well I mean, if you area looking at like I mentioned earlier operational efficiencies is one key area that we will really focus on going forward, especially we normally coming on board.
Speaker Change: We wanted to make sure that we're optimizing where there are opportunities we have within across the company, but we're not leaving any stone unturned, we will look at all areas across the business.
Speaker Change: Now as we've done in advance to identify opportunities to improve our overall performance.
Speaker Change: And I would take that Doug.
Speaker Change: As you saw with one of our European operations have been winding down we're taking that type of approach truly looking at the business as Chuck said across the board and not leaving any stone unturned.
Speaker Change: Okay very helpful and just a quick follow up on central that automation services is there any color you can give us around the adoption rollout over the next few years is there any opportunity beyond the hospital, just a supply chain and centralized management is really top of mind for retail pharmacies right now as well.
Speaker Change: Yes, we see an emerging consolidated service centers, where.
Speaker Change: As these entities have gotten considerably larger.
Speaker Change: That they can get quite a bit of gains by creating a central site at the center to put all their pharmacy services engine.
Speaker Change: And moved some of the cost out of the individual hospitals and use robotics, and we launched we talked a little bit about launching our.
Speaker Change: Consolidated service center offering that really allow.
Speaker Change: For the use of our onsite central pharmacy services and these are quite unique because we are able to put two and three and in some cases for these robust together.
Speaker Change: To generate.
Speaker Change: Ms efficiencies in accuracies with picking for not just a single hospital, but 2030 40 hospitals.
Speaker Change: Awesome to hear thank you.
Speaker Change: Your next question comes from velocity and Samuel from Jpmorgan. Please go ahead.
Speaker Change: Hi, Thanks for taking the question you spoke to seeing some stabilization within the hospital market and I was hoping maybe you could just expand on that a little bit maybe discuss how they are thinking about prioritization of spend and ROI and then our.
Speaker Change: Our budget is loosening across the board or are you just see it kind of in specific product areas.
Speaker Change: Well I think the key is that.
Speaker Change: When you think about spending on pharmacies as strategic investments for our long term return like these consolidated service centers. So these are significant decisions that need to make and significant multiyear programs that involve not just rolling out some system for an upgrade in a particular year, but much longer term.
Speaker Change: And so we're starting to see those conversations re engage and build into our pipeline that give us really comfort because we want these decisions to be just not opportunistic.
Speaker Change: <unk> for one year, but multi year, which means really rolling out our entire platform.
Speaker Change: In order to have these.
Speaker Change: Sort of multiyear discussions about.
Strategic implementation to really make pharmacy key.
Speaker Change: Get the returns and the ROI you won from it it's really a multi year event.
Speaker Change: And we're seeing customers come to the table on these and.
Both engaging us in bringing us into the conversations as well as as we approach them getting them involved in this broader based discussion really at a C suite level.
Speaker Change: That's great to hear.
Speaker Change: As as we're coming up on on the end of the year I was hoping maybe you could just speak a little bit to how we should be thinking about headwinds and <unk> as you look out to 2025.
Speaker Change: And then also how we should be thinking about amplify within that context.
Speaker Change: Well I think.
Speaker Change: I think we're on a good trajectory in that health system said incrementally been improving quarter to quarter and.
Speaker Change: Assumed that that would continue remember just because the health system is now positive doesn't mean, they run out and spend capital. It takes several of those quarters in a row to give them comfort before then.
Speaker Change: Start investing in strategic projects, so assuming that continues in that form.
Speaker Change: I think there is some interest rate sensitivity as long as they flatten or continue to go down.
Speaker Change: See a more willingness dispense strategic capital and to really lean into the pharmacies that said, you're expanding and requires.
Speaker Change: It requires that debt.
Speaker Change: Affordable right for for money to put into these projects.
Speaker Change: And I think that one of the things that it just it just doesn't seem to stop but it's a good thing for US I think is the continued consolidation I was just in to customers. This week and I went into to look at their operations and talk about their future and they both had a lot going on and they both talked about new.
Speaker Change: Acquisitions, they were continuing to add to their system, which CMS seems to be continuing a trend, which just continues to bring the conversation to the.
Speaker Change: These much larger strategic level. So I think those are tailwind.
Speaker Change: Headwinds would be a more macroeconomic.
Speaker Change: It took some change in the way payers pay or.
Speaker Change: Some changes.
Speaker Change: The amount of people insured or other insurance, but I don't really see that as much I just think it's a slowly slow steadily improvement is what we're seeing out there.
Speaker Change: Okay.
Speaker Change: Randy.
Randy: I'd add as well is as we think about it certainly we're seeing some positive signs on the end markets and macros. We all are for Omnicell as we've been sharing with you over the last couple of quarters, we're well along the path from a bookings perspective on the XT upgrade cycle.
Randy: So that's something to keep in mind as well as you think about Ami felt business as we go forward over the next.
Randy: Four to six quarters.
Speaker Change: Great. Thanks, and then just maybe just to kind of follow up to the back half of that question. Just how we should be thinking about kind of amplify within the context of those heads the headwinds and tailwind for next year, maybe one I know it takes a little bit of time for bookings to convert to revenue. So how should we be thinking about timing for that.
Speaker Change: Well I think we just started and I think the conversations are rich I think that as we launch new innovations.
We will continue to do on a regular basis that will even in wrench, those conversations anymore and give more driving reasons for more customers.
Speaker Change: To deploy the amplify platform sooner.
And so I think that.
Speaker Change: It's not just about when does the amplify revenue event take place, it's about getting the broader conversation to get the broader.
Speaker Change: Amplify uplift from the platform so.
Speaker Change: I intend to see I expect to see that.
Speaker Change: Every customer at this point.
Pretty much we are engaged in XD amplify discussion.
Speaker Change: So we're beginning that roadmap and.
Speaker Change: That should be a good.
Speaker Change: That should be a good.
Tailwind to us.
Speaker Change: As we move into 2025.
Speaker Change: Even though we have the.
Speaker Change: We don't have as many upgrades from the G series.
Speaker Change: Great very helpful. Thank you.
Speaker Change: Thanks, and your next question. Your next question comes from the line of Scott <unk> from Keybanc capital markets.
Speaker Change: Hi team. Thanks for the question. So just wanted to get more sense on the product side can you give us any color on how far along are or.
Speaker Change: Way through the upgrade cycle of the XT series currently.
Speaker Change: And then.
Speaker Change: Sort of the opportunity set for us to amplify heading into next year, you mentioned, both software and hardware can you talk about where you see the most opportunity or the bookings currently between the mix of those two thanks.
Speaker Change: Well I think we're substantially through the.
Speaker Change: G series upgrades of the XT series, So we're kind of at the.
Speaker Change: Okay.
Speaker Change: Bookings standpoint, yes, thank you carefully from a booking standpoint.
Speaker Change: The amplify series allows customers to access more products like med chill and other new products that we're innovating. So there is a driving desire to get these other products.
Speaker Change: Floyd in these in the fleet of expertise that we have out there in the marketplace.
Speaker Change: As well as.
Speaker Change: New software features and functions and additive things and so it's.
Speaker Change: It's not all about just upgrading at the end of a cycle, it's about getting access to new solution sets and.
Speaker Change: New ways of looking at products on the supply chain as well as.
Speaker Change: In ambulatory.
Speaker Change: So.
Speaker Change: Customers.
Speaker Change: Wanted to figure out how we can get from where they are today to where they want to be over the next three four years and so XD ample thickness is that discussion that is the on ramp to that.
Speaker Change: Just as.
Speaker Change: Is.
Speaker Change: It's a more positive discussion with the customer.
Speaker Change: Saying, hey, you need to upgrade because as things old.
Speaker Change: And because we have been stepping into their world, helping them solve the problems just not give them a new system.
Speaker Change: And so I think that's why the <unk> is really resonating well with us and we will continue to see.
Speaker Change: Engagement on several levels, because theres a lot of parts of eggs to amplify.
Speaker Change: Customers can access.
Speaker Change: Thanks, Randy for the color.
Speaker Change: Moving on to advanced services, obviously, that's a mixture right now.
Speaker Change: No.
Speaker Change: Comprehensive complex services that you are helping.
Speaker Change: These hospital systems with their advanced pharmacy needs as well as software modules like $3 40, B, how should we think about that mix heading into next year and then obviously the margins.
Speaker Change: On the more services oriented part of advanced services and more software.
Speaker Change: Revenue streams. Thanks.
Speaker Change: Yes, so when we do we do see an opportunity as we again as I mentioned earlier as we continue to invest in.
Speaker Change: San Francisco and the business continues to scale, we do see that contributing to our overall margins.
Speaker Change: But from an advanced services standpoint, I think if you look at our performance this year.
Speaker Change: Advanced services is growing we do expect that to continue to grow for the rest of the year.
Speaker Change: Also I want to call. The fact that we do expect van services for the full year to be around 14%.
Speaker Change: With its solid growth going into 2025.
Speaker Change: Yes did you grow double digit growth into next year.
Speaker Change: Technical services is probably not quite as fast, but we're really moving to this metric.
Speaker Change: Our continued revenue the recurring portion of our business, we think that really helps to make.
Our business more transparent and easy to understand and.
Speaker Change: And really.
Speaker Change: But that's the way we run the business and so we wanted to make sure that we set it up going that way going forward for all of you.
Speaker Change: Thanks, Scott Thanks, Russ to your next question comes from the line of Bill Sutherland from Debenture Mark Company. Please go ahead.
Bill Sutherland: Hey, thanks, everybody.
Bill Sutherland: Wanted to get an update on the IV <unk>.
Bill Sutherland: Yes.
Bill Sutherland: You have to go through some redesign required by the FDA guidelines Hulu.
Bill Sutherland: Kind of where we are with.
Bill Sutherland:
Bill Sutherland: The.
Bill Sutherland: Outlook for.
Getting that into the market and the potential bookings.
Speaker Change: Yes, I'd say, it's still slow, but we're very optimistic about it.
Bill Sutherland: Yes.
Got these next releases windup to helped us optimize those requirements and.
Bill Sutherland: It's beginning to make more sense.
Bill Sutherland: Ryan better outcomes for our customers. So we see we believe we will see.
Bill Sutherland: Increased adoption and increased bookings.
Bill Sutherland: Over a year to year.
Bill Sutherland: Not quite as fast as everybody would like but it's.
Bill Sutherland: It's a great product and I think it is.
Bill Sutherland: Its momentum is building, but still slow.
Speaker Change: Got it.
Speaker Change: And I was just wanted to ask also about capital deployment.
Speaker Change: Any updated thoughts there and particularly.
Speaker Change: With.
Speaker Change: The convert.
Speaker Change: Due next year.
Speaker Change: What the thinking might be around that.
Speaker Change: Yes, we're very mindful of the timing of the convert maturity and we do have while we continue to explore strategic options to it.
Speaker Change: And so that there is no dilution from a shareholder value standpoint, as you know we're in a very strong cash position.
Speaker Change: Close to $600 million onto our balance sheet at $350 million revolver and so we do.
We are looking at different options to ensure that we will.
Speaker Change: Putting ourselves in a position where we're not taking advantage of the timing that we have made.
Speaker Change: It also when a very solid position as you know we.
Speaker Change: Hey.
Speaker Change: 0.25%.
Speaker Change: Convertible senior notes, so we will make take some actions and in near future.
Speaker Change: Thanks Ghansham.
Speaker Change: Bill to your question on capital deployment I would note that we've shared with you that we have a goal to get to consistent GAAP performance, but we are also looking at that ROIC metric as well.
Speaker Change: Moving that return on invested capital.
Youre seeing over the last couple of prior quarters as we are getting much more disciplined.
Our decision, making when it comes to capital deployment within the company.
Bill Sutherland: Thank you.
Speaker Change: Thanks, Paul.
Speaker Change: Your next question comes from the line of Stan Bernstein from both Fargo. Please go ahead.
Stan Bernstein: Hi, Good morning, guys for taking my questions, maybe just a quick one on bookings guidance can you just talk us through what needs to happen to get to the upper end of the range for bookings.
Stan Bernstein: Yes.
Speaker Change: We look at today, we're very comfortable and confident with the bookings that we've achieved year to date.
Speaker Change: We expect this trend that we've seen from a promotional locations on that momentum continues.
Speaker Change: We're confident that we will as we go through the end of the year that momentum should get us to achieve our booking some revised guidance again.
Speaker Change: Guy guiding to the lower end of improving the law.
Speaker Change: Our.
Speaker Change: Bookings for.
Speaker Change: The full year.
Speaker Change: There are some into the confidence that we have in our bookings guidance for the rest of the year.
Speaker Change: Yes.
Speaker Change: Primary thing Sir.
Speaker Change: Just stand to two primary things have changed over the last few years. One is the economic conditions are better.
Speaker Change: Of our customers has improved and the other thing is we've launched new products. So.
Speaker Change: So we have more in the pipeline and more willing customers to buy and I think thats strength of our pipeline for Q4.
Speaker Change: Okay, and a quick follow up on product revenue, obviously, youre seeing a ramp into the fourth quarter <unk> came out I think a little bit light versus guidance can you just talk us through what happened in the quarter.
Speaker Change: That just a timing impact that's now being pushed into <unk>.
Speaker Change: Our <unk> product revenue was in line with our expectations and as I mentioned earlier.
Speaker Change: We are confident though.
Speaker Change: And to achieve our full year.
Speaker Change: Revenue guidance as you saw we did.
Speaker Change: Increase the up.
Speaker Change: And of our product revenue and total revenue is about alpha and that again. That's just it gives it gives us the confidence that we will be able to achieve a product business for four years.
Speaker Change: Alright, thanks, so much.
Dan: Thanks, Dan.
Speaker Change: Your next question comes from the line of David Larsen from BP.
Speaker Change: Please go ahead.
David Larsen: Hi, can you talk a little bit about your sales force like how large is it how many of those reps are quota carrying what portion are allocated into like advanced services and in live and versus product or is it all <unk>.
David Larsen: Together any sort of color around your go forward strategy.
David Larsen: Relative to like a year ago or two years ago. Thanks very much.
Speaker Change: Yes, we've been evolving our sales force and our strategy to do a better job of connecting the customer with our enterprise solution set as opposed to just single product opportunities and with that has come the reorganization of the sales force to have one dedicated people to accounts.
Speaker Change: That helped with the relationship building.
And then those that do have quota carrying or substantially all of those but maybe not as heavily weighted as it has been in the past because of the relationship building and long term.
Speaker Change: Our strategy, we have to deploy more of the enterprise solution set and instead of just.
Speaker Change: A single event. So we will continue to evolve that as we move forward and we don't really disclose the.
Speaker Change: The exact numbers on those people, but I think that we've really seen much better performance.
Our sales force this year and the predictability and the commitments they've made and the numbers that they produced and so we feel.
Speaker Change: That we really are.
Speaker Change: Gone through somewhat of a sea change over the last couple of years, and we're really happy with where we are.
Speaker Change: That's very helpful. Thank you and then can you maybe just talk a little bit about your CRM platform I think a few years ago. You went through a process, where you really sort of reviewed.
Speaker Change: Each account each client how you actually measure kings and or backlog I think you get a little bit more conservative.
Speaker Change: And what you reported as your.
Speaker Change: Backlog number can you maybe just talk about that please.
Speaker Change: And then just how much of your 25 revenue will be covered by your reported backlog if and when you reported on our fourth quarter call. Thank you.
Speaker Change: Yeah, David I think most of the backlog lately on the sites specifically you say generally the connected devices are 12 to 18 months and install some most of that backlog that we report will be somewhat.
Speaker Change: Coming out of backlog over the next two.
Speaker Change: Six to 18 months I, suppose, but it's not a precise measurement.
Speaker Change: And we've spent a lot of time not just redesigning the salesforce for the last question, but also redesigning our systems.
Speaker Change: And creating a better understandable go to market for our customers to easily more easily deploy their capital and that's really allowed us to get.
Speaker Change: Move our on our CRM system, our people and our processes to deliver much better predictability not just in terms of bookings but.
Speaker Change: I would say quite a significant step up in our product revenues in our service revenues as well.
Speaker Change: So I feel like we've taken this time on the last two years to invest in these systems processes and people we've done all three and.
Speaker Change: That is what's driving these much more consistent results and that is why we are confident about Q4.
Speaker Change: Great. Thank you.
David Larsen: Thanks, David.
There are no further questions at this time that concludes our Q&A session I would like to turn the call over back to Randall Lipps for closing remarks.
Randall Lipps: Well I'd just like to stand.
Randall Lipps: Big Thank you to all the Omnicell team that has worked really hard in the last two years to really bring.
Randall Lipps: Bring us to this new point, so exciting to see customers reengage with us on innovation.
Randall Lipps: <unk> them to solve these really difficult problems to make medication management better for the whole world and and then the results.
Randall Lipps: This hard work are flowing through the P&L.
Randall Lipps: Let's just refreshing and finally, just the welcome to R&D.
To the team and we look forward to your leadership and continuing to develop the grade commercialization, we have going to the next step we.
Speaker Change: We'll see you folks next time.
Speaker Change: That concludes today's meeting. Thank you all for joining you may now disconnect.
Speaker Change: [music].