Q4 2024 Omnicell Inc Earnings Call
Okay.
Kathleen: Thank you for standing by my name is Kathleen and I will be your conference operator today.
Speaker Change: At this time I would like to welcome everyone to the Omnicell fourth quarter and full year 2024 financial results call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Speaker Change: After the Speakers' remarks, there will be a question and answer session.
Speaker Change: 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: And if you would like to withdraw your question press the star one again.
Kathleen Nemeth: Thank you and now I would like to turn the call I'll predict Kathleen Nemeth.
Kathleen Nemeth: Senior Vice President Investor Relations. Please go ahead.
Kathleen Nemeth: Good morning, and welcome to the Omnicell fourth quarter and full year 'twenty 'twenty four financial results conference call on the call with me today are Randall Lipps, Omnicell, Chairman, President CEO and founder and Chief.
Speaker Change: Executive Vice President and Chief Financial Officer.
Speaker Change: This call will contain forward looking statements, including statements related to financial projections or performance or other statements regarding on michelle's plans strategies objectives goals expectations planned investment opportunities expense management product services or solutions ability to draw.
Speaker Change: <unk> long term growth and consistent got profitability 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 for more detailed description of the risks that impact. These forward looking statements. Please refer to the information in our press release.
Speaker Change: Issue today in the Omnicell annual report on Form 10-K filed with the SEC on February 28, 2024, and another 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.
Speaker Change: Except as required by law, we do not assume any obligation to update or otherwise release publicly any revisions to our forward looking statements. Our results were released this morning and are posted in the Investor Relations section of our website at IR dot on the self dot com.
Speaker Change: Additionally, we would like to remind you that during this call we will discuss some non-GAAP financial measures.
Speaker Change: Conciliation of these non-GAAP measures to the most comparable GAAP financial measures are included in our financial results press releases 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 measure 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: As we announced on our last earnings call. Starting in 2025, we are changing the bookings metrics that we provide going forward, we will be providing a product bookings metric, which will consist of connected devices and software licenses. We will also be providing a new metric annual recurring revenue or <unk>.
Speaker Change: Our R, which will consist of SaaS and expert services, which was formerly known as advanced services technical services and consumables.
Speaker Change: In our earnings release issued earlier today, we provided a 2020 for reconciliation utilizing the historic bookings metric as well as an illustrative example for comparative purposes, using the new bookings product bookings and a R. R metrics, we will provide further detail on these metrics during today's call.
Speaker Change: And with that I will now turn the call over to Randall Randall.
Randall Lipps: Thank you Kathleen.
Randall Lipps: Good morning, and thank you all for joining us to discuss our financial results for the fourth quarter and full year 2024.
Randall Lipps: Well as our outlook for 2025.
Randall Lipps: Before I begin I'd like to wish everyone, a healthy and happy new year.
Speaker Change: Here at <unk>, we are entering 2025 with a renewed sense of vigor and a vast amount of gratitude for our customers who continue to place their trust in us and demonstrate their support of our vision to transform the pharmacy care delivery model across a wide array of care.
Randall Lipps: And distributions settings.
Randall Lipps: Let's review a few highlights from our strong finish to 2024.
Randall Lipps: We exceeded our bookings guidance for the year driven by strength in connected devices.
Randall Lipps: We solidified our product backlog, which assist with revenue and planning and scheduling for 2025.
Randall Lipps: We delivered consistent revenue performance throughout the year by a loving implementation plans with customers and continually improving processes to enable execution.
Randall Lipps: We solidified our balance sheet at what we believe are favorable terms via the issuance of a new convertible senior notes and we're also able to repurchase a majority of the principal amount of our previously outstanding convertible senior notes that ordinary maturity.
Randall Lipps: And importantly, we continue to see demand for products and services launched as part of the XT amplify program.
Randall Lipps: Yeah.
Randall Lipps: Turning to the financials for the quarter Hanmi sell delivered a solid fourth quarter and I am pleased to note that we returned to a year over year revenue growth for the quarter and are on our way to meeting our objective of delivering consistent GAAP profitability.
Randall Lipps: Total revenues were $307 million, an increase of $24 billion over the prior quarter and an increase of 48 million over fourth quarter 2023.
Randall Lipps: Product revenues were strong coming in at $182 million, which is an increase of $24 billion over the previous quarter and an increase of $37 million compared to fourth quarter 2023.
Randall Lipps: Service revenues were $125 million, an increase of 1 million over the previous quarter and an increase of $11 million over the fourth quarter 2023.
Randall Lipps: non-GAAP gross margin for.
Randall Lipps: Fourth quarter 2024 was 47, 4% an increase of 290 basis points from the prior quarter boosted by our higher product revenue volumes, and a favorable product and customer mix.
Randall Lipps: Our fourth quarter 2024 earnings per share in accordance with GAAP was <unk> 34 cents per share compared to 19% cents per share in the prior quarter and a loss of 32 cents per share in the fourth quarter 2023.
Randall Lipps: Our fourth quarter 2024, non-GAAP earnings per share were <unk> 60 cents compared with 56 cents per share in the prior quarter and 33 cents per share in the same period last year.
Randall Lipps: Fourth quarter, non-GAAP, EBITDA was $46 million, an increase of 8 million compared to the previous quarter and an increase of $23 million when compared to the same periods last year.
Randall Lipps: Now, let's turn to a review of the macroeconomic landscape.
Randall Lipps: We are pleased to note that we see signs of favorable conditions in many of our addressable markets our focus on innovation and building customer awareness around our roadmap, which includes robotics and smart devices intelligence software workflows and data analytics seems to be resonating with the market.
Randall Lipps: I'll now highlight a few of the key customer wins in the fourth quarter.
Randall Lipps: Our multi year X T. Amplify innovation program that we announced in April 2024 continues to gain traction and we see exciting momentum across our portfolio.
Randall Lipps: Here are a few recent highlights.
Randall Lipps: N Y C health and hospitals announced they selected omni sales outcome centric solutions in an effort to improve efficiency and patient safety for one of the nations largest municipal health care delivery systems. According to the health care system leadership. This strategic initiative is.
Randall Lipps: Expected to transform patient care and assist staff in support of their core mission in ways. They did not previously possible.
Randall Lipps: The North Carolina, not for profit health care system selected Omnicell XT automated cabinets as it seeks to enhance patient care on nursing floors and in perioperative settings with our inventory optimization services. This system is expected to increase inventory visibility.
Randall Lipps: <unk> improved insights and optimize workflows across the system that should help to achieve optimal medication inventory outcomes.
Randall Lipps: We are pleased to note. This was a new market share win for Omnichannel.
Randall Lipps: Another East Coast Health care organization will expand as pharmacy technology strategy with the addition of XD cabinet automation and the expansion of anesthesia dispensing automation and software in order to support care initiatives across the enterprise.
Randall Lipps: We believe this is proof of the solid demand outlook for HTS systems in areas such as expansion within current customers.
Randall Lipps: This is an exciting win for Omnicell, one of the largest healthcare delivery systems in the nation will be implementing XT extend a core component of our <unk> offering as they strive to future proof their cabinet footprint and enhanced the security user experience and valley.
Randall Lipps: From their HD platform.
Randall Lipps: 'twenty 'twenty four it was a busy year for IV CES as we increase our footprint of IV station robot installations and expanded our early adopter customer base.
We received positive feedback from our <unk> customers, particularly as the IV robots stock solution capabilities have been instrumental to support these customers during the IV fluids shortage. The enhanced features delivered in a recent update enables a wider variety of drug vials that can now be.
Speaker Change: He used to come bound IV bags and syringes in the IV station robot.
Speaker Change: Unlocking 60 additional N D CS that our customers have been requesting.
Speaker Change: Specialty pharmacy services continues to gain market traction.
Speaker Change: Our offering combines deep expertise and leading technology to help customers maximize their specialty pharmacy outcomes.
Speaker Change: <unk> had several notable wins in the fourth quarter of 2024, including renewal and expansion of services with a large academic medical center a contract for a new specialty pharmacy program with a health system in the northeast and a new collaboration to optimize specialty pharmacy program for health systems.
Speaker Change: Hmm and the southeast.
Speaker Change: Unfortunately twenty-five health insurance provider has selected in life and health as their primary reconciliation and medical billing partner in preparation for their 2025 strategy.
Speaker Change: We are committed to a multiyear growth journey I want to thank omnicell employees for their steadfast commitment to our customer success.
Speaker Change: Their embrace of our culture of innovation and fiscal discipline.
Speaker Change: Thank you for your support of Omnicell, and we look forward to updating you on our progress through 2025.
Speaker Change: At this point I'd like to turn the call over to our Chief Financial Officer.
Speaker Change: For a more detailed review of our fourth quarter and full year 2024 financial performance as.
Speaker Change: As well as our outlook for 2025 Gotcha.
Randall Lipps: Thank you Randall.
Randall Lipps: We delivered solid fourth quarter and full year 2024 financial results.
Randall Lipps: With all guided metrics exceeding all landing in the upper end of our previously stated guidance ranges.
I am very proud of the entire Omnicell team, who continue to demonstrate their commitment to our promise and our guiding principles on a daily basis.
Randall Lipps: We believe our solid fourth quarter results reflect an improving macroeconomic environment.
Randall Lipps: On our commitment to consistent execution discipline.
Randall Lipps: Now I am going to walk you through some of the key drivers of our fourth quarter 2024, and full year 'twenty 'twenty four results.
Randall Lipps: As well as our first quarter 2025 full year 2025 guidance.
Randall Lipps: Looking at our fourth quarter 2024 are resolved.
Randall Lipps: I don't know that.
Randall Lipps: Total revenues were 300 on several medium.
Randall Lipps: An increase of $24 million over the prior quarter.
Randall Lipps: Increase of 48 million over the fourth quarter of 2023.
Randall Lipps: Revenue in the quarter were aided by the strong performance of connected devices.
Randall Lipps: As well as our SaaS on expert services.
Randall Lipps: <unk> specialty pharmacy services.
Randall Lipps: Fourth quarter 2020 for product revenues with strong at 182 million.
Randall Lipps: Representing an increase of $24 million over the previous quarter.
Randall Lipps: And an increase of $57 million compared to the fourth quarter of 2023.
Randall Lipps: Product revenues in the fourth quarter of 2024 increase compared to the fourth quarter of 2023.
Randall Lipps: Primarily due to the improvement of the macro economic environment.
Randall Lipps: The timing of X T series systems implementation.
Randall Lipps: Service revenues for the fourth quarter of 2024 125 million.
Randall Lipps: An increase of 1 million over the previous quarter.
Randall Lipps: And an increase of 11 million over fourth quarter of 2023.
Randall Lipps: Similar to last quarter.
Randall Lipps: <unk> X, but services as well as technical services contributor to services revenue growth compared to the fourth quarter of 2023.
Which we believe reflects the strong customer demand.
Randall Lipps: Our SaaS on export services.
Randall Lipps: And continued growth and value capture of our technical services installed base.
Randall Lipps: non-GAAP gross margin for the fourth quarter of 2024 was 47, 4%.
Randall Lipps: An increase of 290 basis points from the prior quarter.
Randall Lipps: Boosted by higher product revenue volumes.
Randall Lipps: Favorable product and customer mix.
Randall Lipps: A full reconciliation of our GAAP to non-GAAP results.
Randall Lipps: <unk> in each of our third and fourth quarter 2024 quarterly earnings press releases, which are posted on our Investor Relations website.
Randall Lipps: Fourth quarter 2024 earnings per share in accordance with GAAP with 34 cents per share comp.
Randall Lipps: Compared to <unk> 19 per share in the prior quarter.
Randall Lipps: And loss per share of <unk> in the fourth quarter of 2023.
Randall Lipps: As we have mentioned previously.
Randall Lipps: It is management's goal to return to consistent GAAP profitability.
Randall Lipps: We believe our fourth quarter results are continued evidence of our progress towards this goal.
Randall Lipps: Our fourth quarter 2024, non-GAAP earnings per share with 60 fan.
Compared to 56 cents per share in the prior quarter.
Randall Lipps: <unk> 53 per share in the same period last year.
Randall Lipps: Fourth quarter, non-GAAP EBITDA was $46 million.
Randall Lipps: An increase of 8 million compared to the previous quarter.
Randall Lipps: And an increase of 23 million when compared to the same period last year.
Randall Lipps: At the end of the fourth quarter of 2024.
Randall Lipps: Our cash and cash equivalents balance was $369 million.
Randall Lipps: Down from $571 million as of September 30 of 2024.
Randall Lipps: Driven by the fourth quarter convertible senior notes transaction.
Randall Lipps: Including the repurchase of 400 million aggregate principal amount of the outstanding convertible senior notes.
Randall Lipps: Our maturing in 2025.
Randall Lipps: non-GAAP free cash flow during the fourth quarter of 2024 was $43 million.
Randall Lipps: Free cash flow was significantly higher in the fourth quarter compared to the prior quarter as we continue to make good progress on cash collections.
Randall Lipps: And ongoing focus on cost management as we work to drive consistent profitability.
Randall Lipps: In terms of accounts receivable.
Randall Lipps: Sales outstanding for the fourth quarter of 2024 was 77 days.
Randall Lipps: We are pleased with our continued strong quarterly collections on working capital management.
Randall Lipps: This is an area of significant positive progress over the last 18 months.
Randall Lipps: Inventories as of December 31, 2024 89 million.
Randall Lipps: A decrease of $6 million from the prior quarter.
Randall Lipps: And a decrease of 21 million from December 31, 2023.
Randall Lipps: Now turning to review our full year 2024 results.
Randall Lipps: Bookings for the full year 2024 with $923 million.
Randall Lipps: Compared to our guidance of $800 million.
Randall Lipps: <unk> hundred $75 million.
Randall Lipps: An increase of 16 9 million compared to full year 2023.
Randall Lipps: Our strong 2020 for bookings performance was driven by XT upgrades.
Randall Lipps: As we near the end of the XT upgrade cycle as.
Randall Lipps: As well as better than expected bookings of XP extended.
Randall Lipps: Which demonstrates to us strong customer interest in our innovation roadmap.
Randall Lipps: Although backlog was $1.201 billion as of December 31, 2024.
Randall Lipps: Compared to 1 billion on the $143 million as of December 31, 2023.
Randall Lipps: Well the backlog, which includes connected devices, such as XT series automated dispensing systems.
Randall Lipps: On the product portion of our central pharmacy dispensing services.
Randall Lipps: Compounding services.
Randall Lipps: December 31 2024.
Randall Lipps: $647 million.
Randall Lipps: $447 million, a short term backlog.
Randall Lipps: Which we expect to convert to revenue within 12 months.
Randall Lipps: Product backlog increased by $36 million over the prior year.
Randall Lipps: Driven by strength in our connected devices portfolio.
Randall Lipps: As well as our XD extend offering.
Randall Lipps: That's an expert services backlog as of December 31, 2024 was 555 million.
Randall Lipps: Of which 93 million only short term SaaS on Xbox services backlog.
Randall Lipps: It is expected to convert to revenue within 12 months.
Randall Lipps: Some export services backlog increased $23 million.
Randall Lipps: 4% over the prior year.
Randall Lipps: Full year 2024 revenues were $1.112 billion.
Randall Lipps: Decrease of $55 million or 3% from 2023.
Randall Lipps: 2020 for product revenues with $681 million.
Although our 2020 for services revenue.
Randall Lipps: 482 million.
Randall Lipps: Within the full year 2020 for services revenue.
Randall Lipps: Second about services revenue with 238 million.
Randall Lipps: SaaS and services revenues with $244 million.
Randall Lipps: 2020 for SaaS and services revenue increased 14% over the prior year.
Randall Lipps: Our full year 2024 earnings per share in accordance with GAAP with 27 per share.
Randall Lipps: Our full year 2024, non-GAAP earnings per share with $1 71 per share a decrease of 27.
Randall Lipps: From 2023.
Randall Lipps: For the full year 2024.
Randall Lipps: non-GAAP EBITDA was $136 million.
Randall Lipps: Which is above the high end of the revised full year 2024 guidance range, we provided in the third quarter of 2024.
Randall Lipps: Overall, we are very pleased with our 2020 for execution.
Randall Lipps: The customer interest we are seeing in the market.
Randall Lipps: Overall incremental macroeconomic improvement.
Randall Lipps: Now turning to guidance for 2025.
Randall Lipps: As we announced during our last earnings call beginning in 2025, we are changing the bookings metric that we provide.
Randall Lipps: Booking metric included connected devices and software licenses.
Randall Lipps: And export services and consumables.
Randall Lipps: As a reminder, beginning in 2025 advanced services will now be known as SaaS on expert services.
Randall Lipps: Beginning in 2025.
Randall Lipps: We are providing product bookings, which consist of connected devices and software licenses.
We are also providing a new metric.
Randall Lipps: While recurring revenue.
Randall Lipps: Wow.
Which includes thoughts on export services.
Randall Lipps: Okay. Thanks, I'll say, having seen some consumables.
Randall Lipps: We believe these new metrics better reflect how we are managing the business internally.
Randall Lipps: And should be helpful in understanding our modeling our company going forward.
Randall Lipps: For the full year 2025, we anticipate product bookings to be in the range of 500 million to $550 million.
Randall Lipps: Quite a bit of context, using the new definition.
Randall Lipps: Product bookings for full year 2024, with 558 million.
Randall Lipps: The guidance implies 2025 product bookings will be flat to modestly down.
Randall Lipps: In 2025 compared to 2024.
Randall Lipps: As we have said.
Randall Lipps: We are successfully concluding the XP replacement cycle and this is reflected in our product bookings outlook.
Randall Lipps: While we do expect XT amplifier bookings to partially offset the lower equity replacement bookings in 2025.
Randall Lipps: It may not fully offset the decline in XD upgrades bookings.
Randall Lipps: Remember Wow, XT bookings will likely be down in 2025 compared to 2024.
Randall Lipps: We'll continue to see demand for X team expansions.
Randall Lipps: As well as potential new market share opportunities.
Randall Lipps: Looking forward, we are very excited about the customer response to X P. Amplify.
Randall Lipps: And all our refreshed multiyear innovation program.
Randall Lipps: And we expect these new products to be a meaningful contributor to 2025 product bookings.
Randall Lipps: Our year end annual recurring revenue is expected to be in the range of 610 million to $630 million.
Again for context, using a new metric annual recurring revenue at the end of 2024 was $580 million.
Randall Lipps: Within annual recurring revenue.
Randall Lipps: Nicolas services and consumables tend to grow in the low single digits.
Randall Lipps: SaaS and expert services is expected to grow at a stronger pace.
Randall Lipps: Total revenues are expected to be in the range of $1.105 billion.
Randall Lipps: Two $1.155 billion.
Randall Lipps: The midpoint of our total revenue guidance range.
Randall Lipps: <unk> a growth rate of 2% compared to 2024.
Randall Lipps: With product revenue expected to be roughly flat and services revenues growing at a faster rate driven primarily by growth in SaaS and Paas services.
Randall Lipps: non-GAAP EBITDA is expected to be in the range of 140 million to $155 million.
Randall Lipps: At the midpoint non-GAAP EBITDA is expected to expand approximately 100 basis points.
Randall Lipps: non-GAAP earnings per share is expected to be in the range of $1 65.
Randall Lipps: Two $1 85.
Randall Lipps: Remember, we are facing an approximate 20% headwind to non-GAAP earnings per share in 2025 compared to 2024.
Randall Lipps: Due to the reduction in interest income as a result of repurchasing a significant portion of the principal amount of our previously outstanding convertible senior notes.
Randall Lipps: For full year 2025.
Randall Lipps: Assuming an effective blended tax rate of approximately 18%.
Randall Lipps: In our non-GAAP earnings per share guidance.
Randall Lipps: For the first quarter of 2025, we are providing the following guidance.
Randall Lipps: We expect first quarter 2025, total revenues to be between $255 million and $265 million.
Randall Lipps: With product revenues anticipated to be between $137 million on $142 million.
Randall Lipps: And services revenues expected to be between $118 million on $123 million.
Randall Lipps: The first quarter 2020 revenue guidance reflects our typical seasonal product revenue pattern.
Randall Lipps: In line with the historic trends, we have seen in which product revenues tend to increase quarterly as the year progresses.
Randall Lipps: We expect first quarter 2025, non-GAAP EBITDA to be between 19 million and $25 million.
Randall Lipps: We expect first quarter of 2025 non-GAAP earnings per share to be between <unk> 25 per share.
Randall Lipps: As a reminder.
Randall Lipps: First quarter normally includes some seasonal expenses, including payroll taxes benefits with it.
Randall Lipps: We expect non-GAAP EBITDA margin to expand as we progress through the year.
Randall Lipps: With a strong 2020 point hand.
Randall Lipps: I want to reiterate that we are very pleased with our solid results for both the fourth quarter on the full year.
Randall Lipps: And that we believe we are making solid progress towards consistent profitability.
Randall Lipps: We are very excited about the long term outlook for Omnicell.
Randall Lipps: As we plan to deliver innovative solutions on the X the amplify program.
Speaker Change: That app designed to enhance pharmacy nursing at Constancia.
Speaker Change: We've used medication errors of waste and.
Speaker Change: Ultimately maximize the value of our customers.
Speaker Change: <unk> automated dispensing system investments.
Speaker Change: I would also like to take a moment to thank the whole team here omnicell for their hard work.
Speaker Change: <unk> commitment to improve execution and relentless customer focus.
Speaker Change: We will now like to open the call for questions.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: If you have dialed in and I would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: In China Q.
Speaker Change: And if you would like to withdraw your question. Please.
Speaker Change: One again.
Speaker Change: If you are called upon to ask your questions and listening via loud speaker on your device. Please speak up your handset and then she is that your phone is not on mute when asking your question.
Speaker Change: Again, Please press star one to join the queue.
Speaker Change: And your first question comes from the line of Alan <unk>.
Alan: <unk> of America. Your line is now open.
Alan: Good morning, and thanks for taking the questions a random one question on the end market demand you mentioned seeing some green shoots can you expand on that a little bit I think it's pretty clear that hospital performance has improved do you think how do you think that that is translating into budget growth and then as it.
Alan: It relates to the product revenue ramp throughout the course of the year. It seems very similar to last year can you kind of speak to what's driving the product revenue ramp. Thanks.
Alan: Yeah, Thanks, Alex for the questions.
Alan: Yeah, I think the.
Alan: Hospital financial conditions and providers have continued to improve.
Alan: That has really given us the opportunity and probably contributed to our fourth quarter exceeding in our bookings.
Alan: And so I think that really sets us up well for 2025 in fact, those strong bookings.
Alan: Turning into revenues in 2025, mostly and because were.
Alan: We have already pre scheduled most of those were in line too.
Alan: Grow quarter.
Alan: The businesses dropping out so to speak and and so we will see this.
Alan: <unk> over quarter comparative growth.
Alan: That we.
Alan: We hope rose and continues to grow into the 26. So I think we're really well positioned with the strong end of the year.
Alan: The improved financial position of our customers makes it the decision process I think a little bit easier to make.
Alan: And the excitement around amplify frankly.
Alan: It allows us to get in front of them and put these.
Alan: Offerings and to get them to invest in now as opposed to later.
Alan: I would add specialty as well to that yeah, especially as well is also continuing to see good traction we saw that in fourth quarter.
Alan: We at least see some nice expansion there as well with current customers.
Speaker Change: That's helpful and then one for gotcha around.
Alan: Opex growth and gross margin.
Speaker Change: In 2025, there's been really good operating expense management over the course of 2024 as we think about the growth drivers in your business into 2025, I'm just trying to get a sense of how to think about the trajectory of gross margin on the consolidated level and how that compares to the outlook.
Alan: For operating expense growth in 2025, thanks, guys.
Alan: Yes, so as you saw.
Alan: 22024, we did see an improvement in our gross margins quarter over quarter and.
Alan: We do expect that to continue into 2025.
Alan: The key driver is that we will look at from a gross margin standpoint between gross margin improvements in 2025 bps number while we continue to manage our expenses very well.
Alan: We do expect that.
Alan: Some favorable product and customer mix going into 2025, we should see unimproved land gross margins.
Alan: Also.
Alan: We've put in place some operational improvements that we believe will continue to improve our overall financial results and performance, but our focus is primarily on improving our overall profitability.
Alan: You will see us continue to manage our P&L very prudently.
Alan: From a fiscal discipline standpoint that we believe will continue to help us improve our overall profitability.
Speaker Change: Great. Thank you.
Speaker Change: Thanks, Alan next question please.
Speaker Change: Your next question comes from the line of Jessica Fye.
Speaker Change: Sandler Your line is now open.
Jessica Fye: Hi, Thank you guys. So much for taking my question and congrats on the strong results.
Speaker Change: I wanted to understand the upside to bookings in 2024.
Speaker Change: Backing into products bookings up about $100 million year over year and I'm just I'm curious if that was all kind of.
Speaker Change: F T extend and amplify portfolio exceeding expectations or was there some.
Speaker Change: I guess.
Speaker Change: Incremental or unanticipated strength in actual X T.
Speaker Change: XD cabinet bookings, whether that's from competitive conversions.
Speaker Change: Alright. Thanks.
Speaker Change: Thanks, Jeff, Yes, yes, we did see some significant strength in demand for connected devices as we close the year.
Speaker Change: And then we also had.
Speaker Change: Additional bookings from XT upgrades as we were ending the successful upgrade cycle, including some market share wins, so gains that we saw but also ex T extended contribute we saw solid demand for the XT extend which contributed to our improved.
Speaker Change: Bookings for the year.
Speaker Change: That's really helpful. And then I wonder I wanted to just understand the sourcing our cost of debt situation.
Speaker Change: How do you think about just diversification of suppliers across <unk>.
Speaker Change: Countries or or domestically sourced suppliers in and tariff risk to the gross margin kind of framework you just put out there.
Speaker Change: Yes. So you know we've been through these same situations in the past with from a tariff standpoint. So we did put in place some processes that we believe will help us mitigate any potential tariff impact. So we think.
There'll be minimal to no impact to our business when it is that.
Speaker Change: Correct.
Speaker Change: In place.
Speaker Change: Got it and sorry, just last one to clarify on that is that because you have pricing flexibility in your in your contracts or because Neil.
Speaker Change: Stability in your cost of debt.
Speaker Change: It's a combination of both while we do expect some price increases or inflation and so we do factor that into our pricing for 2025, but.
Speaker Change: But we do have some flexibility also to be able to manage and mitigate.
Speaker Change: Any potential cost increases.
Austin: Austin Thank you.
Austin: Thanks, Jeff.
Speaker Change: Your next question comes from the line of Matt <unk> with Macquarie.
Speaker Change: <unk> Hallum capital.
Speaker Change: Please go ahead.
Speaker Change: Good morning, and congratulations on a strong finish to the year I guess first one what are your thoughts as far as the new administration what what.
Speaker Change: They seem to be focused a lot more on technology innovation I would think that that plays well with with your targets and goals, but what are your thoughts on how the new administration could impact your business.
Speaker Change: Well, that's the other dynamic, but I think the overall theme as you suggested is efficiency and.
Speaker Change: Safety and that as you know, that's our core strength and that's our core.
Speaker Change: Driver and our innovation is to make our customers more efficient and safe easy to use easy to deploy so that they can get a better return.
Speaker Change: So I feel like that positions us well and particularly as we deploy more products and higher densities into our customer base theres more data and what that data we're able to drive.
Speaker Change: More outcomes and conclusions.
Analytics are AI to help customers.
Speaker Change: Really.
Speaker Change: A tough decisions that can reduce cost just because they weren't visible before so but theres a lot of dynamics. There are some dynamics around 340, B a lot of discussions nothing in play but.
Speaker Change: Like the rest of us are like the rest of everyone I suppose we're all watching very closely and I think we're well positioned.
Speaker Change: That's great and then maybe a separate question, but as far as it sounds like you had a really strong end of the year with the extra year and extra you amplify X do you extend the next to amplify what are those pipelines look and are you envisioning similar bell curve on the adoption of those or is there anything that would maybe cause that.
Speaker Change: It'd be a little more front end loaded or backend loaded just a little bit of color on the pipeline. Thank you.
Speaker Change: Yes, I think it's the traditional bell curve, but I do think that hospitals have.
Speaker Change: <unk> been slow to purchase and it moved back into the capital equipment markets for expansion that seems to be clearing up so that could give us a little a little.
Speaker Change: More acceleration and to the XD amplify as we move forward and that's what we kind of saw a little bit in fourth quarter and it gives it gave us a lot of.
Speaker Change: And Tuesday Azzam for this year that we will continue that momentum as we go forward. So.
Speaker Change: I think most of the parts of our business are leaning forward and positively.
Speaker Change: Most in every area. So it's an exciting year for us to kind of.
Speaker Change: But the last couple of years behind us and move forward to twenty-five it onto 26 growth.
Speaker Change: It's a good place to be.
Speaker Change: That's great. Thank you.
Matt: It's Matt.
Speaker Change: Next question.
Your next question comes from the line of Scott Shanghai with Keybanc capital markets. Please go ahead.
Speaker Change: Hi, Scott Thanks for the Hi, Hi team.
Speaker Change: First question.
Speaker Change: First quarter guidance, how much of that.
Speaker Change: Assumes the remaining you know.
Speaker Change: <unk> X.
Speaker Change: Within that.
Speaker Change: Product revenues growth, maybe just walk through a little bit of what that new guidance growth assumes.
Speaker Change: And then also I was wondering as you're switching to more expansion throughout the rest of the Europe.
Speaker Change: Fully complete the XT series cycle.
Speaker Change: With expansions and more modular solutions shouldnt that help on the gross margin side, just kind of want to work.
Speaker Change: Applications on the gross margin side. Thanks.
Tata: Yes, let me jump in first and then I'll hand, it over to Tata So just to be clear from the XT upgrade cycle, we're talking about bookings right largely through bookings throughout the revenue for 2025, you see that robust backlog that we have so we're now busy scheduling customer implementations etcetera for X T. So youll see a rig.
Tata: <unk> mix of X T revenue throughout 2025, so just to be clear on that.
Scott: Relative to the first quarter and then respond to the balance of your question Scott.
Scott: Early as you know we've been investing in our SaaS on expert services businesses.
Scott: As those businesses continue to scale, we should see.
Scott: And improvements in order should contribute.
Scott: Overall gross margins for 2025 and that is what that is X T. Amplify XD amplify our XD extend those have even better margin central as XT amplifies Thats, all I would say extend starts to contribute to meaningful revenues in 2025, we should see that helped improve our <unk>.
Scott: Margins as well.
Scott: Great. Thanks.
Speaker Change: And your next question comes from the line of Dan Bernstein of Wells Fargo. Please go ahead.
Speaker Change: Hi, Thanks for taking my questions.
Dan Bernstein: Randy It was nice to see that you are making progress on the robotic component capabilities that you called out in the prepared remarks, I guess what needs to happen for the compounding robot to move beyond the early adopter stage into a more wide scale released and is there a timeline for this happening.
Speaker Change: Yes, I think we're fully expected by the end of this year will be part of at our next level of we just released the software we have one more released this year, which would be.
Speaker Change: Sort of the completion of what we think is the near term profile of the robot that will be market ready and almost all the aspects. So.
Speaker Change: And that's coming to them.
Speaker Change: A very successful and.
Speaker Change: The trial period, and moving forward to the rollout period, and we are rolling out quite a few new customers with the robot this quarter and we expect to continue to increase that.
Speaker Change: Fairly every quarter this year and on into 2006. So I think we've got a good glide path to where we want to be.
Speaker Change: Cured or completed all of the key technical hurdles that we needed to do so it's now about.
Speaker Change: Getting the robots in place and getting the production out of them that customers expect.
Speaker Change: Helpful. And then your competitor is expecting to release, the new dispensary cabinets that it has this year are you seeing any increase in rfps.
Speaker Change: <unk> cabinets from health systems that perhaps youre not.
Speaker Change: Part of your installed base.
Speaker Change: Well I think as new products come on the market that it does.
Speaker Change: Create opportunities for more rfps and opportunities for us to get into the discussion.
Speaker Change: So I do feel like.
Speaker Change: There are more opportunities in our pipeline is larger.
Speaker Change: On our expansion outside of our current customer base.
Speaker Change: Great and then maybe one quick one from charter just any comments on capital deployment priorities over the next 12 months. Thanks.
Speaker Change: Yes. So we continue to say is our capital deployment strategy some needs and we feel very comfortable with our capital strategy that we've put in place today. So we continue to I'll say is the working capital needs and the needs of our business, we will make the right decisions to make sure that we're filing long term.
Speaker Change: Sustainable growth.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thanks, Dan.
Speaker Change: And your next question comes from the line of David Larsen of BPI. Please go ahead.
David Larsen: Hi can you talk a bit about your annual recurring revenue like what percent of total revenue do you expect that to be in 'twenty five and what is your sort of longer term goal. There and then just any color around me and live in when I think you mentioned you sold this to a couple of health plans.
Speaker Change: Very much.
Speaker Change: Yeah, I think our lives and business is really getting traction as we.
Speaker Change: We see.
Speaker Change: You know the ramp up of competition and the need to do better data analysis and engagement with patients.
Speaker Change: <unk>.
Speaker Change: We're proud that we cannot only represents retailers and improving their efficiencies.
Speaker Change: But then also payers by helping them understand.
Speaker Change: What patients are theirs are using their products and how well they are using those products.
Speaker Change: As well as we see other pharmacies, particularly larger pharmacies.
Speaker Change: Our nationwide pharmacies or institutional pharmacies.
Speaker Change: Looking for ways to employ their pharmacist.
Speaker Change: Other activities other than dispensing.
Speaker Change: Meds and so those activities will involve billing.
Speaker Change: Services to payers and so we're excited that that this is a big new frontier. If you will for having pharmacist operate at the top of their license and then getting additional revenues and margins in these larger.
Speaker Change: Pharmacies that have been mostly dedicated to dispensing and not using billing activities.
Speaker Change: Yes with regards to your question on <unk>, we're very excited about our outlook.
Speaker Change: Especially for 2025 <unk> today is about 53% of thoughts with all revenue.
Speaker Change: And we anticipate this.
Speaker Change: Oh, yeah or to continue to grow and contribute to our overall revenue.
Speaker Change: Again specialty pharmacy services and <unk> held.
Speaker Change: And our inventory optimization systems are key drivers of growth.
Growth for the EBIT specialty pharmacy is a key driver thats growing double digit and we expect that growth to continue.
Speaker Change: Great and then I've been hearing about like X P series sort of.
Speaker Change: Run off for a couple of years.
Speaker Change: Is 2025 kind of be kind of your final year of sort of the run off of these XT upgrades and then starting in 'twenty six will be kind of through all of that.
Speaker Change: Thanks, very much obviously I'm getting at product revenue growth expectations longer term. Thank you.
Speaker Change: Yeah, the XD amplified when we announced it we said there was.
Speaker Change: More innovation in the roadmap and that innovation wasn't just <unk>.
Speaker Change: Focused on inpatient, but in other locations where <unk>.
Speaker Change: Management has not been.
Speaker Change: Been digitized and so that's increasing both the addressable market and broadening our solution base and really getting at what our customers need which is the ability to get 100% visibility of their med medication flow.
Speaker Change: And so as we release and innovate.
Speaker Change: These new connected devices that will provide an opportunity to grow our business and particularly on the bottom line side.
Speaker Change: But we also know that with the speed of technology and the things that are going on we're going to have to upgrade that.
Speaker Change: Technology within our systems and provide new platforms.
Speaker Change: Those demands so that is also in our roadmap and in the future, but it's just not one thing I think it's a multiple multi.
Speaker Change: Multiple levels of innovations and it depends on where customers are probably in their lifecycle with our product, which ones would appeal to them at the moment, but.
Speaker Change: We will we will have a lot of offerings and opportunities to expand within our customer base and potentially those outside.
Speaker Change: Great medication safety is so important for delivery of healthcare and you guys do a great job at it. So thanks very much I appreciate it.
David Larsen: Thanks, David.
Speaker Change: And your next question comes from the line of Jean Manheimer, Our Freedom capital markets. Your line is now open.
Speaker Change: Thank you a congrats on a great year and a good outlook.
Jean Manheimer: I wanted to drill down on the AAR are a little bit further to you charge side do you break the IRR out by those respective categories of.
Jean Manheimer: Services and consumables and SaaS.
Jean Manheimer: Yes, so the new metric that will providing <unk> is composed of our SaaS and Paas services businesses.
Jean Manheimer: Technical services as well as consumables.
Jean Manheimer: We do provide some details on the SaaS business is but again those are the three components of KAR.
Jean Manheimer: Right so.
Jean Manheimer: Is there a one to one correspondence between your <unk> and your forward 12 months revenue So said differently.
$620 million at the midpoint, how much of that will convert to revenue in the forward 12 months.
Jean Manheimer: Most of it should convert to revenue in the next 12 months.
Jean Manheimer: Yes, that's the <unk>.
Jean Manheimer: Not the car so it's already running an assumed to be continue to running.
Jean Manheimer: It's kind of easy to.
Jean Manheimer: To understand the business that there's not a not a lot a lot of conversion there. That's ongoing running revenue is the best way to explain that.
Good Okay excellent alright.
Jean Manheimer: Just on omni sphere.
Speaker Change: Great innovation, there and I'm, just wondering with within a customer's site is the way that gets implemented is it.
Speaker Change: Big Bang type of implementation or a phased approach.
Speaker Change: In case of if it sustains US are you supporting the two redundant environments for a time like on Prem in the cloud and does that impact your cost structure at all.
Speaker Change: No it's not actually two systems, you could actually run the cloud system with.
Speaker Change: Our current legacy systems, and then it's meant to be incremental to that.
Speaker Change: The double workload. So it actually allows us to put in the infrastructure first without having to move the connected devices over and you can move those over.
Speaker Change: When you are ready so in.
Speaker Change: One of the things that we have really focused on is minimizing disruption and our customers.
Speaker Change: With new technologies, and new approaches and we took a long long time to design. This technology. So it is easy to deploy.
Speaker Change: Easy to understand and really cause a minimal disruption and so if you get the XD amplify you'll be able to move to.
Speaker Change: The army sphere, rather easily and then.
Speaker Change: The devices over when you are ready.
Speaker Change: That's great. Thank you I appreciate it.
Speaker Change: Welcome back Jamie.
Jamie: Glad to have you get good to be back.
Jamie: And that concludes our Q&A session I will now turn the conference back over to Randall Lipps for closing remarks.
Jamie: Oh, well I just.
Jamie: What.
Jamie: Reiterate how excited we are about 2025.
Jamie: As I said in my first question, we really have dropped out the business. We look forward the comparable growth over quarter to quarter and this has really come about to the strong efforts of the success of <unk> amplify our employees, who have readjusted to deploy.
Jamie: Deploying new cost efficient processes and reorganizing around customer success, which has led to our success.
Jamie: And just really looking forward to exciting year with some new innovation.
Jamie: New types of accounts and just continued growth and they're really setting us up again for a great 2026.
Jamie: Thanks for joining us today.
Jamie: Thank you.
Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Jamie: Okay.
Jamie: [music].
Jamie: Yes.
Jamie: [music].
Jamie: Okay.
Jamie: [music].