Q1 2025 Omnicell Inc Earnings Call
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Speaker Change: At this time I would like to welcome everyone to the Omnicell first quarter 'twenty 25 financial results Conference call.
Speaker Change: All lines 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. If you would like to withdraw your question Press Star one again.
Speaker Change: <unk>.
Speaker Change: Thank you I would now like to turn the call over to Kathleen Nemeth Senior Vice President Investor Relations. Please go ahead.
John: Good morning, and welcome John Yourself first quarter 'twenty to 'twenty five financial results conference call on the call with me today are Randall Lipps, Omnicell, Chairman, President CEO, and founder Nandita, Joku Executive Vice President and Chief operating Officer.
Tata: And Tata Executive Vice President and Chief Financial Officer.
Speaker Change: This call will contain certain forward looking statements, including statements related to financial projections or performance or other statements regarding omnichannel plans strategy objectives goals.
Speaker Change: Vision expectations planned investments opportunities expense mitigation products services or solutions driving toward a recurring revenue model navigating the current macroeconomic environment the impact of our ability to mitigate the impact of tariffs or market or company outlook.
Speaker Change: 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 today in the Omnicell annual report on Form 10-K filed with the SEC on February 27, 2025 and in 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.
Speaker Change: 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 and are posted in the Investor Relations section of our upside on IR Dot Omnichannel Dot com.
Speaker Change: 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 financial press results financial results Press release Pardon me posted on our Investor Relations website.
Speaker Change: 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.
Randall Randall: With that I will turn the call over to Randall Randall.
Randall Randall: Good morning.
Randall Randall: Thank you all for joining us on today's call.
Randall Randall: Our business performed very well during first quarter of 2025 results driven by demand for omni sales robust medication management platform.
Randall Randall: So normally sell.
Randall Randall: We are focused on redefining how medications and supplies are managed across health care.
Randall Randall: As we seek to help customers seamlessly control inventory from the loading dock.
Randall Randall: To the point of patient care.
Randall Randall: Our platform is designed to empower organizations to improve medication safety drive supply chain efficiency.
Speaker Change: Hey, smarter data driven decisions.
Speaker Change: Our future growth is expected to come from three core levers first we seek to capture greater market share across inpatient settings.
Speaker Change: Floating nursing floors operating rooms, and procedural areas as well as central and satellite pharmacies.
Speaker Change: Well continuing expansion into outpatient settings, such as specialty retail and institutional pharmacies.
Speaker Change: Second.
Speaker Change: We are growing and scaling our predictable reoccurring revenue.
Speaker Change: And third we are striving to grow on the sphere, our cloud based platform to extend and connect innovative automation technology, which we expect will include the use of AI across the entire continuum of care.
Speaker Change: Let's review a few highlights from our strong first quarter.
Speaker Change: The demand environment tracked well to our expectations as we saw market share gains.
Continued interest in our platform of products and services.
Speaker Change: We delivered solid revenue performance and are pleased with the growth in our recurring revenue.
Speaker Change: And we continue to see strong customer interest.
Speaker Change: Themselves long term innovation roadmap.
Speaker Change: Now, let's turn to the financials.
Speaker Change: Omnicell delivered a solid first quarter.
Speaker Change: Total revenue was 270 million an increase of $24 million from our first quarter of 'twenty 'twenty four.
Speaker Change: Revenue in the quarter decreased by $37 million from our fourth quarter of 2024, reflecting typical seasonality and the fact that for Corp. 'twenty 'twenty four performance was very strong.
Speaker Change: Product revenues came in above our first quarter 2025 outlook at 145 million, which is an increase of $12 million over the first quarter of 2024.
Speaker Change: Increase of 37 million compared to fourth quarter 2024.
Speaker Change: Service revenues were $125 million, an increase of $12 million over the first quarter of 2024 and flat compared to fourth quarter 2024.
Speaker Change: non-GAAP gross margin for the first quarter of 2025 was 42, 1% a decrease of 530 basis points from the prior quarter due to the combination of lower product revenue volumes as well as some seasonal expenses, including payroll taxes and employee benefits.
Speaker Change: Reset.
Speaker Change: Our first quarter of 2025 earnings per share in accordance with GAAP was a loss of 15 cents per share compared to a loss of 34 cents per share in the first quarter 'twenty 'twenty four.
Speaker Change: The profit of 34 cents per share in the prior quarter.
Speaker Change: Our first quarter of 2025 non-GAAP earnings per share was 26 cents compared with <unk> <unk> per share in the same period last year and 60 <unk> per share in the prior quarter.
Speaker Change: First quarter non-GAAP EBITDA was $24 million, an increase of $13 million when compared to the same period last year and a decrease of 23 million compared to the previous quarter.
Speaker Change: As you can see from our revised 2025 guidance that SASSA will cover in more detail.
Speaker Change: We have completed an initial assessment of the Companys tariff exposure, assuming the announced tariffs, particularly on China based products are implemented as scheduled.
Speaker Change: As a reminder, we began working on optimizing our supply chain several years ago.
Speaker Change: With a combination of dual sourcing and near shoring efforts.
Speaker Change: However, we continue to source a meaningful percentage of our sub assemblies from China. At this time, we anticipate the impact from tariffs for 2025 to be approximately $40 million to non-GAAP EBITDA.
Speaker Change: As a result, we are reducing the ranges for our full year 2025, Don GAAP EBITDA and non-GAAP earnings per share guidance to reflect that currently expected partial year potential impact from tariffs.
Speaker Change: Net of our planned mitigation efforts.
Speaker Change: Please note that absent the tariff headwinds we remain comfortable with our previously issued full year 2025, non-GAAP EBITDA and non-GAAP earnings per share guidance and are only modifying the ranges to reflect the expected potential impact from tariffs.
Speaker Change: We intend to continue to shift production of sub assemblies to more favorable geographies and over time, we anticipate considering broader changes to our supply chain.
Speaker Change: We believe we have a strong competitive position and we plan to continue to innovate regardless of the tariff impact.
Speaker Change: Also as we continue our pivot to recurring revenue services, our exposure to tariffs on a relative basis should decline over time.
Speaker Change: We expect to have more to share with you as the situation develops.
Speaker Change: I'll now highlight.
Speaker Change: A few of the key customer wins in the first quarter.
Speaker Change: Point of care dispensing solutions, including XD cabinets for nursing care areas.
Speaker Change: Seizure workstation for Peri operative settings, and our equity amplifier program offerings continue to be the backbone of medication management for many leading health systems.
Speaker Change: Leading health systems in New Jersey, Pennsylvania, and West Virginia.
Speaker Change: Recently invested in Omnicell solutions as they seek to increase pharmacy, and nursing efficiency and improve patient safety, while delivering maximum value for the technology investment.
Speaker Change: Our comprehensive platform and innovative roadmap are resonating with customers and we are seeing continued momentum in converting customers to omnicell solutions, one of the leading health care organizations, and Illinois has chosen omnicell XT automated dispensing cabinets to support point of care <unk>.
Speaker Change: Sensing across numerous sites of care.
Speaker Change: This health system intends to leverage omni cells enterprise analytic solution inventory optimization service in an effort to enhance inventory visibility gain medication usage insights and optimize workflows across their system.
Speaker Change: And nonprofit health system in Rhode Island selected Omnicell as point of care dispensing solutions, including XT cabinets, and anesthesia workstations, and they look to improve clinical outcomes and enhance efficiency for health care staff.
Speaker Change: Southern California nonprofit teaching hospital has chosen omni cells central pharmacy solutions as it seeks to reduce medication dispensing errors and waste improve accuracy and streamline workflows for their central pharmacy operations, which should free staff to focus on higher value test.
Speaker Change: Yes.
Speaker Change: The federal government, specifically the U S Department of Veterans Affairs, and other federal health care facilities is a sizable portion of omni sales customer footprint. This quarter, we saw traction within our government customers for our central pharmacy and point of care solutions, including products from.
Speaker Change: Our XD amplify program.
Speaker Change: Health systems continue to expand care delivery beyond acute care settings to improve patient access to care reduced costs and increased revenue.
Speaker Change: This expansion includes investments in outpatient pharmacy programs, which for many providers may enable an opportunity for health systems achieve financial growth and improve the patient experience.
Speaker Change: A northeast nonprofit health care system will add a new specialty pharmacy to their community in partnership with Omni sales specialty Pharmacy services Division. We also partnered with a Pennsylvania based health system to open a new specialty pharmacy to serve their community of.
Speaker Change: Georgia based not for profit health care system.
Speaker Change: Selected omnicell to launch a new initiatives targeted at optimizing their specialty pharmacy by expanding patient access to specialty medications and growing outpatient services.
Chad: Now before I turn it over to Chad I want to provide some closing thoughts.
Chad: We are pleased with our first quarter performance and we remain very encouraged about our long term growth strategy and how we believe it aligns with the industry defined vision of the autonomous pharmacy.
Chad: <unk> is a trusted leader in automating medication and supply management and we believe we are poised to grow with hospitals continue to digitize. Despite the fluid tariff environment I am confident that we will manage through the current tariff situation, we were reviewing different mitigation strategies around <unk>.
Chad: Supply chain and I feel confident that the company's competitive position remains strong as we tackled these headwinds with or without tariffs. We are here to help our health care provider partners as they endeavor to increase operating efficiencies and improve patient safety at this.
This point I'd like to turn the call over to our Chief Financial Officer, Chuck EDA and for a more detailed review of our first quarter financial performance.
Chuck EDA: Thank you Randall I want to thank the entire team here at Omnicell.
Chuck EDA: Drive our strong start to 2025.
Chuck EDA: <unk> first quarter 'twenty total pie of final results.
Chuck EDA: All of our guided metrics exceeded all landed in the upper and I'll follow up.
Chuck EDA: I'm going to use.
Chuck EDA: Now I am going to walk you through some of the key drivers of our first quarter 'twenty 'twenty five performance.
Chuck EDA: Well I'll share our second quarter 2025.
David: David for your 25 items.
David: Looking at our first quarter 2025 results.
David: Total revenue were 270 million.
David: Presenting an increase of $24 million over the first quarter of 2024.
David: And a decrease of $37 million compared to the previous quarter.
David: First quarter 'twenty five revenue performance when compared to our fourth quarter 'twenty two before our results.
David: Our typical seasonal pattern in line with historical trends, we have seen in.
David: And which revenue tends to increase quarterly as the year progresses.
David: The year over year increase in total revenue was driven by an increased contribution from our lumpy.
David: Luckily pilot program.
David: As well as continued growth in our SaaS.
David: Services.
David: Including an increase in revenues.
David: Hum.
David: Awful.
David: For the first quarter 'twenty totaled five product revenue was 145 million.
David: Lumping, all inclusive cost medium compostable first quartile total pool pool.
David: Although a decrease.
David: Several over the previous quarter.
David: Service revenue for the first quarter totaled 25 was 125 million.
David: Which includes 12 million from the first quarter of 2024.
David: And was flat compared to fourth quarter 'twenty 'twenty four levels.
David: non-GAAP gross margin for the first quarter up 2025 was 42, 1%.
David: An increase of 230 basis points compared to the first quarter of 'twenty 'twenty four although decrease of 530 basis points from the prior quarter.
David: non-GAAP gross margins when compared to fourth quarter totaled 24, our results were impacted in the quarter by lower product revenue volumes.
David: Cutting costs as well as some susan not expenses, including payroll taxes on employee benefit lucid.
David: Before we close the GAAP to non-GAAP results is included in each of our four year.
David: In fourth quarter, 'twenty, 'twenty, four and fourth quarter of 'twenty totaled five quarterly earnings press release, which are posted on the way in both automation website.
David: Our first quarter 2025 per share.
David: In accordance with GAAP loss of <unk> going forward for sure.
David: Compared to a loss of 34, so first of all on the first quarter of 'twenty clinical.
David: The profitable because those will share in the prior quarter.
David: Our first quarter typically has the lowest revenue quarter for the year.
Speaker Change: Oh revenue close to grow throughout the year.
David: As a result, the first quarter also tends to be the quarter with the lowest profitability.
David: Our first quarter 'twenty totaled five non-GAAP earnings per share were putting sequel com.
David: Compare to those.
David: In the same period last year.
David: Okay.
David: Prior quarter.
David: First quarter, non-GAAP EBITDA was $24 million.
David: An increase of 13 medium when compared to the same quarter of last year, and a decrease of $23 million compared to the previous quarter.
David: non-GAAP EBITDA in the quarter was modestly impacted by high up cost and <unk> labs.
David: Largely driven by non recurring items and some seasonality.
David: Came in a bit higher but looks like it.
non-GAAP earnings per share.
David: non-GAAP EBITDA in the first quarter of total 25 were both higher compared to the first quarter of 'twenty 'twenty four the previous call.
David: The amount of lead by an increase in revenue.
David: In the quarter.
David: At the end of the first quarter of 2025, our cash cash equivalents of 387 million.
David: From 369 million as of December 31, 2024.
David: The company continues to generate solid free cash flow with free cash flow of $10 million during the first quarter of 2025.
David: In terms of accounts receivable.
David: These deals are outstanding for the first quarter of 2025 were 86 days.
David: We remain pleased with our continued strong quarterly collections and we're walking capital management.
David: This is an area of significant positive progress over the last 18 to 24 months.
David: Inventories as of March 31, 2025 with $91 million.
David: An increase of $2 million from the prior quarter and a decrease of 12 million from March 31 2024.
David: Before we move to guidance.
Speaker Change: I'd like to comment more broadly on a quota in view of the tariff headwinds we are facing.
Speaker Change: Last quarter I shared with you that based on the tariffs announced at that time, we thought that our existing mitigation plans would largely offset the potential impact.
Speaker Change: Today of course.
Speaker Change: A much different situation.
Speaker Change: As a reminder, Paris.
Speaker Change: On our first quarter results.
Speaker Change: And as of today, we expect a fairly modest impact on our second quarter performance.
Speaker Change: We are implementing various mitigation initiatives.
Speaker Change: Obviously, it does take time to flow through our financial statements and to have the intended effect of offsetting a portion of it will be higher anticipated costs.
Speaker Change: We would expect that benefits, helping mitigate some plans to begin to take effect as we exit 2025.
Speaker Change: So please keep that in mind as you are preparing your financial models for 2026.
Speaker Change: As we seek to deal with the current tariff situation.
Speaker Change: If the titles that are in place today will remain in place throughout 2025.
Speaker Change: We anticipate the impact to us.
Speaker Change: Quarter, 2025, non-GAAP EBITDA to be approximately $5 million.
Speaker Change: With the impact to our full year 2025, non-GAAP EBITDA to be approximately $40 million.
Speaker Change: Net of our ongoing mitigation efforts.
Speaker Change: As we have said over the course of the past few years and building back to the previous administrations.
Speaker Change: We have taken steps intended to improve our supply chain.
Speaker Change: So continuity of products and reduce cost as well as enhance efficiencies.
Speaker Change: As a result, the majority of our components are dual sourced and we have flexibility to source key components from multiple geographies.
Speaker Change: We are continuing to monitor any changes to the tariff environment and we'll continue to make what we believe are the right supply chain allocation decisions.
Speaker Change: Based on long term goals and in consideration of near term impacts.
Speaker Change: While a significant portion of the estimated $40 million 2025, non-GAAP of <unk> tired of the impact.
Speaker Change: Result of components with currently thoughts on China.
Speaker Change: We also source components from multiple favorable geographies.
Speaker Change: And we will continue to evaluate the allocation of sourcing for these components.
Speaker Change: For the second quarter of 2025, we are providing the following guidance.
Speaker Change: We expect second quarter, 2025, total revenue to be between $270 million and $280 million.
Speaker Change: With product revenue anticipated to be between 148 million to $153 million.
Speaker Change: And service revenue expected to be between $122 million on well and between $7 million.
Speaker Change: We expect the second quarter, 2025, non-GAAP EBITDA to be between $22 million and $30 million.
Speaker Change: Our non-GAAP earnings per share to be between <unk> 19 cents per share and 32 cents per share.
Speaker Change: Please note that the ranges for non-GAAP tells me that our non-GAAP earnings per share are wider than we typically guide due to the tariff uncertainty.
Speaker Change: For full year 2025.
Speaker Change: Maintaining our previously issued product bookings and a lot of reoccurring revenue on revenue guidance.
Speaker Change: As a result of the potential tariff impact as we see it today.
Speaker Change: Adjusting the ranges for our full year 2025, non-GAAP EBITDA and non-GAAP earnings per share guidance.
Speaker Change: We are reducing the upper end of our 2025, non-GAAP EBITDA guidance by $10 million.
Speaker Change: And we're reducing the upper end up on non-GAAP earnings per share guidance by <unk> <unk>.
Speaker Change: We are also reducing the bottom end of the range on non-GAAP EBITDA and non-GAAP earnings per share on why do you mean, both ranges to reflect the increased uncertainty due to tariffs.
Speaker Change: If not for the current potential impact of tariffs our full year 2025, non-GAAP EBITDA and non-GAAP earnings per share guidance we.
Speaker Change: We have previously provided would not have changed.
Speaker Change: We anticipate product bookings to be in the range of 500 million to $550 million.
Speaker Change: Our year end 2025, and while recurring revenue is expected to be in the range of $610 million to $630 million.
Speaker Change: Total revenues are expected to be in the range of 1 billion on the one under the $5 million 1 billion to $155 million.
Speaker Change: non-GAAP EBITDA is expected to be in the range of 100 million to $145 million.
Speaker Change: Please note that this is a wider range than we typically guide I'll move for like the potential tariff impact we see today.
Speaker Change: non-GAAP earnings per share I expect it to be in the range of $1 to $1 65.
Speaker Change: Again this is a wider range than we typically guide and it reflects the tariff uncertainty unexpected impact that we discussed earlier.
Speaker Change: As a reminder, we are also facing.
Speaker Change: <unk> made two cents headwinds to non-GAAP earnings per share in 2025 compared to 2024 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.
Speaker Change: For full year 2025, we are assuming an effective blended tax rate of approximately 18% in our non-GAAP earnings per share guidance.
Speaker Change: Please note that our second quarter and revised full year 2025 guidance is based on our current estimate of the potential impact of the tariffs in place today.
Speaker Change: Clothing goes which are scheduled to.
Speaker Change: Included in the future and does not include any potential additional tariff impacts from future changes not yet an outfit or the potential impact of additional with the political parties that may be important.
Speaker Change: We recognize that the current situation is fluid and we will continue to monitor the potential impact as the year progresses.
Speaker Change: In summary, I am pleased with the strong resolves that all of US here at Omnicell has worked hard to deliver for the first quarter of 2025.
Speaker Change: We believe that these results reflect the strong customer demand for our innovative outcome centric medication management solutions.
Speaker Change: As our customers look to be embracing the industrial defined vision.
Speaker Change: The autonomous pharmacy.
Speaker Change: And our continuous focus on driving the business towards a reoccurring revenue model.
Speaker Change: Despite the challenging evolving product situation.
Speaker Change: Extremely proud of how our team has remained resilient.
Speaker Change: Committed to delivering on <unk> mission to be the clinicians most trusted partner for medication management.
Speaker Change: We would now like to open the call for questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Speaker Change: I'll pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from Jessica Hassan with Piper Sandler.
Jessica Hassan: Hi, guys. Thanks.
Jessica Hassan: For taking my question and thank for the color on Antara.
Jessica Hassan: Can you just describe what your outlook implies in terms of.
Jessica Hassan: Tariff distribution or how the burden of tariffs is that certainly there between Amazon your customers like to what extent are you passing for some portion of price.
Jessica Hassan: Or are you.
Jessica Hassan: Absorbing effectively all.
Jessica Hassan: Thanks.
Jessica Hassan: Well at this moment, we are not passing.
Jessica Hassan: Significant price increases onto the customer, but as we continue through the tariff situation theres a possibility that we could.
Jessica Hassan: Maybe just not lower discounts as much.
Jessica Hassan: We.
Jessica Hassan: We do have contracts with customers that we will live up to.
Jessica Hassan: But I think for the for the most part.
Jessica Hassan: We need to.
Jessica Hassan: Reoriented reorient, our supply chain to reduce the impact of tariffs. That's the biggest move we can make.
Speaker Change: Got it that's helpful and so the reiterated guidance implies no change to units effectively because the price to the customer will be the thing. That's my first one and then just secondly, and then just want to know cause exco amplify have any have kind of a more favorable.
Jessica Hassan: Supply chain.
Speaker Change: Yeah, and more favorable our domestic supply chain relative to <unk>.
Speaker Change: At <unk> cabinets, and then just can you confirm that X T. Amplified first product they'll extend is on the market and and deploying right now thanks.
Speaker Change: Okay Alright.
Speaker Change: Hi, Jessica this is down the thanks for the question well just to kind of paint a picture XD amplify as part of our XP portfolio and when you look at the armies to our portfolio in general our point of care products, which <unk> is a big part of an amplifier components are sourced globally.
Speaker Change: So.
Speaker Change: That's what's really driving our exposure, particularly particularly from a tariff standpoint, and with respect to the rollout XD is being rolled out as we speak we started the rollout last year. So that's a part of our portfolio that continues to ramp.
Speaker Change: Your next question comes from Dana Manheimer with Freedom capital markets.
Dana Manheimer: Thanks, and good morning.
Dana Manheimer: Could you just maybe talk about the cadence of that $40 billion tariff impact in other words charged I called out $5 million in Q2, but I'm trying to get a sense for whether the biggest impact will be in Q4 since that's when you.
Dana Manheimer: Installs the most hardware so just curious on that trajectory.
Speaker Change: Yes, Jim So the total impact for the year is $40 million. So the gross impact is about $70 million, but then we have some better staying in Vince inventory towards.
Speaker Change: Through the end of the year, we have a total of about $50 million and mitigation efforts, that's how we get to the $40 million and so the $40 million, we have about $5 million that is going to be recorded in <unk>.
Speaker Change: The second quarter and then the remainder will be in the second half of the year. So we're looking at about $30 million to $35 million in patent the type of level.
Speaker Change: And I would add Jim that there could be some bias towards the fourth quarter.
Jim So: Part of your comments about that being typically the strongest revenue quarter for us.
Speaker Change: Right right that makes sense, thanks, and my follow up is.
Speaker Change: Randy you called out some nice wins in Illinois in the northeast with respect to X T. I'm just curious if those selections maybe were extended from the fourth quarter I'm, just trying to get a sense on where the demand is and where we are in the cycle for XT upgrades now thank you.
Speaker Change: Yeah, those were new customers and they have their own timing theyre, not really tied to seasonality I would say.
Speaker Change: It's more about when the decision to make a swap and make the investments and we kind of see those come and go kind of regularly every quarter, but we.
Speaker Change: We may not have as many of the second quarter, but that wouldn't say, there's any special timing.
Speaker Change: The notice to those and those were.
Speaker Change: Really.
Speaker Change: Love, where <unk> was and where we're taking it and really saw the strategic fit with what they wanted to do and what we had to offer now as well as what we were rolling out so well.
Speaker Change: We think that trend will continue.
Speaker Change: That's great. Thanks again thanks.
Gene: Thanks Gene.
Speaker Change: Your next question comes from Allen Lutz with Bank of America.
Allen Lutz: Good morning, and thanks for taking the questions I know a lot of focus has been on the tariff piece here, but I wanted to talk about just generally what your hospital customers are thinking here.
Speaker Change: Some data points out in the market that that pharmacy, it budgets may actually be inflected, a little bit more positively than where they've been over maybe the past couple of years or so so if we kind of ignore the tariff piece for a second are there any fundamentals going on within the hospital market.
Speaker Change: Youre seeing that could be driving any type of reacceleration in demand for pharmacy.
Speaker Change: And those types of budget. Thank you.
Alan: Thanks Alan.
Speaker Change: Well certainly the specialty is.
Speaker Change: Top topic.
Speaker Change: All providers and that is really making the pharmacy conversation with our customers that I have a lot more strategic.
Speaker Change: Not just about the savings and safety issues, but the revenue generation, particularly in the outpatient settings, and particularly around specialty pharmacy and so.
Speaker Change: Those kinds of strategic discussions.
Speaker Change: It just seem to be more.
Speaker Change: More on customers' minds as these.
Speaker Change: Providers has gotten to be very very large so they want to leverage that and they want to deploy a system that can help them leverage that so I think thats. The leaning we're feeling in the market. We saw the momentum at the end of last year, and we're continuing to see that momentum.
Speaker Change: In the first quarter and in the marketplace today.
Speaker Change: Great. Thanks, Randy.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Your next question comes from Bill Sutherland with benchmark.
Thank you everybody.
Speaker Change: Wondering about as we think about the new.
Speaker Change: EBITDA guidance range.
Speaker Change: What's what are the assumptions at the lower end of it.
Speaker Change: B the assumptions at the higher end, so just a matter of success with mitigation and if that's the case, maybe I should rephrase the question.
Speaker Change: What are the two or three key mitigation steps, you think youre going to be most effective.
Speaker Change: Yes, so youre right the bid.
Speaker Change: Changes that we've made and the guidance was primarily driven by the to account for the titles both at the upper end.
Speaker Change: Looking at the mitigation actions that we put in place.
Speaker Change: Because we saw most of our products from China.
Speaker Change: We're looking at are really.
Speaker Change: Reallocating, our supply chain footprint to more favorable geographies across the globe, including North America. So thats one of the amendment to give some factors and as Randy mentioned earlier, we're looking at oil pricing options of the price pricing that we can take.
Speaker Change: Based on our contracts to.
Speaker Change: Try to mitigate it.
Speaker Change: Tim will review the impact of tariffs.
Speaker Change: Okay.
Bill: Hey, Bill just to add just add a couple of points to try to describe the other additional actions were taking are also accelerating component shipments from lower tariff geographies. So a lot of this.
Bill: The levers that we have available to us as it is based on work that was done in the past and past years to really build resiliency into our supply chain as Randy also touched on we're looking at.
Bill: Evaluating pricing as we go as well so all these things come together and they give us the ability to mitigate at least some portion of the tariff exposure that we're seeing.
Bill: And.
Bill: Yes, I'm sorry.
Bill: Now I would also just.
Bill: Also add to the conversation that you know in terms of the tariff impact to EBITDA, the lower and just assumes the full impact the change to the higher end is contemplating the impact were expecting in the second quarter.
Bill: Sure.
Bill: Okay.
Bill: Are the two components or two.
Bill: The two biggest factors.
Bill: Semiconductors.
Bill: And metal for the frame.
Bill: Yes.
Bill: The primary driver here.
Bill: Just kind of going back to your prepared statements. The primary driver here is when you look at the components and sub assemblies that we source from China, That's what's really driving a lot of the net exposure of the $40 million in 2025.
Bill: And as we're working with our partners to reallocate and move those sourcing nodes. If you will outside China will start to see the benefit of that but really that's the piece that's driving the exposure here okay.
Bill: Okay.
Speaker Change: And then I guess last Mandy just proud.
Bill: Question.
Bill: <unk> X.
Bill: An update on how thats.
Bill: Moving forward.
Bill: Yes, we are.
Bill: We've had a very successful first quarter and rolling out our next release to our all of our customers and gotten a very favorable responses from our customers about the new capabilities that that release comes with it.
Bill: And it really allows for.
Bill: Both.
Bill: <unk> ranges of marketplace to drive through the system.
Bill: As well as a more speed and reliance.
Bill: Reliability.
Bill: No.
Speaker Change: It's going well and it continues to build momentum and we do have great pipeline.
Bill: And our sales force as they take this product out and so we think that.
Bill: Slowly, but continuously builds and grows.
Bill: Every quarter.
Bill: Great. Thanks for all the color guys.
Bill: Yes.
Speaker Change: Your next question comes from Dan Bernstein with Wells Fargo.
Dan Bernstein: Alright, thanks for taking my questions.
Dan Bernstein: Just back on the China tariff discussion, how much time would it take to sufficiently disintermediation the supply chain exposure to China.
Dan Bernstein: Just.
Dan Bernstein: The way I would frame it here.
Dan Bernstein: If I go back to the actions that we've taken as a company to strengthening our supply chain.
Dan Bernstein: Really gets anchored in some key partnerships on the supply side and we've made investments across multiple geographies and that's giving us the flexibility to move the applications out of China with regards to how long that would take that that's something that's probably going to happen over time.
Dan Bernstein: I mean, there are still some some components that flow through China, and Taiwan, I think theres going to be a lag on those types of things.
Dan Bernstein: That will sort of gave the ability to disintermediation completely.
Dan Bernstein: But we're doing basically we're taking actions here to move what we can to other nodes and then.
Dan Bernstein: The last few pieces, we'll have to work through over time, but.
Dan Bernstein: That's how I would explain that.
Speaker Change: Okay, and do you have any revenue exposure to China.
Dan Bernstein: Nothing material.
Speaker Change: Okay. Thanks, so much.
Dan Bernstein: Thanks, Dan.
Speaker Change: Your next question comes from Matt Hewitt with Craig Hallum.
Matt Hewitt: Good morning, Thanks for taking the questions maybe first up.
Speaker Change: Historically.
Speaker Change: You were in a position where your products your services were call it top five.
Speaker Change: From a decision standpoint at your customers and that's kind of that's kind of helped you when things were a little shakier there were questions about the macro.
Speaker Change: How does that how does your product portfolio service portfolio sit today I just you look at hospitals and there are some questions about the macro in Medicaid cuts and things like that and we've heard anecdotally at least that there are some companies that are starting to see customers kind of pull back a little bit on some of the purchasing decisions. Yet you obviously had a very.
Speaker Change: <unk> quarter, you reaffirmed your revenue guidance for the year. So is it because you kind of sit in that top five purchasing decision or is there other some other dynamic that's helping you.
Speaker Change: Well I think I think pharmacy as I said brinci becomes a more and more strategic for these super large providers.
Speaker Change: And frankly, we've seen.
Speaker Change: Believe the hospital margins first quarter around 6%, which continue to grow.
Speaker Change: They want to invest in pharmacy.
Speaker Change: <unk>.
Speaker Change: And those investments aren't just then our equipment, but <unk>.
Speaker Change: Expanding pharmacies to be really outpatient driven as well by having the outpatient driven piece.
Speaker Change: Lease providers can stay more connected to their patients and be more holistic as they approach their care.
Speaker Change: Their outcomes and so they want to do that and they realize in order to do that those kinds of things.
Speaker Change: They need to do more than just have good equipment inside the four walls of the hospital, but they must have a strategy to go outside of those walls.
Speaker Change: You have to have a specialty strategy and you have to have an outpatient strategy.
Speaker Change: Those topics are high on the list of the C suite, and we will continue and really position us well to tell the whole story of Omnicell, not just parts and pieces.
Speaker Change: That's helpful. Randy maybe as a follow up question, a little bit separate here, but.
Speaker Change: I realize that you're sourcing some of your components globally, but with such an outsized tariff on the products coming from China is there any way that you could quantify I mean is it roughly half of your components are coming from China.
Speaker Change: And as you know as you mitigate that as you shift.
Speaker Change: Some of your sourcing to other regions that would have an outsized impact on helping your margins recover or any color that you can provide on the geos.
Speaker Change: China is Roger with China is our biggest exposure and as we mitigate that one and move things to North America.
Speaker Change: Which we actually had a three year plan, we're about one year into it so.
Speaker Change: If we didn't have the tariffs would probably be about two years, but that's what we're trying to accelerate the plan to to move quicker on that that's the outside is probably two years, but.
Speaker Change: We believe we can accelerate that and get things back to <unk>.
Speaker Change: North America, where the impact is small so there are some other things that are a little bit temps, but they're mostly on rounding rounding numbers the key about.
Speaker Change: Being in China is that these are sub assemblies in other words, they're just not electronic board they actually build the sub assembly. So that we can do the manufacturing.
Speaker Change: And the states for configuration and chip in here. So they are feeding our manufacturing that we have state side.
Speaker Change: Makes sense alright, thank you.
Matt Hewitt: Thanks, Matt.
Speaker Change: Your final question comes from David Larsen with BT I E.
David Larsen: Hi can you talk about the progression of expected revenue growth I think both in product and services I mean, your revenue growth looked pretty good in the quarter year over year and it seems like kind of year over year basis, you're guiding to.
David Larsen: A pretty significant slowdown in that growth and I'm. Just wondering why that is and just any thoughts on X P. Amplify how those sales are progressing and maybe what the current penetration rate is in your base. Thanks very much.
David Larsen: Yeah, Thanks, David we.
David Larsen: We feel really strong about the amplified portfolio.
David Larsen: Got it after its first year started last year and the momentum continues we're going to do great in that product line. It is.
David Larsen: <unk> <unk>.
David Larsen: Products that really starts the discussion at all of our accounts about how to prepare now how to get more efficiencies and safety today and prepare for the future.
David Larsen: Future.
David Larsen: Possibilities of more innovation to help move to outpatient.
David Larsen: Integrate with specialty.
David Larsen: And look at some retail SaaS business as well so I think.
David Larsen: <unk>.
David Larsen: I feel like the momentum is continuing and I think we will get there I think that.
David Larsen: We're still earlier in the first half of the year. So, we'll probably be able to provide more clarity on on product bookings as we move throughout the year.
David Larsen: Where we might end up there, but I just think.
David Larsen: I think is the feeling in the company and the feeling in.
David Larsen: The way, we're running the company as we do have positive momentum and that is continuing forward really built on the back of <unk>.
David Larsen: Customers.
David Larsen: We really want to move pharmacy forward in their operations and make a strategic so.
David Larsen: Feeling good about this year.
Speaker Change: Great. Thanks, and just related to that how would you characterize like the hospital buying environment. I mean, there was a period there where you know.
David Larsen: Labor constraints and higher inflation.
David Larsen: You mentioned like a 6% margin for facilities now would you say that the environment. Despite tariffs has improved.
David Larsen: Indefinitely.
David Larsen: Definitely and I think that.
David Larsen: So those are always.
David Larsen: Laggards right. There is something that's happening generally takes a while for it to.
David Larsen: To flow through so I think there is.
David Larsen: We don't see any slowdown in our revenue our install processes, we went back and recreated those over the last two years. So we have very precise inputs on near term medium and long term installs.
David Larsen: And the same for the sales cycle.
David Larsen: And we haven't seen any slowdown in either although I.
David Larsen: I think the sales cycle could slowdown as possible, but we haven't seen it yet.
David Larsen: Okay. Thanks very much.
David Larsen: Yes.
David Larsen: Thanks, Dave.
David Larsen: I will now turn the call back over to Randall Lipps for closing remarks.
Speaker Change: Yeah, well like I said, we're really positive on the first quarter of the year.
Speaker Change: As we've entered the tariffs we understand that that is a headwind, but we've got good mitigation plans going we do believe that we will be able to.
Speaker Change: Over the long term set those right.
Speaker Change: We've got to continue to ship and install for our customers as the business continues to bill the other areas of the recurring.
Speaker Change: Sections of our business to continue to be strong and we're happy with our specialty and alive and business.
Speaker Change: And I just want to also reach out and know that the teams out there have been working hard.
Speaker Change: Through all of the supply chain issues many hours a night.
Speaker Change: Good plan in place to get Us, where we need to go and continue to improve so stay tuned I'm sure there'll be some new news on the tariffs as we move forward.
Speaker Change: But we wanted to position ourselves to.
Speaker Change: To be nimble and ready.
Speaker Change: To do what we need for our customers and for our shareholders. Thank you.
Speaker Change: Thanks, everyone.
Speaker Change: Ladies and gentlemen, this concludes today's call. Thank you all for joining you may now disconnect.
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