Omnicell Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Matt Hewitt - Craig-Hallum Capital Group LLC - Analyst : Good morning and thank you for taking the questions. Maybe first up on the revenue side, obviously another strong performance from the services side. The product side you obviously it's, you are still dealing with a little bit of headwinds. But I'm just curious, was there anything related to the hurricanes? Were there any delayed implementations or anything that maybe is leading to the better anticipated growth here in the Q4?

Question: Matt Hewitt - Craig-Hallum Capital Group LLC - Analyst : Got it and then product gross margins a very nice pop here in the third quarter. I'm just curious. Do you see that continuing to trend higher? Are you still working through some of the inventories purchased during the supply challenges of COVID? And therefore, that's creating a little bit of a headwind and when do you think, or how long should it take to get back to maybe where you were just a couple of years ago, which is closer to 50% gross margin? Thank you.

Question: Matt Hewitt - Craig-Hallum Capital Group LLC - Analyst : That that's really helpful. Thank you. And maybe one last one, if you don't mind regarding the XT amplified pipeline. given that this is a different type of upgrade cycle than you've experienced over the last few where it was more of the big equipment, this is more of a software. Would you anticipate that this would maybe not follow a typical bell-shaped replacement curve. Is there an opportunity here for this to be maybe a little bit more front end loaded, if you will, maybe over the first, two to three years, you would see greater demand than you typically would with an upgrade cycle. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 12:30PM, OMCL.OQ - Q3 2024 Omnicell Inc Earnings Call

Question: Jessica Tassan - Piper Sandler - Analyst : Hi guys. Thanks for taking my question and congrats on the quarter. I wanted to just ask kind of directionally about the cabinet contribution excluding amplify year over year in 2025. I know we don't have guidance yet, but just should we be thinking about the cabinet as being essentially stable through the end of the XT cycle or will they continue to decline off of the 24 base?

Question: Jessica Tassan - Piper Sandler - Analyst : That's helpful. And then maybe Randall, can you just provide some perspective on how we should be thinking about the cabinet life cycle? Does this amplify refresh cycle kind of change the historical 10-year cadence of new product releases? Or is it just a component of that 10-year cycle which is still intact? It would be helpful if you could just offer some costs. Thank you.

Question: Allen Lutz - Bank of America - Analyst : Good morning and thanks for taking the questions. One for Randall here, just kind of at a high level as we look at the product revenue over the past couple quarters and then look to the 4Q and I know Matt kind of already asked about, was there some type of a push into 4Q, But just trying to figure out the guidance for 4Q product revenues is really strong and just trying to dissect exactly what is driving the sequential change. Because if we look back the past few years, there's been a sequential change to the negative side, which I think was more on the market getting weaker. But what exactly is going on in 4Q that gives you confidence around the product revenue side? Is it the market improving? Is it extended amplify contributing more trying to get a sense of what's driving the improvement into the back quarter of the year? Thanks.

Question: Allen Lutz - Bank of America - Analyst : Thanks. And then a follow up from a comment you made around the specialty pharmacy business you opened up to in the quarter. Seems like there's continued momentum there. As we think about the Inflation Reduction Act, there's a lot of impact there to specialty drug pricing and [340 B] and so it seems like the IRA is causing a lot of changes to that part of, of your customer's business. Has that had any type of impact either positive or negative on your prospects or your conversations with these customers is it bringing them in? Is it bringing them to the table trying to understand if there's anything to read from those changes that begin next year? Thanks.

Question: Allen Lutz - Bank of America - Analyst : Thank You. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 12:30PM, OMCL.OQ - Q3 2024 Omnicell Inc Earnings Call

Question: Stephanie Davis - Barclays - Analyst : Hey guys, congrats on the quarter and thank you so much for taking my question. I was hoping we could revisit your cost optimization initiatives just given the magnitude of the recent earning fees and the creation of a COO seat. So how should we think about the initiatives taken to date? Have there been any major opportunities on earth by your third-party consultants? And acknowledging that it's only been like a month. Is there any early color from Nnamdi Njoku show and his top priorities as he gets into the COO seat.

Question: Stephanie Davis - Barclays - Analyst : Are there any broad strokes or buckets of initiatives you can talk about that can give us just maybe like a one level deeper on granularity.

Question: Stephanie Davis - Barclays - Analyst : Super helpful, and just a quick follow up on central med automation services. Is there any color you can give us around the adoption roll over the next few years? Is there any opportunity beyond the hospital? Just as supply chain and centralized med management is really top of mind for retail pharmacies right now as well?

Question: Stephanie Davis - Barclays - Analyst : Awesome to hear. Thank you.

Question: Anne Samuel - JPMorgan Securities LLC - Analyst : Hi, thanks for taking the question. You spoke to seeing some stabilization within the hospital market. And I was hoping maybe you could just expand on that a little bit, maybe discuss how they're thinking about prioritization of spend and ROI and then our budgets loosening across the board or you just see it kind of in, in specific product areas.

Question: Anne Samuel - JPMorgan Securities LLC - Analyst : That's great to hear. as we are coming up on the end of the year. I was hoping maybe you could just speak a little bit to how we should be thinking about headwinds and tailwinds if you look out to 2025 and then also how we should be thinking about amplify within that context. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 12:30PM, OMCL.OQ - Q3 2024 Omnicell Inc Earnings Call

Question: Anne Samuel - JPMorgan Securities LLC - Analyst : Great thanks, and then just maybe just to kind of follow up to the back half of that question, just how we should be thinking about how to amplify within the context of those headwinds and tailwinds for next year, maybe when I know it takes a little bit of time for, kind of bookings to convert to revenues. So how should we be thinking about timing for that?

Question: Anne Samuel - JPMorgan Securities LLC - Analyst : Great, very helpful. Thank you.

Question: Scott Schoenhaus - KeyBanc Capital Markets - Analyst : Hi team. Thanks for the questions. I just want to get more sense on the product side. Can you give us any color on how far along you are away through the upgrade cycle of the XT series currently? And then in sort of the opportunity set for XT amplify heading into next year, you mentioned both software and hardware. Can you talk about where you see the most opportunity or the bookings currently between the mix of those two? Thanks.

Question: Scott Schoenhaus - KeyBanc Capital Markets - Analyst : Thanks for the color. Moving on to advanced services obviously that's a mixture right now of comprehensive complex services that you are helping these hospital systems with their advanced pharmacy needs, as well as software modules like [340B]. How should we think about that mix heading into next year? And then obviously the margins on the more services-oriented part of advanced services and the more software revenue streams. Thanks.

Question: Bill Sutherland - The Benchmark Company, LLC - Analyst : Hey, thanks everybody. Wanted to get an update on the IVX. That's had to go through some redesign required by the FDA guidelines from the kind of where we are with just the outlook for getting that into the market and the potential booking.

Question: Bill Sutherland - The Benchmark Company, LLC - Analyst : Got it. I just wanted to ask also about capital deployment any updated thoughts there and particularly with the convert that's due next year and what the what the thinking might be around that.

Question: Bill Sutherland - The Benchmark Company, LLC - Analyst : Got it. Thank Nchacha.

Question: Bill Sutherland - The Benchmark Company, LLC - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 12:30PM, OMCL.OQ - Q3 2024 Omnicell Inc Earnings Call

Question: Stan Berenshteyn - Wells Fargo - Analyst : Hi, good morning. Thanks for taking my questions. Maybe just a quick one on bookings guidance. Can you just talk us through? What needs to happen to get to the upper end of the range for bookings?

Question: Stan Berenshteyn - Wells Fargo - Analyst : Okay, and a quick follow up on product revenue, obviously, you are seeing a ramp into the fourth quarter. 3Q came out I think a little bit light versus guidance. Can you just talk us through what happened in the quarter? And is that just the timing impact that's now being pushed into 4Q?

Question: Stan Berenshteyn - Wells Fargo - Analyst : All right, thanks so much.

Question: David Larsen - BTIG - Analyst : Hi, can you talk a little bit about your sales force? Like how large is it, how many of those reps are quota carrying? What portions are allocated to like advanced services and enliven versus product? Or is it all mixed together any sort of color around your go forward strategy Relative to like a year ago or two years ago? Thanks very much.

Question: David Larsen - BTIG - Analyst : That's very helpful. Thank you. And then can you maybe just talk a little bit about your CRM platform? I think a few years ago you went through a process where you really sort of reviewed each account, each client, how you actually measure bookings and, or backlog. I think you got a little bit more conservative in what you reported as your backlog number. Can you maybe just talk about that, please? And then just how much of your 25 revenues will be covered by your reported backlog? If and when you report it on the fourth quarter, call. Thank you.

Question: David Larsen - BTIG - Analyst : Great. Thank you.