OMNICELL, INC. Q3 FY2024 earnings call

• Welcomed Nnamdi Njoku as Chief Operating Officer, who will lead operational change management and culture of care initiatives to enhance shareholder returns.
• Macroscopic landscape shows end markets stabilizing, favorable for capital projects and system modernization. Investing in next-generation upgrades and outcomes-based solutions for XT fleet and specialty pharmacy services.
• Revised full-year 2024 outlook, raising profitability guidance ranges due to expense management and process streamlining.
• Third quarter 2024 financial results were solid, with total revenue at upper end of guidance range, non-GAAP EPS and EBITDA exceeding prior guidance.
• Key customer wins: Minnesota health system upgraded point-of-care solutions; Ohio health system signed IV compounding service agreement; Boston medical center expanded automation footprint with anesthesia workstation; Advanced Services had strong performance with a large health system selecting Central Pharmacy Dispensing service; Specialty Services opened two new specialty pharmacies; EnlivenHealth's solutions adopted by health systems in Georgia and Michigan.

Third quarter 2024 total revenue was $282 million. Product revenues were $158 million, an increase of $2 million over the previous quarter and down $30 million compared to the third quarter of 2023, accounting for approximately 56% of total revenue. Service revenues were $124 million, an increase of $4 million over the previous quarter and an increase of $14 million over the third quarter of 2023, accounting for approximately 44% of total revenue. Non-GAAP gross margin for the third quarter 2024 was 44.5%, an increase of 30 basis points from the prior quarter.

• Full year 2024: Bookings expected in range of $800 million to $875 million; total revenues in range of $1.1 billion to $1.110 billion; non-GAAP EBITDA in range of $129 million to $134 million; non-GAAP EPS in range of $1.65 to $1.72.
• Fourth quarter 2024: Total revenue expected between $295 million and $305 million, product revenues between $177 million and $182 million, services revenues between $118 million and $123 million; non-GAAP EBITDA between $40 million and $45 million; non-GAAP EPS between $0.55 per share and $0.62 per share.
• Starting 2025, plan to change bookings metric to product bookings (connected devices and software licenses) and introduce annual recurring revenue (advanced services, technical services, consumables).

• Forward-looking statements subject to risks, uncertainties due to factors like macroeconomic conditions, FDA regulations, etc. As mentioned in press releases and SEC filings, actual results may differ materially from forward-looking statements.

Q: Maybe first up on the revenue side, obviously, another strong performance from the services side. The product side, obviously, you're 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?

A: Hey, Matt. Good morning. Thank you for the question. The hurricane did not have any impact in our Q3 revenue. As you saw, the revenue was in line with our expectations, and we do also expect our Q4 revenue to increase.

Q: 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?

A: Yeah, Matt, as you know, we've been focused on improving our overall financial performance and gross margin continues to be a key focus of ours. We do expect our gross margin to improve over time as we continue to invest in advanced services as it scales. We are also in a position where we believe the feedback that we're getting from our customers with regards to the initial XT Amplify launch will continue, and those should start contributing to having a positive impact in our margins over the years as they start contributing to meaningful revenue.

Q: Just kind of at a high level, as we look at the product revenue over the past couple of quarters and then look to 4Q. And I know Matt kind of already asked about was there some type of 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?

A: Yes. Good question. There's nothing substantially different. We met our guidance for basically in Q3. Q4 just represents what's on our schedule. We've been working really hard to create great predictability based on the schedule of customer resources and our own resources and being able to meet those. And those schedules are very strong and set up even before we end of the quarter. So it gives us really high confidence that we can meet these ranges and feel confident about getting the right balance of recurring revenue as well as product revenues.