Welcome, everybody. My name is Scott Schoenhaus. I'm the Healthcare Technology Analyst at KeyBanc. Happy to have Omnicell with us today for our fireside chat, Nchacha Etta, CFO, and Kathleen Nemeth, Investor Relations. Kathleen, I'll pass the floor to you. I know you have some slides that you want to go through as well.
I do. Thank you so much, Scott, and welcome, everyone, to our fireside chat today. I also want to thank the entire team at KeyBanc for hosting us today. We appreciate it very much. Next slide. So, thank you, Kristen, for advancing that. So, before we get started today, we are going to have just a couple of slides, three or four, then we'll sit down with Scott for the fireside chat. But I do want to remind everyone that during the course of today's presentation and Q&A, we may make statements related to the future. There's always risks when you're talking about the future, so be sure and review our recent filings with the SEC to get a full list of those. And now we have a couple of slides our CFO will present, and then we'll get into the fireside chat.
Thank you, Kathleen. And Sean, I'll just signal you to go to the next slide when I need you to. So, thank you. So, basically, Omnicell, as everyone is aware, has been in this business for the last 30 years, and with an overall strategy to transform the pharmacy care delivery model through outcome-centric innovation, combining robotics, smart devices, expert services, as well as intelligent software to basically optimize clinical and business outcomes across all settings of care, with the ultimate goal to make sure that our customers, there's the right outcome for our customers and their patients. Next slide.
So, I mean, from an overall standpoint, if you look at where Omnicell operates today, we have a robust set of solutions that we do provide to our customers to help them manage and achieve the desired outcomes from, like I mentioned earlier, smart devices that focus to ensure that the streamlining workflows are expected to achieve pharmacy and nursing efficiencies. From a robotics standpoint, we do have our IV robot that is designed to automate manual tasks and enhance safety and optimize labor for our customers. From a services standpoint, we do have both on-site and remote experts that primarily focus on optimizing our customers' technology in an effort to deliver the right or desired outcomes for our customers. And finally, we do also provide or offer connected devices or intelligence intended to drive data-driven performance optimizations for our customers. Next slide.
From an overall growth drivers or revenue standpoint, again, Omnicell, having been in this business for 30 years, we do have some really solid key drivers that are helping us be successful in the marketplace, beginning with a very strong position with our customers. One of the key foundations of Omnicell, as most of you know, is that we have a strong position with the top 300 U.S. healthcare systems. This strong or solid customer base has really helped Omnicell be successful in the past, and we continue to build on the relationships that we have with our customers. Secondly, we do have a very robust backlog of $1.1 billion as we ended the year 2023. That is really positioning Omnicell to continue to manage our plans and growth strategy for 2024.
With a very solid backlog, we're very confident that it puts us in the position to be able to meet the needs of our customers and achieve our growth, our revenue plans for 2024. From a growth standpoint or growth driver standpoints, there are a few areas that we see as key opportunities for us, beginning with, again, like I mentioned, our customers continue to increasingly turn to Omnicell to help them manage their medication or help them with medication management. Omnicell is well positioned today with our suites of products and services to help our customers meet those needs and get to the desired outcomes. We do have expansion opportunities within our existing customer base. It's a key focus of ours. We continue to work with our customers and our sales force effectiveness and commercial excellence to ensure that we capitalize on those opportunities.
From an advanced services standpoint, we continue to expand our total addressable market. It's part of our overall key strategy since 2022. We continue to focus on ensuring that we're scaling and expanding our advanced services portfolio with some of the products and services that you're very familiar with. We continue to also explore and work on strategies to capitalize on opportunities to improve our overall market share through competitive conversions, which have been one of the key success factors of Omnicell in the past and will continue to be so as we execute our overall strategies. Next slide. A very key important metric is our balance sheet. Omnicell today is in a very solid position from a liquidity and working capital standpoint.
We do have a strong capital structure that helps position us to be successful as we work on deploying our overall growth strategy for the medium, short, and long term. We have a very solid cash position, $468 million. If you look at our total assets and total equity, we've almost doubled our total assets over the last 5, 6 years, as well as our total equity. With this strong balance sheet, we expect to continue to fund our overall innovation and manage the key growth strategies and strategic priorities that we have for our business. With the liquidity position that we are in today with our revolver, as well as our cash position, puts us in the position where we believe that we can fuel our overall innovation and growth strategies in the short, medium, and long term.
I believe that was the last slide. No, this is the last. So again, as I mentioned earlier, Omnicell is well positioned to win in the marketplace. We have the right solutions and the right business model to solve this big problem that we see out in the marketplace in medication management. And we're partnering with our healthcare, with the healthcare systems, who are very key partners of ours to help us execute on the strategies that we continue to build to solve the medication management problem. As everyone is aware, Omnicell has a strong track record of solid financial performance. We will continue to be very prudent as we make capital allocation decisions and continue to drive profitable growth for the company. And so, we're really looking forward to getting some questions from you as we switch here to the Q&A.
Great. Thank you so much, Nchacha. So, I'd like to kick off the fireside chat with some Q&A, and then I'll open up to the audience. Investors, if you have a question for Omnicell, there's a chat box button on the bottom of your screen, and you'll submit a question, and I'll see it on my end and through our portal. So, feel free to ask questions, and we'll get to you at the end of this fireside chat. But I guess, Nchacha, can you just, from a high-level perspective, update us on what you're seeing with the healthcare system and markets and their budgets this year?
Sure. Thank you for the question, Scott. So, we're seeing some encouraging signs that healthcare systems finances are stabilizing and maybe in the early stages of some sort of a recovery. We are therefore expecting 2024 CapEx budgets to increase compared to 2023. What this means is that we will see healthcare systems start to, hopefully, move forward with some long-delayed capital projects in 2024.
Great. Maybe let's talk about your bookings expectations for this year, and then maybe talk about the console upgrade cycle that you have planned and what's embedded in 2024 guidance and sort of what's the longer-term opportunity for that particular upgrade.
Yes. As you know, we don't provide updates on guidance within the quarter. However, what I can say is that the customer environment today and the trends are unchanged and consistent with what we communicated during our last earnings call. What I would say is that we are encouraged by the opportunities to offer new and innovative product enhancements on a larger installed base, including to your point, the XT console upgrade, which we believe with the new innovation, we should see a modest increase in our point-of-care bookings or product bookings in 2024. I'll let Kathleen provide some insights on the XT product lifecycle, the XT upgrade.
Yep. Thank you, Nchacha. That's great. And Scott, specific to your question about the outlook for this year, we said on the call for the XTE, which is the beginning of the XT upgrade cycle, the expected revenue there is very small, modest this year towards the second half of the year. But overall, when you think about the installed base we have now with XT, which has increased quite significantly over the last 2 years, this is a very good opportunity for us, not just the XTE, but future innovations that we intend to announce in the near term around the XT cabinet. That white space, if you will, around the cabinet really presents an opportunity for us.
And so, it will scale and roll out over this year, and then we would expect that to pick up as we go into the next year and the year after that. So, we think it's a good opportunity overall.
Yeah. No, thanks for all that color, Kathleen. I want to shift over to advanced services. Maybe we can talk about the regulatory environment that was impacting the IVX compounding robot and your advanced services. Yeah.
Yeah. So, we have cited a couple of times that there have been some regulatory headwinds. They're both at the federal level and the state level. At the state, it's usually the pharmacy boards that want to get involved. This is not surprising, right? Within healthcare, anytime you have something new, there's, for good reason, a lot of compliance and a lot of regulation associated with that. Now, that being said, we're seeing good interest and demand for our IV products from our customers. I just want to pause for a moment. Just for anyone new to the Omnicell story, what we're talking about here is compounding IV medications. The way health systems do that now is they use an outsourced provider. What they'd like to do in the future state is bring that in-house, have it run by using robotics, automation, and expert services.
That's what Omnicell is focused on now. How do we bring that portfolio to our customers in a way that can improve outcomes, improve safety, ensure compliance, etc.? That's just some background and overall context. We are encouraged that since these regulations have been announced, customers have begun to adapt to them as they do. The more we see customers getting used to them and vetting these regulations, it helps us because then we're able to ship another IV, and that customer gets it, and that becomes a use case for us that we're able to take out to the market. Again, it's early days. IV is scaling for us, and it's very early. It's still in limited customer release. Nevertheless, it's an exciting area of the portfolio.
Great. You guys mentioned about a business review that you announced on the fourth quarter earnings. Can you discuss maybe what you're hoping to achieve with this review?
Yes, Scott. The ultimate goal of the review is to help us identify different growth opportunities as well as productivity enhancements and efficiencies or operational improvements and efficiencies. The reason we engage with the management consultant is to help us do what I consider a comprehensive review of our business, right? We have a lot of great products that we've either launched or acquired over the last several years. It's just time to do a review of those. Given the current environment, we believe it makes sense to do this review. With the ultimate goal, again, or the outcome will be to really identify areas where we can actually refine our overall product portfolio or just improve our overall business results and performance.
We believe that there is a need for a significant and thoughtful evaluation of where we can make some of these changes to improve our performance, not just from an operational standpoint, but also looking at our go-to-market initiative or initiatives as well as our overall business performance and product portfolio. Engaging with the management consultant is what we think is extremely important for us. It's totally bringing in a new set of eyes. We've been working a lot on our strategy as a management team and our strategic priorities. But again, we don't know what we don't know, right? So, engaging with the management consultant, we believe, will really help us identify some of the growth opportunities that we might be missing.
Great. Thanks, Nchacha. So, we have some investor questions coming in. The first is curious if you have any impact from the Change Healthcare cybersecurity disruptions on your core customers, or are you seeing any impacts on them and your business?
I could address that. Clearly, it's something anyone within our sector is looking at and monitoring. For us, we do not expect any impact to our business as a result of this. Thank you, Scott.
Great. Another investor question is on your convertible notes. How are you thinking about addressing the convertible notes? Does it make sense to settle these at maturity?
No, we don't think it makes sense to settle it at maturity. What we've been doing is we're very mindful of the upcoming maturity of the senior notes. And so, what we've proactively been doing is considering various options to maintain strategic flexibility for our company. And with our current cash position, we are very confident that we will be able to minimize any potential dilution to our shareholders. So, we're looking at this very, very seriously. We know it's very important that we act on it. And we will make the right decision here in the near future.
That brings me to a follow-up question. I think you have nearly $500 million of cash and equivalents on the balance sheet currently. How are you thinking about capital allocation, Nchacha?
Yeah. I mean, as you are aware, we're in a very strong liquidity and working capital position. We continue to evaluate our capital allocation priorities that will continue to fuel innovation and support our overall long-term growth. We will, and most importantly, optimize shareholders' return on capital. At this time, we are focused on a very prudent capital management approach, and we will continue to evaluate this as part of the management and operational review. We will deploy capital as needed as we evaluate our business to meet our overall growth strategy. That's what Omnicell has been successful at doing in the past, and that's what we will continue to do.
Great. I guess I have another follow-up question on advanced services. Obviously, IVX is the big moving part there on the guidance. But can you maybe provide some color on other parts of the advanced services portfolio, maybe 340B, maybe on the retail side, Enliven Health, what you're seeing with those offerings?
Yeah. I'll jump in here. Kathleen might have added some context. But so from an Advanced Services standpoint, Enliven continues to be we acquired this business a few years ago. It continues to be a focus area from a strategic standpoint for us. And we are making some investments in the area with the solution of the solutions that we're providing or planning to provide to our customers. We've had some challenges with Enliven, but those are very short-term challenges from my perspective. As we dive deeper into the business and assess the overall go-to-market strategy of Enliven, we believe that it has some long-term growth potential for our business. Within Advanced Services as well, we have Specialty Pharmacy, which continues to perform extremely well, another business that we acquired a few years ago.
We continue to expand and invest in that business as well as look at other adjacencies, including 340B, to continue to grow that business. Like I said, Specialty continues to be a very key strategic investment for us with a lot of growth potential.
Great. Kathleen, I don't know if you want to add anything there. I can move on to the next question.
No, that's fine. Thank you, Sean.
So, when we think of your Point of Care, I think there's obviously a difference in revenue recognition between your product offering and your Advanced Services offering. But I think there's an initiative to try to move that towards kind of an Advanced Services model. Can you maybe discuss a little bit more about that and when or how that can be achieved in the near and longer term?
Yes. So, a few years ago, we reviewed our overall growth strategy, and Advanced Services was one of the key areas where we felt like we need to invest into kind of put us in a position where we have recurring, predictable revenue growth. We continue to invest in Advanced Services, as you are aware, with both from a product and services/solution standpoint. However, I also want to bring your attention to the fact that, again, point-of-care Connected Devices continues to be a key area of growth for us because with the high margins that we get in point-of-care, we are not ignoring investing within our Connected Devices portfolio. And so, again, it's not that we're ignoring point-of-care or Connected Devices. We're just diversifying our overall business strategy to put us in the position where we can get some predictable revenue or achieve some predictable revenue growth.
As Advanced Services continues to scale, then it would be more of a bigger contributor to our overall profitability or our overall profit margin. Today, the business is not scaling as fast as we want for some obvious reasons that you are aware. But we are looking at different strategies to continue to invest and grow the Advanced Services business. As that business grows or that segment grows, we will see improvements in our overall margins. But again, I want to stress the fact that Connected Devices and Point of Care is where we're really focusing because that's where we get the higher margin and higher profitability.
Great. I guess as we close out here, I don't see any more remaining questions from the audience. But broadly speaking, Nchacha and Kathleen, if we continue to see improvement for hospital systems with their operating margins and continue to see improvement in that end market, how should we think about, I guess, the near and longer-term opportunities? Is it going to be mostly refresh cycles on XT series? Is it going to be more on the advanced services side? I know what the near-term guidance is, but I'm just trying to think. If there's more budget to be unlocked, is there more upside on the advanced services growth than anticipated maybe in the near to mid-term?
So, Omnicell has grown primarily or historically, the growth has come really from the hardware or our ADC, right? And so, that continues to be a key growth area of focus from a growth standpoint. So, we will continue to go through the cycles. I mean, the next cycle will really drive some of the growth that we're hoping. But then in between, we will continue to come up with different innovational product enhancements as well as services from an Advanced Services standpoint to help us diversify and continue to grow our overall portfolio. And so, like I mentioned earlier, it's not really just Advanced Services that we believe will fuel our growth here. Advanced Services is key because as it scales, then it will be a bigger contributor, more predictable contributor to our overall performance.
But we are not taking our eyes off our connected devices or point-of-care business because it is very pivotal, and that's what's really driving some of the outcomes that our customers need to help them meet their patients' or customer needs.
Absolutely. Well, Nchacha, Kathleen, thank you so much for participating in our conference. We very much enjoyed it. Investors, if you have any follow-up questions, please feel free to email me, and I'll pass it along to the team. But thank you all for attending.
Thank you, Scott.
Thank you, Scott.
Thank you, everyone.