All right. Thanks, everyone, for joining. My name's Jess Tassan. I cover managed care and healthcare IT at Piper. I'm really excited to be here with CEO, Chairman, and Founder of Omnicell, Randall Lipps, and new CFO, Baird Radford, as well as Head of IR, Kathleen Nemeth. Kathleen, I'm going to hand it over to you for a minute for Safe Harbor, and then we'll get into it.
Thank you, Jess. First of all, I would like to welcome all of you today, both those of you in the room and those of you who may be listening online. So very quickly, during the course of today's discussion with Jess, we may make forward-looking statements. There are risks associated with making forward-looking statements. Please be sure to review our most recent filings with the SEC. With that, I'll turn it to our CEO, Randall Lipps, for some opening comments.
Thank you for joining us today. Medication management is really an exciting moment, especially for providers as they become more complex, as they try to answer all the medication management processes that patients and clinicians need. And it's what we're all about. We're trying to deploy the best enterprise solution that makes complex medication management simple, particularly for these very, very large providers. And so we announced yesterday that we've got some significant announcements at the trade show coming up. Jess, I'm sure you were going to ask me that question. And it's exciting because it is more about the enterprise. How can we meet the needs of the enterprise? And what are those needs?
Those are the ability to respond quickly, to light up all the areas of medication management, small, medium, and large in these providers, to be able to look at it holistically from inpatient to outpatient, to be able to do updates without any type of onsite actions, and really the ability to deploy in a much easier way, plug and play. Send a device in, plug it in, you're up and running. You don't need to have lots of labor or lots of actions to deploy these new enterprise solutions. So we're just really excited about it because we know that the industry needs this type of approach. I think we're the only ones really running after this broad-based approach. We already have technology that's high-trust certified, ready to deploy. We started deploying it to some of our earlier customers, and we know it's really resonating in the marketplace.
But we're excited to be here and tell you more about what's going on.
Awesome. All right. So Omnicell is close to 50% of the automated dispensing cabinet market, where the company's XT product is in its eighth full year of release, just to kind of set the baseline. Baird, you joined as CFO in August of 2025. So Randall, what did you see in Baird, and what are your hopes for him as CFO? No, I'm just, right, you guys have talked a lot about just migration to a more recurring revenue model. So I'm curious how Baird's hire is going to help you advance that goal.
It is actually a great question. As we kind of ended our revenue cycle over the last few years, we wanted to get ready for the next revenue cycle, but do it differently. And for that, we as a company not only retooled our processes and go-to-markets as we're moving forward, but we retooled our leadership. And that's with Nnamdi, our new COO, who's been here exactly one year and Baird. And what we're looking at is how to really extend our growth and improve our margins as we go forward and be able to scale in a very rational, easy way, have more predictable revenues, more predictable earnings, and make everything easier. We're trying to make it easier for the customer, and we want to make it easier for ourselves as we grow with our customers and solve their problems. Baird's had a variety of background.
I really liked his background as a chief finance guy at not CFO, but the finance guy at Intuitive Surgical. Had a lot of experience there with both types of revenue models, capital, leasing models, and recurring revenue. So it really fit the mold, I think, for what we're looking for. And it's just nice to have a fresh set of eyes on the business and really making some tough decisions that make a lot of sense when you bring in the right kinds of people.
Did we expect the way that you price your products for customers to change dramatically, or for the financial model from an investment perspective to change?
I think we want to monetize, particularly our current customer base, differently as we move forward. We've really been stuck on this 10-year model. I'm not sure that's the best way to monetize our base as we move forward and introduce not just one new system for a 10-year period, but several systems over several years that solve different needs, but allow our customers the flexibility to choose the right one at the right time for them.
Got it. And are they paying cash for these solutions upfront, or is this a more lease-type model, or do you offer both options?
I think we want to be more flexible in that role. I think as you move away from the 10-year, which is mostly a capital-oriented purchase, you can move into more leasing models that are for five years, and then that allows you to upgrade with the technology and solution bases out there. It's really a great way to stay engaged with a customer about product cycles and technology cycles that you don't have to wait to the end of the 10 years to get engagement. You can do three, four, or five.
Okay. That makes sense. So 2025 has obviously been a pretty tumultuous year between tariffs and healthcare policy reform through it all. Omnicell's proved kind of remarkably resilient. You guys have managed to raise revenue guidance twice, year to date. Current outlook is 5%-6% top-line growth at the midpoint. Adjusted EBITDA guidance now $143 million, so within $5 million of the initial pre-election day outlook. Can you just give us a state of the union on 2025 revenue and adjusted EBITDA guidance? What does it include in terms of headwinds from tariffs and policy implications from the business?
Yeah, of course. It really starts with the execution of the team. If we rewind the clock to, call it, six quarters ago, the operations side of the house got very focused in a few directions. One, within the commercial side of the organization, lining up scheduling for implementation. So our products require implementation and acceptance by customers. And that's how we convert an order into actual revenue through that implementation. The team's been outstanding at lining up those timelines with our customers so that staffing is available both on our side and on the customer side. That focus has increased our predictability and has allowed us to have better insights into upcoming quarters. And as that played out over 2025, we grew in confidence in our schedule and our ability to meet those top-line numbers.
From a bottom-line perspective, you definitely flagged the nature of tariffs and what that did. And I'll rewind us a couple of years on that one. The company really was thoughtful about its approach to supply chain management, identifying vendors with multiple geographies of capabilities. And in the moment when the tariffs hit, it gave the company the ability to buy in slightly in advance of the adoption of those tariffs, to build up inventory and to manage costs, but to also systematically use that moment in time to shift where we source and subassemble products around the world to optimize for tariff and labor costs. And so as we went through that process this year, we're definitely proud of the team. Their ability to claw back a big chunk of that EBITDA by managing successfully through a tumultuous tariff moment is a testament to the group.
As we exit this year, we feel like we're exiting this year at a much better place from a supply resilience perspective, meeting the needs of our customer, as well as from an overall cost perspective. So we got it at the end of last quarter. The 2026 tariff impact should be below our exit velocity rate, so below the $6 million quarter range.
That's really helpful. So just following up on one thing you mentioned, is the roughly $40 million of upside to products revenue guidance implied in the revised 2025 guide? Is that coming from these scheduling efficiencies that you're referring to, basically the ability to convert long-term backlog a bit earlier than maybe you'd previously thought?
Yeah, that's definitely a contributing factor. As we get closer to that scheduling capability, that has helped. And as we've seen that unfold as the year has gone along, we also highlighted in our third quarter earnings release, we've been very, very impressed by the adoption of XT Extend, so the console upgrade that we provide to our customers to help extend the useful life of some of their nearer-term or mid-term product offerings.
Got it. And those typically are in-year bookings to revenue conversion.
Their cycle time is much easier than the large scale that you would have associated with a full system refresh. So yeah, those can occur quicker.
Okay. Got it. And then just in terms of offsetting the incremental cost of tariffs, how much of that is through price on the product side, and how much is through operating expense efficiency?
The answer would be yes, yes, and yes. It is all those things, so it is seeking opportunities where we have them to leverage price. Long lead-time contracts often lock us into specific pricing actions, and so we have not gotten sideways with any of our customers on that, but as we do new transactions, we are leaning into more appropriate pricing to reflect the cost structure that we have. We've then used discipline on our discounting to really help make sure that for the short lead time, whether it's an enhancement to an existing customer, meaning new product or XT Extend, to really make sure that we're recognizing the macro environment and managing costs through pricing optimization.
Okay. That's really helpful. So obviously, three key results exceeding guidance across both segments, products, and services. We spoke a little bit about the product beat, but the revenue beat had about 100% flow-through to Adjusted EBITDA. And this is something that is always not confounding, very impressive to me, and I think to investors. How is that possible, especially just with most of the revenue beats coming in the product segment?
So as the business that we have with multiple business lines, there's always give and take. And so what you see is, although it flowed through to the bottom line dollar for dollar, there was a series of actions taken by the team to manage the cost structure along the way. So some of it was revenue, which generated a gross margin, but there were also efforts by the team to continue to rationalize the cost structure that allowed us cost structure decreases, OpEx decreases that made us a more direct line flow to the bottom. Not an always thing. This was just in the moment the stars aligned appropriately for that. Typically, you could expect top-line revenue will flow through closer to the margin level, gross margin level.
But this was a place where we had a number of other initiatives in place that also bore benefit for us in the quarter.
Okay. That's helpful. And then just what gives Omnicell confidence that the strength in 3Q is sustained in 4Q, where guidance implies basically flat revenue across those segments?
Yeah. So back to the scheduling advances that the team has made, their ability to work with customers and their staff to make sure implementations occur timely has been a huge benefit for us. And so we entered the quarter with a high degree of confidence around the scheduling and therefore gave us a heightened degree of confidence around the revenue for the quarter.
Okay. That's helpful. So a big focus, obviously, heading into the end of the year is bookings, backlog, and visibility. So 25 bookings are guided to 525 at the midpoint, 558 in 2024, so down modestly year- over- year. Can you help us understand just what goes into product bookings and how do bookings convert to backlog, ultimately to revenue?
Product bookings, the biggest component of that is our point of care business. The connected device is the larger umbrella. The point of care solutions, our automated cabinets, are the key component of that. For us, it really is about the life cycle of the customer capital process and internal approval process. Some institutions are able to move quicker. Some institutions are forced to move quicker because of their capital availability or their integration needs. Others tend to take a little bit more time. Embedded in that is a series of moving parts, one customer at a time that we see. Anything more specific I can hit on there?
I actually have one follow-up for Randall. Just bookings are obviously down slightly year- over- year, but just pretty resilient, I think, overall, despite Omnicell being towards the end of what's historically been this 10-year cabinet upgrade cycle. Can you comment on the competitive landscape, new products like IVX, and then what appears to be a TAM expansion with health systems investing in centralized distribution facilities? I'll just hit this here. Investors want to know if there was a pause on competitive decisions or on RFPs pending the release of a product from one of your large competitors and whether there is effectively a bull list of demand now that that product's been released and looks arguably inferior to Omnicell's XT.
Well, I think the market is quite dynamic now as most of the equipment in the marketplace is either aging out or about to age out. So big replacement cycle coming gradually for us and seems to be more apparent in the competitive spaces. Certainly, a lot of customers were out there waiting to see what the new tech was. And so it's easy to get these institutions to wait. And I think the wait is over. And I think that gives us the opportunity, and we know it's giving us more opportunities to go meet with customers we've never talked to in 10 years. And so because of that, we've expanded our sales force, particularly around these new opportunities. And we feel that, well, as always, our competitor is very tough, but we'll get our fair share there.
Exciting. Okay. Got it. Would you all expect 2025 to represent a bookings trough?
We said this was a trough year, and I think that's holding to that in many ways. We also took this year with Baird and Nnamdi to reset some of our costs and do some one-time cleanup so that we can really enter next year with a good growth profile and expanding margin profile. So we're really excited about where we are as a company when it comes to our product releases, where we are with our customers, where we are with our leadership change. We've made a lot of changes. It's just it really sets us up for some great new stuff coming down the road.
Awesome. So is the sales force expansion you mentioned represented in the 3Q SG&A number, or are we modeling a roughly $3 million step-up sequentially in 4Q? How should we think about continued ramp of that investment?
Yeah. The team was opportunistic in hiring and will continue to be so, but at this point, we think we largely have the right sales force in place to assist, and they were in place in the third quarter. They came in during the course of this year.
Okay. That's helpful. So just with bookings down modestly, at least at the midpoint of guidance and backlog likely lower exiting 2025, what other factors should investors be thinking about as we model 2026? Is it fair to assume there is some level of higher in-year bookings to revenue conversions occurring next year just because XT Amplify is sort of accelerating?
I'd point to a couple of things. Some of the bookings last year had longer lives on them. Typically, you could have implementations as quick as six months, but typically 9, 12, 15 months. So a portion of the 2024 bookings will flow over into 2026 implementations and therefore 2026 revenues. So that's one part. I think the second part to think about is outside of our product revenue, that recurring annual recurring revenue that takes place. So whether it's the systems, the technical services that we have in place on our installed and growing install base, as well as pricing on those arrangements, or it's our specialty pharmacy business, which we continue to stand behind and get excited about the opportunities there.
The benefits that we've seen emerging in both of those parts of our business during the course of this year should be considered as you think about 2026.
Okay. That is very helpful. So I hate to skip over the specialty pharmacy remarks, but I want to get into XT Amplify a little bit. Can you just give us a quick kind of overview of the products that comprise XT Amplify? And as we think about the XT install base, which we estimate is approaching $3 billion by 2028, what customers in terms of the year of install or their tenure are available for or are eligible for XT Amplify refreshes?
Yeah. We're at the early stages of the XT Amplify. So we have more growth and more opportunity to grow there. But we want to continue to give customers a lot of options as we move forward beyond just the XT Amplify, which is mainly the XT Extend, which is the console piece. There are a lot of extra services and the like that connect with OmniSphere, which is our enterprise solution for the cloud. And we're very excited about that because it really is the key to us delivering great quality experience for our customers, easier to install, lower cost for us, and better returns for us as customers pay differently for it than they have in the past. And I just think that Amplify is the on-ramp to that. And I think we're going to continue to do well with that.
Okay. Got it. And then just on OmniSphere, what percent of your XT installed base has access to this platform today? Was it internally developed and what is the pricing model?
Yeah. It was totally internally developed. It's a single-app multi-tenant. So it's the highest tech quality. It's high security certified. It is state-of-the-art type tech. What we love about it is that we can apply engineering resources to it as we go forward that allows immediate updates for everybody, not have to do it each customer at a time. And this will really empower us to deploy more tech quickly, not just big ADCs, but medium-sized ADCs, even small ADCs, products in doc offices and clinics and surgery centers. So it's a really key driver. Every customer today can start with OmniSphere where they are and move some of the functionality they have to it. As we develop new products, it will be able to connect into that directly. So we're moving forward January 1 with all customers being able to access that product.
Got it. Got it. And so when we think about the XT cabinet install base, I guess just how do we think about the pricing of OmniSphere on a per cabinet or per customer or per client?
Yeah. We haven't talked much about it, but our goal is to do it a little bit differently than we've done in the past. We'll probably provide all the options to the customer, and then as they use them, they get all the functions and all the solutions with all of our products, and then as they use them every year, we'll readjust for their utilization of that product and apply it, so it really allows them to try and utilize all the types of solutions we have in the cloud or solution sets that they could have, and then allows them as they gradually use more to get a service fee. This is very much like the Epic model.
Got it. So when we think about just an example of the services that you're referring to, would it be something like inventory management and just what types of upgrades are pushed through to the hardware devices through the OmniSphere?
Yeah. It could be anything related to improvement or new function, new feature, drug diversion, optimization. Any of these things can be then applied and accessed through OmniSphere when they're deployed, and the customer doesn't have to go change their hardware or insert a disk and re-update. It's just all put in place as it rolls out through the whole system, so it's quite unique, I think, in the industry. It will really reduce our costs going forward, not only create a better experience for the customer, but also as we deploy more of the OmniSphere, it will allow us to drive a better margin.
About workflow, data analytics, access within not just the hospital, but a broad health system, giving to the pharmacist he or she is able to then understand what they have across the hospitals in their system.
Access to that kind of information real-time allows them to make decision-making both on need to bring drugs back, redeploy drugs to other locations, and optimize their purchasing patterns. And so those are a few of the initial points. But we shouldn't underestimate the importance of workflow enhancements, working their way down through the techs who are restocking the cabinets and the nurses who are using the cabinets. Those workflow distributions are a lot quicker as well, and they help a hospital streamline its practices.
Okay. Interesting. I look forward to learning more at ASHP. So I guess just maybe one on the market to wrap things up. So how are you thinking about hospital financial health in 2026 and just propensity to invest in pharmacy solutions? Obviously, we know 340B is a huge driver of hospital pharmacy margin and overall health system margin. There may be some pressure on the 340B savings in 2026 in addition to policy-related headwinds. So just interested how your conversations are going and what health systems are saying into next year.
Certainly, every customer has a different profile, and particularly the ones that have more government payer mix tend to have less flexibility, but every hospital, even those, have to have these systems in order to run their hospital, and so it's our goal to give every customer advance notice on when these systems are, how long they're going to last, when they're going to need the upgrades, and what the options are, so not all of our products are mandatory, but these are, and so we feel like we have more confidence even in rough times getting these products put in place because they're necessary, and the other thing is medication management is such a big bet in the outcome of healthcare. You cannot manage your cost. You cannot manage your outcomes if you can't manage the medications. It's just impossible, and so I think pharmacy is becoming more strategic.
And I'd like to remind everybody, even a small provider with, I don't know, 20 hospitals, they will have a million locations of discrete medication management they have to manage. So having too much, too little, wrong types, it can create a lot of costs if you're not doing it right. And that's why we need this enterprise autonomous AI-driven system to really be doing all these tasks for everybody because you can't do it. You don't have enough people to do it all right.
That makes sense. Last one. Randall, what is Omnicell's current or your current view on the ADC cycle? Is the market ready for a new cabinet? And how do you think about just the timing of launch, given secular headlines?
I think I couldn't be more excited. I just feel like, I don't know, everything's back. It's just like it's an exciting moment in the time of the history of the company. And what's even better is our customers, because their problems are big, they're more open to high-tech, robotic, whatever kind of solutions are out there. They know that these systems need to do more than what they've been doing in the past. They need to make a bigger difference. They need to work easier, and they need to solve problems more instantaneously, not waiting for a report to print or someone to do something, but do it instantaneously. And that's really a great satisfaction over the 30 years that I've been doing this to see some of these hard problems resolved and see customers embracing them and excited about the new innovations we have.
Okay. Great. Thank you guys so much. I appreciate this.
Thanks, Jess, for having us.