With that, I will turn the call over to Randall. Randall?

Randall Lipps: Good morning, and thank you all for joining us. Today, I will walk through our high-level performance for the fourth quarter and fiscal 2023, including some key customer wins. Nchacha will also provide an update on the current demand environment and our Q1 and full year 2024 outlook. Beginning with our results, we delivered overall 2023 financial results roughly in line with the original guidance as we provided in February 2023. However, bookings for full year 2023 were down 19% for the prior year and missed our original guidance. For the fourth quarter, total GAAP revenues were $259 million, down 13% from the prior year. Total non-GAAP EBITDA for the fourth quarter was $24 million above our fourth quarter guidance due to strong expense management versus $26 million for the prior year.

GAAP earnings per share was a loss of $0.32 per share versus a loss of $0.64 for the prior year. Now let me be clear, we do not view our recent performance as acceptable. Although we have taken various actions to improve our performance, we intend to take further action. For example, over the past few years, we launched a number of advanced services that are gaining traction with customers and beginning to scale. We also previously announced a heightened focus on managing costs, including an approximate 7% reduction in our workforce announced last quarter. These already announced cost actions are expected to result in $50 million of savings on an annualized basis by the end of 2024. But we recognize we have more to do. Our results tell us there is a need for a thoughtful evaluation of where we can potentially make other changes to improve from our operations and go-to-market initiatives to our product portfolio.

Accordingly, we have decided to undertake a holistic review of the business with the assistance of an outside consultant in an effort to determine how we can best optimize our operations and investments. Now Omnicell's strength has been demonstrated repeatedly over the years, and we believe our core Point of Care business remains critical to health systems' ability to safely and efficiently manage medication across the continuum of care. We intend to continue to evolve as a company to improve our performance and deliver returns to our shareholders. We are moving forward with this work with determination and urgency. We will continue to transform the pharmacy care delivery model and advance the industry vision of the autonomous pharmacy. However, we are committed to ensuring we deliver strong returns for shareholders as we work to achieve this mission.

I look forward to updating you on the progress. With that, I would like to share [Technical Difficulty]

Operator: Pardon the interruption, we are experiencing a technical difficulty. Please allow a moment for the conference to continue.

Kathleen Nemeth: Thank you, operator. Will you continue the recording, please?

Randall Lipps: [Technical Difficulty] industry-wide headwinds impacting hospital and health systems seem to persist in 2023. But as we move into 2024, we are seeing some encouraging signs of stabilization. Industry research indicates that 2024 CapEx budgets could increase year-over-year. In turn, some forecast for predicting that health systems will start moving forward with long delayed capital projects in 2024. However, we believe challenges may persist across the industry, including continuing high labor costs and operating costs. And therefore, we will continue to take what we believe is a cautious approach to managing our business. We continue to believe that Omnicell is an essential part of the solution for the industry.

We think we are uniquely positioned to capture incremental market share as hospital cost pressures alleviate and the macroeconomic environment improves. As I mentioned, our lower year-over-year bookings create challenges for 2024, and we expect revenue and non-GAAP EBITDA profit to decline from 2023. However, as we work to transform the pharmacy care delivery model for a combination of automation, intelligence and technology-enabled services, we believe that the solutions we are able to deliver to customers are more important than ever. The total addressable market for medication management remains large. Omnicell has successfully increased our installed base of Point of Care connected devices through market share gains over the previous three years.

We are very enthusiastic about and encouraged by the opportunities to deliver product and service enhancements within the XT installed base. We recently launched the XT console upgrade, which is designed to enhance data and network security and improve nursing efficiency and overall user experience for our XT cabinets and showcased this solution at ASHP 2023 Midyear Meeting in December. The XT console upgrade is part of a broader strategy toward a planned XT product refresh. We are investing in the XT platform to bring a multiyear initiative that provides key products and services to drive medication management outcomes. This year, our innovation pipeline related to the XT platform is anticipated to begin to provide key product enhancements and services designed to improve medication management.

Our XT fleet of products are focused on delivering outcomes health systems are asking us for and related to patient safety and efficiencies. As I mentioned, our innovation pipeline is very strong within Point of Care, and we believe we are beginning to see the signs of stabilization in 2024. We are very excited about these initiatives because they will amplify what our customers have already purchased. Now turning to some important customer wins during the quarter. Health systems continue to find value in long-term collaboration with Omnicell as evidenced by two multiyear sole-source agreements. This includes an Illinois-based health system, which has expanded a multiyear sole-source agreement to convert the automated dispensing cabinet footprint across multiple locations to Omnicell's XT Automated Dispensing System.

Standardizing their technology strategy with Omnicell solutions should position this health system well for future expansion. Most recently, in January, we were pleased to participate in the grand opening of Tennessee-based Ballad Health's new consolidated distribution center, which will support medication distribution for Ballad Health Hospitals across the Appalachian Highlands region. This new facility is anchored by our central pharmacy dispensing solution, which includes three XR2 robots, along with Omnicell Carousels and Packagers, which are intended to help Ballad Health optimize inventory management and allow pharmacy staff to focus on higher-value tasks. Trish Tanner, VP and Chief Pharmacy Officer for Ballad Health, has long been an advocate of technology-driven pharmacy care as a member of the Automation Pharmacy Advisory Board.

During the event, she commented, "It's not just technology, it's about advancing patient care, streamlining operations and embracing future where our health professionals can devote more time to what truly matters. And that, of course, is the well-being of our patients". We could not agree more with this sentiment and are proud to be leading the effort to enable our customers to get closer to achieving the industry vision of the autonomous pharmacy. We also continue to take steps to enhance our corporate governance with the recent election of Eileen Voynick to the Board of Directors. Eileen is a widely respected leader with significant experience in the software, technology, and health care industries with a track record creating value for shareholders, accelerating growth, driving operational excellence, and developing global businesses.

We are thrilled to have her join the Board. Welcome, Eileen. Now let me be clear. We have hard work ahead of us, but we are taking the steps we believe are necessary to strengthen our financial performance, accelerate profitable growth, and drive shareholder value. We remain confident in Omnicell's long-term opportunities and continue to believe that the company is uniquely positioned to transform the pharmacy care delivery model and ultimately help enable our customers achieve better outcomes and increase their ROI. Now with that, Nchacha, I will turn it over to you for more details on the quarter. Nchacha?

Nchacha Etta: Thanks, Randall. And thank you all for being here today. We will discuss our full year 2023 financial performance, the current demand environment, and our Q1 and full year 2024 outlook. Over the last three quarters, we have taken a hard look at our business and products, along with our go-to-market strategy and have given a lot of thought to how we can strengthen and refine certain processes. As Randall mentioned, to better understand the opportunities in front of us and ways we can strengthen our financial performance, we have decided to undertake a comprehensive review of our business and engage a consultant to assist in looking at everything from good opportunities and further operational improvements to productivity enhancements and refinements in our product portfolio.

During 2024, we also intend to reevaluate the financial and key performance metrics we report, including bookings and backlog. And we will consider potential new metrics we may be able to share in an effort to provide additional transparency and information to our stockholders. We look forward to updating you on our progress. With that, let me get into results for the fourth quarter and full year 2023 as well as our outlook for 2024. For the fourth quarter 2023, total GAAP revenues were $259 million, slightly above the midpoint of the guidance range we provided during our third quarter 2023 earnings call. Total revenues in the quarter were down 13% compared to the fourth quarter of 2022, reflecting lower Point of Care revenues, primarily as a result of ongoing health care systems capital budget and labor constraints.

Services revenue were $113 million, an increase of 12% versus the fourth quarter 2022, primarily driven by growth in Technical Services as a result of strong execution, growth in the installed base and decisive pricing actions. Non-GAAP gross margin for the fourth quarter 2023 was 43.6%, a decrease of 210 basis points from the prior quarter. Compared to the third quarter of 2023, non-GAAP product gross margin decreased 450 basis points, while non-GAAP services gross margin expanded modestly. The decrease in product gross margin is primarily based on the impact of the lower revenue and mix of product within the quarter. A full reconciliation of our GAAP to non-GAAP results are included in our fourth quarter 2023 and third quarter 2023 earnings press release, which are posted on our Investor Relations website.

Our fourth quarter 2023 earnings per share in accordance with GAAP were a loss of $0.32 compared to earnings of $0.12 per share in the prior quarter and a loss of $0.64 per share in fourth quarter 2022. Our fourth quarter 2023 GAAP earnings per share include $10 million of severance-related expense associated with our 2023 cost savings plan. Our fourth quarter 2023 non-GAAP earnings per share was $0.33 compared to $0.62 per share in the prior quarter and $0.33 per share in the same period last year. Our fourth quarter 2023 non-GAAP EBITDA was $24 million, a decrease of $17 million compared to the previous quarter, which reflects the impact of lower product revenue in the fourth quarter, partially offset by cost savings actions taken in the quarter.

Our fourth quarter 2023 non-GAAP EBITDA and non-GAAP earnings per share exceeded the guidance range we provided during our third quarter earnings call due to strong cost management across our organization. Turning now to review our full year 2023 results. Bookings for full year 2023 were $854 million, compared to our original full year 2023 guidance of $1 billion to $1.1 billion provided in February 2023 and $1.54 billion for the full year 2022, a decrease of 19% from the prior quarter. 2023 bookings were lower than original full year guidance, primarily driven by lower-than-expected orders for our Advanced Services, particularly tech-enabled services, which includes CPDS and IVCS. Additionally, our Point of Care bookings, including XT cabinets, were lower than original expectations as a result of health care system customers continue to delay capital budget decisions and XT cabinet bookings continue to moderate as a result of timing in our XT upgrade cycle.

To summarize, the majority of the lower-than-expected bookings in 2023 was a result of lower demand for CPDS and IVCS and other Advanced Services. Our total book backlog was $1.143 billion as of December 31, 2023, compared to $1.215 billion as of December 31, 2022. Product backlog includes connected devices such as XT Series Automated Dispensing Systems and the product portion of our central pharmacy dispensing services and IV compounding service. Product backlog as of December 31, 2023, was $611 million, of which $378 million is short-term product backlog, which we expect to convert to revenue within 12 months. Product backlog decreased by $186 million over the prior year as a result of lower 2023 bookings. Advanced Services backlog includes only the service portion of our Advanced Services multiyear contracts, which have a stated minimum commitment within the agreement.

While we partner closely with our customers when providing Advanced Services and the majority of our Advanced Services are provided on a multiyear contracts, only a portion of those contracts have stated minimum commitments. Advanced Services backlog as of December 31, 2023, was $532 million, of which $72 million is short-term Advanced Services backlog, which is expected to convert to revenue within 12 months. Advanced Services backlog increased $130 million, up 27% over the prior year. Our full year 2023 GAAP revenues was $1.147 billion, a decrease of $149 million or 11% from 2022. This decrease in revenue over the prior year reflects the impact of lower bookings, as I just outlined. Our 2023 product revenues were $709 million, and our 2023 services revenue were $439 million.

Within the full year 2023 services revenue, Technical Services revenue were $226 million, and Advanced Services revenue were $230 million. 2023 Advanced Services revenues increased 14% over the prior year. Our full year 2023 earnings per share in accordance with GAAP were a loss of $0.45 per share. Our full year 2023 non-GAAP earnings per share were $1.91 per share, a decrease of $1.09 per share from 2022. For the full year 2023, we delivered non-GAAP EBITDA of $138 million, a decrease of $55 million from 2022, which is above the revised 2023 guidance range we provided in the third quarter of 2023. The year-over-year decrease in earnings per share and EBITDA was mostly driven by lower revenues during the year, partially offset by cost savings actions, including the benefit from cost savings plans we announced in November 2022 and November 2023.

Although our full year 2023 bookings and revenues were lower than expected when we provided the original guidance in February 2023, we are pleased with the results of the cost savings plan that we announced in November 2023. Together with other factors, including ongoing cost savings initiatives implemented throughout the year, the implementation of the 2023 cost savings plan drove non-GAAP EPS and EBITDA to be above the original guidance and non-GAAP EPS and EBITDA guidance. However, we believe there is more work to be done on this front. And as I mentioned, we are actively working to identify opportunities to further streamline our costs. We believe the favorable profitability during the year demonstrates our commitment to taking actions designed to bolster the continued profitability of our business during this challenging customer and product period.

At the end of fourth quarter 2023, our cash balance was $468 million, up $21 million from $447 million as of September 30, 2023. Our full year 2023 non-GAAP free cash flow was $126 million compared to $17 million for the prior year, which includes the benefit of reductions in accounts receivable and inventory during the year, reflecting strong working capital management. As we communicated in our November 2023 earnings call, we continue to be mindful of the upcoming 2025 majority of our convertible senior notes and are considering various options to maintain strategic flexibility for our company and in an effort to minimize potential dilution for our stockholders. In the meantime, we believe we are in a very good position with the current convertible senior notes, which have 0.25% coupon interest rates.

In short, we remain confident in our capital structure and our ability to support the ongoing execution of our growth strategy. In terms of accounts receivable, day sales outstanding for the fourth quarter 2023 was 90 days, an increase of six days over the prior quarter, and a reduction of three days compared to the fourth quarter 2022. Inventories as of December 31, 2023, were $110 million, a decrease of $37 million from December 31, 2022. Our global supply chain team continues to make great progress managing inventory levels. Now moving to our 2024 full year and first quarter guidance. We would like to start by commenting on the current demand environment we are seeing within Point of Care. We are encouraged by the opportunities to offer new and innovative product enhancements on a larger installed base, including the XT console upgrade rollout noted in his opening remarks.

We believe that with these new innovations, we should see a modest increase in Point of Care product bookings in 2024. Our core franchise is strong, our channel is a durable source of future opportunities, and we are excited by our innovation pipeline. Based on these expectations, we expect our full year 2024 bookings to range between $750 million to $875 million. We expect our full year 2024 total revenues to range between $1.045 billion to $1.120 billion. We expect product revenues to range between $605 million to $650 million. We expect services revenue to range between $440 million and $470 million. We expect services revenues from Advanced Services to range between $220 million and $235 million. We also expect services revenue from Technical Services to range between $220 million and $235 million.

The revenue guidance reflects our expectation for the continued impact of a challenging environment for our health system customers and timing of our XT product life cycle. At the midpoint, the full year 2024 revenue guidance implies an expected year-over-year product revenue decline, partially offset by a modest increase in Advanced Services revenue when compared to 2023. As we have shared in the past, Advanced Services provide a stable recurring revenue stream and for a majority of our services, we have multiyear contractual partnerships with our health systems and retail customers. As we continue to book new orders, the increase in the installed base will continue to contribute to Advanced Services revenue growth. Please refer to our fourth quarter 2023 earnings release published on our Investor Relations website for a summary of the full year 2024 revenue guidance components.

We expect full year 2024 non-GAAP EBITDA to range between $90 million and $120 million. We expect full year 2024 non-GAAP earnings per share to be between $0.90 and $1.40 per share. For the full year 2024, we are assuming an effective blended tax rate of approximately 19% in our non-GAAP earnings per share guidance. The full year 2024 non-GAAP EBITDA and non-GAAP earnings per share guidance includes the expected impact of the full year-over-year gross margin percentage decrease as a result of the lower Point of Care revenue, partially offset by the benefit of the recently implemented cost savings plan. We continue to expect approximately $50 million of annualized cost savings as a result of the cost actions announced in November 2023, of which around 75% is expected to be in operating expenses.

A majority of the benefit from the cost actions is anticipated to be realized in the beginning of the first quarter of 2024, with a smaller portion of the savings expected as we progress through the year. As a reminder, the cost actions are expected to be partially offset by year-over-year inflation as well as lower gross margin due to anticipated product mix. For the first quarter 2024, we are providing the following guidance. We expect total first quarter 2024 revenues to be between $232 million and $242 million, with product revenues to be between $128 million and $133 million, and services revenue to be between $104 million and $109 million. We expect first quarter 2024 non-GAAP EBITDA to be between a loss of $2 million and earnings of $4 million.

And we expect first quarter 2024 non-GAAP earnings per share to be between a loss of $0.10 per share and breakeven per share. In summary, we continue to execute against our long-term growth strategy and navigate a challenging macroeconomic environment. We are seeing challenges for our customers, including the impact of the macroeconomic environment and labor challenges, and we expect these headwinds to continue in 2024. However, we are confident that the approach we are taking to managing the business should position Omnicell to deliver on our commitments over the long term. The team has built a strong foundation from which we expect to continue our momentum in transforming the pharmacy care delivery model and are taking actions intended to improve our performance.

We remain focused on driving value for our stockholders as we look to execute on our strategy and work to capture the opportunities we see ahead of us. We continue to endeavor to drive long-term profitable growth and success at Omnicell. I want to conclude by thanking our employees for the continued hard work and commitment to Omnicell. With that, we would like to open the call for questions.

See also 13 Worst Rated Fast Food Restaurants in America According to Reddit and 15 Best States for First-Time Homebuyers.

To continue reading the Q&A session, please click here.