Omnicell, Inc.

Good afternoon. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the OmniCell First Quarter 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. Ms. Kathleen Nemeth, Senior Vice President of Investor Relations, you may begin your conference.

Good afternoon, and welcome to the OmniCell First Quarter 2023 Financial Results Conference Call. On the call with me today are Randall Lipps, OmniCell Chairman, President, CEO, and Founder, Scott Seidelman, Executive Vice President and Chief Commercial Officer, and Peter Kuipers, Executive Vice President and Chief Financial Officer. This call will contain forward-looking statements, including statements related to financial projections or other statements regarding Omnifil's plans, objectives, expectations, cost savings actions, or outlooks that are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied. For a more detailed description of the risks that impact these forward-looking statements, please refer to the information on our press release issued today in the OmniCell Annual Report on Form 10-K filed with the SEC on March 1, 2023, and in other, more recent reports filed with the SEC. Please be aware that you should not place undue reliance on any forward-looking statements made today. All forward-looking statements speak only as of the date hereof or the date specified on the call. Except as required by law, we do not assume any obligation to update or otherwise release publicly any revisions to our forward-looking statements. Our results were released this afternoon and are posted in the Investor Relations section of our website at ir.omnicel.com. Additionally, we would like to remind you that during this call we will discuss some non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are included in our financial results press release issued today. With respect to forward-looking non-GAAP measures, we do not provide a reconciliation of forward-looking non-GAAP measures to the comparable GAAP measures on a forward-looking basis. as these items are inherently uncertain and difficult to estimate and cannot be predicted without unreasonable effort. With that, I will turn the call over to Randall. Randall?

Good afternoon and thank you for joining us today. Our team had a solid start to the year and we continue to advance our strategy to transform the pharmacy care delivery model and deliver mission critical medication management solutions for our customers. I'd like to begin with an update on what we are currently seeing in the overall healthcare industry and medication management space, and then walk through our high-level financial results and key highlights from the first quarter. Starting with the market environment, our customers are continuing to face challenges due to labor constraints, and they remain mindful of their capital budgets. While we are seeing some stabilization throughout the industry, we expect the labor and salary cost pressures that hospitals saw in 2022 to continue throughout this year. In our view, these trends underscore the need to automate and modernize the medication management process. And as the industry continues to navigate these challenges, we believe OmniCell is an important part of the solution. As discussed last quarter, we remain focused on taking what we think is a cautious approach to managing the business and have taken decisive action in line with this approach. In February, we announced plans to reduce our workforce across many of our functions in order to lower our cost structure. We have also reduced our real estate footprint to align with our broader hybrid work strategy and in an effort to further reduce costs. We continue to execute on our expense containment efforts, and in the first quarter, we incurred approximately $14 million of non-recurring restructuring and related charges, including $8 million of impairment and abandonment charges of operating lease right-of-use assets and other assets, and $5 million of employee restructuring. Since the inception of our cost containment plan in November of 2022, we brought our office space square footage down by 21%, and our headcount reduction is tracking to our plan, which was originally announced in November 2022 and updated in February 2023. We also continue to anticipate that the annualized savings from operating expenses will be around $50 million for 2023, which does not include the expected volume-based reductions within our cost of sales. Now, turning to our high-level financial results for the first quarter, we think our results reflect our team's operational execution and financial discipline as we navigated another quarter of macroeconomic uncertainty. We exceeded our first quarter 2023 guidance ranges for total product and service revenues, non-GAAP EBITDA, and non-GAAP EPS. We generated total revenues of 291 million, non-GAAP EBITDA of 27 million, and non-GAAP earnings per share of 39 cents. Our solid first quarter performance was primarily driven by the timing impact of revenue, cost, and expense within the year. And we expect to continue executing through the uncertain macroeconomic environment as we progress through 2023. Peter will speak to the key drivers of the quarter in his remarks and provide further details on our financial performance. Moving on to the current customer landscape. Quarter to quarter, it becomes increasingly clear to us that despite a challenging macroeconomic environment, customers continue to choose OmniCell. We are pleased to note a new central pharmacy dispensing service win which includes the XR2 robot with the University of Iowa to support central pharmacy operations. Additionally, a Southern California-based non-for-profit healthcare system signed up for CPDS, including the XR2 robot. A New York State Healthcare Enterprise plans to convert their automated dispensing system footprint across the four-hospital system to OmniCell XD cabinets I'll also upgrading to central pharmacy dispensing service and a major Illinois health system along with a Texas based medical center chose to partner with Omni cell to establish a new specialty pharmacy services program. We have also made meaningful progress on integrating our recent acquisitions and the pipeline for our advanced services portfolio remains strong. Scott will speak about these integrations shortly, and we are confident OmniCell is well positioned for growth in the future. Now, I'd like to briefly discuss our strategic alliance with Long Island University and the opening of the Center for Innovation Medication Management, or CEM, that we announced recently. As we continuously discuss, we find there is a significant burden put upon nurses and pharmacists to handle the bulk of the administrative work. This strategic alliance is intended to modernize and standardize pharmacy education as health systems start to embrace automation in order to foster a safer and more efficient pharmacy. The CIM is a state-of-the-art laboratory with a working fleet of OmniCell devices and is designed to provide an immersive pharmacy technology and analytics experience for LIU pharmacy students. Through the SIM, LIU pharmacy students have early access and exposure to OmniCell devices and should enter the workforce with a competitive edge, as well as hands-on experience with OmniCell's innovative technology. The SAM will also host OmniCell customers for product demonstrations and diligence, and will serve as a training facility for our advanced services operational teams, who will then go to implement this technology at customer sites. We're excited to invest in the future of OmniCell through this important initiative with LIU. and we believe it will bring increased awareness to OmniCell's devices. I also want to highlight that in April, we published our 2022 ESG report, which many of you have hopefully had the chance to see. If you have not yet read it, I encourage you to take a look at the full report on our website. As noted in the report, we have taken steps to bolster our internal systems in order to protect patient data, execute critical efforts to further harden our identity computing environments, and implement various human capital initiatives to foster a culture of inclusivity, wellbeing, and belonging. As we strive to build a healthier world, We are dedicated to furthering our ESG journey through purposeful action. Before I turn it over to Scott, I want to touch on our search for OmniCell's next CFO. As mentioned on last quarter's call, Peter will be stepping down at the beginning of July, and a national search for our next CFO is well underway. I want to reiterate my thanks to Peter for the significant contributions he has made to OmniCell. as well as his commitment to making this a seamless transition process. We'll provide additional updates as appropriate. Now with that, I'll turn it over to Scott.