Omnicell, Inc. Aktie

Well, good afternoon, everyone. I'd like to welcome everyone here to a presentation from Omnicell. Very pleased to have the management team here today. Thank you for making the trip.

You probably don't know this, but when I spent about 5 years at Baxter, so I got very familiar with the pharmacy space. And while we don't cover Omnicell, I've always sort of seen the company in out and about doing customer visits and also just doing kind of the general market research. So really pleased to have the opportunity to sit down with you and talk a little bit about the business.

Well, glad to be here, Dave. Thanks for having us.

So maybe we just sort of start with some like high-level framing here. I mean you've come out of a tough period for the business, and now you're seeing growth kind of reaccelerate here. Maybe just help us think about just the evolution of the top line growth rate the past couple of years and how we should think about -- maybe we'll start with 2026, and then we'll talk a little bit later about the longer term.

Sure. Well, the pandemic was a big acceleration of our business and really brought in the product cycle. And so we saw decreased growth probably for the first time in a long time in '23 and '24. Now we've returned to growth in '25. We've launched a new product. We're standing on the precipice of our next cycle of brand-new exciting products, both front end, back end. And we've also entered specialty pharmacy in a big way. So the business has 2 levers now, sort of the revenue and earnings-producing side of pharmacy and big providers as well as the cost containment and control of medication management on providers on inpatient and outpatient.

Yes. Maybe we could dive into the market a little bit here because obviously, you and Pyxis have been around a while. Medication management continues to be a pretty big challenge for hospitals. So where would you say in terms of just market dynamics? Like what have you solved? What still needs to be solved? And what are your customers telling you now are their biggest priorities?

Well, just in terms of medication management, medications are the #2 largest expenses for providers right after labor. So it is something that's very concerning and does have the duality of offering both revenue and earnings capacity as well as cost containment. So getting the meds right is important to getting the right outcomes. And sort of in that sphere, we've seen medication move to sort of a nice to have some automation products to a must-have to mission-critical to having whole visibility, not only in a hospital, not only in inpatient, but in outpatient as well.

So there's a really big lean in to wanting a total enterprise viewpoint that can be rationalized across hundreds, if not 1,000 facilities to make sense. And that is something that we see all the time as being on the docket for these customers as they expand. They're continuing to get bigger and even in disjointed geographies, which is pretty amazing. And so to make great decisions on medications means you can make the difference in your margin on your business. So you need a system that can be enterprise-wide and acceptable.

One of the things that's always interesting about a story like Omnicell or conversations we have around whether it's pick this or this business, you always get kind of bucketed as like it's an equipment company. But if you look at your revenue, it's only -- it's a little over half products, I think, and then the rest is software and service. So like what is Omnicell today? And how do you think about the framing of the business?

Great question. I mean it's more hardware-centric in the earlier days, and now it's becoming more software services-centric because you just don't need a piece of hardware to manage the drugs itself. You need all the intelligence that helps you get drugs to the right place. And if you think about some of these institutions, they have 1 million, 1 million discrete locations where they're trying to manage meds to a very precise level in order to be able to get them to the patient at the right time and the right way.

And with that equation of difficulty, you can't do that with people. You've got to have great intelligence and systems that really operate at a whole different level. And so it's exciting to see how AI and cloud-based systems can start to really make a dent in some of the expectations of what you can really refine in the processes.

So how are you now selling to customers? Are you moving to a SaaS model? Do you talk about ARR as a metric now? I mean how is the business model changing?

Well, there's more components on the software SaaS side more naturally, we want to take the workload off our customers. So taking the servers out of the basement and moving them into the cloud, taking cybersecurity, taking the management of upgrades and all those things, we want to take that on for our customer because it's just better. But those are fees and those are recurring fees. And then there's a connection fee to that cloud as you need storage or compute power or other things associated with it.

So we're able to move more of our services along with the hardware. You still need the hardware, but you can not only purchase it, but lease it or in some cases, actually rent it in order to get the results you want. And so our business is people like to think of it as when is the next product cycle, but it's so much different than it was even 5 years ago.

And I would think on the software side, obviously, the pace of [indiscernible]. So are you equipped to deliver over-the-air upgrades and [indiscernible] software launch?

I mean, great question. In the on-prem equipment basis, you can deliver about 2 software upgrades a year, maybe a major and a minor. As we move to the cloud, we have upgrades every 30 days. And so our ability to accelerate innovation, accelerate results and provide more services for our customers where we're actually doing the hands-on work maybe of some of the optimization and other things is more enabled by that.

And just operationally, just to make sure I understand it. When you're taking a hospital on-prem to cloud, are you actually doing that? What is -- what are you actually moving? And what's on the hospital and what's on you?

Well, we're actually taking their on-prem equipment and moving it into the cloud and connected it to our OmniSphere. So it's all our product at that point, it's all managed by us. And that's a huge relief from the institution. So they are paying many today to obviously manage on site, provide computer space for it. So they're redirecting those dollars from internal to external to us. So that's a new revenue source for us.

But probably more importantly, it's a better customer 1xperience. It also means that as we deploy different types of equipment, not just sort of the main cabinet that goes on nursing floors, but other kinds of devices, they become plug and play. You plug them into the network, they get lit up, get connected to the OmniSphere in the cloud, and then you're able to aggregate all that data and workflows in a single place.

And then I want to jump into some products in the business in a second, but one more strategy question. When BD bought CareFusion, obviously a while ago, part of the strategy was sort of comprehensive medication management and the sort of end-to-end. The pump is going to call up the dispensing cabin and tell them what's need and somehow it's going to get from there, the sensing cabin in the basement up to the patient and it was -- it kind of made sense sort of -- but I want [indiscernible] numbers sometimes. But as you think about your positioning in the market competitively, do you see -- how do you think about end-to-end medication management and where you play?

Well, medication management is important. There's a lot of medication management processes that go on the nursing floor. There's a lot that go down before meds get to the floor like robotics for mixing and compounding and fluids management is a big piece of it. And look at the specialty drugs we have coming queued up, 25% of those are going to be infused. And so having products and services that help enable that in institutions that are not ready for that kind of growth is important. And I don't think we want to own just every space as long as we can rationalize and connect into that space, that's the most important part.

Okay. Maybe let's jump into some of the products. Let me talk about Titan XT. You've talked about that as your third-generation platform. Tell us a little bit about features and benefits and what are some of the differentiators that you're bringing to market here?

Well, I hate -- and I want to -- it's just -- it's really cool. It's not just, it's an upgrade and improvement over the old. We started with a clean sheet paper, started all over, and it really predicts what people are going to use the system for. So when a nurse comes up and it's time to get meds up for a patient, it predicts what patients she most likely wants. So it's 9:00, here and 9:00 meds. So already has it queued up and it says this is what you want. 2 clicks and you're in and you're out and then you have the meds flowing out. This is versus the old way of I want to get this patient and I want to get this drug and this drug, you don't have to do that anymore. You can see it's just so easy to use.

So all of this predictive setup really releases the nurses from burdening them down with doing all these tasks individually. And the same thing for pharmacy techs when pharmacy techs interact with the system, it actually gives them a menu of things they need to do at that moment when they walk up. And this kind of tech really allows nurses and pharmacists to be quickly in service on how to use the product. They don't need a lot of training. It's very intuitive. If I were to come up and just ask you to use the new system and say, take out 3 runs for Randy, it's 9:00. You could instantly do it. If I ask you to do that on our own system, you'd say, well, you need to send me in training. I don't know what to do at this point.

So this is a huge step function task where we've been. And the fact that it's operating in the cloud as well as a very strong edge system, it really allows us to be able to implement new changes, new innovation faster than we ever could in the past. And that's what I'm excited about. I used to hate going to see like 10 customers and boy, they all want this one thing. Yes, let's put that in the road map. Okay, that's 2 years from now. Now it could be 60 days from now or 90 days or 180 days from now. It's just -- it's -- the business is fun again. It's almost like we're starting over and it's -- we're embedding new stuff and moving fast.

And for Titan XT, you might take back your comment that even I could figure out -- I want to ask that question. When I want to ask my next question, like how does this actually work? Like how does it know how does it ingest the data to figure out like that I'm going up at 9 a.m. to pull a script for Randy, like patient actually like visualize this for us. I walk up to it, and it knows that it's me and knows that I take care of patients like that...

I don't identify at some point [indiscernible] you. And then you as a nurse have been either assigned or usually assigned certain patients. And so you've either taken a med out for that patient already or most likely have these rooms when you come there. It knows all these things. Now it may predict something that's not quite right, so you may have to adjust it. But most of the time, as you use it more, it gets better and better and better. And all patients have meds scheduled that haven't been fulfilled yet at a certain period of time over a certain window.

So it's pretty easy to predict what you're there for and you need to apply those meds in order to be medically correct in getting those meds to the patient at that time. So it sounds [indiscernible] age, but it's pretty intuitive, and it's probably one of the areas that we get the most amazing feedback from is we don't really have to sell them on them. We just said, try this, try that, what do you like? And why do you like it? And it's very satisfying seeing people use it.

And how do you think about the product development and needs when you go through different sites of care, whether it's a hospital pharmacy on the general floor, in the ICU? I don't know if you're in the retail pharmacy, but how -- do you need different platforms for [indiscernible] setting? And how do you think about that...

We definitely need different settings for each of those, ICU, ER, general medsec floor, even certain other kinds of floors, you may need different dynamics based on additional protocols that need to be followed, but all those are customizable. And what's really cool about our innovation center and in our executive briefing center, you can go set up all of those from a corporate standpoint and then push a button and roll them all out before they're even shipped out. And then it's literally plugging it in and provisioning the system on site lights itself up, and it doesn't take a lot of people on our site or their site to get the system going. And just physically, you just need to transfer the meds over.

So this is just I've been in this business so long. We've been studying these problems for so long. We finally said, let's just slew -- let's just kill all these problems off and let's make this easy because the biggest part of health care adopting new technology is how adaptable, how much pain is it cost to change. And if you move the pain of change, you're going to get people taking the tech all day long.

Okay. That's a good segue kind of jumping into the business a little bit. You came out of the gate had a strong Q1. You exceeded revenue expectations as well as all profitability metrics. You kept revenue guidance unchanged for the year, but reflected the earnings outperformance on the bottom line in the balance of the year. Talk to maybe now it's a little bit of reflection, give us some thoughts to contextualize Q1 and kind of your decision to leave guidance unchanged.

We shared with the market at the Q1 earnings that we felt that we were still within the range of the full year revenue being a quarter in. We're partway into the year. But we definitely saw some early signs that showed profitability following through for the rest of the year.

A couple of things. One, we've been pretty disciplined on our spend management. And so we're starting to see some early wins there. In terms of margins, we saw favorable gross margins in the first quarter, a little higher than the upper end of the normal range. And so as we prepared our full year guidance, we brought back to a place that we thought was more reflective of a full year. So solid Q1, high end of revenue, beat on earnings, and we were able to cascade the earnings component, a big chunk of it forward throughout the rest of the year.

And as you think about the revenue side of it, how much of this was, well, it's 1 quarter in, maybe there's some market uncertainty out there see what happens or there was something onetime in Q1?

I think we have good visibility to the year being within that range. And I think we find ourselves trying to manage through from the end of the cycle of XT, which is now in year 10 to the entrance of the new product, Titan XT, which is in year 0. And so we want to find a thoughtful, smooth management through. And what we found for our employees and for our customers is the consistency of implementation within the customer sites is really helpful for managing our cost structure and managing our customers' experience, both of which are important to us.

I can see the intuitive thoughtfulness on guidance coming through. I love [indiscernible] and -- marshall trade you on expectations management. But clearly, I can hear it. So maybe just on that product cycle transition. Handoffs are really tough when you go from one product launch to another in any business. What are some of the things that you guys did to prepare to make it as smooth as possible? And have you contemplated any hiccups in that transition?

Well, I think we -- our last big transition when the G series to the original XT series. We made some mistakes and we had a lot of learnings. One of the mistakes is we had a hard cutoff pretty quick on our G Series. And we really kind of forced out our customers to quickly move to the new series. And a lot of it we're fine with the G Series and said, I'll make my decision to move to the next generation in a couple of years. I just want to run my operation. I don't want to disrupt what I have or my expansion plans.

So in this case, we're still going to be able to sell our old series XT as well as our Titan XT. It just depends on where you are as an institution. We'll make it as easier to facilitate both, but we're not going to cut off immediately both series or start to try to reconvert old orders into new orders, those kinds of things unless the customer really, really wants to. And that will make a smoother transition instead of having salespeople go back and redo orders and things like that.

And secondly is giving customers not just how does the transition work for the hardware, but how does all the software work and setting up a 3- to 5-year plan so that they can really understand where each of these pieces come into play and what options they have and putting that strategic plan together with the customer that works over the next 2 or 3 years and making sure it meets their priorities. So having a very specific plan that allows for the rollout of product where they want it and at the speed that they want it.

And that's one of the things that particularly Baird and the team have brought into the company is this more consistent rollout steady quarter-to-quarter without a lot of fluctuations, which gives us better cost, better quality and customers are just the higher expectations for both sides is exactly what's going to happen. And then it does happen when it does that way.

So -- and I think we're really set up for the transition, and we're giving you plenty of time to announce with plenty of beta testing time. I think we've done a lot of things a lot differently than we've done in the past. And so it's exciting as every quarter goes by that we do the check boxes and then move on to the next set.

Excellent. Maybe just coming back to the question on guidance for a second, sparked one there is talk about having a lot of visibility to the year. Maybe just unpack where that -- the source of that visibility, how far in advance do you really kind of do when backlog converts to revenue? And what are some of the leading indicators that you watch to kind of reinforce that confidence?

Yes. I think a couple of things, David. The team has done a really nice job of engaging with our customers. It's a way to not only sell the product, but to actually set up the implementation and the ultimate usage experience. That increased engagement has given us greater clarity on scheduling, which has allowed us to manage our workforce accordingly. And so that experience also provides line of sight during the course of the year, which is really helpful in satisfying those customer needs.

And how far in advance do you -- one thing -- do you close in this visibility go up? Or is it pretty...

Yes. So as you would anticipate, you start to look 1 to 2 quarters out, you got a high degree of visibility as you get to 3 to 4, you have a good degree of visibility and out [indiscernible] in a thoughtful, consistent manner [indiscernible]90 days out, 180 days out is really nice clarity in the business, and that allows us to set up to satisfy our customers.

And maybe just on the market for a second. You've talked about a $2.5 billion annual kind of refresh cycle -- about a 10-year cycle. So the $8 billion to $10 billion ADC market you talked about, is that cumulative -- over duration. And any -- I think BD is about to go through a product or refresh sort of product refresh. Is there any kind of like abnormalities that occur in these cycles? Obviously, you had COVID, but where do you think we are in that kind of ADC replacement cycle?

The ADC replacement cycle is prime over the next several years, where the other party -- primary party in the space has market share leadership. And we've been steadily chipping away at it over the years. They have a significant number of their hardware units that are coming off lease and are subject to renewal. And then we are entering that year 10 of the natural refresh of our hardware. So as I look forward over the next 2, 3, 4 years, I think it's a really exciting time in the space. And I think the innovator mentality that's very focused on the customer experience should prevail.

Maybe talk about a little bit about robotics and AI you just hired a clinical -- someone to lead [indiscernible] just hired clinical leadership with Perry coming into the organization. Maybe talk about your vision for that opportunity, what you're hoping gets accomplished here and how are you going to measure success?

Yes. I think we have 2 primary road maps there. One is to use AI to supplement faster, better, cheaper work, whether it's engineering or customer service. We have initiatives everywhere in the company. Everyone in the company must be trained in AI and how to use it and operate it. It's not just a certain departments. And so we think we can drive efficiencies and better returns. So we're all learning at a pretty fast pace. But we really think native agentic AI is really important to the business. And so we have a separate team working on that. And we believe that, that will actually help accelerate new products and new services that are solution-based. They're just not services. We'll just do the work for you. And to me, that's really exciting.

And because you look at most big hospital providers have shortages in their tech spaces. They don't have enough techs to do the pharmacy workload required to meet the operational needs. And so if we can move some of that off the plate with AI and with robotics, I think they're very hungry. And a lot of the -- some of the tasks are pretty simple and easy to do or don't take much work if it can be supervised or reviewed from a quality standpoint. So I think we'll be able to provide actual solutions and workload movement from our customers.

And one of the things I've always struggle with is like how do you monetize the solutions-based business? Like it makes a ton of sense for the customer. But how do you -- what's the business model?

Well, there's 2 or 3 things. One is, as you take off workload, you pay a fee and then they pay you a consumption fee based on not so much people time, but eventually, it rolls into tokens and compute time that you're providing on their behalf to drive these solutions. And I think that -- I wonder, maybe you would be a better advice on this, but I wonder if that's kind of going to be sort of the currency of the future is really how much compute power are you using? And how much expertise or domain expertise do you provide that can give you a view on the solution that no one else can provide.

Interesting. Okay. Well, we look forward to staying tuned on that and getting to our updates. Maybe I'll just -- I want to turn to the P&L in a second, but EnlivenHealth has been a little bit of a drag on the SaaS business. Maybe just unpack for us a little bit what are the factors contributing to that and then what turns it around?

Well, retail is -- the whole sector has been sort of a drag these days. And we have been retooling our business to meet more of their needs. And where there's a little bit of a crisis, I think it's a pretty big opportunity. So we've reformatted some of our solutions and reformatted some of our engineering to provide new solutions to these issues that these institutions have, particularly to be more competitive in the marketplace with the likes of Amazon and so forth.

Is this a strategically important business to you?

As long as it's growing and it's increasing in revenue, it should be. But our providers do use retail and retail, not all the pharmacies have other than specialty have a strong retail strategy, some do and some don't.

Okay. Maybe just toggling over to the P&L for a second here. I mean the gross margin has quite a bit of variability in it between that 43% and 46% level. Help us think about like the drivers there? And should we -- is -- the quarters are always important, but how should we think about sort of the broader gross margin trend?

I think we'll always see some variability from quarter-to-quarter. The drivers of that largely are about which products we end up placing and installing during the quarter and recognizing revenue. The other part of it is what customers did we implement at and what was our strength in negotiation in terms of ultimate pricing there. So we'll see some variability.

A couple of things I'd point to. 2025, we saw an increase in software, field software upgrades. And so that impacted our service margin. We had anticipate seeing improvements in 2026 over 2025 as a result of that. As we enter our new product offering in Titan XT, we'll be introducing it at a modest premium in price. We believe that we'll be able to expand margins as we work through the initial ramp-up and scale-in process on the manufacturing side. So over time, we're definitely focused there.

And you brought up token cost and compute cost is not coming up as like a thing on our earnings calls, not just in IT hardware and software, but we heard about this from GE HealthCare. We heard about it from Canon and a few other players. How are you thinking about sort of the surging cost of chips and memory and other key inputs while we're on the topic of gross margin?

Yes. I think it starts with our supply chain team. They've done a really nice job of building vendor relationships that allow us to protect the resiliency of our supply chain. And by that, I mean our ability to procure the goods necessary to deliver product to our customers timely. They've done a really nice job there. We look at where we can qualify new vendors and we look at opportunities to advance buy when there's periods of compression in the supply availability. And so we'll look to continue to manage that. But I think it starts first and foremost, with a team that is leaning forward and trying to address this proactively. So it's something we're all going to face in this industry, but it's something that we're doing eyes wide open.

And how much can you do if memory price is up 40%?

I think it starts with memory is a relatively smaller component of our cost. So largely, our cabinets are steel and frames that are created, but there is an electronic component to it that we have to manage through, but this is not the core capability or the highest contributing cost is memory. Now fluctuations in memory or in chipsets definitely will cause an impact in the business, but we're managing our way through that.

Okay. Maybe just lastly on EBITDA, maybe it's just an artifact of timing. I think if you look at your second quarter adjusted EBITDA guidance, it's for a little bit of a step down versus what you produced in Q1. How should we think about kind of cadence of EBITDA?

I think I'd frame it more as Q1 was a bit of a step forward and Q2 is a step into the normalized range. By that, I mean, Q1, we were at the higher end of our gross margin. So you had talked about 43% to 46%. We're at the upper end of that. The second thing that we saw was we saw [indiscernible] management side [indiscernible] wisely. And sometimes that means putting up some toll gates before spending goes through to make sure it's the appropriate return that we would anticipate. So we signaled to the market that a portion of Q1 was higher margin on products and mix and a portion of Q1 EBITDA overperformance was a result of delaying certain purchases that will be made over Q2 and Q3.

Okay. But no holding back on growth-related investments?

No, absolutely not. We're a green light on the sales force, the competitive front and bringing both Titan XT and OmniSphere into the marketplace. So those are green lights. And it's the back office and it's the other aspects of our business where discipline is important and warranted that we're being a bit more mindful.

Excellent. Maybe we'll just kind of close on capital allocation. I mean you've gone through this process, you had the converts and you were buying back stock. And now you're in a pretty good position. How are you thinking about use of the balance sheet?

Well, I think on the make or buy decision, I think for smart products, we think that we can buy and integrate quickly even they are quickly accretive and fit in the salesperson's bag right away and, in some cases, already in the market. I think it makes a lot of sense to look very closely at those. I think that -- and in both spaces in specialty and in our workflow inventory business, it makes sense to look at those, particularly if they can be connected into the OmniSphere. That's the key because as you connect in more products, more systems, you're just able to collect and aggregate the data and fix it out. But on -- but on operating leases, I don't know if you want to.

Yes. I think I'll start with the use of capital at the places where we believe we have the best right to perform and win for shareholders. That's in our core business. And what we learned over the back half of last year is having an on-balance sheet, easy to offer leasing or rental program for customers kept us in the game longer on competitive opportunities. And so if we have [indiscernible] there, we've done it historically. We want to lean into that [indiscernible] of return of capital through the expansion of the top line and profits that come with it. So we're going to spend more time on leasing going forward and making sure we're meeting customers where they are on whether it's capital sale or whether it's leasing sale.

Excellent. With that, I think we're just about out of time. Maybe I'll turn it back to you for any closing remarks, [indiscernible]. You obviously had your Q1 earnings, here at the conference being with investors. Like what's the message you want people to walk out of here with as we kind of gear up for second quarter earnings?

Well, I would just say as we gear up for the year and the next year, it's an exciting time to be part of Omnicell. We've got the whole leadership team. Probably our AAA leadership has changed over or been remade over the last 2 years. I have the best management team ever. We're ready to double the size of the company as we start this next growth and innovation sprint that we're on. It's just a great time to be at Omnicell. And I thank all the employees and people who have been making -- getting us set up for this run, and it's just really exciting. And it's attracted a lot of great management people. We just hired a new leader to take over for our specialty, a seasoned veteran in the arena. So it's just -- we're set and ready to go. And so this is the start.

Excellent. Well, that's a great place to leave us. And thank you for making the trip to Miami and look forward to getting the next update in August.

That's been great. Thanks for the question. Thank you.

Thank you.

Hello, and welcome to the Annual Meeting of Stockholders of Omnicell, Incorporated. Please note that today's meeting is being recorded.

It is now my pleasure to turn today's meeting over to Randall Lipps, Chairman, President, Chief Executive Officer and Founder of Omnicell. Mr. Lipps, the floor is yours.

Good afternoon. I'm Randall Lipps, Chairman, President, Chief Executive Officer and Founder of Omnicell. I'm very happy to welcome you to Omnicell's 2026 Annual Meeting of Stockholders. We want to thank you all for taking the time to join us today. While the meeting is virtual only, stockholders of record and registered beneficial owners who joined the meeting as stockholders with their control numbers will have the opportunity to ask questions related to the meeting matters, which we will address following our discussion of the proposals to be voted on.

Before I call the meeting to order, I'd like to introduce to you the members of the Board and the business team members who are with us today. Our Board members joining us online, in addition to me, are Joanne Bauer, Edward Bousa, Mary Garrett, Kaushik Bobby Ghoshal, Mark Parrish, Bruce Scott, Robin Seim and Eileen Voynick. The other officers online with us today are Baird Radford, our Chief Financial Officer; Nnamdi Njoku, our Chief Operating Officer; and Corey Manley, our Chief Legal and Administrative Officer and Corporate Secretary. We are also joined by Eric Lehmann, our Assistant Corporate Secretary, to moderate any questions we receive -- we may receive.

Finally, I would also like to introduce Dremeco Seifert, Etienne Akpan and Tarani Vijay Shah of Deloitte & Touche, Omnicell's independent registered public accounting firm, who are present and available to respond to appropriate questions.

The meeting will now officially come to order. We will proceed with the formal business of the meeting as set forth in our Notice of Annual Meeting of Stockholders and proxy statement. I'm appointing Corey Manley, our Corporate Secretary as the Secretary of this annual meeting.

And with that, let me turn the meeting over to Corey to cover a few formalities.

Thank you, Randall, and good afternoon, everyone. Just a few reminders before we go into the proposals. First, I have an affidavit from Omnicell's transfer agent, Computershare Communication Services, certifying that commencing on April 16, 2026, a notice of annual meeting of Omnicell's stockholders was deposited in the U.S. mail or sent via electronic delivery to all stockholders of record at the close of business on March 27, 2026.

Second, you may vote your shares online prior to the closing of the polls. The polls will be closed for voting after we go through each of the five proposals to be voted on. You may ask questions pertaining to the proposals presented after we've read through them. Please refer to our rules of conduct available on the meeting center website.

Now I'll turn it back to Randall to introduce our Inspector of Elections.

At this time, I'd like to introduce Carolyn Beer of Computershare Trust Company, our transfer agent, who is also joining us today. I'm appointing Ms. Beer to act as the Inspector of Elections at this meeting.

I'll turn it back to Corey now to report on the existence of the quorum.

Thank you, Randall. The Inspector of Elections has reported that proxies have been received for at least a majority of the total number of outstanding shares entitled to the vote. Therefore, we have a quorum and may now proceed. There are five proposals to be considered by the stockholders at this meeting. As a reminder, the polls will be closed to voting after we go through the matters to be voted on.

Now I'll turn it back to Randall to describe the five proposals.

Thank you, Corey. The first item of business is the election of directors. There are three Class I directors nominated to serve until 2029 Annual Meeting and until their successors are elected and qualified. The nominees for Class I directors are Joanne B. Bauer, Robin G. Seim and Eileen J. Voynick.

The second item of business today is the advisory vote to approve the compensation of the company's named executive officers as described in the proxy statement. The stockholders have been asked to vote on -- advised to vote on an advisory basis on the following resolution: Resolved that the company's stockholders approve on an advisory basis the compensation of the named executive officers as disclosed in the company's proxy statement for the 2026 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, the 2025 summary compensation table and the other related tables and disclosure.

The third item of business today is to vote to approve the amendment of the Omnicell 2009 Equity Incentive Plan. As amended to, among other items, increase the number of shares of common stock authorized for issuance under the plan by 1.6 million shares.

The fourth item of business today is to vote to approve an amendment to the company's amended and restated Certificate of Incorporation to provide exculpation from personal liability for certain officers as permitted by Delaware law and make certain other minor and non-substantiative updates.

The fifth item of business today is the ratification of the selection of Deloitte & Touche LLP as Omnicell's independent registered public accounting firm for the year ending December 31, 2026. That was the final proposal for today's meeting.

Are there any questions about the five proposals at this time. As a reminder, we ask that any questions pertain only to these proposals. General business questions will be addressed at the end of the meeting.

Mr. Chair, there are no questions regarding the proposals. Okay, the time is now 4:38 p.m. Eastern, and because there are no questions related to the proposals, the polls are now closed for voting.

Thanks, Corey. Can we move on to the results of the voting?

The Inspector of Elections has provided us with preliminary results and confirmed that all of the director nominees have been elected and all other proposals have passed.

Thank you, Corey. We expect to report our preliminary voting results or if available to us on a timely basis, our final voting results on a current report on Form 8-K to be filed with the SEC within four business days after the end of this meeting. If not earlier reported, we expect to report our final voting results in an amendment to our Form 8-K within four business days after the final results are known to us.

Are there any questions regarding the company's business at this time?

Mr. Chair, there are no questions regarding the company's business at this time.

This concludes today's meeting, and the meeting is now adjourned. Thank you again for attending today's meeting and for your continued support of Omnicell.

This concludes the meeting. You may now disconnect.

To have Omnicell here. We have CFO, Baird Radford. And before I get started with questions, he has a couple of prepared remarks. Baird?

Good morning, everybody. During the course of this discussion, I'll certainly make some forward-looking statements. I refer you back to our Form 10-Ks and 10-Qs, just normal typical housekeeping things. But Allen, thanks for having us at the conference. We're excited to be here.

As we think about where Omnicell is right now, we're at a pretty exciting time, entering a new product cycle with the announcement of Titan XT and the OmniSphere platform, the cloud-based platform. At the same time, a large competitor launched a new product as well. So really exciting time in the marketplace for us. We also had a really good first quarter, solid revenues, strong performance on the earnings side, and we kicked off 2026 in a pretty good way.

So, we feel good about that. And as we think about this upcoming year, this really is a year about Titan XT, our new product. And so, as we enter the year and we enter this discussion, we come in definitely with a lot of enthusiasm about where we are in the business.

Yes. It's definitely a really exciting time from our perspective as well at Omnicell. You mentioned the new product launch with Titan XT, you're moving to the cloud with OmniSphere, and you talked about competitive takeaways.

There's a lot on your plate and a lot of transition going on in the business in 2026. You've been with the company for a little less than a year, I think. As you think about your 2026 priorities, can you lay out what the goals are? Obviously, there's a lot going on. I would love to get a sense of what are your main priorities for this year.

Yes. We have a -- I think it starts with having a great team. I definitely joined a really strong leadership team and the layers that lay beneath that are also really strong. We do think about it in an orchestrated way how we can run this business effectively. As I think priorities, it really starts with Titan XT and OmniSphere, our new product. It's exiting our current product, the XT, bringing that to the end stages.

This will be the 10th year of that product and exiting strong while starting with a running start into our new product offering is a really important focus area for us. Inclusive of that is building interest within the customer set, competing with our primary competitor and moving us forward in a way that we are really focused on delivering the value that we believe the new product has.

The second thing that we're really focused on and is a priority for us is just about execution, the discipline in which we approach every day, every month, every quarter and focus on the profitability of this business and the revenue growth of this business. The third thing for us, you can look back at our historic profitability levels. I like to look at non-GAAP EBITDA as a primary measure of profitability. And you'll see that we're at a relatively historic low. We know we have more work to do there.

And so one of our priorities this year is being really focused and disciplined on the spend side and doing that in a way that allows us to invest in the product future through Titan and OmniSphere and then hold back in the areas where a little less investment is needed, typically in the back office and the G&A functions. So, as we enter this year, we enter eyes wide open that the expansion of profitability is important to investors.

As we think about the transition to Titan XT, you obviously have a legacy or current product in the market, XT, XTExtend. And so, it's -- I would assume it's a balancing act between continuing to sell those products and then also preparing your customer base and prospects for the new product.

And can you talk a little bit about how you're handling that? -- because obviously, you have a 2026 guidance that's out there, you have 2027 where Titan XT is going to be more generally available. How are you going to the sales force and telling them to pitch XT with Titan XT on the horizon?

That's a great question, Allen. I think it starts with discipline, and it starts with focus on our customer base. Our customers don't all need the exact same product. And so, meeting the customer with where they are in the journey allows us to bring our product offering to them. For customers who adopted XT in the early years, 2017, '18, '19, they're approaching years 8, 9, 10 on that hardware.

We're engaging them in a way that is focused on the new product, Titan XT and OmniSphere. As we think about those customers that have acquired XT in the last few years, they have a relatively young installed base, and it makes sense for them to do their growth strategy on the same platform. So, whether they're expanding through acquisition or they're expanding their footprint within their health system, those additional purchases make sense to align with the young installed base of XT.

In the middle sits that group of customers that is not ready for a capital upgrade and won't be for several years. And that's the place where XTExtend fits nicely. It provides that customer base with a bridge to OmniSphere, our cloud-based solution, workflow applications, and it is a really nice central point for that middle-aged set of cabinets that exist within our installed base.

So, Allen, I think it really starts with the customer, where they are in their installed base and then focusing our offering to meet those needs.

And then obviously, you weren't with the company when they launched XT. But there's a lot of similarities and some differences between the XT launch back 9 years ago and the Titan XT launch. I guess, internally, you've talked a little bit about this cohort being a little bit younger than when the G-Series was replaced.

Would love to get a sense, but now software is a much bigger part of the business. Would love to get a sense of the major similarities and differences between this new launch, whether it's how you're going to market, how you're thinking about it versus the learnings of the XT launch almost a decade ago.

Yes. So, when I came on board, the focus was immediately on Titan XT for me, the refresh cycle and understanding where we had been out of G-Series to XT and how that translates to us going forward. And what I can say is that one of the biggest things we learned was the importance of reliability of the cabinet to our customers, the nurses who are on the floor, trying to spend more time with patients, having a cabinet that's reliable is really important to them.

So, as we designed Titan XT, we designed it in mind with all the learnings that we had from XT. XT was a great platform adjustment for us, improved reliability and usage for our customer base. So, we started there. We then extended it through OmniSphere. And what OmniSphere was really intended to do is provide cloud-based solution, so improved security, improved infrastructure support for the health system, but more importantly, a platform for which we could put applications that meet the unique needs of the health institution.

Some of the things that we've highlighted in demonstrations to customers already include workflow-related applications. This helps a nurse get through the machine to get the medications for their patient as efficiently as possible, so much more efficiently than on the current XT system, and we think that will be a delight for our customer base.

For the pharmacy technicians who are in short supply, the ability to get to a cabinet to be guided through the restocking, the removal of medications and efficient use, we believe will significantly reduce the amount of time and energy that the pharmacy technicians have to put into restocking the cabinet so the medication is close to the patient.

And then there is the supply chain aspect of it. By having visibility to an enterprise-wide solution, the pharmacists and the supply chain teams at these institutions will be able to more effectively balance medication throughout their system. If we have too much medication in one machine, it can move down the floor to another machine or down a level or to another hospital. And that load balancing, we believe, will be super insightful for the supply chain aspect of our customer base that is trying to figure out how to optimize their cash flow and their inventory management.

Those are things that are different. When I look externally, a couple of things that are different is we now have a large competitor introducing a new product at the same time, which means not only our Omnicell customers thinking about their path to upgrade and refresh and doing it in the lens of an enterprise solution, but it's occurring at the same time that our primary competitors' market is shifting. And so those units are in play as well for us. That's really exciting and interesting for us.

And Allen, you alluded to that earlier about a lot happening and excitement in the space. I think it really comes from the amount of equipment that will be turning over in the next 5 to 7 years, gets a really nice cycle. Now with that said, you started with a younger installed base. So it's important that we also flagged for investors the reality that when we exited the G-Series, those units were a few years older than we're in the position right now.

So when I think about tailwinds, the technology, the competitive environment, and I think about potential headwinds, the age of the installed base, I think it allows investors to make a decision based on the thesis that they believe is most relevant at this time.

On the call, Randy said, I'm trying to find a quote here that prospects are increasingly reassessing current solutions that may not be performing well with interoperability, and he talked a lot about meaningful opportunities for competitive conversions.

Your peer said on a call that they're seeing momentum in their product as well. And I think they said 75% of their wins are competitive conversions. So, I think there's a lot of optimism on both sides here. It's obviously very early. Can you talk about what informs your confidence that Omnicell is -- has these opportunities and can be a share gainer in this next launch?

Yes. That is the place where being the smaller independent with unique focus on this space. We don't have conflicting constraints of other divisions. We know who we are as a company, and we're in the medication management business. So, when we think about the competitive set, we think about what differentiates us.

How do we create a product offering that is unique to meeting the needs of the pharmacists and the nursing staffs that we support. And we've been pretty good over the years at taking market share, and we continue to believe that we can do that with a really solid differentiated product.

Now at this point in time, we find ourselves in a nice place. When we announced the new product, Titan XT, at ASHP in December, we're able to display the use cases of it. So not only see the equipment firsthand, but have nurses and pharmacy techs go on to the machine as they would in their role and see how the software that we've created plays out in a live demo. Our ability to demonstrate that to customers has been really positive.

We received significant feedback from our ability to not have something on the horizon, but to have something that is living and breathing that can be demonstrated today that is a short window to public launch, which we've highlighted for the software side to be the first half of 2027. So physically touching that at conferences has been very helpful for the customer base. Yes, I think that's where I'll leave it.

That's great. And then as we think about the cadence of Titan XT, I think that Randy was very adamant in his or deliberate in his phrasing saying that there's a multi-quarter, multiyear capital cycle here. The size of the opportunity is $2.5 billion.

As you think about the cadence of that opportunity over the next -- you tell me how many years, what is a reasonable baseline assumption for the timing and pace of demand? You talked a little bit about it picking up in early 2027. How should we think about this opportunity over a multiyear period?

Yes. I think we step this through in types of years or segments of years. 2026 will largely about -- be about refreshing the XT cycle. So existing XT customers with young installed bases that are expanding.

We'll sell a fair share of XTs this year. Despite the product being in its 10th year, it's ripe for that customer base given their young installed base to stay on platform. We'll also sell a good amount of Bridge XTExtend, helping set the stage for the ability to access OmniSphere and the workflow applications and other applications that will reside on OmniSphere for general availability in the first half of next year.

We'll also, I would anticipate in the back part of the year this year, see increasing levels of Titan XT bookings as customers are thinking about their refresh cycle. As I move forward through '27 and '28, I think that balance shifts where you'll see more Titan XT, less XT. And in between, you'll continue to see XTExtend as it is that bridge for those middle-aged cabinets to OmniSphere.

To make sure I'm understanding this, is your expectation that bookings -- the majority of bookings will shift from XT to Titan XT at some point between 2027 and 2028?

I think we'll continue to see XT come down. Everybody is incented for that. The company is incented to get moved to the next platform. Customers are incented to have access to OmniSphere.

And I don't think customers with older equipment are going to want to bridge through Extend. I think they're going to want to take the reliability of the updated hardware along with the opportunity on OmniSphere and make that natural transition point from end of life for them of their equipment to start of new life with Titan XT. So yes, I think that will continue to increase.

And how should we think about the product margins on Titan XT? The gross margins on the product side have been up and down over the past 10 years. Would love to get a sense of how you view those gross margins relative to, I'll just say, where product margins are today in the business. Would you expect Titan XT to impact your gross margin profile in the product revenue line?

Yes. Let me -- I'll hit the question, and then I'll provide a little context that I think will be useful for the investor base. We've announced that we anticipate a modest premium in pricing. With the cost structure in place, we would anticipate that we'd see a modest improvement in margins as a result of that.

Now from a context perspective, the period in which you measure against is super relevant. As we think about over the last couple of years, because our booking cycle is such that when a booking lands roughly a year later, it could be a little quicker, it could be a little longer, those cabinets are actually placed in the field, implemented and revenue recognized.

So, as you can imagine, over the last couple of years, we've been deploying and implementing capital that had been negotiated during the period of 2022, 2023 and 2024. For those of you who followed the story, 2023 and 2024 were rough years in the business of declining revenue. And as you can imagine, with less moxie in the marketplace, pricing was challenging to maintain while getting bookings and revenues.

So, you do see a recent little hangover of our position in the marketplace and our ability to maintain price. So as we go forward, the enthusiasm around the new product offering and the value that the new OmniSphere solution provides, we believe will allow us to better protect the top line, which goes a long way through the margin structure.

And as we think about the long-term margin structure of the business, your guidance this year calls for 12% to 14% margins, which is below the cycle peak EBITDA margins, which were in the high teens.

High teens.

At the same time, your recurring revenue continues to move higher. OmniSphere should add more high-margin revenue. Can you talk about the opportunity to expand margins over time from here?

Is there any way or any reason why Omnicell shouldn't be able to get back to those peak margins at some point? Would love to get a sense, is that a fair bar? Could they be higher? Could they be lower? Just trying to get a sense of the historical model here and how to think about some of the changes you've made and how that could influence long-term margins?

Yes. So not lost on me and not lost on the management team is where margins are at the current stage and where they are relative to where they had been years ago. We're really focused on it.

When I came on board, one of the first things I did was spend a lot of time with investors hearing their perspective, hearing the history that they had with the company, and it was crystal clear to me that we needed to create stability in the top line revenue and expand it. And we also needed to be focused on a more disciplined way on our spending and improve margins. So, we've heard the message loud and clear.

In 2025, we grew non-GAAP EBITDA at a rate of 1/2 the rate of revenue growth. As we set forth this year's plan, our goal was to do it by at least 2x the rate of revenue growth. We won't get back to historic levels immediately, but the management team recognizes that we're way under delivering, and we've retained the focus and come back to this that we believe it's important to expand profitability.

So, you see us taking the step as we provided the 2026 guidance. As we got into our Q1 earnings release, we signaled that we saw some positive benefits in the first quarter, some of which was positivity on the gross margins that flowed to the bottom line that was at the upper end of the range. The second part was some spending that we had shifted out into Q2 and Q3.

These were things that were more back-office G&A related where, you know, you need to make the investment, and it needs to be made this year. But the discipline around every 30-, 60-, 90-day delay helps keep costs in control over the long term, and it allowed us to lean into those profit or opportunity creating opportunities through focusing the money on Titan XT, OmniSphere development and our sales force. And so, we took a very disciplined approach of those things that could make the business go faster, got funded quickly and fully.

And those things that we know we need to do from the support and infrastructure, we're a little more cautious, pausing, asking the hard questions of does it need to be done now? Does it need to be done to this full extent? And I think that's a healthy discipline within a company. So, from a margin perspective, I'll bring us back to we know where we are now is not good enough, and we're committed as a management team to making meaningful improvement.

Related to that, as we think about the margin rate and some of the investments you're making in 2026, exiting this year, you mentioned ERPs and HR initiatives. How should we think about the size and cadence of those investments exiting the year? And then as we think about the sales force that you mentioned, -- before you joined, the company had gone through some RIFs, I believe, around the sales force.

How does the size of your sales force today compare to back then, if you're aware of the difference. But maybe more importantly, do you have the appropriate sales force today to capture that $2.5 billion opportunity? Or should we expect the company to be hiring more as we head into that opportunity?

Yes. We feel really good about the sales leadership that we have and the sales team. We made investments over 2025 that allowed us to bolster key places, whether it was in the middle markets, the government work or it was in the competitive set, so big game hunters.

We added a few people in strategic places over the course of 2025. And we feel like we entered 2026, not only with a great product, but with the momentum of a strong sales force. So, we feel really good about where we are commercially right now. We will continue to be super disciplined as how we expand the support structure of this business.

And we're going to be really focused on making sure that as we add heads, we know that they're going to create immediate incremental value or we'll pause on those until we get to the point where we know we can add immediate incremental value. So we'll continue to be disciplined in that area. But from a commercial perspective, I'm really excited about the team, really excited about the leadership of that team. And I think we find ourselves well poised with a great product and a great team at a really important moment.

That's great. We have about 5 minutes left. I want to shift gears to the Enliven business. Would love to get a sense of the health of the retail pharmacy customer today. There's been some -- within the industry, some store closures. It seems like maybe that's starting to moderate a little bit. But would love to get a sense for what's embedded in expectations for that business in '26? And how does that outlook look?

Yes. So, 2025 was a rough year for the entirety of the retail pharmacy sector. Store closures with Rite Aid, struggles that Walgreens experienced. It definitely cast a cloud over the sector. Our business, they did a nice job at really trying to rightsize the cost structure, making some hard decisions, but they definitely faced headwinds on the top line side. So that is a business that pulled back a little bit in 2025.

As we enter 2026, Nnamdi said on the Q1 earnings call, participation in recent conferences and trade shows, it's as if there's a renewed sense of optimism in the sector. Now as a company, we'll be cautious about that. We'll think about how do we step into this moment. But as we think more broadly about the industry, there's a view that there's promise on the future, which is a good place to be for the retail sector.

It's important to recognize not all patients want to stay in the hospital or pick up medications in the hospital. They want to get home. They want to get back to their daily life, and they want to get into a routine of picking up medications and prescriptions in their local community.

So, there is absolutely a place for retail pharmacy, a very important place in retail pharmacy. And so, we think that this is part of that ebb and flow. Now we'll be cautious as we head through this and very disciplined on the cost structure, but we like our offering in the space. And hopefully, things continue to improve.

One question I didn't ask but was sort of related to the conversation at the top, just the macro environment, the spending environment for your hospital customers. I know there's a lot of things to go through with you and your biggest peer introducing new products.

But we maybe move that to the side for a second. What the hospital budgets look like today for CapEx, specifically for cabinets relative to maybe a year ago or when you started? Does it seem like there's any material change one way or another?

It doesn't seem like there's a change going on right now. Health systems will always be cautious about the deployment of capital. Their approval cycles are from several quarters to several years, and that's intentional. The investments are large, and they want to be mindful of where they're placing their bets and knowing that they'll get value from it.

I'll not go down the path of what we think we can do in that space, but we do believe that the new offering is -- really meets the needs of the hospitals. As these discussions go with hospitals, I think we're going to continue to find there's going to be an equal focus on procedure volumes within those institutions and the reimbursement that they're able to receive from their mix of payers.

So, hospitals will always be cautious in this space. But since I joined and prior to joining, I think all the capital surveys that I've seen is there continues to be enthusiasm for investing in capital in health systems, but it's something that we and other industry participants are always mindful of.

And then with the last 90 seconds or so, I want to touch on capital deployment. In the early 2020s, Omnicell did a few acquisitions, but hasn't really done anything since. Would love to get a sense of how you think about M&A versus share repo, given where the stock is and given the opportunity that you see ahead. We view the stock is dislocated here but would love to get a sense of how you think about the relative opportunities between M&A and share repo.

Yes. I'd step us back even one more place. Like, when I think about capital deployment, I think about deploying it in a way where we know we have the right to win. And the place where we have the right to win is in our core business. We have a history of being able to sell cabinets and driving profit, which is good for shareholders.

So, when I think about capital deployment, I start at the top -- if I can take competitive share by offering a leasing or an extended period payment program similar to our competitor, I can stay in more deals. Like our team can be competitive from a product offering and the timing of cash flows in a way that I think is valuable to investors.

So, I start with capital deployment there, then I think about how do we get through constructive tuck-in investments that help accelerate our business. So, with that, we're out of time.

Yes, Baird, thank you so much for the presentation. Really appreciate it. And thank you, everyone, for joining.

Yes. Thanks for joining, everybody.

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Omnicell First Quarter 2026 Financial Results Call. [Operator Instructions] It is now my pleasure to turn the call over to Baird Radford, Executive Vice President and Chief Financial Officer. You may begin.

Good morning, and welcome to the Omnicell First Quarter 2026 Financial Results Conference Call. On the call for Omnicell today are Randall Lipps, Omnicell Chairman, President, CEO and Founder; Nnamdi Njoku, Executive Vice President and Chief Operating Officer; and myself, Baird Radford, Executive Vice President and Chief Financial Officer.

This call will contain forward-looking statements, including statements related to financial projections or performance and market or company outlook based on current expectations. These forward-looking statements speak only as of today or the date specified on the call. Actual results and other events may differ from those contemplated due to numerous factors that involve substantial risks and uncertainties. For more information, please refer to our press release issued today, Omnicell's annual report on Form 10-K filed with the SEC on February 26, 2026, and in other more recent reports filed with the SEC. Except as required by law, we do not assume any obligation to update any forward-looking statements.

During today's call, we will discuss some non-GAAP financial measures. Full reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are included in each of our fourth quarter 2025 and first quarter 2026 financial results press releases. Our results were released this morning and our financial results press releases, including these reconciliations, are posted on our Investor Relations section of our website at ir.omnicell.com.

For our call this morning, Randall will begin with an overview of our first quarter 2026 performance and strategic priorities. I will then review our quarterly financial results and our updated outlook for 2026. We will then open the call for questions.

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

Thank you. Good morning, everyone. We started 2026 with solid execution in the first quarter, delivering results at the high end or above our previously issued Q1 2026 guidance ranges across all key metrics, which we believe reinforces the durability of our business model. Total revenue for the quarter was $310 million. Non-GAAP EBITDA was $45 million and non-GAAP earnings per share was $0.55.

We believe these results reflect the continued momentum across our core businesses, disciplined cost management and our ability to execute as we continue to advance toward our goal of achieving the vision of autonomous medication management. We continue to see constructive demand environment, including meaningful competitive conversion opportunities. Health Systems appear to be increasingly reassessing incumbent solutions that may have struggled to deliver consistent reliability, scalable service and enterprise-wide interoperability.

As customers prioritize these key factors, along with efficiencies from moving medication workflows, particularly in environments facing ongoing staffing and cost pressures, we believe Omnicell is well positioned to serve as a long-term platform partner. As a reminder, our strategy is anchored in driving autonomous medication management as we seek to deliver improved outcomes across the patient care journey. We are operationalizing our strategy through the 3 tightly connected priorities.

First, expanding our market presence across inpatient and outpatient pharmacies and patient care settings. Second, scaling predictable reoccurring revenue and advancing OmniSphere, our cloud-native medication management platform. These 3 core priorities reinforce one another. Expanding our footprint and increasing interoperability across care settings is anticipated to increase the scale and breadth of the medication workflows we support, which should provide a broader foundation for enterprise-wide automation and standardization.

Increasing reoccurring revenue will give us the visibility and confidence to invest intentionally improving products and accelerating innovation with AI. Execution on this priority is evident through our growing Specialty and Consumables business. Finally, OmniSphere is the unifying layer that is meant to bring our enterprise offerings together, connecting devices, data and workflows on a single secure platform. The OmniSphere platform is designed to shift medication management from reactive manual process toward guided and increasingly autonomous workflows.

We believe OmniSphere will enable our customers to unlock clinical capacity, enhance safety and compliance and drive more predictable operational and financial outcomes. We're seeing this play out in recent customer decisions as large and complex health care organizations increasingly select Omnicell to support medication management holistically. For example, health care providers within the U.S. Department of Veterans Affairs, continue to expand their use of Omnicell solutions as they seek to support more standardized streamline medication workflows across their organizations. These deployments span central pharmacy and point-of-care solutions, IV workflow and inventory optimization services, reflecting what we believe is a system-level focus on reliability, efficiency and enterprise visibility across the patient care journey.

Similarly, a major academic medical center in New York recently chose to expand its Omnicell footprint across multiple facilities, extending our central pharmacy and our point of care solutions as they strive to enhance safety, improve operational consistency and support enterprise-wide standardization. A Rhode Island-based health system selected our pharmacy dispensing services as it sought to support safety and efficiency in pharmacy operations as part of our broader effort to modernize and standardize medication management across the system.

As these enterprise relationships deepen and broaden, we're seeing a national expansion of reoccurring revenue streams tied to the installed base, which should improve our financial visibility and support continued investment in engineering and advanced analytics to deliver the value-added products and solutions that address customer pain points. We're also seeing strong engagement across outpatient and specialty pharmacy settings. A health system in Southern Missouri recently partnered with Omnicell Specialty Pharmacy Services as it worked to enhance clinical outcomes and improve the patient experience, while supporting the growth of the specialty pharmacy program.

We find this engagement reflects the same enterprise mindset, customers leverage Omnicell not for technology but for the services and expertise that they're intended to extend medication management beyond the acute care settings and create more predictable recurring value over time. We're grateful for the trust our customers are placing in us to solve their critical medication management challenges. For those new to the Omnicell story or taking a renewed interest in our product offerings, we formally introduce Omnicell Titan XT, our next-generation automated dispensing system at ASHP late last year.

Titan XT is designed to combine proven and reliable automation with enterprise-level data and workflows and is built on our HITRUST certified cloud platform, OmniSphere. Together, this offering is intended to deliver enterprise-wide visibility, guided workflows and a modern infrastructure developed to support large complex health systems. Importantly, Titan XT represents a meaningful step as we advance toward autonomous medication management and is one step on the journey to connect every patient care area and pharmacy location with OmniSphere.

Since introducing Omnicell Titan XT, we've been encouraged by customer engagement and feedback. Customers are responding positively to potential opportunities for meaningful workflow efficiency improvements including reductions in manual card filling activity, improved visibility into inventory expirations and time savings across nursing and pharmacy operations. Additionally, customers are embracing the backward and forward compatibility planned to be offered by Titan XT and OmniSphere as it enables them to plan and execute a migration to our next-generation platform at a pace that works for them.

As we've noted previously, Health Systems capital approval cycles remain multi-quarter to multiyear activities, announcing Titan XT in late 2025 was intentional, giving customers time to incorporate the new platform into their long-term planning. Our expectations around installed base refresh pacing are unchanged. We anticipate modest incremental Titan XT revenue in 2026. With initial hardware shipments planned to begin in the second half of the year, followed by a phased rollout of OmniSphere functionality in the first half of 2027.

More broadly, customers are moving towards platform partners who can help them transform medication management end-to-end. The focus is on integrated standardized workflows across the full medication cycle to improve safety, efficiency and cost. We believe this shift plays directly to our strengths and supports deeper, long-term partnerships.

In summary, we began 2026 with solid execution, disciplined financial performance and a clearly defined platform road map. While we remain mindful of evolving macro environment uncertainty and capital spending dynamics, we are confident in the durability of our business model, and the long-term opportunity ahead to modernize medication management.

Well, with that, I'll turn it over to Baird to walk through our first quarter financial results and outlook. Baird?

Thank you, Randall. We started 2026 with focused execution in the first quarter, delivering at the high end or above our first quarter guidance, reinforcing our confidence in our business model as we have kicked off the transition from XT to Titan XT and OmniSphere. We believe performance in the quarter reflects solid execution across our portfolio, coupled with strong cost management and some spend shifting into the second and third quarters.

Total revenue for the first quarter was $310 million, representing 15% year-over-year growth and finishing at the upper end of our previously provided guidance range. This year-over-year growth was primarily driven by steady execution within our points of care connected devices revenues as well as continued growth in our recurring revenue streams.

As a reminder, we are expecting revenue to be more linear in absolute dollars rather than year-over-year percentage growth rates as we progress through this year. Product revenue was $175 million, up 20% year-over-year. This growth is driven by the strength in our Connected Devices portfolio in both North America and international markets. Service revenue was $135 million, increasing 8% year-over-year with growth driven again by strong performance from our Specialty Pharmacy Services.

From a profitability standpoint, for the first quarter of 2026, GAAP earnings per share was $0.25 compared to a loss of $0.15 per share in the first quarter of 2025. Non-GAAP earnings per share in the first quarter of 2026 was $0.55 compared to $0.26 in the prior year period. Non-GAAP EBITDA for the first quarter 2026 totaled $45 million compared with $24 million a year ago. Our strong profitability performance in the first quarter reflects disciplined cost management and improved operating leverage.

For the first quarter of 2026, non-GAAP gross margin was approximately 46% compared to 42% in the first quarter of 2025 and 44% for fiscal year 2025, driven primarily by favorable mix and execution improvements across both product and services. As a reminder, we performed the software upgrade at customer sites that provided a headwind to the first quarter of 2025 and full year 2025 gross margins.

Turning to the balance sheet. Cash and cash equivalents totaled $239 million as of March 31, 2026 compared to $387 million a year ago. The year-over-year change primarily reflects the repayment of $175 million of principal amount of debt that matured in September 2025 as well as the repurchase of approximately $78 million of common stock during 2025. Free cash flow was $39 million in the first quarter of 2026 compared with $10 million in the prior period and $18 million in the fourth quarter of 2025.

Before turning to guidance, I'd like to briefly connect our first quarter performance to the broader operating context for 2026. We exited 2025 with a healthy backlog and improved revenue linearity driven by enhanced customer scheduling and coordination. These same dynamics supported our first quarter 2026 results and are anticipated to continue to provide greater predictability as we move through 2026. We also exited 2025 with strong competitive pipeline activity and we remain positive about our competitive positioning exiting the first quarter.

The introduction of Omnicell Titan XT and the OmniSphere platform has increasingly shifted customer conversations towards enterprise-wide standardization and longer-term platform planning. While we think this reinforces the long-term opportunity ahead, it also reflects multiquarter to multiyear nature of health system capital approval cycles, which is an important consideration as investors think about pacing in 2026.

Since the introduction of Omnicell Titan XT, we've had constructive conversations with many customers around Titan XT and OmniSphere. Early feedback from customers have experienced demonstrations of our new Titan XT and OmniSphere software and workflows has been very positive. Customers are highlighting the DynamicRestock capabilities with guided workflows that are designed to simplify pharmacy technician tasks and reduce time spent on cabinet restocking. Customers are also noting that streamlined medication retrieval workflows for nurses will likely reduce the time the nurse spend looking for patient meds. That should free up more time for care at the bedside.

During the first quarter of 2026, we booked our initial Titan XT orders, consistent with our expectations. Turning now to our outlook for the second quarter of 2026 and fiscal year 2026. For the second quarter of 2026, we expect total revenue to be in the range of $307 million to $313 million. Within that total, product revenue is expected to be between $174 million and $177 million and service revenue is expected to be between $133 million and $136 million. We expect second quarter 2026 non-GAAP EBITDA to be between $37 million and $42 million, and non-GAAP earnings per share to be in the range of $0.40 to $0.48.

This outlook reflects continued evolution across the business, typical seasonal patterns within services and our expectation that the increased revenue linearity we saw in late 2025 continues through 2026. For the full year 2026, we are maintaining our previously provided guidance for product bookings, ARR and total revenue, while increasing our guidance ranges for non-GAAP EBITDA and non-GAAP earnings per share. For full year 2026, we anticipate product bookings in the range of $510 million to $560 million. Given the timing of our Titan XT announcement and our customers' multi-quarter to multiyear capital approval cycles, we continue to anticipate that the full year 2026 product bookings will be weighted toward the back half of this year.

Total revenues are expected to be $1.215 billion to $1.255 billion with product revenue between $690 million and $710 million and service revenue between $525 million and $545 million. Year-end 2026 annual recurring revenue, or ARR, is expected to be between $680 million to $700 million. Non-GAAP EBITDA is now expected to be between $153 million and $168 million compared to previous guidance of $145 million to $160 million. Non-GAAP earnings per share are now expected to be between $1.80 and $2 compared to $1.65 to $1.85 previously.

This guidance includes our updated estimate of approximately $12 million of tariff-related costs impacting the P&L in 2026. As a reminder, tariffs remain fluid and we continue to closely monitor. Our guidance also assumes an estimated non-GAAP effective tax rate of approximately 15%. Before concluding, I'd like to provide additional context around several assumptions underlying our full year 2026 outlook. As Randall outlined, our 2026 product bookings outlook reflects where we are in the XT life cycle. As we discussed at the time of the Omnicell Titan XT and OmniSphere announcement last December, 2026 marks the 10th year of use of earliest XT cabinets, which were first shipped in 2017.

While we believe the potential benefits of Titan XT provide a significant long-term replacement opportunity, health system capital budget approval cycles typically span multiple quarters to multiple years. Launching Titan XT in late 2025 was intentional, allowing customers sufficient time to incorporate our new offering into their planning cycles. We continue to estimate the total replacement cycle opportunity to be in excess of $2.5 billion. That said, it is important to remind investors that the XT installed base today is younger than XT series installed base was at the time of the XT launch, which may create near-term pacing considerations. This dynamic may be offset in part or whole by the expanding value of the nursing and pharmacy technician workflows, supply chain management and data analytic capabilities we are building into OmniSphere.

These collective factors are reflected in our 2026 product bookings guidance. As shared previously, we also expect revenue linearity to remain in place throughout 2026, which is anticipated to result in a quarterly revenue profile that is more muted in terms of quarter-over-quarter dollar movement and experienced in historical patterns from prior years. From a cost structure perspective, our full year 2026 guidance reflects a continued focus on balancing long-term value creation with probability.

At the midpoint of our full year 2026 guidance ranges, non-GAAP EBITDA is expected to expand by more than twice the rate of revenue growth, while continuing to fund innovation, development and customer experience initiatives. In closing, we are pleased with our start to 2026. With disciplined execution and a clearly defined platform road map anchored by Titan XT and OmniSphere, we believe Omnicell is well positioned to drive sustainable, profitable growth in 2026 and beyond.

With that, we'll now open the call for questions. Operator?

[Operator Instructions] Our first question comes from the line of Stan Berenshteyn from Wells Fargo.

I wanted to get an update on the retail segment. I was wondering if you can offer some color as to EnlivenHealth, how that progressing? Do you continue to see headwinds related to the footprint within the retail pharmacy segment.

Stan, this is Nnamdi here. Thanks for the question. So just to give you a sense of what's happening there. Our team just returned from one of the major conferences NACDS, and -- what I will say is the mood in the room there was really with the major players. Looking forward, there's been a lot of challenges that have happened in that space in the last couple of years, but it seemed like there was some sense of stability and looking forward. Now it doesn't mean those challenges are getting muted. But what they are reporting back is that those key players are looking forward and the volumes there continue to increase, and it seemed like the tone in the room was really about how to deliver on those growing demand at the lowest cost. And that's where we see our Enliven solutions really playing a role there. Omnichannel communication, patient engagement solutions. So we're really just focused on engaging our customers in a way that is delivering value for them to meet that growing demand, but also continue to drive cost down with regards to how they serve their customers.

So what I will say in summary is it's been a challenging time in the retail segment. I think that challenging sort of dynamic continues to play out. But there's been some sense of kind of looking forward with regards to just trying to figure out how to meet the growing demand that's out there. And we're just focused on just partnering with them to be able to deliver on that.

Next question comes from the line of Jessica Tassan with Piper Sandler.

Congrats on the great results. Do you guys just mind kind of articulating the sources of gross margin upside on the product side in 1Q and on the services side and the extent to which you expect those sources of gross margin upside or the gross margin upside to be durable versus kind of transitory?

Thanks for the question, Jess. In terms of gross margins, we did see 46% total non-GAAP gross margin in the first quarter. It compares to 42% a year ago in the first quarter and 44% for last year. A couple of things contributed to that. First, on the product side, we saw favorability in the product and customer mix in our connected devices. And on the service side, we lapped the investments that we were making during the course of 2025 in field-based software upgrades at our customer. So those 2 vectors are contributing to that performance.

What I would say is that margins will continue to fluctuate from period to period. And last quarter, in the fourth quarter, maybe we're a little bit at a lower end. This feels like we're maybe a little bit at the upper end in the near-term cycle. So I don't want to call this the new ceiling or new floor. But I think we'll continue to see small fluctuations from period to period based on that mix.

Your next question comes from the line of David Larsen with BTIG.

Can you size the Titan deal and also talk about the acute care environment and the impact of the big deals at [ Bill Add ] from complications in hospitals and so on for the right volumes for elective procedures going forward.

Awesome. Thanks, David. You were a little faint on that, but it sounded like the tightened environment and the market conditions around the acute care environment.

David. So what I would say right out is it's a great time to be in medication management. As you know, the 2 main players there have rolled out new offerings and customers are reassessing the incumbent solutions. As we also look out there, technology is advancing and really giving us the chance to deliver on consistent reliability, scalable service, enterprise visibility. So it's pretty favorable out there in terms of being in this space today.

So following our December announcement, we've been out there engaging customers, it's been very favorable. We continue to build our pipeline. I'll point to a couple of things that we're hearing from our customers as we have those conversations. The things that are really landing well have to do with looking at sort of system-wide visibility. So when you think about these complex health systems, the ability to centrally manage user management and devices across the health system in a standardized way is resonating as we have those conversations.

The other thing that we're also seeing out there is the ability to sort of have a migration flexibility is also giving us a chance to really engage health systems as they expand, particularly those health systems that have a newer fleet. So the ability to have a mixed fleet environment and manage that migration is going really well. And then we've also talked about the workflow benefits with guided workflows and some of the things that we're really trying to address around operational variability.

And in an environment with labor constraints as well, that's really landing well with those guided workflow conversations. So in a nutshell, it's a positive response we're feeling out there. We're investing in our commercial go-to-market approach, making sure we have the demo equipment out there to give customers a chance to really experience the solution that we're rolling out. So we're very encouraged by the discussions that we're having. We just continue to engage customers in that dialogue and to build the pipeline.

Next question comes from the line of Allen Lutz with Bank of America.

Randy, a follow-up on the product bookings. The guidance there was unchanged, but I wanted to look a little bit underneath the hood. And I think you said the installed base refresh assumptions are unchanged. As you think about your customers and your prospects as they think about going for XTExtend versus Titan XT, are you seeing any increase in cancellations for XTExtend and maybe more customers looking toward Titan XT. Would love to get a sense of anything within there is different than your expectations a quarter ago.

And then as it relates to the product bookings guide or conversations with customers really has anything changed over the past 3 months?

That's absolutely a great question because it has changed because now there's more optionality for customers and customers who may have been just leaning into an XTExtend extent to upgrade their current systems are now saying, well, maybe I should use Titan XT. And how do I feather that in. With it coming out, the hardware coming out at the second half of this year and the software coming out, the next part -- first part of next year.

And so the conversations have people reevaluating their configurations and their strategies to acquire the equipment. And I think you're right, probably less people are less interested in the XTExtend package and more interested in how to deploy and when to deploy the Titan XT. So it's definitely making the conversations and the size of the deals, upsizing the size and how that, of course, involves some people have to go back to capital committees and get one and rejuggle that a little bit. But it's all really positive. It is -- and people know that when you deploy technology, you want to deploy it once for a long time. So particularly, these health care systems would rather wait and get the best result than do it twice in 5 years or something like that. So we kind of knew that would happen.

Our next question comes from the line of Bill Sutherland with StoneX.

I was curious as -- particularly as these deals that you're in discussion about get larger. What Baird, you've talked about the likelihood that you'd start to look into leasing and -- or some kind of financing opportunities with -- in certain situations. So I'm wondering how that's progressing for you guys.

Yes. We continue to find that it's an important offering for us to provide to customers. There are customers that are trying to line up their cash flows in line with our operating revenues, and there's others that are looking at it through a capital purchase lens. And so continuing to offer both has been helpful and constructive in conversations. And I think it's leading to what we believe is a really nice pipeline of activity, both existing customers and competitive opportunities. And so having that in our portfolio has been quite useful.

Your next question comes from the line of Scott Schoenhaus with KeyBanc.

I guess a follow-up there. You just mentioned the pipeline in your prepared remarks, the strength of your pipeline, but you mentioned the competitive conversions here. You talked about the workflow enhancements in the technology. I think that's better than your competitor out there. Your competitor also has a Class II FDA recall in the market. Maybe just talk about what's embedded in your bookings guidance on the competitive conversion side and where you see this going over the next 12 months? Because there seems a clear opportunity here in the marketplace that you haven't had in the last replacement cycle that could be significant.

Yes. Thanks for the question, Scott. Yes, we definitely are excited about the moment that's present, having a new product in the market space is one thing, but also knowing that there's a large group of opportunities out there where customers, ours and our competitors' customers, will have to make decisions about their path forward. As we think about the assumptions that were baked into the bookings, it's important to remember that we've been taking share over an extended period of time. And what that may do is vary a little bit from year-to-year. But over time, we've consistently been able to increase our market share. So we've built that assumption into our guidance. And what you see is a modest increase year-over-year and competitive wins assumed in our guidance.

Our next question comes from the line of Matt Hewitt with Craig-Hallum.

Congratulations on the strong start to the year. I guess sticking along the competitive conversion commentary. Obviously, market share, you guys are growing it there. But I'm just curious, are you seeing an increase in demand from these new customers to sole, meaning we would expect over the course of this year into next year, the number of sole-sourced hospitals or systems has increased because of some of these competitive dynamics?

Matt, thanks for the question. I would say, just reflecting on the engagement that we're seeing out there, I don't know that we're seeing a material shift in the volume of sole source agreements. If you recall, most of the ways that we engage with our customers here, we tend to get into those types of arrangements with them particularly these large customers. So I don't know that there's a material shift on that front. But we are pretty encouraged with just the volume of activity we're seeing out there.

And as we start to progress some of these to the contracting stage, we'll see something out there. But at this point in time, I'm not sure that there's a signal there I can point to that's a material change.

Yes. Matt, the only thing I'd add on to that is that for our customers, the importance to them of having a reliable cabinet is something that they really enjoy about working with Omnicell. And when we think about the innovation culture at the company. That does play into the continued dialogue with customers about how we are helping meet their evolving challenges in the pharmacy. So as a thought partner and as an innovation partner. Those are 2 things that really end up in these conversations pretty heavily. And although not changing, but worth mentioning.

Yes, let me add one comment to that. I do think there's a bigger portion of our bookings coming from competitive conversions as we move into the future. And some of those deals may be sole-sourced, usually a big provider does look at doing sole source. But it's just where we are in the dynamic of some of these very large whales, how long it takes to get those contracts in place, I think this is what [ Nnamdi's ] comment. But I think for sure, we're in a fantastic market with a lot of competitive activity. I mean we just the other day, had to double or maybe even more triple the amount of demo equipment out there just because there's so much demand for people to see the product.

And our final question comes from the line of Gene Mannheimer with Freedom Capital Markets.

Congrats on the good quarter and outlook. Your initial fiscal '26 EBITDA guidance that you provided back in February was a little bit muted. As I think about that, and I think you cited some planned investments, it appears that some of those shifted out of the quarter. Baird, and maybe you can elaborate a little bit on what those are and when they -- when we might expect to see it land?

Thanks for your question, Gene. Yes. I -- as a follow-up to Jess's question about gross margins. We did land at 46% in the quarter. It's a little higher than we've seen over the course of the last several quarters. So maybe a little bit higher than normal. In terms of shifting out of costs, we had some places where we had the flexibility to keep the operating activities on track, not put us behind. But to shift a little bit of money out into Q2 and Q3. So I would expect to see some operating expense increases as we move into those periods. But I think the most important part is that we've really focused internally on the spend discipline and trying to reach the right balance between the long-term growth needed and profitability in the business.

And in the first quarter, we did see early signs of those initiatives starting to take traction. And what you see is us gathering and putting some of that additional belief into the remainder of the year. So overall, I think it's a positive quarter, and it's a positive outlook as we move forward. And that's what we reflected in the guidance update.

With no questions in queue. I will now hand the call back over to Randall Lipps for his closing remarks.

Well, thanks for joining us today. We're really excited about where we are and just this point in the history of medication management, just a wide availability in the market to make some serious changes. And we're excited about the innovations we're bringing on our platform that's empowered by AI or enterprise agents and new robotics and world models, all these things are helping to drive us toward in the autonomous pharmacy in an accelerated fashion, which is as you all know, has been at the tip of our tongue for quite a while.

So we're starting to see that come into the view, it's exciting customers and it's even exciting, of course, to our employees who are the best automation team in health care. So we appreciate you guys. So thanks for joining us today, and we'll see you soon. Cheers.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.

Hello, and welcome to the Omnicell Fiscal Year and Fourth Quarter 2025 Results. [Operator Instructions] And please note that this call is being recorded.

I will now turn the call over to Kathleen Nemeth, Senior VP, Investor Relations. You may begin.

Good morning, and welcome to the Omnicell Full Year 2025 and Fourth Quarter Financial Results Conference Call.

On the call with me today are Randall Lipps, Omnicell Chairman, President, CEO and Founder; Baird Radford, Executive Vice President and Chief Financial Officer; and Nnamdi Njoku, Executive Vice President and Chief Operating Officer.

This call will contain forward-looking statements, including statements related to financial projections or performance and market or company outlook based on current expectations. These forward-looking statements speak only as of today or the date specified on the call. Actual results and other events may differ materially from those contemplated due to numerous factors that involve substantial risks and uncertainties.

For more information, please refer to our press release issued today, Omnicell's annual report on Form 10-K filed with the SEC on February 27, 2025, and in other more recent reports filed with the SEC. Except as required by law, we do not assume any obligation to update any forward-looking statements.

During this call, we will discuss some non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures are included in our financial results press releases. Our results were released this morning, and our financial results press releases are always posted in the Investor Relations section of our website at ir.omnicell.com.

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

Good morning, and welcome to Omnicell's Fourth Quarter 2025 Earnings Call. We are pleased to report a solid finish to 2025. The fourth quarter total revenues, bookings and ARR each coming in above the midpoint of our previous announced guidance ranges. We executed nicely in our core point-of-care business and saw strong demand for our flagship point-of-care connected devices, including XTExtend, which drove our robust top line performance during the quarter. We are happy to see the ongoing customer focus on our innovative solutions, leading to recent wins at major health systems and government health care facilities. We continue to advance our transformation efforts into an end-to-end medication management platform technology company.

Looking ahead, we remain focused on delivering innovative solutions that aim to continuously improve the customer experience and enable the Autonomous Pharmacy vision. We believe that our commitment through operational excellence as well as customer and patient-centric outcomes positions us to drive long-term value for all of our stakeholders.

As we have outlined previously, we expect our future growth to continue to be driven by 3 core pillars, which include expanding our market presence; scaling reoccurring revenue; and accelerating our technology platform.

First, expanding our market presence. We're actively working to grow our product footprint across the inpatient and outpatient care environments, including nursing units, operating rooms and a full spectrum of pharmacy settings. We believe that the recent customer wins and increased platform adoption underscore the strength of our solutions and the trust we are building across the health care continuum.

As part of this expansion of market presence, we introduced Titan XT, our transformational enterprise-wide automation dispensing system at the ASHP Annual Meeting in December. Titan XT is designed to unify proven automation and powerful intelligence and will deliver a more efficient medication management experience to support a growing health system. With the Titan XT launch, we continue to focus on extending the power of OmniSphere, Omnicell's cloud-based HITRUST certified medication management platform into inpatient nursing care areas. This should deliver greater control of medication inventory management for pharmacy while providing nurses with more confidence when administering medications.

At the ASHP Annual Meeting, we connected with over 4,000 pharmacy leaders who had the opportunity to see firsthand how we are working to empower autonomous medication management to deliver improved patient outcomes, a superior clinical experience, and greater visibility and security. We are encouraged by the early positive feedback that we are receiving from pharmacists and nursing as our sales team discusses Titan XT and OmniSphere with customers.

Second, scaling reoccurring revenue. We are focused on expanding our base of predictable recurring revenue through cloud-based offerings, software subscriptions and revised service contracts, which is anticipated to provide greater predictability for our business, while delivering long-term value to our customers. As Baird will discuss in a moment, our strong fourth quarter performance was driven in part by continued strength in annual recurring revenue, which exited the fourth quarter of 2025 at an annualized run rate of $636 million, an increase of 10% from our 2024 exit rate.

Lastly, accelerating our technology platform, OmniSphere. OmniSphere is our cloud-native platform designed to unify all Omnicell products under a single, secure infrastructure, intended to make it simpler, safer and more connected to manage medications within a growing health system. Designed to be the connected backbone for medication management, OmniSphere offers a single command center for automation and intelligence that is engineered to provide enterprise-wide visibility into medications and supply inventory.

As previously announced, OmniSphere achieved HITRUST CSF i1 certification in 2025, demonstrating our commitment to cybersecurity and adherence to high industry standards for data protection and medication management. Recognizing this recent example of our commitment to customer-centric solutions, Omnicell once again noted among the top 50 health care technology companies by the Healthcare Technology Report for a continuous focus on innovation that is designed to help health care organizations deliver safer and more precise care. We believe the power of Omnicell's products and services portfolio to support safety and efficiency across all care settings is resonating with the market as large health systems across the country select Omnicell during the quarter as their medication management partner.

Competitive convergence during the fourth quarter of 2025 included leading health systems serving Louisiana, Mississippi, a large Texas-based academic health system and a New England integrated health delivery network, all of whom have indicated that they plan to leverage Omnicell's central pharmacy automation, point-of-care dispensing solutions and Omnicell's inventory optimization service in an effort to drive patient safety, improve clinician and pharmacy staff efficiency and support an optimized pharmacy supply chain. This was also another strong quarter for our point-of-care solutions, including XTExtend, which has helped to drive significant wins across the U.S. and Canada, including leading health systems in Western New York and Honolulu, Hawaii, along with Canadian providers in British Columbia and Vancouver.

During the fourth quarter, the Department of Veteran Affairs selected Omnicell's point-of-care dispensing and IV workflow solutions to support medication management at a number of hospitals across their network. As we look at the broader economic environment influencing customers' capital decisions, we are encouraged by early reports from publicly traded health systems and industry reports, which suggest increasing patient volumes and improving financial performance.

While hospital fundamentals have been strong, some potential uncertainty still exists, particularly around regulations and tariffs. Nonetheless, I'm excited by the momentum we have coming out of 2025, driven by our commitment to empowering autonomous medication management. As hospitals and health systems continue to navigate the dynamic cost and regulatory environment, we remain dedicated to our mission to be their most trusted partner, helping empower them to achieve better patient outcomes, lower cost and improve staff efficiency.

Now at this point, I'd like to turn the call over to our Chief Financial Officer, Baird Radford, for a review of our financial results. Baird?

Thank you, Randall, and good morning, everyone. As we report out 2025 results and look forward to 2026, Omnicell enters the new year with strong momentum, anchored by a solid fourth quarter 2025 finish and continued customer confidence in our business strategy and product road map.

For the full year 2025, we delivered bookings, annual recurring revenue and total revenue above the midpoint of our most recently provided guidance. We believe this performance reflects resilient customer demand and solid execution across our business.

We also ended 2025 with the successful introduction of Titan XT at ASHP in early December. The initial response from customers has been positive, which we believe validates both the introduction timing and the strategic importance of this next-generation automated dispensing platform.

Titan XT, powered by our cloud-based OmniSphere platform is designed to bring enterprise-wide visibility, centralized inventory management, guided workflows and a modern infrastructure that is engineered to support the shift toward autonomous medication management and reinforces our confidence in the potential multiyear product refresh opportunity ahead.

Additionally, customers appear to be appreciating the optionality created by our flexible financing options and are recognizing the innovation embedded in our product road map. These dynamics, combined with the early signals we are seeing in pipeline activity should position us well as we continue to advance towards sustainable, profitable growth in 2026 and beyond.

Now moving to our fourth quarter 2025 results. Total revenue was $314 million, representing an increase of 2% from the fourth quarter of 2024 and an increase of 1% compared to the previous quarter. Fourth quarter 2025 product revenue was $180 million, representing a decrease of 1% compared to the fourth quarter of 2024 and an increase of 1% over the previous quarter.

Service revenue for the fourth quarter of 2025 was $134 million, which increased 8% from the fourth quarter of 2024 and increased 1% over the previous quarter.

Non-GAAP gross margin for the fourth quarter of 2025 was 43.2% compared to the fourth quarter of 2024 of 47.4% and 44.2% in the previous quarter.

Our fourth quarter 2025 GAAP earnings per share was a loss of $0.05 per share compared to a profit of $0.34 per share in the fourth quarter of 2024 and a profit of $0.12 per share in the previous quarter.

Our fourth quarter 2025 non-GAAP earnings per share was $0.40 compared with $0.60 per share in the fourth quarter of 2024 and $0.51 per share in the previous quarter.

Fourth quarter 2025 non-GAAP EBITDA was $37 million compared with $46 million in the fourth quarter of 2024 and $41 million in the previous quarter.

Moving on to the balance sheet. Our cash and cash equivalents totaled $197 million as of December 31, 2025, compared to $369 million as of December 31, 2024. As a reminder, the year-over-year decrease reflects the repayment of debt with a principal amount of $175 million that matured in September 2025 and the repurchase of approximately $78 million of our common stock during 2025.

The company continues to generate solid free cash flow with fourth quarter 2025 free cash flow of $18 million compared to fourth quarter 2024 of $43 million and $14 million in the previous quarter. In terms of accounts receivable, days sales outstanding for the fourth quarter of 2025 were 65 days, which compares to 77 days in the fourth quarter of 2024 and 74 days in the previous quarter. Inventories as of December 31, 2025, were $101 million compared to $89 million at December 31, 2024, and $107 million at September 30, 2025.

Turning now to a review of our full year 2025 results. Product bookings for full year 2025 were $535 million, landing above the midpoint of our previously provided guidance of $500 million to $550 million and compared to product bookings of $558 million in 2024. Product backlog as of December 31, 2025, was $640 million, down 1% compared to our 2024 exit. Our 2025 exit backlog includes $435 million categorized as short term, which we anticipate converting into revenue in 2026.

Exiting 2025, annual recurring revenue, or ARR, was $636 million compared to our previously provided guidance of $610 million to $630 million and compared to ARR of $580 million exiting 2024. Our full year 2025 total revenue was $1.185 billion, in the upper range of our previously issued guidance of $1.177 billion to $1.187 billion and compared to $1.112 billion in 2024.

Our full year 2025 product revenue was $666 million compared to $631 million in 2024. Our full year 2025 service revenue was $519 million compared to $482 million in 2024. Within the full year 2025 service revenues, technical services revenue was $260 million and SaaS and expert service revenue was $259 million.

Our full year 2025 GAAP earnings per share was $0.04 per share compared to $0.27 in 2024. Our full year 2025 non-GAAP earnings per share was $1.62 per share compared to $1.71 in 2024. For the full year 2025, non-GAAP EBITDA was $140 million compared to $136 million in 2024.

Before we move on to 2026 guidance, I'd like to walk through some of the key insights from our fourth quarter 2025 and full year 2025 performance. For full year 2025, we delivered product bookings of $535 million, which is in the upper half of our most recently provided guidance, and we exited 2025 with a product backlog of $640 million.

Fourth quarter 2025 closeout was driven by XT orders. And as expected, there were no Titan XT orders placed in 2025. The state of our competitive pipeline exiting 2025 continues to give us confidence that our focus on providing reliable products, while at the same time, advancing our platform innovation through OmniSphere is resonating with our customers.

We delivered $314 million of total revenue in the fourth quarter of 2025 and $1.185 billion for the full year 2025, with both results landing in the upper end of our most recently provided guidance. As expected, the movement in total revenue from Q3 to Q4 was more linear than in prior years as we continue to see the benefits from improved customer scheduling and coordination, leading to more predictable connected device implementations.

During the fourth quarter of 2025, we also saw solid performance in our consumables and specialty offerings. Fourth quarter 2025 non-GAAP gross margin was 43.2%, reflecting a 1 percentage point decline compared to the third quarter, driven by declines in product margins, partially offset by improvements in service margins. Compared to the fourth quarter of 2024, non-GAAP gross margins declined by approximately 4 percentage points, which primarily reflects the impact of $7 million of tariff costs in the fourth quarter of 2025, along with shifts in product and customer mix in the quarter.

Going a layer deeper into non-GAAP gross margins. Compared to the third quarter of 2025, product margins in the fourth quarter of 2025 reflects shifts in product and customer mix associated with connected device implementations completed in the quarter. As we shared our outlook during our third quarter earnings call, service margins for the fourth quarter of 2025 improved, driven by the progress we made in the third quarter on software upgrades for our customers.

Moving on to operating expenses. The fourth quarter 2025 increase versus the third quarter largely reflects costs associated with the American Society of Hospital Pharmacists Annual Meeting in December, where we announced our new automated dispensing system platform, Titan XT. Additional costs incurred during the fourth quarter funded opportunistic investments in customer experience and human capital initiatives. We believe these investments will benefit us as we transition from XT to Titan XT and OmniSphere.

Despite fourth quarter total revenue landing at the higher end of our guidance, fourth quarter 2025 non-GAAP EBITDA was at the lower end of our guidance. Fourth quarter non-GAAP EBITDA reflects the investments highlighted in my operating expense remarks, which we believe were important to support the long-term health of the business. As we previewed on our second quarter 2025 earnings call, you will see that our non-GAAP earnings per share results for the full year 2025 reflect an approximately $0.21 per share headwind compared to 2024 due to the reduction in interest income in 2025 resulting from our repurchase of a significant portion of outstanding convertible senior notes in the fourth quarter of 2024.

Now turning to 2026 guidance. For the first quarter of 2026, we are providing the following guidance: we expect first quarter 2026 total revenue to be between $300 million and $310 million, with product revenue anticipated to be between $171 million and $176 million and service revenue expected to be between $129 million and $134 million. We expect first quarter 2026 non-GAAP EBITDA to be between $27 million and $33 million and non-GAAP earnings per share to be between $0.26 and $0.36 per share.

As a reminder, the first quarter normally includes some seasonally higher expenses, including payroll taxes and benefits reset.

For full year 2026, we are providing the following guidance. We anticipate full year 2026 product bookings to be in the range of $510 million to $560 million. For full year 2026, we expect total revenue to be in the range of $1.215 billion to $1.255 billion. Full year 2026 product revenue is expected to be in the range of $690 million to $710 million, with service revenue expected to be in the range of $525 million to $545 million. Year-end 2026 ARR is expected to be in the range of $680 million to $700 million. Non-GAAP EBITDA for the full year 2026 is expected to be in the range of $145 million to $160 million and full year 2026 non-GAAP earnings per share is expected to be in the range of $1.65 to $1.85 per share. This guidance includes our current estimate of tariff costs hitting our P&L in 2026 of approximately $15 million.

We recognize that the regulatory environment surrounding tariffs remains fluid, and our guidance reflects tariffs in place as of today. Our guidance also includes an estimated effective tax rate of approximately 13% in our non-GAAP earnings per share guidance.

Before concluding my prepared remarks, I would like to share a bit of additional context that informed the guidance that we are providing today. Our full year 2026 product bookings guidance was developed in recognition of where we are in the XT life cycle. As we shared in December, with the announcement of Titan XT and the OmniSphere platform, 2026 is the 10th year of use for our initial cohort of XT cabinets, which were first shipped in 2017.

As we transition from the late stage of XT hardware to the early stage of Titan XT hardware, we also recognize that health system capital budget approval cycles tend to range from several quarters to a few years. Therefore, it was important for us to announce Titan XT in 2025 to give our customers sufficient time to incorporate our new product offering into their planning cycles and prepare for implementations.

As for the potential size and pacing of the hardware replacement cycle, we shared with investors in December that we estimate this replacement cycle opportunity to be in excess of $2.5 billion regarding pacing of product bookings and product revenue. It is important to balance considerations such as our current XT installed base being not as old as the G Series installed base was when we announced XT, creating a near-term potential headwind.

Additionally, it is important to consider the potential customer benefits of the software workflows as well as the data and AI-enabled analytics enhancements that are expected to be offered in our OmniSphere platform, creating a potential tailwind. For these various reasons, our 2026 product bookings guidance reflects a midpoint in a similar range to our reported actual 2025 product bookings.

As you look to build out your P&L models for 2026, I will remind you that we shared with investors in December that we anticipate 2026 incremental revenues from Titan XT to be modest. We expect Titan XT to be available for shipment in the second half of 2026 and the improved software functionality in OmniSphere to be available in the first half of 2027.

Additionally, we anticipate that the increased level of revenue linearity that we experienced in the later quarters of 2025 will likely continue through 2026, which should result in a 2026 quarter-over-quarter revenue pattern that is flatter in absolute dollars than our past historical patterns.

Moving on to our cost structure. Omnicell's management team continues to be focused on balancing the importance of making investments for the benefit of the long-term health of our business with our commitment to expanding profitability for investors. The midpoint and high end of our 2026 guidance reflect non-GAAP EBITDA expansion at a rate of approximately 2x the rate of total revenue growth.

At the same time, this guidance reflects anticipated investments to ready Titan XT and OmniSphere platform for commercial adoption as well as advance other enhancements to the customer experience. Also included in our 2026 guidance is spending associated with the transformation of our back-office systems and workflows, including a multiyear update and refresh of our enterprise resource planning or ERP systems, which are coming off vendor support in 2027 and will result in approximately $10 million of associated expenses in 2026.

As I reflect on 2025, I'm grateful for the level of commitment and execution by the team here at Omnicell. We delivered a solid fourth quarter and a strong close out of 2025. As I look ahead, I'm excited to have joined the Omnicell team, and I'm optimistic about the future and positive feedback that we have received from health systems following our announcement of Titan XT and the OmniSphere platform. With customers responding positively to our continued emphasis on innovation and execution against our product road map, we believe we are well positioned to drive sustainable, profitable growth in 2026 and beyond.

We would now like to open the call for questions. Operator?

Our first question comes from the line of Allen Lutz with Bank of America.

This is [ Dev ] on for Allen Lutz. Baird and Randy, I just want to step back and take a look at this product booking expectations and the cycle and just get a sense of how we should be viewing this?

I think you mentioned the G Series maturity versus where XT stands today. I guess as you look at the Titan cycle and the ramp over the next couple of years, is it sensible to take the typical 8- to 10-year replacement cycle and consider how you lap placements of XT in 2017 to 2020? Or is there some sort of other variables that make this ramp a little different? I think you mentioned that maturity of G Series as one. I would just love to get an understanding of how you're thinking about this ramp, in particular, based on kind of the internal data you have, around placements in the prior cycle over the next few years, not just in 2026.

Yes. Thanks for the question, Dev. I think the starting point here that's really important to keep in mind is that we believe that this refresh cycle is in excess of $2.5 billion. We continue to feel really good about that opportunity. And you laid out factors about how do you consider the XT refresh that took place as a guide. I think broadly, you're in the ballpark. I think the tricky part is always customer to customer, how do you land those. But broadly, we see a similar level of rollout over the course of, call it, the next 8 or so years. So I think you're thinking about that right. Randy, anything you want to add?

Yes. I think it's a broader discussion. Obviously, when we go to see our customers, they're really excited about not just the hardware, but the platform. And to access the platform and all its capabilities, you have to be on the Titan. So that becomes the overwhelming discussion, not about how old is my hardware and how new is the new hardware. It's about all the things that we're bringing.

Many of our customers are very complex organizations that have built up a large portfolio of inpatient and outpatient institutions that are complex and hard to manage. And so they really need this enterprise level, single enterprise-level connected point where they can manage all these things in a rational manner. It's the only way they're going to be able to manage their true cost. And so the discussion is much broader and much more enthusiastic about the platform than just the focus on the hardware. And because the platform allows us to bring in other technology solutions that we can bring in that we can't bring in today on our current hardware.

So I would just say that the -- from the trade show to now, which has only been 45 days, the top of our pipeline is full of activity, not only internally of the $2.5 billion is within our own customer set. But just the general market in general, which is even larger than that, we have engaged fairly fervently. And I think we even saw a little of that in the fourth quarter where we had a fairly large contingent of competitive upgrades there.

So that momentum has started, and we believe it will continue. We're early on in the year here, and we've just introduced the product. And so I think we put out what we knew today, but I mean, it's only -- I don't even know, 45 business days from when we made the announcement. But the excitement has never been better. I mean 2025 was a year of innovation. We opened up the innovation lab. We launched Titan XD. We relaunched OmniSphere at the next level. I mean it's just excitement around here, both internally at the company and externally in the marketplace. We couldn't be happier.

Got it. That's very helpful. And then just one last one for me. Just on -- there's been some rightsizing efforts over the last couple of years. As you look ahead to this Titan cycle and as well as OmniSphere and the rest of the product suite, do you see a need for any incremental investments around the sales force around clinical education, marketing, support individuals? How should we kind of think about the SG&A spend line item over the next few years relative to, I guess, how that's grown into 2025 here?

Yes. I think Nnamdi and I will tag team this. From a sales perspective, we've signaled in the past calls the competitive environment that we're seeing brewing and being in those deals is super important. Randy alluded to some investments we made during 2025 to increase the sales force to make sure that we're well positioned to capitalize on this market opportunity in front of us. So you'll start to see some of those come through. And then on the clinical side, do you want to share anything?

Yes. Just broadly speaking, as Randy talked about, we're excited about the response we're getting from our customers. And we know that this is a pivot point for the company. So we are investing in our sales force and how we go to market, particularly around pricing and how we package all the solutions that we've just announced.

On the clinical side as well, we'll continue to make investments in the field with regards to how we engage our customers from a clinical standpoint. So overall, I would say we're making the right investments in the right areas to make sure that customers really understand the value of what we're bringing to the marketplace.

And our next question comes from the line of Matt Hewitt with Craig-Hallum.

Maybe first up, given the launch of XT coming shortly on the heels of XTExtend, I'm just curious, those customers that had gotten into queue, maybe had signed contracts for Extend, what has been the feedback from them? Are they pushing ahead with Extend with plans to upgrade to Titan at some point in the future? Or are you having some of those pipeline candidates come back and say, oh, hold the line, maybe we want to go with Titan. Can we get in queue for that maybe in the back half of the year when that platform is available?

Thanks, Matt, for the question. So if you take a step back, one of the principles we've operated under here is really meeting customers where they are. So think about it from the standpoint of customers that have an aging fleet obviously have a compelling reason to go to Titan XT and for all the reasons that we've articulated. For those customers that you're calling out that have made the investment in XTExtend, they still have the ability to access cloud capability once we have that generally available. So it's not an investment that goes to the wayside here. Those customers will get the benefit of accessing our cloud capability through OmniSphere because the XTExtend consoles are essentially a cloud-enabled console. So as we think about it here, all -- we have the ability here to engage just about every customer out there with a path to the cloud.

That's super helpful. And then maybe just a follow-up on the gross margins. You're facing some tariff costs, I get that. Is there anything that you can do from a mitigation standpoint to reduce those costs, maybe not immediately, but over the course of this year so that you can get those product gross margins back to where they should be?

Yes. So there are a couple of things wrapped in there that I want to share. As it relates to the fourth quarter, we definitely saw the impact of the customer and product mix. So based on those installations in the product side during the quarter, there was a little bit more unfavorable mix than we had seen in the past. I think that is a little bit more of a Q4 thing than a broader reset of what the margins would be.

As you talk about tariffs, we are looking forward and the mitigation efforts completed by the team during 2025, and they really did scramble well following the implementation of those tariffs. We're exiting the year with roughly $6 million in the fourth quarter of tariffs, and we signaled $15 million into tariffs over the course of the entirety of 2026. When you think about how that will roll out, it's probably a little more front-end weighted than back-end weighted next year, but we'll start to see some natural benefits from the efforts that the team has undertaken on tariffs. So those are 2 points to flag.

I think the third point to flag is that the supply chain team is very committed to finding ways to manage our use of the global supply chain network to optimize the cost structure. How do we make sure we have a resilient available supply chain? And how do we do that through the lens of optimizing on cost to try to yield better margins. So we continue to remain very focused on that area.

And our next question comes from the line of Scott Schoenhaus with KeyBanc.

Randall, I believe you mentioned in the first question about seeing traction from the competitive wins with your conversations with customers. Maybe can we dig more there? The largest -- your largest competitor in this kind of duopoly hasn't done a refresh cycle in a long time, and there should be a lot of pent-up demand. Can you maybe comment on what you're seeing? And then maybe what's embedded in the guidance for bookings in terms of the competitive wins?

Yes. I think, obviously, the timing of this announcement was very good for us as it also was timed with marketplace. In our marketplace, everyone is looking at refreshing their systems over the next few years. And it's allowed us to get in a lot more conversations that we would not have had, had we not announced the product at this time. And so it really hats off to the Omnicell team for getting this product out and ready and announced.

And so we know we're in more fights than we've been. The top of the funnel is really strong and fresh. And it's really our opportunity to take more market share. Now in general, it's hard to put these accounts into permanently into the backlog until you sign them. So I'd say we've kind of built our forecast based on what we see today. I don't know, Baird, have I described that the right way?

Yes. We definitely felt the momentum as we were exiting 2025, the vibrancy of the competitive environment. As Randy alluded, it is difficult to bake those into a guidance, but we have assumed a modest step-up, reflecting our confidence of where we're positioned in that space. And we don't shy away from the competition. We're excited to have our outstanding products and the reliability and our innovation road map considered by competitive customers. So we're looking forward to the fight.

Perfect. Maybe just as a follow-up, Baird, you talked about mix shift pressures on the margins this quarter. But maybe talk about that maybe as a potential tailwind as you -- roll the OmniSphere product in terms of mix shift on margins?

Yes. So as we think about OmniSphere, we'll be releasing for general availability, those software workflow enhancements in the first half of 2027. I'd love to share more with you about where that is. We're pressure testing with customers at this time, our thoughts around how to go to market in that area. And we signaled in December that we'll look to, in the back half of this year, provide you a more complete and comprehensive review of where that product and offering -- set of offerings stands and how we think that will roll ourselves forward. So just need a little bit more time on that, but we definitely will share.

And your next question comes from the line of Bill Sutherland with The Benchmark Company.

Your ARR was very strong, and you're guiding strong. Maybe some granularity there in terms of the growth drivers.

Yes. I think -- Bill, are you thinking historically or are you thinking guidance-wise?

Both, actually. I was a little surprised at the strength that you reported and you followed through with a similar kind of growth trajectory for this year?

Yes. On the ARR side, historically, we had a really nice run in 2025 on the technical services. So the traditional break fix for our connected devices. The team did a very nice job in that space of making sure that contractually available pricing opportunities were secured. And so the team did a very nice job over the course of the last 18 months, and that yielded us some benefit.

Also baked into that ARR are our consumable and our specialty businesses, and those continue to perform nicely. We're encouraged by the momentum in both of those businesses. And what you see here, you see those 3 factors carrying forward in the guidance that we are setting for ARR in 2026.

Great. And then one thing I've been thinking about is with the success that you're seeing with Extend and people and your customers excited that, that is going to provide them an on-ramp with OmniSphere. Does that change the calculus in terms of the number of the cabinets that are going to be just refreshed versus replaced by Titan? And just trying to think about kind of the impact of this new go-to-market strategy.

Yes. It's a great question. One of the goals, of course, is to lean into reoccurring revenue. And as we're able to connect to the OmniSphere either with Titan or with an XT platform, older -- a newer XT platform only, the older ones can't connect, but the newer ones can. It really allows us to garner subscription fees because we no longer have the back end. You don't have the cost of running on-prem servers or on-prem licenses and cybersecurity, that's all done in the cloud by us.

So as we move those connections over to OmniSphere, it really allows us to generate, I would say, a new and healthy source of revenue for our customers who don't want to run on-premise equipment, so to speak, in these large enterprises. So I think while you're looking at the hardware opportunity, it might be a little less, a little more. It's really the opportunity to garner this new revenue stream from OmniSphere that is going to be a big driver in our future.

Really is -- it's about accelerating adoption of OmniSphere is how you guys are thinking about it, of course.

Exactly. Exactly. Good extraction.

And our next question comes from the line of Jessica Tassan with Piper Sandler.

So my first one is just can you give us a sense of how Omnicell contends with the lease structure that we believe kind of dominates your competitors' ADC installed base? Does Omnicell need to wait for lease expiry? Do customers upgrade early? And then just are lease terms or the duration of leases going to constrain the rate of competitive conversions you're able to achieve over the next 2 or 3 years?

Well, thanks, Jess. There's a lot tied up in there. Let me try to unpack that. One of the things that we've always done is we've offered third-party leasing to customers. And we found that, that program has helped some, but has also created a bit of administrative burden for others. So as we were working our way through 2025, it became apparent to us that the market opportunities that are presenting themselves in some of these competitive arrangements would benefit Omnicell if we were to have an Omnicell financed leasing opportunity for customers.

We've introduced this into a number of conversations, and we found that it's allowed us to stay in those conversations longer. And I think it comes back to -- the company has always desired to meet the needs of customers where they are. And the extension of Omnicell-driven financing program is just one more extension of that kind of ingrained culture here. Some customers, I think, will take the option. I think some will not. And so I don't see a wholesale shift in the way we do business. But I do see it as a great opportunity for us to remain competitive in competitive bid situations and potentially pick up a few additional customers because we're willing to use our balance sheet. So pause there and see if anything you want me to go deeper or want us to talk about more, Jess.

I think I'll follow up offline on that one. I guess my just follow-up would be, we saw the CommonSpirit Conifer announcement earlier this week. I guess, is there a risk or have you all contemplated the risk that AI tools potentially allow health systems to consider sort of homegrowing the pharmacy inventory management and procurement platform and that could compete with or undermine the OmniSphere launch in '27?

Well, we think AI is a great tool, and it will be used for supply chain, but you need to have an infrastructure to operate it across in order to get the right results. And so our infrastructure, particularly as you look at OmniSphere, is all geared toward AI.

And so we don't have to garner the tool sets that everybody needs to use to get the optimal returns on their supply chain, but they need an infrastructure that is enterprise-wide, that is reliable, that's secure, that you can exercise whatever types of AI you want to, both those that we offer and maybe even some that some of these institutions might have. So we think it's a net-net plus for us because people really want access to real-time data in a very large enterprise manner in order to do the right kinds of modeling, and that leans toward us.

And your next question comes from the line of Stan Berenshteyn with Wells Fargo Securities.

First, I'd love to get an update on the robotics. I was wondering if you could maybe give us what percentage of product revenue was founded by robotic products in 2025? And any changes in expectations for that mix to differ at all in 2026? And any changes in expectations for bookings?

Yes. I'll hit the revenue component and then Nnamdi. We have not yet disclosed the robotics platform. I will say, in any given period, it has not been a material amount. We are encouraged by the momentum of the XR2 offering, but it is a discrete set. You got to have the space for it and you got to have the needs and purpose for it. So that is a lower volume product. So...

And just kind of building off Baird's comment. So overall, I mean, as Baird said, it's not a material component right now, but we still think that automation and robotics is part of the answer to some of the challenges our health systems are facing. So we're just continuing to work on the right suite of solutions to meet that need. So that's where we're focused on right now.

Got it. And maybe on the services side, I would love an update on Enliven and 340B. I know Enliven, I think you have some pressures earlier in 2025. What are the expectations as we think about next year and -- or this year, I should say, as well as if you can comment on how 340B has been performing and what are your expectations?

So on the Enliven side, as we know, there's headwinds in the retail segment, and that's continuing to sort of unfold out there. With Enliven here, we're still -- the solutions that, that business provides into that retail segment, we still feel like long term, it's the right suite of solutions. But there are some headwinds in that market right now that we're continuing to watch. And what we're focused on right now is just helping our customers navigate through those headwinds. So that's kind of where things are right now, and that's kind of the focus of that business.

With respect to 340B, that is part of our specialty offering at this stage. We feel it's a compelling part of our specialty business and a big contributor with regards to how we go to market on specialty. And as you know, there's a lot of chatter out there in the marketplace with regards to the pilot program with the top 10 specialty drugs. But as we connect with customers, they're definitely watching it. But at the same time, those drugs tend to be replaced by generics or newer drugs that come on to the marketplace. So overall, from a net standpoint, customers are watching it, but we still feel like there's not a material change to our revenue expectations with the specialty business.

Got it. And maybe one quick follow-up here for Baird regarding the comments related to the ERP platform implementations. I think you called out $10 million in incremental expenses for 2026. Is that supposed to just come off like in 2027, all else equal? Or is there some other things we should be contemplating like improved efficiencies that are going to help margins as you continue to grow the business?

Yes. It will definitely be a multiyear system implementation that we'll be experiencing. But like any large initiative, we have assumed that we are going to be able to drive efficiencies through the use of the system. I would stop short of saying it's anywhere near dollar for dollar, some things you just have to do to maintain the corporate structure. But we definitely are planning that these system investments will yield benefits to our business, particularly as we clean up the way in which we work with our customers and satisfy their needs. That should provide opportunities on the commercial side for us.

And your next question comes from the line of Eugene Mannheimer with Freedom Capital Markets.

Congrats on the great progress. When we think about the Titan adoption cycle, do you envision the same bell curve type of shape that we saw during the last cycle, right, in which it peaks and the corresponding revenue peaks in years 3 to 5 and then tapers off? Or do you envision a more of a linear pace of adoption?

Well, Gene, Randy Lipps, I think, yes, it's more typically the bell shape. But I think what is different this time is we will have a lot more additional products to add on to the OmniSphere that fill in some of those gaps. So we're not just selling Titan. We're able to plug and play small, medium and large, some with software, some with hardware, additional products off the OmniSphere that really deemphasizes just sort of the bell curve profile of the business because we really want to move toward a business that's much more sustainable, much more higher margin than we are today with reoccurring revenues.

And I think we're getting ourselves set up for that with Titan being the initial product that plugs and plays off of OmniSphere to bring great value to customers. But as we add more products, they will just plug and play off the OmniSphere and continue to build out their own, I guess, bull cycle -- bell curve cycle as well. So it's going to be a wave of products, just not a product wave cycle. I think that's the difference we're doing here. And we're going to lean into the OmniSphere revenue generation portion of the future as well, not just sort of the hardware moment, if you will.

Got it. Makes a lot of sense, Randy. And my follow-up would be, you implied that you're bullish, obviously, on your ability to gain share vis-a-vis your primary competitor. So again, looking back to prior product cycles, do you think your experience in competitive conversions will be similar to that which you witnessed in their last product cycle that they embarked on 10 or 12 years ago?

I just think our opportunity in the market has never been better. I think the key here is we have the right product for these complex customers who have evolved from 5, 10 or 20 hospitals to 50 to 100 hospitals. And so the solution sets are enormously different for those type of customers. And the only way to really reach these customers with the solution set is to have an enterprise cloud-based single-app multi-tenant product that really allows the customer to get as big as they need, in every area they need and to shift and move quickly with plug-and-play resources that can track the medication management wherever they go.

And so when we talk about our solution resonating with the customer, it's the same Chief Pharmacy Officer or Operational Officer who said, yes, we just acquired [ 2,500 ] clinics. Now I got to manage those medications, what do you have? And so we have our MedVision software-only product for clinics. You can just plug that in and start running. You don't need to have to do a whole bunch of other things. Great. So it's this broadened conversation about these institutions that are really big that are looking for true platform players. And I just feel like we're so far ahead out there that as long as we can get those discussions right, we're going to win more than our fair share.

And our final question comes from the line of David Larsen with BTIG.

Can you talk a little bit about the 1Q revenue guide? It actually looked very good relative to what we were expecting. Did any deals maybe push from 4Q into 1Q? And is that a positive indicator for the volumes we're seeing in hospitals and demand from hospitals?

Yes. We -- on the push, we did not see anything material push from Q4 to Q1. As it relates to Q1, we're seeing a little more linearity in the business right now. And I think that's really just important to recognize. The business is not only growing, but it's become increasingly in this moment, predictable. That certainly helps us with implementation. It helps us manage costs. It helps us manage customer expectations in a very positive way. And so yes, we're happy to see the results as well.

And then when we use the phrase cloud and OmniSphere, does that mean that Omnicell is going to host all of the data for all of your clients with OmniSphere and Titan and then the clients will kind of use the software to access that data and you'll charge a hosting fee and you can update the software overnight immediately in real time across the entire network. Just does that mean you're going to be hosting the data or like Amazon host it?

Yes, David, exactly. No, Omnicell will host it. And we will be providing the oversight and of all the data. And just as you said, David, you've described it perfectly. The customers do not need to manage either the compute power, the storage power or access power to their systems. We will make that easy, simple and safe for them.

Okay. And then just the last quick one. So at some point in time, over the next, call it, decade, your clients are going to have to convert from XT to Titan. At some point, XT will not be supported even if that's like in 10 years. Is that correct?

Well for sure, probably sooner, but yes.

Probably sooner.

That concludes our question-and-answer session. I will now turn the call back over to Randall Lipps for closing remarks. Randall?

Well, thank you for joining us. A shout out to the Omnicell team. We had an amazing year last year in innovation and launching new products. We opened this brand-new innovation center in Austin. We launched our new product, Titan. We've got the OmniSphere in more locations. It's just one of those pivot moments for the company that in 30 years, only comes around once in a while. And it's really a pleasure to see the enthusiasm there and this launch as we move toward the autonomous medication management world, which is not that far off. It's closer than you think. And tech is available, customers are ready and Omnicell has got the products and people to make it happen.

Thank you very much. We'll see you next time.

That concludes today's call. You may now disconnect.

Good afternoon, everyone, and thank you for joining us today. I'm Kathleen Nemeth with Omnicell. It's my pleasure to be here today with our founder CEO and President; Randall Lipps, as well as our Chief Financial Officer; Baird Bradford; and our Chief Operating Officer, Nnamdi Njoku.

We're thrilled that you're able to join us, both here in the room as well as those of you joining us online. We can't wait to talk to you more about our announcement this -- that we made this morning, which is on our IR website at omnicell.com.

Before we start our Q&A, I do want to remind everyone that during the course of the discussion today, we may make forward-looking statements. There is always risks when you're talking about the future. So we encourage you to read our most recent filings with the SEC, which you can also find on our website.

With that, I'm going to turn it over to Randall for some opening comments, and we'll start with some Q&A.

Thank you, Kathleen. And what an exciting day it is for us here at the company to launch what I've termed our third wave of technology in our platform. We originally started with the G Series, original XT Series, and today we launched our third wave called Titan XT. And this is a new enterprise platform everything is new about it, new hardware, new software, new approach to solving these difficult problems that pharmacies have today.

And some of the exciting things that we can do that we haven't been able to do is really to have a real-time approach to solving these difficult problems that these big providers have as a change and morph. The new enterprise systems allows you to plug and play, different kinds of devices around the facilities to gather more visibility and to gather more data. This then resides in the cloud, which then allows us to do more analytics and provide both efficiencies and safety.

And so as we bring this new product to market, it has really become a pivoting point for us to launch our next generation of products. This is the first one that falls under this Enterprise Edition umbrella. And it's already making a difference. We have a few systems employed in the marketplace. We've gotten great feedback from it. And we know that it's going to be a winner not only for our current customers, but for a lot of customers who haven't yet experienced Omnicell.

Thank you, Randall. So our first question, Nnamdi, I would like to ask you. Could you help us understand how the Omnicell Titan XT is different from our current XT?

Yes. So Titan XT was really designed for a growing health system. When you think about it, these health systems, they're larger, they're growing, they're managing a lot of complexity, managing larger patient populations and also managing medications in more locations as we -- than ever before. So really Titan XT was designed as an enterprise system that really allows the health system to centrally manage capability like user, formularies, standardize how things are sort of done within that health system and really get full visibility.

A number of examples of capabilities that Titan XT has built in it Randy just mentioned. So you have the DynamicRestock capability. It's simple and intelligent, but the DynamicRestock capability is all about simplifying pharmacy tasks. You have the FiveRights capability that's all about using intelligent alerts to drive safer nursing decision-making. We've also delivered some AI capability that has made the system more intelligent taking data internally and externally, and really driving proactive decision-making as well and continue to sort of address things like stock out risk.

And then finally, from a protection standpoint, this system is secure. We've designed it to really get to the leading data and privacy protection standards. So we're really talking about a very secure system here. So there are lots of capabilities that makes it different from what's in the marketplace.

Thank you, Nnamdi. And now Baird, I'd like to ask you a couple of questions here. First and foremost, I know this is on people's minds. When will Titan XT be bookable?

Yes. So right now, Titan is now bookable. From a hardware perspective, we anticipate having first shipments in the second half of 2026, which really aligns nicely with the lead times that our customers need to make their decisions about timing of resources and implementations. So second half of 2026 is when we believe we'll start to ship the hardware.

From a software perspective, as Randy alluded to, we already have OmniSphere platform being used by the first cohort of customers. They're providing valuable experience and feedback to us. We anticipate ramping the use in this initial cohort over the course of 2026. So we can learn more from that customer base, how to best solve their needs before general availability of the OmniSphere release, which will be in the first half of 2027.

So a follow-up question to that. Could you talk to us about what the pricing structure is for Titan XT. Historically, Omnicell as many of us know, have sold our equipment as a capital purchase. Will this continue? Or are there any differences?

There's a lot wrapped up in that question, Kathleen. Let me kind of unpack. From a hardware perspective, what we're finding over time is there's an increasing interest from new customers in leasing models. So we'll continue down the capital path as we have in the past, but we're also going to look to meet the customers at their need points. and introduce leasing transactions into the quoting and bid process. Where that turns out will be customer by customer need, but expanding our offering, we believe, will allow us to position Omnicell in a way that gives us the best chance in new competitor opportunities.

From a software perspective, sorry, pause -- on the hardware side, we have not announced the price, I should mention. However, we do believe that the additional value that we're providing with the new features and functionality with the hardware warrants a premium in the marketplace to today's pricing. From a software perspective, we believe the software solution for cloud, workflow, inventory management, analytics and other data needs fits nicely into a more traditional software or subscription model basis. We'll look to gather the information from users as to the value drivers that they see, and we'll share more information over the upcoming quarters as we move closer to general product availability of OmniSphere platform in the first half of 2027.

Okay. And Nnamdi, turning back to you, would you consider Titan XT a full forklift upgrade?

So Titan XT will be a full forklift upgrade for customers that have older systems that are approaching the end of useful life. So those customers would require a forklift upgrade. As you remember, we've talked about our XTExtend program, which is a call enabled console and customers that, I would say, that have newer systems can use that console and access cloud capability. So the ability to get full visibility into the enterprise, a lot of powerful analytics. So that's the distinction I would make between the two. But eventually, those customers will have to go through a forklift upgrade as their systems age.

Okay. And Randall, a question for you. We're here at ASHP in Las Vegas. It's super exciting. Of course, we have our competitor here. And so I was wondering if you could talk a little bit about the overall market and specifically about how this new launch is differentiated from our competitors.

Well, for us, we're really giving customers the opportunity to get on-ramp to the latest and greatest technology in a logical way. We will partner with our customers to move them to the cloud and to tighten in the best, easiest way possible. While other situations arise in the market where they've come to the end of the line of the product. So that has put a lot of interest. Everyone is interested at this show as to what their next move is with automation. You need to have our systems or our competitors or a system in your inpatient health care in order to run it in order to be compliant. You can't run without it.

And so everybody is looking. So you could imagine at this show, we are having record numbers of visits to our booth, organized visits before and after the booth, and not surprisingly so. And it's just an exciting moment because many times like our customers or like hospital [ company ] they don't make these decisions once every 5, 10 years. So -- but now everyone is highly engaged in making that decision over the next few years and it's made a lot of great discussions and built a lot of momentum.

The thing that we're really focused on from our side is enterprise. Many of these institutions, when you get up to over 50 hospitals, you easily have over 1 million discrete locations you have to manage. So you want to understand what your enterprise has in place even if it crosses several state lines, if it crosses several geographies, locations, inpatient and outpatient. And then you want to understand how those medication movements and situations are positioned maybe not just at the enterprise but regionally and then in smaller regions and then local and then down to the very -- maybe an ICU, you want to compare all your ICUs across all 100 hospitals and take a look at those.

So when you think about how to manage medication management and my firm belief is you can't reinvent health care, which we need to do today, without reinventing medication management, it's key. The beta is too big in the outcome and not being able to reinvent it. And you have to have that broad scope and understanding to be able to have a very enterprise view and all the way down to a very micro view of your medication management. And the only way you can do that is really through these cloud-based system that has every single transaction available live and ready to apply whatever analytics and AI you want to in a secure setting. So we know that's the problem to solve. Titan and our enterprise solution solves that problem.

Yes. That's great. And so well said, Randall. And for those of you who are joining us online, if you are here in Vegas and you're on the booth for the excitement is really palpable. We -- our customers are enjoying an immersive experience in Omnicell -- with Omnicell's products in addition to the XTExtend and some of the other products and services that we have here at the show.

So now I'd like to, Nnamdi, if I could go back to you and dive in a little more on the details and the differences. We know there's questions on differences between XT and Titan, but also we've been talking recently about XTExtend and the capabilities that brings. So help us understand why our customer would purchase XT Titan versus XTExtend?

So it's really -- think about it as it's really a device age dependent. So the age of the systems the customer has. If you're a customer that has systems that are about to run out or get closer to the end of its useful life, that customer would be a perfect core to consider Titan XT. With XTExtend, if you remember this, as Randy said, this is an on-ramp to cloud capability. So customers that have invested in XTExtend essentially have a system that is cloud ready. So if they're interested in accelerating their journey to the cloud, that's something that we can use that XTExtend product to connect to OmniSphere to get all the benefits that we've talked about. For customers that I would say, generally speaking, that have systems that are on the newer side and want to accelerate their journey to the cloud, XTExtend is something that they can consider.

Okay Fantastic. Thank you. So there, let's ask a question that we know is on a lot of people's minds, revenue. When do we think that we'll start to see revenue from Titan XT?

I think it's important to remind everybody of our product or our sales cycle. So the lead time of pipeline considerations and back and forth with customers through their capital purchasing process, combined with the time it takes us to get resources, both at the customer side and within Omnicell schedule to do implementations. At the end of that implementation is the acceptance by our customer and the recognition of revenue.

So if we think about the factors of the initial XT units were shipped 9 years ago, beginning in 2017. We're coming up on that natural 10-year life. And we believe we'll start shipping product at the back part of next year. So from a revenue guidance perspective, we'll share more as we get into the Q4 earnings, but I think it would be important to signal at this point, 2026 revenue -- incremental revenue from Titan will be modest.

Thank you. Now what I'd like to do is we do have some attendees here with us. And so I'd like to give you an opportunity to ask your questions, and then we'll go back to some of the prepared questions. So Gene, would you like to go first? And I will repeat the question for the benefit of those online.

Sure. In terms of -- so the revenue opportunity not to expect much from Titan in 2026. But will customers be kind of making incremental purchases maybe to get ready for Titan? Is there some ramp before they do that?

So let me repeat the question. So the question was will customers be making incremental purchases of Titan as they get ready for the ramp?

So a couple of things, and I'll ask Nnamdi to jump in here as well. Just backdrop to, we have a number of orders already placed for which we'll be working proactively with customers to figure out which delivery solution meets their time line and their needs, whether it is XT moving to cloud capability through Extend or whether it is XT -- Titan XT. We are not yet at the end of the upgrade cycle. So we definitely have a little bit more life in us. We've shared that we're in the later stages of XT. But part of providing Titan XT to the marketplace was really to line up that capital purchasing cycle within our customers. The duration that, that takes requires that we provide insight to our product road map so they can make strategic decisions about their capital and their asset deployment. So...

Yes. The only other thing I'll add to that is, if you remember when we -- Randy kicked off, we talked about having multiple pathways for customers and just the ability to engage our customers now to figure out the right pathway that lines up with their goals is reason for the announcement today. So we're looking forward to having that conversation with that clarity...

Yes. I'd also add that many customers, when they're making or considering making the ADC decision, that's when they add in other products, which they may deploy sooner. So they tend to sort of go through a buying process that includes everything in a package. So those bookings may come in '26 and part of those may start to be delivered earlier than later that aren't part of the Titan package, but could be XR2 or maybe something else.

Got it. And just if I could get a quick follow-up when you introduced XT back in 2017 or whenever it was, you talked about I don't know, $900 million opportunity at scale to swap out with traditional cabinet with XT. Is there -- do you want to put some parameters around Titan?

Of course, yes. Yes. So we looked at the installed base that exists right now. We also looked at the importance as Randy mentioned. These systems, the ADCs are really important to the health system, their management of medications. Based on those factors, we believe that the market opportunity is around $2.5 billion.

That's our customer base, right?

Any other questions from the room?

I know you can't control when systems move on hardware and maybe last cycle probably happened faster than you thought. And it sounds like you're trying to utilize leasing, maybe to bring out the lumpiness of some of the hardware sales. Can we talk about the recurring side of revenue, what's going to drive sort of the recurring nature of the business beyond sort of the cycle?

I'll repeat the question. The question was on the recurring rate of the revenue as we go through the cycle. So commenting on that a bit. So Baird, do you want to start?

I'm happy to start. The largest portion of the recurring revenue is the service revenue that comes from the installed base of connected devices. So that is -- with growing installed base comes the opportunity along with pricing adjustments, allows for growth in that line item. Also in there, we have our specialty business which we continue to be bullish about their progress that they're making as well as our consumables business. So that annual recurring revenue component are those areas.

One place I would highlight, and we signaled this at the third quarter earnings release. Also in that recurring revenue stream is our EnlivenHealth business. We all know that the factors facing retail pharmacy has created a bit of a headwind in that area. We're grateful for the hard work the team has put into managing through those difficult industry times, but that is also embedded in our annual recurring revenue rate.

Actually do have another question, Nnamdi, for you. Regarding the XT Titan, is it the same footprint as the XT or is it different?

Well, so it is the same footprint largely between Titan XT and the XT platform.

Okay. So customers won't be required to do any type of build-out or...

It shouldn't require any more space needs because you move from one to the other for the most part.

Fantastic. So I'll open it again to the floor. Is there any questions?

Yes. So kind of like big picture stuff. So what long-term role does Omnicell envision playing in the digital transformation of hospital medication [ networks ].

Okay. So I'll repeat the question. So what long-term role will Omnicell play in the digital enablement of hospitals and that journey towards digital medication management?

Yes. Well, I think the key differentiator for Omnicell is the physical management of medications. And so wherever you have medications that require visibility or access to from a physical standpoint, we will be involved in. So that can even go all the way to the home. And I think as we see our health care systems start to develop even more, they want to manage more of the patient holistically, which means they got to manage the medications more holistically.

And it's really important to -- it's easy to digitize a process. But for pharmacy to digitize it right, you have to be able to understand where they're physically located and how they're physically administrated. And that's getting your meds and taking your meds sounds simple, but that's the equation we have to get right every time 100% of the time.

And so Randall, maybe another big picture question for you. There's been talk about the next 12 to 18 months of this being a time of the market really opening up for point of care. And so what's your view on that? And again, if you could just review with us again our competitive differentiation and how we feel about that opportunity going forward?

Well, yes, as we take this big enterprise approach toward medication management holistically, it's not just about the Titan XT systems on nursing floor. It's about how to manage all the medication management throughout these systems. And so when we're using this talking point, critical point to come in and talk about the next generation of Titan XT, it's really about the whole management of medication management in these institutions. And so a lot of these discussions revolve around consolidated service centers and the use of our robots in those, the use of setting up centralized IV and distributing IV from one central location to another to gain efficiencies and even some safety.

So as we look at that rollout of the world, we have to continue to deploy small, medium, medium-large, large devices that are connected into our platform that are constantly giving us the visibility to really create what we call an autonomous medication management process. We're not that far from it, but I think we see it out there. We've launched in our -- internally in our company, Ignite 2030. And it's all about getting to that autonomous world, which we know will be there in 5 years.

Thank you, Randall. And I think that's a wonderful point for us to close on today. So I thank Randall, Nnamdi and Baird for being here and all of you for your great questions. Again, we couldn't be more excited about this announcement, and we appreciate your interest in the company. Thank you very much.

Thank you.

Thank you for standing by. At this time, I would like to welcome everyone to today's Omnicell Third Quarter 2025 Financial Results Call. [Operator Instructions] After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Kathleen Nemeth, Senior Vice President, Investor Relations. Kathleen?

Good morning, and welcome to the Omnicell Third Quarter 2025 Financial Results Conference Call. On the call with me today are Randall Lipps, Omnicell Chairman, President, CEO and Founder; and Baird Radford, Executive Vice President and Chief Financial Officer; as well as Nnamdi Njoku, Executive Vice President and Chief Operating Officer. This call will contain forward-looking statements, including statements related to financial projections or performance and market or company outlook based on current expectations. These forward-looking statements speak only as of today or the date specified on the call.

Actual results and other events may differ materially from those contemplated due to numerous factors that involve substantial risks and uncertainties. For more information, please refer to our press release issued today, Omnicell's Annual Report on Form 10-K filed with the SEC on February 27, 2025, and in other more recent reports filed with the SEC. Except as required by law, we do not assume any obligation to update any forward-looking statements. 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 releases. Our results were released this morning and our financial results press releases are posted in the Investor Relations section of our website at ir.omnicell.com. With that, I will turn the call over to Randall. Randall?

Good morning, and welcome to Omnicell's Third Quarter 2025 Earnings Call. We are pleased to report another strong quarter. The total revenues, non-GAAP EBITDA and non-GAAP EPS all exceeding the upper end of our previously issued guidance. We believe this robust performance reflects strength in our core point-of-care business and exceptional execution by the entire Omnicell team. Continued demand for our flagship point-of-care connected devices, including XTExtend, remained strong and drove our robust top line performance during the quarter. We are happy to see strong adoption of innovative solutions across inpatient and outpatient settings with recent wins and major health systems and government health care facilities.

We believe that our transformation into an intelligence medication management technology company is progressing well and we are encouraged by early positive customer feedback on our OmniSphere cloud-based platform. Looking ahead, we remain focused on delivering innovative solutions globally that aim to continuously improve the customer experience and advance our customers closer to the industry defined vision of the autonomous pharmacy. We believe that our commitment to operational excellence, customer-centric innovation and cybersecurity positions us to drive long-term value for all stakeholders. As we have outlined previously, we expect our future growth to continue to be driven by 3 core pillars: first, expanding our market presence.

We're actively working to grow our connected devices footprint across the inpatient and outpatient care environments, including nursing units, operating rooms and a full spectrum of pharmacy settings. We find that recent customer wins and increased platform adoption underscore the strength of our solutions and the trust we're building across the health care continuum -- scaling reoccurring revenue. We're also focused on expanding our base of predictable recurring revenue through service contracts, software subscriptions and cloud-based offerings, which is anticipated to give us greater visibility into our business, and deliver long-term value to customers.

Lastly, accelerating our technology platform OmniSphere. I must hear that our cloud-native platform designed to unify all Omnicell products under a single secure infrastructure. It is purpose built to enable enterprise-wide visibility into medication and supply inventory and simplify access to automation and intelligence tools. As previously announced, OmniSphere achieved high trust CSF1 certification, demonstrating our commitment to cybersecurity and adherence to high industry standards for data protection and medication management.

Before we begin reviewing our third quarter 2021 results, I'd like to take a moment to welcome Baird Radford to Omnicell as our new Executive Vice President and Chief Financial Officer. Baird brings more than 30 years of experience in health care and technology finance leadership, and we are thrilled to have him join our executive team. His deep expertise in driving strategic growth and operational excellence will be instrumental as we continue to progress our transformation into an intelligent medication management technology company. We look forward to Baird's leadership as we advance through innovation and executional rigor and seek to further our mission to deliver value to our customers, partners and stockholders.

Turning to our third quarter 2025 financial results. Total revenue in the third quarter was $311 million, representing an increase of $28 million or approximately 10% compared to the third quarter of 2024 and an increase of $20 million or approximately 7% compared to the previous quarter. Our third quarter 2025 earnings per share in accordance with GAAP were [ $0.01 ] per share compared to $0.19 per share in the third quarter of 2024 and $0.12 per share in the prior quarter. Our third quarter 2025 non-GAAP earnings per share were $0.51 compared with $0.56 per share in the same period last year and $0.45 per share in the prior quarter.

Finally, during the third quarter of 2025, we substantially completed the $75 million stock repurchase program, which our Board authorized earlier this year. Despite a complex macroeconomic backdrop, we remain encouraged by the resilience and adaptability we are seeing in the hospital and health system markets. While inflation and regulatory uncertainties continue to influence capital spending decisions, we're seeing a steady and continued focus on strategic investments. Hospitals seem to be prioritizing technologies that deliver strong ROI and operational efficiency, areas where we believe our portfolio is well aligned.

On the policy front, although some uncertainties remain around federal funding, we're optimistic about the long-term commitment by hospitals and health systems to medication management infrastructure and innovation. Our technology and services solutions are designed to support hospitals in navigating these dynamics and we're confident in our ability to grow through continued partnerships and value creation despite some of these industry headwinds. As we continue to execute on our strategic transformation, we're seeing strong market validation of our product and services road map. Our customers are responding positively to the breadth and depth of our solutions particularly as we expand our reach across the continuum of care. From the successful rollout of our XTExtend offering to the early customer experiences with our cloud-native OmniSphere platform, it's clear that our technology is resonating with health care providers who indicated they are seeking to enhance visibility, cybersecurity, efficiency and patient safety.

These innovative solutions are not only driving demand, but also, we believe, reinforcing Omnicell's position as a trusted partner in the journey towards the autonomous pharmacy. This was another strong quarter for our point-of-care solutions, including XT cabinets for nursing care areas, and IT workstations for perioperative settings and XTExtend. Leading health care providers across the U.S. and Canada, including the Department of Veterans Affairs are choosing Omnicell solutions to support their medication dispensing needs. One of the largest health systems in the Southern United States, selected Omnicell's points of care solutions, along with our premier inventory optimization service intelligence offering and other central pharmacy solutions. In an effort to increase inventory visibility, improve insights and optimize workflows across their Georgia-based network.

Our specialty pharmacy services offering, which is designed to help health systems launch and scale specialty pharmacy and 340B programs continues to gain traction in the market. A leading hospital on Oregon's Southern Coast has selected Omnicell to help its efforts to expand access to high-acuity therapies across rural communities aligning with the system's mission to deliver integrated community-based care. A not-for-profit health system in the Southeast United States is launching its first specialty pharmacy with support from Omnicell. This new program is intended to support multiple hospitals and closely align with the systems cancer center, expanding access to life-sustaining therapies while advancing integrated locally delivered care.

As we look ahead, I'm energized by the momentum we're building through our commitment to innovation with hospitals and health systems navigate dynamic environment, Omnicell remains steadfast and our mission to be their most trusted partner, empowering them to achieve better outcomes, reduce costs and alleviate staff burnout. I am confident that our focus on delivering value through innovation will continue to position us for success and support our customers they shape the future of health care. As a reminder, Omnicell will be attending the 2025 American Society of Hospital -- midyear meeting in Las Vegas from December 8 through the tenth and where we are very excited to be sharing some of our new innovations. Now with that, I'd like to turn the call over to Baird. Baird?

Thank you, Randall, and good morning, everyone. I'm thrilled to be joining you today for my first earnings call at Omnicell and pleased to report that we exceeded our outlook delivering results above the upper end of our previously provided third quarter 2025 guidance. Before I jump into the financials, I wanted to share a few thoughts and observations for my first couple of months here at Omnicell. First, I have been truly inspired by the passion and dedication shown by our employees to deliver on Omnicell's mission to transform medication management through the delivery of innovative and reliable solutions for our customers.

This customer focus positions us well to meet the rising expectations of the health systems we serve. Second, I'm excited about the market opportunity we see ahead of us. in our connected device business, the cornerstone of our customer offering and in our digital enablement road map, that is focused on pairing our innovative hardware offerings with cutting-edge software solutions and services. Third, I believe our business model provides the opportunity for us to create sustainable top line revenue growth while also prioritizing investments in a manner that expands profitability.

Now moving to our third quarter 2025 results. Total revenue was $311 million representing an increase of $28 million or approximately 10% from the third quarter of 2024 and an increase of $20 million or approximately 7% compared to the previous quarter. Third quarter of 2025 product revenue was $177 million, representing an increase of $19 million compared to the third quarter of 2024 and an increase of $14 million over the previous quarter. Service revenue in the third quarter of 2025 was $133 million, which increased $9 million from the third quarter of 2024 and represented an increase of $6 million over the previous quarter.

Non-GAAP gross margin for the third quarter of 2025 was 44.2% compared to the third quarter of 2024 of 44.5% and 44.7% in the prior quarter. A full reconciliation of our GAAP to non-GAAP results is included in each of our second quarter 2025 and third quarter 2025 quarterly earnings press releases, which are posted on our Investor Relations website. Our third quarter 2025 earnings per share in accordance with GAAP or $0.12 per share compared to $0.19 per share in the third quarter of 2024 and $0.12 per share in the prior quarter.

Our third quarter 2025 non-GAAP earnings per share were $0.51 compared with $0.56 per share in the third quarter of 2024, and $0.45 per share in the prior quarter. Third quarter 2025 non-GAAP EBITDA was $41 million compared with $39 million in the third quarter of 2024, and $38 million in the prior quarter. Our cash and cash equivalents totaled $180 million as of September 30, 2025 compared to $399 million as of June 30, 2025. The decrease reflects the repayment of a principal amount of $175 million of debt that matured in September 2025 and the repurchase of our common stock in the third quarter 2025 of approximately $62 million. .

The company continues to generate solid free cash flow with third quarter 2025 free cash flow of $14 million compared to third quarter 2024 of [ $9 ] million and $27 million in the prior quarter. In terms of accounts receivable, days sales outstanding for the third quarter of 2025 or 74 days, which compares to 83 days in the third quarter of 2024 and 75 days in the prior quarter. Inventories as of September 30, 2025, were $107 million compared to $95 million at September 30, 2024, and $106 million at June 30, 2025. Now I would like to walk through some of the key business drivers for the third quarter of 2025. Product revenues continue to be strong. with third quarter 2025 product revenues of $177 million, up $19 million compared to the third quarter of 2024 and up $14 million compared to the prior quarter.

As I mentioned in my initial remarks, connected devices continue to be the cornerstone of our product offering and our strong product revenue performance in the third quarter of 2025 was driven by strength in our point-of-care products including XTExtend. We also continue to see a positive impact from the process improvements we have put in place over the past 2 years. These improvements includes scheduling and customer engagement throughout the sales and implementation process, which contributed to our overperformance in the quarter compared to our previously announced expectations. Non-GAAP EBITDA in the third quarter of 2025 was $41 million, up by $2 million compared to the third quarter of 2024. And up by $3 million compared to the prior quarter.

Non-GAAP EPS in the third quarter of 2025 was $0.51, which is down $0.05 compared to the third quarter of 2024, but up $0.06 compared to the prior quarter. If you recall, during our second quarter 2025 earnings call, we noted that we expected to see some headwinds in the third quarter of 2025 from increased tariff expense and nonrecurring software upgrade costs in the field that are modestly impacting our non-GAAP EBITDA and non-GAAP earnings per share. During the quarter, we successfully mitigated some of the nonrecurring software upgrade costs that we had noted previously by leveraging existing resources and various process efficiencies.

Before we move to our guidance, I would like to provide an update on the tariff impact during the third quarter of 2025 and our current thoughts on tariffs for the remainder of 2025. In the third quarter of 2025, tariffs impacted profitability by approximately $6 million net of mitigation efforts. We expect a similar $6 million net profitability impact in the fourth quarter of 2025. For full year 2025, the net tariff impact on profitability is projected to be approximately $15 million after reflecting benefits from our supply chain management and pricing mitigation efforts. The supply chain team's efforts around tariff mitigation strategies have been impressive. They have worked with our contract manufacturers to move the sourcing of subassemblies and components to more favorable geographies while continuing to strengthen our supply chain resilience and maintain high product quality standards for our customers.

While these mitigation efforts take time to reflect in the financials, we anticipate these actions will have a beneficial impact throughout 2026. Therefore, at this time, we believe the full impact of tariffs in 2026 will be lower than the $6 million per quarter run rate as we exit 2025. Now turning to guidance. Please note that our fourth quarter and updated full year 2025 guidance is based on our current estimate of the potential impact of tariffs as of today. We recognize that the situation is fluid, and we are continuing to monitor the situation. Although there could be modest cash flow implications to the fourth quarter of 2025, from potential increases in tariff rates. We don't anticipate the potential changes to materially impact fourth quarter profitability.

We will reflect potential near-term tariff changes, if any, in our 2026 guidance that we will provide in connection with the fourth quarter 2025 earnings call. For the fourth quarter of 2025, we are providing the following outlook. We expect fourth quarter 2025 total revenues to be between $306 million and $316 million with product revenues anticipated to be within $175 million and $180 million and service revenues expected to be between $131 million and $136 million. As we have shared previously, we expect revenue to be more linear in 2025 as process improvements that we have established last year are currently driving more consistent scheduling and stronger operational execution.

We expect fourth quarter 2025 non-GAAP EBITDA to be between $37 million and $43 million, and non-GAAP earnings per share to be between $0.40 per share and $0.50 per share. For full year 2025, we are maintaining our previously issued guidance ranges for product bookings and annual recurring revenue and modestly raising the midpoint of our guidance ranges for total revenues, non-GAAP EBITDA and non-GAAP earnings per share. Consistent with our prior guidance, we continue to anticipate 2025 product bookings to be in the range of $500 million to $550 million and year-end 2025 ARR is expected to be in the range of $610 million to $630 million. For 2025, total revenues, we are raising and narrowing our guidance range.

Total revenues for full year 2025 are now expected to be in the range of $1.177 billion to $1.187 billion. as compared to our prior expectation of $1.13 billion to $1.16 billion. Within product revenues, we saw a stronger third quarter of 2025 than previously guided on the strength of scheduling and customer engagement levels, combined with the momentum that we are carrying into the fourth quarter of 2025, product revenues for full year 2025 are now expected to be in the range of $661 million to $666 million compared to our prior expectations of $625 million to $640 million. Within service revenue, we have seen stronger performance within Technical Services revenues.

Accordingly, we have increased the midpoint for Technical Services revenue guidance from $248 million to $260 million for full year 2025. However, our SaaS and expert services revenue growth has been slower than expected, particularly within our Live and Health business as that business faces headwinds in the retail pharmacy space. As a result, we have modestly lowered the midpoint for our SaaS and expert services revenue guidance for the full year 2025 from $265 million to $259 million. Non-GAAP EBITDA for the full year 2025 is now expected to be in the range of $140 million to $146 million compared to our previous range of $130 million to $145 million.

Finally, full year 2025 non-GAAP earnings per share are expected to be in the range of $1.63 to $1.73 versus our prior expectation of $1.40 to $1.65. The increase of our profit metrics at their respective midpoints represent the expected benefit from higher revenue levels, partially offset by investments in customer experience enhancements and innovation. For full year 2025, we are assuming an effective blended tax rate of approximately 18% in our non-GAAP earnings per share guidance. As we wrap up, I would like to extend my deep appreciation to the entire Omnicell team for their warm welcome and also for their incredible efforts in delivering a very strong third quarter of 2025. Their resilience and dedication have laid a solid foundation for continued success throughout 2025 and into the future. We would now like to open the call for questions. Operator?

[Operator Instructions]

All right. It looks like our first question today comes from the line of Jessica Tassan with Piper Sandler. Jessica, please go ahead.

So I guess the most important one for me is just, Baird, it's awesome to hear you emphasizing the hardware as being kind of central to the Omnicell platform. I'm interested to know, are you guys engaging with start-up companies and doing diligence to figure out how to implement humanoid robots in the pharmacy or how to develop more sophisticated robotics? And if so, does that potentially expand your reach into retail pharmacies or ambulatory settings like just how should we be thinking about investments in hardware and specifically in robotics over the next, call it, whether inorganic or organic over the next couple of years? And then I have just 1 on some 4Q detail.

Well, yes, absolutely. I mean it's all about AI and robotics. And if you look at Per Genova, who we just hired as a new technical leader has an extensive robotic background for that reason. So I think that it's key that we use robotics and deploy robotics to capture the information and detail visibility of where meds are so that we can apply our -- the power of intelligence across those to optimize and deliver outcomes for everyone. So that's absolutely -- and I'm sorry, Jessica. What was the other question?

Yes. I guess just 1 quick follow-up. So is there any thoughts being given to potentially making a smaller version of the central dispensing robot just so that it's easier for customers to purchase both from like a physical capacity and then also obviously a budget perspective?

Yes. I think we're looking at a lot of different dynamics there, not only just size but speed and types of robots. So I would say that there are a lot of different options on that plate that we are deploying as well as just adding robotics to some of our current products that are more manual intensive today.

Got it. Last one is just I think there's some investor confusion just around OmniSphere. Can you clarify if an ADC does not run on OmniSphere today, what is it running on? And is Omnicell penetrated today across the ADC install base? Or is it a large incremental revenue opportunity akin to XTExtend.

Yes. OmniSphere does run on our current products, so you can connect the OmniSphere to our color touch products. But long term, They'll be integrated to another platform, a clean sheet platform. So an easy path from OmniSphere to getting all of our products connected onto the platform.

Yes. I would say, Randy, I would add that OmniSphere is in still in limited customer release. There are some customers that are running it. Their current -- most of the current customers are an OmniCenter. And eventually, they'll migrate over to OmniSphere. That's the long-term vision to that part of our innovation road map.

Yes. We have early adopters running on it today, and it's been running for several years actually, we've been working on it so it's a mature product.

Thanks, Jess, for all 3 of your questions. Next question, please.

Yes. Our next question is -- or I should say it comes from the line of Matt Hewitt with Craig-Hallum Capital Group.

Congratulations on a strong quarter. Maybe I wanted to touch on the IV opportunity. You called out the Ballard Health or the Ballard Health win. And I'm just curious, as customers are looking to integrate our solutions, are they add the IV at each facility? Or are they looking at more of a hub and spoke type model? I'm just trying to gauge how they're seeing this impacting their business and where it can go from there.

Thank you, Matthew, for that question. Let me maybe provide just a broad perspective about how we're thinking about IV and I'll hit your question directly. So we see a great opportunity in the IV space, what customers just taking control over their IV supply chain and to really unlock that opportunity, we're looking at different ways of doing that, everything from semiautomatic to fully automatic solutions. And we have a number of programs out there right now with our workflow product at analytics. With respect to IV robot that you're asking about, it kind of depends on the size and the footprint of the health system that typically our implementation takes into account just what the goals of that helps us to -- what they want to achieve from a throughput on a volume standpoint, and that dictates how a new robot actually go into implementation. So that's typically how we approach that.

And our next question comes from the line of Stan Berenshteyn with Wells Fargo.

First, on bookings guidance, you reiterated your guidance. I'm curious, as we sit here in the fourth quarter, is the composition of the products within your bookings in any way different than what you had anticipated at the start of the year? And can you also comment on whether you've seen any changes in your sales cycle?

So thanks for the question, Stan. From the bookings perspective, I think it's important to recognize that we exited Q3 with good momentum. Our engagement with our pipeline continues to be strong. And we continue to see them looking primarily at our point-of-care products. And we have not seen a change in the mix within those offerings.

Okay. And maybe just 1 quick 1 on the compounding robot. I think previously, Randy, you said you're at the tail end of making upgrades here, it's potentially coming out of limited release -- can you give us an update on that? And then what do you anticipate happens once you're out of limited release? Are you changing your go-to-market strategy there? How should we think about that?

Yes. Well, I think it's -- we're still in limited release, and we don't have an emphasis state for when we're coming out of that limited release date, we want to get it right. And it's a product that is complex and is FDA regulated, so we have to be very careful how we approach that. On our semi-automated platform, it is doing really well and picking up, and we feel like that continues to answer a lot of the open issues in the market that needs a solution. .

And our next question comes from the line of David Larsen with BTIG.

Congratulations on the good beat and raise. Randy, can you maybe talk a little bit about the buying environment? We're kind of -- I'm kind of hearing mixed things from different companies that sell into the hospital sector. Some are saying there's the risk of a slowdown with the Big Beautiful Bill Act because of Medicaid and exchange enrollment headwinds that might happen, others are saying there's not really any drag at all. What are you seeing? And what are your discussions like with your clients? It looks like things are going pretty well.

Yes. I think things in general have been improving. I think it's really hospital system specific. If you have a lot of government pay or a higher percentage of government pay than the average, you're going to have more headwinds. I think the most interesting thing is that really there's a big refresh cycle that's approaching. And all the hospitals are preparing for this refresh cycle because we see a lot of the old first generation systems are recent generation systems in the marketplace sunsetting that are not our systems, but our competitors so when that refresh cycle comes, people are aware that they need to prepare for purchasing more tech in the pharmacy space.

And with our first wave of refresh cycle coming up. It is an opportunity for us to really approach the marketplace with all of our new innovative platforms particularly around our OmniSphere and intelligence platform where people really want an enterprise solution that's unique. So really, really excited about this changing mindset due to the timing in the market and our ability to have these deeper conversations both with our customers and those who are not our customers.

That's great. And then I'm hearing a lot about GLP-1s. Every time I look up, somebody is mentioning it. Can your compounding product help hospital systems create a compounded GLP-1 solution for their patients? Or is that not an area you're sort of in.

Well, we've looked at that area, and we haven't found the best way to use our technology there to formally create a program or create a program for the hospitals. But we're still looking at it. And I think it's we're wondering if it's going to change with the oral solids coming out and what impact that would have on the IV compounding approach. .

All right. Thanks for the question, David. Our next question comes from the line of Bill Sutherland with the Benchmark Company.

Baird, you called out the headwinds that are slowing the enliven product, any other industry headrooms in particular that you guys are watching most closely as far as could impact as you go into 2026. .

The short answer is we're not seeing anything at this time. We are definitely focused on staying very close on the point-of-care business to those customer negotiations and monitoring the flow through of backlog as well as negotiations of the pipeline for bookings to come. So those are the places where we stay very focused. But at this point, we're seeing a consistency with the last several quarters.

Okay. And then while I've got you always curious about capital deployment as you look into this quarter.

Thanks for the question, Bill. As we highlighted during Q3, we completed the remaining $62 million of our $75 million share repurchase program. This helped us reduce our outstanding share count over the course of the FAP program by 5%. As we look forward, I think it's important to keep a couple of things in mind. I'm working with the team to get up to speed on our potential options and trade-offs as it relates to investing in first organic growth as well as potentially acquisitions and/or share repurchases. Still relatively new to the company in 2 months. So there are no actions currently planned, but I definitely want to reiterate for this group that we are committed to being prudent and disciplined in making these decisions into the future.

And our next question comes from the line of Scott Schoenhaus with KeyBanc Capital Markets.

Congrats on the strong quarter, and welcome, Baird. So I guess a lot of my questions have been answered. But I guess my question will be on 340B. Randall, your commentary seemed a little bit more positive this quarter versus previous quarters. Anything to draw there with the customer behavior is changing there? Is it anything to do with the regulatory side from the HIC subsidies? And then how do you adapt your platform or your selling season this year around the regulatory, there is may be positives that you can sort of adapt your conversations with your clients such as 340B?

Yes. Well, thanks, Scott. I appreciate the comment and the questions. Yes, I think we've really matured over the last year, particularly this year, we're seeing more crossover sales from our regular sales force with our 340B team acting as a good go-to-market. So we're seeing over half of our new customers and pipeline coming from current Omnicell customers. And this is a really positive indicator. This is where we want to get the synergies. And as we kind of change our go-to-market added in some sales force strength. We're seeing good results from that. And we're picking up the pace there as we sign these new contracts which will eventually come out in increased ARR. We think it's a positive business. We haven't seen anything to really slow it down even though there's a lot of chatter about some of the specialty drugs being -- costs being reduced. There's still enough activity there that it makes it worthwhile for these hospitals to pursue a specialty pharmacy and to operate -- make it easy for them to operate it by using our services. .

Scott. And our next question comes from the line of Eugene Mannheimer with Freedom Capital Markets.

Congrats on the great numbers and welcome Baird. I just really had one. I mean you had a very strong quarter. So you cited strength in your point of care business I'm just wondering like how much of that outperformance was due to net new wins versus expansions within the base versus, say, maybe you're seeing some tail end of the XT upgrade cycle? Just trying to understand some of the dynamics within that.

I think we saw relative consistency there. There were wins. There were expansions within existing customers. And can't really pin it on anything specific. It was just really good, solid execution by the team across the offerings.

Makes sense. Where are we in that XT upgrade? Is it 90% of the way done at this point?

No, we're -- for the cohort we have, and it's very early on, right, because just started last April. So...

The full XT not the Extend. Yes. The full Extend. So -- from a bookings perspective, though, we're well along the completion of the upgrade cycle. Obviously, from a revenue perspective, we've got bookings and backlog, which we expect to continue to ship throughout the next several quarters. From an Extend perspective, as Randy said, we're still fairly early in that -- from that respect. .

And our next question comes from the line of Allen Lutz with Bank of America.

Randy, you mentioned the sunsetting of a competitor system may be presenting a unique opportunity for Omnicell to take some share. Can you talk about how big that opportunity is? Can you talk maybe a little bit about the historical switching rate between you and 1 of your major competitors? And then as you go to market trying to convince some of those prospects to switch, what is sort of the pitch? And can you talk overall about your expectations as it relates to what, if any of that is embedded in guidance for the rest of the year?

Yes. Thanks for the question, Allen. Yes, it's a significant size market, right? It's $8 billion to $10 billion market. And the opportunity for us to switch is about moving from sort of a unique product to a platform. And this is the centerpiece of our approach is the enterprise offering that we have with OmniSphere, which really sits the central piece that allows you to connect all of the current technology, all the new technology, all the smaller technology to a central platform to collect the data and integrate into the operation of these very, very large institutions.

It really allows you not to have additional servers or the cloud just expands for as you need more space. And so it provides the flexibility that you need to give these institutions as they move more patients to outpatient or change their cadre of hospitals around to different sets as they acquire or get rid of those. It's the flexibility they need to do that. And because they want the outcomes and the outcomes depend on collecting the data and storing it and using it in an intelligent way. And then approaching the autonomous pharmacy, you need to have all the data to do that in order to actually let the system start to make high-level decisions for you. I mean, historically, we've grown this company by taking market share.

I think through the pandemic, things were muted and coming out of the pandemic -- thanks for muted because of people didn't want to have the people to do the switching. I think that's now that's changed now. Hospitals are much more stable. The employee base is stable, and they want to spend strategic capital. So I think we'll get our fair hearing in these accounts. and it's a unique opportunity. And we have been leading the innovation. We absolutely believe we have the best product in the marketplace by far. And we're going to get more than our fair share. We have, and we will.

And it looks like there are no further questions at this time. So I will now turn the call back over to Randall for closing comments. Randall?

Well, Well, thank you, everybody, for joining. It is a unique time in the industry, and we're really excited about it. I hope that some of you will be able to meet us at ASHP and see some of the new innovations we're bringing to the marketplace. It's an exciting time to be in our markets. We've been preparing for these upcoming years, and I think we've done a good job and move forward and get back to some solid growth. Thanks for joining. Cheers.

And again, ladies and gentlemen, that does conclude today's call. You may now disconnect. Have a great day, everyone.

Thank you for standing by. My name is Eric, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Omnicell Second Quarter 2025 Financial Results Call. [Operator Instructions] I would now like to turn the call over to Kathleen Nemeth, Senior Vice President, Investor Relations. Please go ahead.

Good morning, and welcome to the Omnicell Second Quarter 2025 Financial Results Conference Call. On the call with me today are Randall Lipps, Omnicell Chairman, President, CEO and Founder; Nchacha Etta, Executive Vice President and Chief Financial Officer; and Nnamdi Njoku, Executive Vice President and Chief Operating Officer. The call today will contain forward-looking statements, including statements related to financial projections or performance and market or company outlook based on current expectations. These forward-looking statements speak only as of today on the date specified on the call.

Actual results and other events may differ materially from those contemplated due to numerous factors that involve substantial risks and uncertainties. For more information, please refer to our press release issued today Omnicell's annual report on Form 10-K filed with the SEC on February 27, 2025, and in other more recent reports filed with the SEC. Except as required by law, we do not assume any obligation to update any forward-looking statements.

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 releases. Our results were released this morning, and our financial results press releases are posted in the Investor Relations section of our website at ir.omnicell.com. With that, I will turn the call over to Randall. Randall?

Good morning, everyone, and thank you for joining us today. We had a strong second quarter and first half of 2025, and I am pleased to announce today that we are reaffirming our full year 2025 outlook for product bookings and annual reoccurring revenue and modestly increasing our full year 2025 guidance for total revenues, non-GAAP EBITDA and non-GAAP earnings per share, which reflects our strong first half 2025 performance and greater visibility as we move through the back half of the year.

I'm proud of the team's ability to deliver strong despite the headwinds from tariffs and uncertainty in the macroeconomic environment. I'm also pleased to note that we are seeing that overall customer demand is tracking to our expectations. which we believe reflects the strength of our innovative portfolio of products and services. Customers appear to continue to see the value in our products and have been receptive of broader pricing increases and strategies we have recently started to implement. Also, we think it's important to remember that our installed base has grown significantly over the last several years.

And as we continue to announce new innovations and capabilities, it should position us well as we move forward. I'm excited about the journey Omnicell is on, evolving from a device-centric medication and medical supplies management company to an end-to-end medication and medical supplies management technology platform company, combining both automation and intelligence that serves the entire continuum of care. This transformation is meant to allow us to serve our health system customers by providing high visibility of medications and medical supplies in every location and giving them accurate, actionable insights intended to enhance operational and clinical outcomes.

Now let's review the second quarter 2025 financial results. Total revenue was $291 million, representing an increase of $14 million or 5% over the second quarter of 2024 and an increase of $21 million or 8% compared to the previous quarter. Our second quarter 2025 earnings per share in accordance with GAAP were $0.12 per share compared to $0.08 per share in the second quarter of 2024 and a loss of $0.15 per share in the prior quarter. We believe that we are building customer awareness around our road map, which includes both automation with robotics and smart devices and intelligence with software and analytics, and this appears to be resonating with the market.

We believe we are increasingly viewed by our customers as a way for them to maximize their capital and strategic investment dollars. As I noted, we are pleased to see that customer demand is tracking to our initial expectations at the start of the year despite the uncertainty customers are facing, whether from legislative or economic environment. We expect our future growth to continue to be driven by 3 core levers: First, expanding our market presence. We are focused on capturing greater market share across both inpatient and outpatient settings. This includes nursing units, operating rooms and pharmacies of all types from central pharmacies to specialty pharmacies. Our recent customer wins and continued platform adoption reflect what we think is the strength of our solutions and the trust we believe we are building across the health care continuum.

Second, scaling reoccurring revenue. We are taking actions to grow and scale our predictable recurring revenue base. This includes service contracts, software subscriptions and cloud-based offerings that are expected to provide long-term value to our customers and greater visibility in our own business. We are pleased to note that we are growing and scaling our predictable recurring revenue base, both from growth in market share and price levers. And third, accelerating our technology platform, Omnisphere.

A key pillar of our transformation is Omnisphere, our cloud-native platform designed to be the connected backbone for all Omnicell products. OmniSphere is intended to enable enterprise-wide visibility into medications and medical supplies inventory and provide a single point of access for all cloud-connected automation and intelligence. This quarter, we were proud to announce that Omnisphere received [indiscernible] certification. an important milestone that affirms our commitment to cybersecurity and operational excellence. We believe we are the only med management company to achieve this milestone and importantly, at a time when many customers are looking for solutions that achieve the highest data protection standards. In the second quarter, we unveiled our innovation lab in Austin, Texas. This facility is dedicated to solving customer identified pain points through rapid prototyping and testing.

We also hosted at our lab Illuminate 2025, our fifth annual customer-focused event that aims to shine a light on customers' most pressing medication management challenges and Omnicell's innovative solutions that are helping to drive enhanced clinical and operational outcomes. As more patient care shifts toward an outpatient model, we believe there is a growing need for better medication management at the clinic level.

To support health systems in managing growing inventory locations in outpatient settings, we launched MedVision, a software solution that is built to offer the ability to manage real-time medication inventory workflows in clinics. The product is designed to provide visibility through dynamic dashboards, insights into stockouts, stock values, usage and high interoperability through automated reordering and replenishing at the clinic level. We are pleased with the market reception thus far. Also, to continue our path to increase visibility within the hospital to continue to lead the industry with innovation, we launched a new RFID product line, MedTrack. We are starting in the operating room with the first offering named MedTrackOR. The RFID enabled draw is designed to work in conjunction with an Omnicell anesthesia workstation to allow noncontrolled medications to be automatically tracked via RFID and allow providers to adopt grab-and-go dispensing and returning approach within the operating room and procedural area environments. These exciting new products continue to add to our strategy that seeks to create visibility and provide actionable insights throughout the health system and reach the outcomes laid out in the Autonomous Pharmacy framework. These innovative products also reflect our commitment to seeking to help health care providers improve outcomes, reduce costs and alleviate staff burnout. I'm confident in our long-term strategy and our ability to lead the next era of medication management. We are building the infrastructure, the talent and the technology that should support our customers as they navigate a rapidly evolving health care landscape. Now let's turn to some of the customer win highlights for the second quarter. We continue to be pleased with the strong customer demand for our XT Amplify offering, particularly XTExtend, which again helped drive our strong top line performance in the second quarter of 2025. XTXtend was part of several larger portfolio deals this quarter, including a significant win at a large Northeast health organization with 7 locations across New Jersey, along with other wins at health care entities in Nebraska, Northern Pennsylvania and Southern and Central New York and government health care facilities.

In June 2025, we held our inaugural IV Trust Summit, which brought together industry leaders, patient safety advocates and policy advisers to explore opportunities for improving patient safety of intravenous medication compounding through automation and intelligence. Our IV automation solutions continue to gain traction in the market with a leading Southern California health system selecting Omnicell to provide IV automation solutions that are intended to support safety and accuracy for their sterile compounding operations. Our central pharmacy footprint continues to grow with a large non-for-profit academic medical system in Illinois and a Mississippi-based Catholic health system selecting our central pharmacy dispensing service in its efforts to enhance safety and efficiency in central pharmacy inventory management and dispensing.

Finally, a leading acute care regional hospital in Northern Georgia has selected Omnicell Specialty Pharmacy services to launch a specialty pharmacy designed to extend its advanced inpatient and outpatient services as it seeks to deliver comprehensive community-focused care. In summary, while we are mindful of macroeconomic uncertainty and are working to navigate a dynamic cost structure environment relative to tariffs, we are pleased with the pace of innovation Omnicell is delivering across the entire continuum of care and are excited about the opportunities ahead. We believe our focus on innovation and providing ROI solutions will resonate with customers during these uncertain times. Now with that update, I'd like to turn over the call to Nchacha. Nchacha?

Thank you, Ronda. I want to start with a big thank you to the entire team at Omnicell for delivering outstanding financial results for our second quarter of 2025. Your strategic thinking, resilience and ability to navigate through challenging tariff headwinds has been nothing short of exceptional. This quarter, I am pleased to report that we delivered strong results, exceeding the upper end of nearly all of our previously stated guidance ranges. Now I am going to walk you through some of the key drivers of our second quarter 2025 performance as well as share our third quarter and updated full year guidance. Looking at our second quarter 2025 results, total revenue was $291 million, representing an increase of $14 million or approximately 5% from the second quarter of 2024 and an increase of $21 million or nearly 8% compared to the previous quarter.

Compared to the second quarter 2024, we saw year-over-year growth from all 4 of our major product categories, including connected devices, which benefited from XTExtend as well as key contributions from technical services, SaaS and expert services and consumables. Compared to our second quarter 2025 product revenue guidance, we saw stronger-than-expected revenues from connected devices, including contributions from lease renewals as well as consumables.

Second quarter 2025 product revenue was $163 million, representing an increase of $7 million compared to the second quarter of 2024 and an increase of $18 million over the previous quarter. Service revenue for the second quarter 2025 was $127 million, which increased by $7 million from the second quarter of 2024 and represented an increase of $3 million over the previous quarter. Non-GAAP gross margin for the second quarter of 2025 was 44.7%, representing an increase of 50 basis points compared to the second quarter of 2024 and an increase of 260 basis points from the prior quarter. Second quarter 2025 non-GAAP gross margin when compared to first quarter 2025 results benefited from higher product revenue volumes, favorable pricing, customer and product mix as well as some seasonal expenses, which were lower in the second quarter of 2025. A full reconciliation of our GAAP to non-GAAP results is included in each of our first quarter 2025 and second quarter 2025 quarterly earnings press releases, which are posted on our Investor Relations website.

Our second quarter 2025 earnings per share in accordance with GAAP were $0.12 per share compared to $0.08 per share in the second quarter of 2024 and a loss of $0.15 per share in the prior quarter. We are very pleased to see earnings per share in accordance with GAAP swing to a positive compared to the prior quarter with the improvements driven by higher revenues and continued focus on prudent expense management. As we have noted in prior calls, our goal is to deliver consistent GAAP profitability. Our second quarter 2025 non-GAAP earnings per share was $0.45 compared to $0.51 per share in the same period last year and $0.26 per share in the prior quarter. Second quarter non-GAAP EBITDA was $38 million compared to $40 million in the same period last year and $24 million in the prior quarter.

As of June 30, 2025, our cash and cash equivalents were $399 million compared to $387 million as of March 31, 2025. Our company continued to generate solid free cash flow with free cash flow during the second quarter of 2025 of $27 million, which represents an increase of $17 million compared to the prior quarter. In terms of accounts receivable, days sales outstanding for the second quarter of 2025 was 75 days, which represents a decrease of 11 days compared to the prior quarter. Inventories as of June 30, 2025, were $106 million, an increase of $15 million from the prior quarter and an increase of $13 million from June 30, 2024.

As a reminder, during the second quarter of 2025, our Board of Directors authorized a new stock repurchase program of up to $75 million. As of June 30, 2025, we have bought back approximately $16 million worth of our stock. Going forward, we plan to continue buying back shares of our common stock opportunistically.

Before we move to the guidance, I would like to provide an update on the tariff impact during the second quarter and our current thoughts on tariffs for the second half of 2025. The impact of tariffs on our profitability in the second quarter of 2025, net of our mitigation efforts was approximately $2 million, and we currently expect the net quarterly impact of tariffs for each of the third and fourth quarters of 2025 to be approximately $6 million per quarter.

At this time, we expect our net tariff impact in 2025 to be approximately $15 million, which includes $32 million in gross tariff impact. which we expect to be partially offset by our estimates of the forecasted timing of the tariff impact on the income statement and our ongoing and planned mitigation efforts. As we have mentioned in previous calls, we are implementing various mitigation initiatives, but obviously, this take time to flow through our financial statements and to have the intended effect of offsetting a portion of our higher anticipated costs.

As part of our mitigation efforts, we are reviewing our pricing strategies and have recently started implementing price increases. While it is early in this effort, we are pleased with the market reception we have seen, which we believe reflects the strength of our portfolio of products and solutions. We believe our products drive significant value for customers, given our focus on quality and superior return on investments.

We would expect the benefits of the various mitigation plans to have a greater effect as we exit 2025. Therefore, our projected 2026 tariff impact is anticipated to be lower than the currently expected annualized run rate of the $6 million impact in the fourth quarter of 2025. Please keep that in mind as you are preparing your financial modeling for 2026. Even before this round of tariffs kicked off, we had already been taking steps intended to improve our supply chain resilience, ensure continuity of products and reduce cost and enhance efficiencies. We are making good progress on our mitigation efforts and continue to feel confident in the steps we are taking to address this issue. Now turning to guidance. Please note that our third quarter and updated full year 2025 guidance is based on our current estimate of the potential impact of the tariffs as of today.

We recognize that the situation is fluid, and we will continue to monitor the potential impact as the remainder of the year progresses. For the third quarter of 2025, we are providing the following outlook. We expect third quarter 2025 total revenues to be between $290 million and $300 million, with product revenues anticipated to be between $165 million and $170 million and services revenue expected to be between $125 million and $130 million. We expect third quarter 2025 non-GAAP EBITDA to be between $28 million and $32 million and non-GAAP earnings per share to be between $0.30 per share and $0.37 per share.

Please note that we expect to see some headwinds in the third quarter of 2025, including increased tariff expense and nonrecurring software upgrade costs in the field that will modestly impact our non-GAAP EBITDA and non-GAAP earnings per share guidance. For full year 2025, we are maintaining our previously issued guidance ranges for product bookings and ARR and modestly raising our guidance ranges for total revenues, non-GAAP EBITDA and non-GAAP earnings per share.

As we move through the back half of the year, these adjustments to setting of our guidance metrics reflect both our strong first half performance and greater visibility into full year results. Consistent with prior guidance, we continue to anticipate product bookings to be in the range of $500 million to $550 million and our year-end 2025 ARR to be in the range of $610 million to $630 million. For total revenues, we are raising and narrowing our prior guidance ranges.

Total revenues are now expected to be in the range of $1.13 billion to $1.16 billion as compared to the prior expectation of $1.105 billion to $1.155 billion. Non-GAAP EBITDA is now expected to be in the range of $130 million to $145 million, up from our previous guidance of $120 million to $145 million. Finally, non-GAAP earnings per share is expected to be in the range of $1.40 to $1.65 versus our prior expectation of $1.30 to $1.65.

As we have mentioned previously, we are also facing an approximate $0.20 headwind to non-GAAP earnings per share in 2025 compared to 2024 due to a reduction in interest income as a result of repurchasing a significant portion of the principal amount of our previously outstanding convertible senior notes in the fourth quarter of 2024. For the full year 2025, we are assuming an effective blended tax rate of approximately 18% in our non-GAAP earnings per share guidance.

As we close I once again would like to thank the entire team here at Omnicell for driving our strong second quarter 2025 performance and setting a foundation for what should be a strong 2025 and beyond. I am extremely proud of how our team has remained resilient and committed to delivering on Omnicell's mission to be the clinician's most trusted partner for medication management. We would now like to open the call for questions.

[Operator Instructions] Your first question comes from the line of Jessica Tassan with Piper Sandler.

Randall, I'm wondering if you can just describe the competitive landscape. It sounded like you guys were gaining momentum in the kind of top 300 hospital space. Are those hospitals still in the market, have macro headwinds or kind of the impending 2026 volatility in marketplace and Medicaid kind of scared some portion of your pipeline? Or is it still strong? And then just in terms of competitor behavior, obviously, we are aware of a competitive launch. Is Omnicell proactively approaching customers and prospects in light of that? Or is the launch just softer and less threatening than maybe we and investors have feared?

Sure. Good to hear from you, Jessica. I really believe that hospitals are talking slightly differently, but their buying behavior is -- has not changed. I think in the middle market, we tend to do very well as we do in all the markets, I think. But I think it's a little bit easier to swap. And I think we line up very competitively with -- in the competitive world against what's coming out and what we have out and what we're going to bring out. So that momentum has continued in that market. Their financials seem to be in line to continue to buy our products and make the swap. So we feel confident about that. And I think as we have done here in Austin, Texas, we've launched our innovation center. We are really moving away from just being a product company to a tech company. So it's more about an enterprise, high-tech solution that's cybersecure that can answer a lot of different problems throughout an institution's continuum of care. And it's probably less about one product here or there. So I think we have the strongest solution set in the marketplace, and that continues to resonate really well with customers that we currently have and the ones that we're going after.

The next question comes from the line of Matt Hewitt with Craig-Hallum Capital Group.

Congratulations on the strong quarter. Maybe kind of an extension of the prior question. What are you hearing from customers regarding the Medicaid cuts and the impacts that they're facing on that side of the equation and its ability to purchase more products. Is it affecting the way that they're kind of lining up in queue? Or is it changing the way that they look at the services, maybe looking to adopt your services more broadly as a way to kind of reduce their overhead? Any color there would be great.

Yes. I think as they think about these new legislative things coming down, they just haven't arrived yet. They have to go through the federal government and through the state government. And so -- and I'm not sure that they really can assess the full impact yet. But we do see these systems, the big providers really thinking about can technology begin to really solve some of my bigger issues, not just fill the gap, but actually solve some of these problems. So it really puts us in a good position to help reduce cost and improve efficiencies and really make a better experience for the users, which is really critical, particularly nursing. So I just feel that we are so well positioned with what we have to offer from an enterprise standpoint that it just seems to be resonating with customers. And I feel like as we move forward, it's just going to get better even if the dollars get tight, which they haven't yet. So just to be clear, we haven't seen any customer change of behavior in our pipeline to push out things or slow things down. It's been steady.

Your next question comes from the line of Stan Berenshteyn with Wells Fargo.

I would love to maybe get some comments on the IV compounding product that you have. You just announced the inaugural Trust Summit that you just hosted. Can you just give us an update on the demand environment within compounding? And then also, I think previously, you've mentioned, Randy, that the compounding robot has been getting fixed up and upgraded. Do you have a time line of when that robot will graduate from being offered on a limited release basis?

Yes. We just released our fourth and final phase of completing the product substantially. And that was lined up with the timing of the IV Summit. So we have a product that's ready to go and has been gaining momentum, both in the pipeline, and we do have a backlog of customers that have begun to install. So that marketplace is picking up for us. We're pretty much the sole player in that market. And the new features and functions and productivity and safety features have been accepted really well. And we have -- I think another key indicator of the momentum of that product is the reference of all the customers now, pretty much all the customers are a good reference for us as we go forward. And I just -- I'm excited about it because this is a hard, difficult product to make and solves a hard problem for our customers. And that's where you get good value and good return for them and for us.

The next question comes from the line of David Larsen with BTIG.

Congratulations on the good quarter. Randy, can you talk a little bit more about software in the clinics? And any color around like your product road map, what are you doing for the docs and the offices at these hospital systems? And sort of what's your vision going forward?

Well, it's really critical as we move to a fully automated world, the autonomous pharmacy, as I look at it, that you have to have full visibility of all the meds and all the locations, which include clinics, which include doctors' offices that include outpatient surgery centers and the like. And in order to do that, you have to have solutions that fit those situations. And MedVision is a down payment on that. It really allows you to go anywhere that meds are. You can use hardware to manage and control those or you could just use open shelves. It doesn't matter. But the key is that it's an integrated system into our entire enterprise platform. So you don't have to buy separate platforms or separate systems or integrate them in later, it's already totally integrated. So it's an easy add-on for our customers to move from inpatient to outpatient without having to deploy new servers, new systems or even new training. And it works really well from smart devices or smart pads in order to deploy it very quickly. So the key to reaching the best systems you can on an enterprise level require you to get to 100% visibility of the product and the supply chain and location at all times. And that's what we're striving for.

Okay. So as volume shift towards outpatient settings, ASCs, doc offices, it sounds like you're meeting that demand and that need that hospital systems have. And then can you maybe just talk a little bit about your visibility into implementation schedules? We're here midway through the year. What is your visibility for 3Q and 4Q?

Well, we've really worked on this over the years and have really created a solid go-forward process. We almost have 95% to 100% visibility on the entire rest of the year as far as scheduled of installs required to meet our revenue commitment. And it even goes beyond just the end of the year, it goes into next year. So we have changed this process over the last few years, and we continue to yield great benefits from it, not only for the customers and the predictability, but for employees who fly out to these customers to do the installs, they can schedule their lives around the known install dates and create a great experience for our customers.

Your next question comes from the line of Bill Sutherland with The Benchmark Company.

Just a 2-parter here on tariffs. Is the guidance assuming that the temporary -- the 30% tariff that was for the 90 days sticks? And are you -- and I'm curious about you last time talked about shifting subassembly work from China and really getting a lot of -- just a lot of the cost of sales here. Just curious how the outlook for that looks.

Thanks for the question, Bill. So I'll address the work we've been doing to build resiliency into our supply chain. With regards to the mitigation efforts that we talked about last time, I would say we're very well on our way to having most of that in place that allows us to move the allocations as needed. As we talked about, a big part of our exposure were components we were sourcing from particularly China. And we've put things in place that as we go into 2026, we feel pretty good about the resiliency that we've built into our process. So that's where we are right now. Good progress there.

Your next question comes from the line of Allen Lutz with Bank of America.

Really nice gross margins on the product side. And you talked in the prepared remarks about raising prices. I'm curious, did that impact gross margins in the quarter? Is raising prices specifically related to tariffs? Or is it broader than that around the value prop you're providing? And then can you just talk about expectations for gross margins into the second half of the year?

Well under the pricing, we put a -- I'll answer the pricing question. We put pricing process in place a few years ago. And what -- and it's continued to pay off because as you put prices in, it takes a while for them to flow through. But what we have been doing of late is being able to range -- raise the range of pricing increases that we've had, maybe a little bit higher due to the higher rates of inflation that are permitted in our contracts, and that's beginning to flow through. And so -- but it wasn't specifically around tariffs per se, but it has been just about the increased cost overall that we have borne as a company, and those have kind of gone through without too much pressure. So we feel really good about that. And a lot of them continue to be implemented, and we'll continue to see the results of those price increases as we move forward.

With regards to gross margin expectations, we've been very pleased with the progress that we're making on gross margin. We've said this before. We're investing in our SaaS and services businesses. And as those businesses continue to scale, we expect to see them contributing to our gross margin going forward. Also, just speaking about our multiyear innovation program, XT Amplify has been getting very good reception from our customers. And as the business continues or start contributing to meaningful revenues going forward, we should see that have a positive impact on our gross margin.

Your next question comes from the line of Scott Schoenhaus with KeyBanc.

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Congrats on the really good quarter. I have a 2-part question. So you clearly noted more visibility in your business. And I think Advanced Services and the recurring revenue nature there is clearly contributing. My question is that as we roll off the XT Series replacement cycle in addition to new software and service modules and offerings, should we see much more of a revenue mix shift? We only saw 100 basis points of mix shift this year per your expectations. How should we think about this mix shift going forward and the margin opportunities there as you build traction in Advanced Services? And then secondly, I think Nchacha mentioned strong lease renewals in the quarter supporting product revenues. Could you remind us what percentage of your customers pursue leases now versus CapEx payments? And is there a change in behavior in regarding advanced services purchasing decisions with these sort of lease renewal customers versus full CapEx?

Yes most of our customers do purchase and some of those then execute a leaseback through their own banking relationships and some go through our leasing facilities. It's really a small portion of our business that really goes through our own facilities. And so it's not -- it's probably 10% of our business or something around that number. I think the customer -- I think the mix is growing slowly, but nicely on the more reoccurring, we're about 50-50 now, and we're growing a little bit more. But as we see customers beginning to renew with the Amplify, we know that, that's going to drive more product revenues through. And also our consumable business is continuing to grow nicely, which is also flows through the product line. So I think it will kind of go back and forth, but I think it's a lot better positioned than we have been historically, where maybe it's been 30% of our business has been reoccurring, 70% has been product. And this really allows us to weather storms when there are capital freezes. I don't I don't really see any shift in behavior and wanting to buy one way or the other. It is a different environment from the years past when interest rates were 0% and so people had large lines of their own to execute on leasebacks of equipment. And now that interest rates are higher, perhaps we can do more leasing and lean in more into reoccurring revenue products, but it's a slow movement.

Operator, could you reopen the line for Bill Sutherland. Bill, I don't think we addressed your question on tariffs. We want to make sure to get to that.

[indiscernible]

We can hear you. Yes, go ahead.

Okay. Cool. Yes. The first part of it was about the rate assumed in the back half guide for tariffs. That was the 30% that's been in place, I guess, until August 12 or if that gets pushed. I'm just wondering what you guys assume.

Yes. We did assume 30% rate, which is based on the tariffs that we announced at the beginning of the second quarter. And that's what that's the assumption that we used for the full year projection.

Your last question comes from the line of Eugene Mannheimer with Freedom Capital Markets.

Congrats on a good -- I was wondering if you could elaborate a little more on Omnisphere in terms of what you're seeing with respect to customer adoption and rollout? And should we be thinking about this as a multiyear evolution? And how does it impact revenue and in particular, recurring revenue over time?

Yes, Eugene, and good to hear from you again. Yes, Omnisphere is a key platform as we move forward. And our entire customer base over several years will be moving to Omnisphere as it will be -- represent the enterprise solution engine to all of our products. I think it's one of the most exciting pieces when you sit down with customers and talk about because these customers are massive, they're large. And they want to deal with one single vendor that can provide everything they need through a cybersecure that has flexibility, both in compute power and storage power without having to buy any servers, without having to do anything in their IT room where it's all managed on the outside by us. And so you can see that, that kind of product is one that really lends itself to the ever-changing landscape of these providers as they add more outpatient facilities or they acquire an inpatient facility, it becomes really easy to deploy and use. And with that, we are going to drive additional revenues to get connected into that device into that back-end system. And yes, you'll start to see more reoccurring revenues as we move forward. Now we're just at the beginning of the deployment. We've been working on this product for gee, 5 years. We've had it in beta for 2 years, and we're now just rolling it out. So it is a hardened product, as we mentioned, HITRUST certified that we're going to connect everything, every device out there we have to it. to collect the data and manage the system. And eventually, it will be the backbone to apply all of our AI engine pieces to, which are also great revenue generators for us as we solve really big complicated problems for our customer in a simple, elegant way.

That sounds exciting, Randy. And just my follow-up is on some of the new innovations you've been introducing, MedTrack, MedVision, MedChill going back to last -- earlier in the year. Are these products in response to solutions that your competitors already provide? Or are these unique and unmatched by your competitors today?

Well, we kind of try to go figure out where the customers' problems are and build out solutions. And we really think that these will meet our customers' needs. And most of these are fairly unique solution sets in the marketplace. And most importantly, these solutions are integrated into a platform. One of the feedbacks that we get from customers is they don't want to buy third-party products that integrate into our platform. They want to buy products from us that are totally integrated into the platform. And so it's really important that we continue to innovate and deliver new products that can be easily deployed and automatically connect into the network of the OmniSphere as we move forward. It makes it really easy to come out with new hardware platforms that automatically plug into our OmniSphere network are immediately identified, don't take a lot of time to configure and easy to deploy. So it's just -- I think because we have this enterprise platform, it's easy to add on more solution sets quicker. That is our goal.

I will now turn the call back over to Randall Lipps for closing remarks. Please go ahead.

Well, thanks for joining us today. And as you can see, Omnicell does have momentum out there. A nice quarter to the team, nice delivering on the results, exciting times as we move from a product to a tech company, we deploy these new solutions, and it's just a privilege to work in the industry. So thanks for being with us, and we'll see you next time.

Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.