Omnicell , Inc. (NASDAQ:OMCL) has reported a robust first quarter for 2024, with total revenues of $246 million surpassing its previous guidance and showcasing a positive financial trajectory. The company has announced its plans for product and service expansion while maintaining a cautious stance due to macroeconomic challenges.
Key Takeaways
- Omnicell's total revenues reached $246 million, exceeding forecasts.
- Non-GAAP gross margin stood at 39.8%, with earnings per share at $0.03.
- The company is exiting an underperforming international product line.
- A successful Illuminate 2024 event and market traction for XT Amplify program offerings were highlighted.
- Omnicell opened a new location at Good Samaritan Hospital and celebrated the success of its EnlivenHealth brand.
- A cautious outlook persists due to interest rate environment and customer budget constraints.
- Q2 guidance anticipates total revenues between $250 million and $260 million.
- Non-GAAP EBITDA for Q2 is projected to be between $14 million and $20 million, with earnings per share between $0.10 and $0.20.
Company Outlook
- Non-GAAP gross margin is expected to expand in the second half of 2024.
- The company is focusing on strengthening its operational and financial performance.
- Omnicell believes it is well-positioned for future growth.
Bearish Highlights
- Higher than expected income tax expense partially offset benefits in Q1.
- Accounts receivable day sales outstanding increased, indicating slower payment from customers.
Bullish Highlights
- Cash and cash equivalents balance rose to $512 million.
- Non-GAAP free cash flow was strong at $38 million.
- Successful resolution of regulatory review for IVX robots.
- Demand for MedChill products and Specialty Pharmacy Services continues to grow.
Misses
- Inventories decreased by $7 million, which may indicate a reduction in stock levels or improved inventory management.
Q&A Highlights
- Cost savings initiatives from year-end are mostly reflected in Q1 results, with continued benefits expected.
- Positive performance noted for EnlivenHealth, with new client wins and expanded services.
- Pull forward demand in services revenue seen in Q1, expected to balance out over the year.
- Omnicell is excited about new innovations and its multiyear roadmap.
Omnicell's first quarter of 2024 has set a positive tone for the year, with the company not only exceeding its financial expectations but also progressing strategically. The company's decision to streamline its product line and focus on high-performing areas like the XT Amplify program and Specialty Pharmacy Services reflects a targeted approach to growth.
Despite the challenging economic environment, Omnicell's cautious yet optimistic outlook, coupled with a strong balance sheet, positions it favorably as it continues to innovate and deliver solutions that address customer needs. Investors and stakeholders alike will be watching closely as Omnicell navigates the dynamic healthcare landscape, aiming to deliver on its promises of operational excellence and financial strength.
InvestingPro Insights
Omnicell, Inc. (OMCL) has demonstrated resilience in its first quarter of 2024, with an impressive revenue performance. As investors look deeper into the company's financial health and future prospects, InvestingPro data and tips provide a more nuanced view of Omnicell's position in the market.
InvestingPro Data highlights the company's current market capitalization at $1.35 billion. Despite the challenging market conditions, Omnicell's revenue for the last twelve months as of Q1 2023 stood at $1.147 billion. However, it's important to note a revenue decline of 11.48% during the same period, which aligns with the company's cautious stance in the face of macroeconomic challenges.
On the profitability front, Omnicell's P/E Ratio is currently at -65.25, reflecting its recent struggles with net income. This is further emphasized by the adjusted P/E Ratio for the last twelve months as of Q1 2023, which is -144.61. Yet, the PEG Ratio of 0.13 suggests potential for growth relative to earnings expectations.
InvestingPro Tips for Omnicell shed light on key aspects of the company's financial strategy and outlook:
1. Analysts predict the company will be profitable this year, which could signify a turnaround from the recent performance.
2. Omnicell's valuation implies a strong free cash flow yield, indicating the company's ability to generate cash after funding the expansion of its asset base.
For investors seeking a comprehensive analysis, InvestingPro offers additional tips on Omnicell, including insights on debt levels, dividend policies, and trading multiples. To explore these further, visit https://www.investing.com/pro/OMCL and remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 5 more InvestingPro Tips available for Omnicell, providing a detailed understanding of the company's financial health and market potential.
Full transcript - Omnicell (OMCL) Q1 2024:
Operator: Good morning, ladies and gentlemen my name is John and I’ll be you conference operator for today. Please note that today’s call is being recorded. All lines have been placed on mute to prevent any background noise [Operator Instructions] I will now turn the call over to Kathleen Nemeth, Senior Vice President, Investor Relations. Please go ahead.
Kathleen Nemeth: Good morning, and welcome to the Omnicell first quarter 2024 financial results conference call. On the call with me today are Randall Lipps, Omnicell Chairman, President, CEO and Founder; and Nchacha Etta, Executive Vice President and Chief Financial Officer. This call will contain forward-looking statements, including statements related to financial projections or other statements regarding Omnicell’s plans, strategy, objectives, goals, expectations, products or solutions actions to streamline our international product line holistic review of the business or market or company outlook that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied. For a more detailed description of the risks that impact these forward-looking statements, please refer to the information in our press release issued today, and the Omnicell Annual Report on Form 10-K filed with the SEC on February 28, 2024, and in other more recent reports filed with the SEC. Please be aware that you should not place undue reliance on any forward-looking statements made today. All forward-looking statements speak only as of the date hereof or of the date specified on the call. Except as required by law, we do not assume any obligation to update or otherwise release publicly any revisions to our forward-looking statements. Our first quarter results were released this morning and are posted on the Investor Relations section of our website at ir.omnicell.com. Additionally, we would like to remind you that during this call, we will discuss some non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are included in our financial results press release posted with respect to forward-looking non-GAAP measures, we do not provide a reconciliation of these measures to the comparable GAAP measures, as these items are inherently uncertain and difficult to estimate and cannot be predicted on a GAAP basis without unreasonable effort. With that I will turn the call over to Randall. Randall?
Randall Lipps: Thank you, Kathleen, and good morning, and thank you for joining us on the call today. I will walk through our solid financial performance for the first quarter of 2024 and provide an update on the current demand environment and our successful Illuminate 2024 customer event. Beginning with our results, our first quarter 2024 came in above our previously announced guidance on several key metrics. Total revenues were $246 million. Total revenues in the quarter were $4 million above the top end of our guidance range, primarily due to solid execution and timing within both Technical Services and our Advanced Services. Non-GAAP gross margin for first quarter was 39.8%, a decrease of 380 basis points from the prior quarter, primarily due to lower revenue volume leverage. Our first quarter 2024 non-GAAP earnings per share were $0.03. First quarter non-GAAP EBITDA was $11 million. First quarter 2024 non-GAAP EBITDA and non-GAAP earnings per share exceeded our outlook due to the better-than-expected revenue as well as strong cost and operating expense management. Since our last earnings update, we have retained an external management consultant conduct a holistic review of our business with the aim of streamlining our operations and unlocking shareholder value. Today, we announce our intention to exit one international product line, which was not delivering sufficient returns on our investments. This action was already under active consideration prior to hiring the external consultant. While this was a first small step, we are indeed moving forward with determination and urgency. Now, let’s turn to the current macro environment and industry landscape. As we move into 2024 there are some reports pointing to encouraging signs that health system finances are beginning to stabilize. Hospital finances reflect a strong start to 2024 with calendar year-to-date operating margins approaching 5%, primarily due to accelerating outpatient revenues, lower contract labor spending and lower average lengths of stay. At the same time, the interest rate environment remains challenging with forecasts for rate reductions unpredictable, and we continue to see areas of the customer base that are still facing budgetary constraints. Therefore, we are continuing to take what we believe is a prudent and cautious approach to our business planning and management. We have begun to see market traction for some of our initial XT Amplify program offerings. The 500 plus bed academic medical center in Massachusetts is a new customer for Omnicell and is converting its automated dispensing system footprint to XT Amplify cabinets. Our CarePlus solution, which is designed to improve solution adoption and provide data driven performance optimization information supported by expert services, was identified by the customer as a pivotal differentiator that created unique value for their purchase decision and as part of a six-year extension of a sole source agreement, a Kansas-based health system is seeking to maximize the value of their XT technology through XTExtend a comprehensive console swap designed to improve a high level of security while enhancing the user experience. Health systems across the country continue to recognize the value of Omnicell’s advanced services offering that is designed to help transform pharmacy care. In addition to adopting our Central Pharmacy Dispensing Services, a large Southern California hospital plans to leverage our IV compounding service in an effort to provide more accurate, safe and cost effective sterile compounding. Our customer base for Specialty Pharmacy Services now exceeds 400 hospitals and clinics. We’re excited to announce the opening of a new location at Good Samaritan Hospital in Indiana, which cited Omnicell’s experience and expertise in specialty pharmacy program management as key to their decision to partner with us. We expect our customer base to include an additional seven pharmacies to open in second quarter 2024. We believe the combination of Omnicell’s 340B TPA with our Specialty Pharmacy Services program management offering is delivering growth opportunities for our customers. Our EnlivenHealth brand had a strong first quarter 2024 with a large buying cooperative choosing Enliven’s analytics solution as it works to transform its complex pharmacy data into actionable insights and outcomes focused on patient care and operational efficiency. We had multiple other wins in the quarter as well. On April 16, we announced XT Amplify innovative program intended to enhance pharmacy and nursing efficiency, reduce medication errors and waste, and ultimately maximize the value of the XT Automated Dispensing System investment. We introduced the first set of solutions in this multi-year program as part of our virtual Illuminate 2024 customer event, where healthcare and pharmacy leaders had the opportunity to learn about the potential benefits of XT Amplify. We were joined by Jennifer Hillman, Executive Director of Pharmacy at San Antonio-based University Health, who recently completed the XT conversion project and shared her successful experience with attendees. While it’s early, we assure you that XT Amplify is intended to be just the beginning of our reinvigorated focus on new products and services, which we expect to bode well for long term growth. I hope that you can see that we are taking the necessary steps that we believe will strengthen our financial and operational performance, accelerate profitable growth, and drive shareholder value. We remain confident in Omnicell’s long term opportunities and continue to believe the company is uniquely positioned to transform the pharmacy care delivery model and ultimately help enable our customers drive better outcomes and increase their returns on investment. Now, with that, I’d like to hand it over to Nchacha to discuss our results. Nchacha?
Nchacha Etta: Thank you, Randall. I want to thank all of our employees for delivering the results this quarter. We exceeded our guidance across all key metrics, delivered strong cash flow, and managed our expenses carefully and responsibly. While we still have work to do to strengthen our financial and operational performance we are off to a good start and I am pleased with the level of commitment and engagement I see across our company. Turning to our financial results. Our first quarter 2024 total GAAP revenues were $246 million, a decrease of $13 million over the prior quarter and a decrease of $45 million compared to first quarter of 2023. The year-over-year decrease reflects the impact of a continued challenging environment for some of our health system customers and the timing of our XT product life cycle. Services revenue were $113 million, an increase of 8% over the first quarter of 2023, which was primarily driven by growth in technical services as we continue to see the benefits from the growing installed base and pricing actions. Total revenues in the first quarter were $4 million above the top end of our previously disclosed first quarter 2024 guidance range, which was primarily due to solid execution and timing within both Technical Services and our Advanced Services. Non-GAAP gross margin for the first quarter 2024 was 39.8%, a decrease of 380 basis points compared to the prior quarter, primarily due to lower revenue volume leverage. We expect our non-GAAP gross margin to expand in the second half of 2024 as we anticipate volume leverage from higher product revenue. A full reconciliation of our GAAP to non-GAAP results is included in each of our first quarter 2024 and fourth quarter 2023 earnings press releases, which are posted on our investor relations website. Our first quarter 2024 earnings per share in accordance with GAAP was a loss of $0.34 [ph] per share compared to a loss of share $0.32 per share in the prior quarter and a loss of $0.33 per share in the first quarter of 2023. Our first quarter 2024 GAAP earnings per share includes the impact of $3 million for the potential wind down of the Medimat robotic dispensing system product line we announced today. Subject to local law and statutory works council consultation requirements. If the wind down proceeds, the total non-recurring costs we estimate to incur related to the wind down are approximately $15 million to $20 million, of which we have already incurred approximately $5 million. If the wind down is agreed to the RDS restructuring plan is expected to increase our annualized net operating profit and we plan to incorporate this expectation in our full year 2025 guidance. We do not expect the RDS restructuring plan to have a significant impact on our revenue and we do not expect to achieve significant cost or operating expense savings related to the restructuring in 2024. Our first quarter 2024 non-GAAP earnings per share were $0.03 compared to $0.33 per share in the prior quarter and $0.39 per share in the same period last year. First quarter non-GAAP EBITDA was $11 million, a decrease of $13 million compared to the previous quarter and a decrease of $16 million when compared to the same period last year. First quarter 2024 non-GAAP EBITDA and non-GAAP earnings per share exceeded our expectations, primarily due to revenue execution and timing, as well as strong cost on operating expense management. As we continue to take what we believe is a prudent approach with our investment decisions. The benefits from our higher revenue and lower expenses were partially offset by higher than expected income tax expense. The higher first quarter income tax expense was the result of timing within the year and we continue to expect our 2024 non-GAAP effective blended tax rate to be approximately 19%. At the end of the first quarter of 2024, our cash and cash equivalent balance was $512 million, up from $468 million as of December 31, 2023. Non-GAAP free cash flow during the first quarter of 2024 was $38 million as we continue to see strong cash collections and working capital management. In terms of accounts receivable, day sales outstanding for the first quarter of 2024 was 94 days, an increase of four days over the prior quarter primarily due to the modest decrease in revenues. Inventories as of March 31, 2024 were $103 million, a decrease of $7 million from the prior quarter and a decrease of $38 million from March 31, 2023. The decrease is primarily due to the strong efforts of our supply chain team as they continue to execute and make progress on our global supply chain process improvements and inventory management initiatives. For the second quarter of 2024, we are providing the following guidance. We expect total second quarter 2024 revenues to be between $250 million and $260 million with product revenues to be between $140 million and $145 million, and service revenues to be between $110 million and $115 million. We expect second quarter 2024 non-GAAP EBITDA to be between $14 million and $20 million and we expect second quarter 2024 non-GAAP earnings per share to be between $0.10 per share and $0.20 per share. In summary, we are working with a sense of urgency to strengthen our operational and financial performance. We are pleased to have delivered the first of many expected innovations and new capabilities for our fleet of XT medication dispensing systems, and we believe Omnicell is well positioned for the future. With that, we would like to open the call for questions.
Operator: [Operator Instructions] Your first question comes from the line of Stan Berenshteyn from Wells Fargo. Please go ahead.
Stan Berenshteyn: Hi, good morning, everybody. Just maybe a question on the XTExtend mid cycle upgrade. Can you just walk us through how we should think about this? How much of the installed base is expected to be upgraded? What’s the timeframe expectation there? And then, how many years of life does this upgrade expect to add to the cabinets? Thanks.
Randall Lipps: Thanks, Stan. Well, we’re really excited about the XT Amplify, and it’s really more than just a console upgrade. There are a multitude of products and services we just announced that go with the amplify platform. And as we stated before, we will continue this multi-year journey of expanding the XT Amplify to include more products and services that allow us to get into areas that we don’t service today, like ambulatory and surgery centers and other areas the inpatient, that don’t have good visibility. So it is a multiyear program with multi products and services that go beyond just a console upgrade. So, I think we want to be really careful to get our customers expecting this innovation to actually solve some problems that we haven’t been able to solve.
Stan Berenshteyn: Okay, can you maybe give us a quick update on the regulatory review of the IVX robots? Are you seeing any resolution on that front?
Randall Lipps: Definitely have at the end of last year; there was some final resolution on some of the regulations going forward. So we’ve now taken that information and melded it into our customer interaction and have a more clear determination, how to classify each of the robot locations and what set of regulations they’re under as they deploy.
Stan Berenshteyn: Thank you. Maybe just to backtrack the first question, for clients that are just doing the console upgrade. So once they do the upgrade, can you just share with us how many more years of life does the cabinet get once they do that upgrade?
Randall Lipps: Well, it’s probably customer dependent, but I think that the key is in order to get the next versions of software and hardware, you eventually have to do the upgrade, or to get access to the new product lines, you have to do the upgrade. And I think the future of Amplify includes both hardware and software changes. But it isn’t really about overly focusing on those piece, but the solutions we’re delivering to the market.
Stan Berenshteyn: Great. Thanks so much.
Kathleen Nemeth: Thanks, Dan.
Operator: The next question comes from the line of Matt Hewitt from Craig-Hallum. Please go ahead.
Matt Hewitt: Good morning. Thank you for taking the questions. First up, regarding the health of the customers. Randy, it was nice to hear that you’re starting to see some improvement there. Are you seeing a change in the discussions? Obviously, last year was really tough, but are you hearing from your customers that, okay, we’re feeling better with our financial position; we’re feeling better about our staffing positions. Now, we’re ready to come back to the table and proceed with the plans that we had maybe thought about last year, but now we’re ready, or is it still kind of touch and go and you have the conversation and there’s still kind of, I don’t want to say standoffish, but holding back a little bit?
Randall Lipps: Well, I think it’s really depends on the account. There’s some accounts that just seem to be doing well, but there are many that are not. And there seems to be a lot of sensitivity around capital equipment deployment at these institutions, particularly around inpatient. So, I think we’re having good discussions. People want these products. It’s really about the timing of returning of the health of the capital equipment environment in these accounts. And I would just say they’re pretty prudent and cautious about it. But for the long term, I think we’re in a good position.
Matt Hewitt: Got it. And then maybe a separate question regarding XT Amplify. How should we be thinking about, I guess, the adoption curve of the full XT Amplify platform? Does that change the traditional kind of model, if you will, the bell shaped curve? Or I guess another way to look at it is with these incremental capabilities with the services, how does that change the revenues from XT as we look out over the next few years? Because it seems to me at least that there’s more of a services component to that. So does it change the rev rec as we look out over the lifetime of Amplify?
Randall Lipps: Well, there’s still, the connected devices are generally still mostly capital. We do have some connected devices that are not. But yes, I think what’s going to drive our customers to move to the Amplify platform, which we just launched, and it does take a while to get into the pipeline and get decision moving. It won’t be just to upgrade the console; it’ll be these other areas that they want to access these new innovations. And we did say that we were going to have not only a multiyear roadmap of Amplify innovations, but even this year, we’re planning to announce more innovations by the end of the year.
Matt Hewitt: Got it. All right, thank you.
Operator: The next question comes from the line of Scott Schoenhaus from KeyBanc. Please go ahead.
Scott Schoenhaus: Hey, team. Good morning. Thanks for taking my question. I guess first on the end markets, did you see any change in your behavior from your customer base during the change healthcare disruption? And then now post into April and May, have you seen any impact either operationally from a labor perspective as they had to focus on getting the billings and claims file? Did you see any impact from your customers on your business or forward demand? Thanks.
Randall Lipps: We have not seen any impact on our business, but to be sure, we’re cautiously monitoring it and looking for any impact. But to this point, we haven’t seen any disruption in our business.
Scott Schoenhaus: Okay, thanks, Randy. And then on the XT Amplify side, I think you noted last quarter that some of the bookings guidance for this year included this upsell. Given the traction that you’ve clearly seen so far, does this change the amount of bookings baked into your full year guidance for the XT Amplify? Thanks.
Randall Lipps: No, I think we’re comfortable with our position and on our outlook and in our guidance on product, which I believe was slightly higher this year than it was last year. And that did contemplate the launch of Amplify.
Scott Schoenhaus: And then if I could just sneak one last one. Sorry, Randy. The RDS divestiture. Does this signal to us that you’re going to be divesting from international markets going forward? How should we read into the RDS divestiture?
Nchacha Etta: Yes. Hi, this is Nchacha. I don’t think this signals that we are exiting the international market. This action that we’ve taken or that we’re considering taking is part of an ongoing plan to ensure that we – that our investments generate the right level of returns for our shareholders. And so, as you know, we did engage with an outside consultant. So this is part of the overall strategy to continue to improve our overall financial performance and ensure that we are unlocking sustainable or long term value for our shareholders.
Scott Schoenhaus: Thank you.
Kathleen Nemeth: Thanks, Scott.
Operator: The next question comes from the line of Jessica Tassan from Piper Sandler. Please go ahead.
Jessica Tassan: Hi, guys. Thanks for the question. So maybe to kick off, I was hoping you could just help us understand what some of the offerings in the XT Amplify suite are. So ServerScale, CarePlus, XTExtend, what are these solutions, and are all of them available today?
Randall Lipps: Yes, all of them are available for order today. The XTExtend is up is the centerpiece on the hardware is the console upgrade. The CarePlus allows us to go in and redesign the workflows for our customers. ServerScale allows us to not have to wait on the timing of hospital budgets to get new servers to be expanded to meet greater demands for the number of connected devices on their server, so it allows for to be able to pay it as a service so that the server pieces are included whenever they need it. And I just think MedChill is one of the very exciting pieces. We get a lot of feedback that customers want up to go to this kind of product, which really helps you singulate down to the single skew on a refrigerated product and have access and locking control to it. So this gives you more confidence from a pharmacy standpoint of deploying refrigerated products, which can be costly or toxic and have better control out of them, instead of just an open refrigerator. So we know there’s good demand for these products and that we’ve already started to see people highly engaged about them and wanting to get access to them. I’m not quite sure all of them will be, all of them are bookable now. All of them will be delivered this year. If they’re not…
Jessica Tassan: I’m interested to know, kind of how your specialty pharmacy consulting business has helped kind of inform this product development pipeline, if at all.
Nchacha Etta: Yes, I think the nice aspect of specialty pharmacy is that it really engages with a very high level of the C suite and really on a monthly basis, which then really allows us the platform to talk about other ways to improve both revenues and cost impacts of the pharmacy operation. And as we look at, what our health systems are going through or what they need, it’s a lot of solutions that are dependent on ambulatory or outpatient clinics. And so we’re excited that Amplify in this roadmap has solutions that address those places.
Jessica Tassan: Awesome. And my last question is just can you update us on trends in 340B? So both on the contract pharmacy side and on the covered entity side, maybe like year-over-year, quarter-over-quarter, just volumes would be helpful.
Randall Lipps: Well, I think 340B is pretty much third party administrative. TPA is sort of in line with where we were last year and it continues to be. It is also a good product to combine with our specialty pharmacy services, so that when a drug is available on the outpatient or through the third party administrative side, it’s an extra benefit that we can offer instead of having to run it through the specialty pharmacy on site pharmacy. So we think it’s a good product to have and to offer in combination with our specialty pharmacy service.
Nchacha Etta: Jess, I’ll just add to that that. I remember the last time we spoke, I think we said that 340B is generating about $30 million to $35 million annually for us, and we expect that to continue.
Jessica Tassan: Got it. So no growth year-over-year in 2024. Is that on the 340B contract pharmacy split billing side?
Nchacha Etta: That’s correct. We do expect it to be flat, but we continue to. It’s part of our overall strategy. As Randall mentioned, we look forward to combining it with our inventory optimization services.
Jessica Tassan: Got it. Thank you, guys.
Nchacha Etta: Thanks, Jess.
Operator: [Operator Instructions] The next question comes from the line of David Larsen from BTIG. Please go ahead.
Jenny Shen: Hi, this is Jenny Shen on for David Larsen. Thanks for taking my questions and congrats on the quarter. I think you’ve mentioned some focus on outcomes based solutions and taking an outcome centric approach. Can you just elaborate on what that means, what your focus is on there, and highlight some of those key outcomes? Does that potentially mean that you could move to a model where, say, your clients recognize a certain amount of cost savings or reach a certain level of adherence, where you would receive a certain performance payment for that? Thanks.
Randall Lipps: Yes, I think that’s a little bit beyond where we’re thinking at the moment. But certainly medication management is such a big beta in the outcome of any patient, whether as well as the finances of any event related to a patient activity. So, I think it’s prudent upon us to make those connections between those pharmacy activities and the impact eventually to the patient, as well as to the bottom line of the facility. So they’re easier to make as you get access to more of the data and get more access and visibility to the transactions throughout a patient’s episode and we continue to see that. We probably see it most in our retail cloud based solution set, where we’re able to inform through our retail software, where we’re able to inform the pharmacy and eventually doctors and patients how well they’re adhering to their medication management regimens. So those are the kinds of outcomes we’re looking at. We’re not quite there yet. Tying it to the actual scientific outcome, so to speak.
Kathleen Nemeth: Anything else Jenny?
Jenny Shen: A quick question on cost. You’re speaking some good cost savings initiatives over the last few quarters, just any additional levers you think you can pull there?
Nchacha Etta: Yes, Jenny, we do continue to evaluate and assess our overall cost structure and this is part of our ongoing strategy, and we will make the right decisions that we think necessary, that will continue to help us increase our overall financial performance and unlock shareholder value.
Jenny Shen: Thank you. Congrats on the quarter.
Nchacha Etta: Thanks.
Kathleen Nemeth: Thanks, Jenny.
Operator: The next question comes from the line of Stephanie Davis from Barclays. Please go ahead.
Anna Kruszenski: Hi, guys. This is Anna Kruszenski on for Stephanie. Thank you for taking our questions. My first is I was curious if you could talk about how hospital buying is being impacted by the push pull of the change disruption and better utilization levels.
Randall Lipps: I think if you’re referring to the change impact, we’re not seeing any impact in our business, but we’re monitoring it carefully.
Anna Kruszenski: Got it. Okay, thank you. And then as a follow up, just given the recent cadence of forward guidance conservatism, can you walk us through what your assumptions are in the 2Q [ph] guidance? And is this reflective of a pull forward in 1Q or the softer backdrop or just setting a lower bar?
Randall Lipps: Yes, we’re very comfortable with our plan for the guidance that we provided. I know we had a good first quarter and we are not changing our outlook at this point. We continue to track to what we provided. We are seeing some headwinds with some of our customers, but we maintaining our guidance for the year.
Anna Kruszenski: Got it. That’s helpful. Thank you for the color.
Kathleen Nemeth: Next question.
Operator: The next question comes from the line of Bill Sutherland from Benchmark Company. Please go ahead.
Bill Sutherland: Thanks, everyone. Hey, Nchacha.
Kathleen Nemeth: Hi, Bill.
Bill Sutherland: Hey, get the cost initiatives, the cost takeouts that you plan, Nchacha, are they fully reflected now in the model that we’re seeing for, I guess, 2Q?
Nchacha Etta: Bill, I want to make sure I understand your question. Are you referring, which cost takeout, are you referring to?
Bill Sutherland: The ones that you implemented year end? Correct? Am I remembering correctly?
Nchacha Etta: Yes.
Bill Sutherland: Okay. So there’s been nothing incremental year-to-date?
Nchacha Etta: Well, the majority of the benefit from the cost actions were realized the beginning of the first quarter of this year with a smaller portion. We anticipate a smaller portion to continue throughout the year, but the majority was realized in the first quarter.
Bill Sutherland: Okay. And then over to Enliven a little more color. Randy, potentially on what benefited the business and the outlook for it?
Randall Lipps: Yes, I think we’re cautiously optimistic there, but we’ve seen some, a good start to the year with some nice wins, and those wins are the contracting portion and they will result in the ARR as we move forward. But it’s nice to see that business, and I think that’s coming because of the settling down of pharmacists and retail outlets a little bit. And so it gives us a good platform to come in and put in new innovation, but that business is doing solid and then, we believe will eventually grow steadily over the long term.
Bill Sutherland: Has it been more about new rooftops or adding services to current clients?
Randall Lipps: I think the most. A little bit of both, but I think the most recent is rooftops.
Bill Sutherland: Okay. Because it seems like you have such massive market share. Okay, thanks everybody.
Randall Lipps: You bet.
Operator: The next question comes from the line of Stan Berenshteyn from Wells Fargo. Please go ahead.
Stan Berenshteyn: Hi, thanks for allowing me to follow up here. Just wanted to quickly ask on your comments regarding the services revenue pull forward. Can you just give us some color as to what contributed to the timing impact in the quarter? Thanks.
Randall Lipps: Yes, Stan, we saw the timing impact was primarily driven by the pull forward demand in our advanced services as well as our technical services. We do expect that to even out as we go throughout the course of the year. So that’s why we’re tracking or maintaining the guidance outlook that we provided.
Stan Berenshteyn: Great. Thank you.
Operator: As there are no further questions at the queue this time, this concludes our Q&A session; I would like to turn the call over back to Randall Lipps for closing remarks.
Randall Lipps: Well, thank you for joining us today. It’s really an exciting time at Omnicell to see this new innovation, multiyear roadmap. It’s really allowing us to engage with our customers and solving problems that have been pain points that haven’t been addressed. And it really allows us to talk about the future with them. Not only the future of inpatient, but outpatient, and having a more holistic platform and approach to really innovate automation and deliver on the autonomous pharmacy is what the industry needs. I also want to thank the Omnicell employees. Thanks for the hard work and going through Q4 and launching off a good, refreshing year, and I look forward to seeing you next time. Cheers.
A - Kathleen Nemeth: Thank you.
Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
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