Financial Data and Key Metrics Changes - In Q1 2026, the company reported revenue of $50.8 million, adjusted EBITDA of $8.3 million with a margin of 16%, and free cash flow of $3.2 million [6][22][24] - Revenue decreased by $8.5 million from Q4, primarily due to the divestiture of the third-party hardware resale business, VoIP Supply [22] - Year-over-year revenue declined by $1.7 million, or 3%, excluding $7.6 million from VoIP Supply [22] - Gross profit was $36.8 million, with a gross margin of 72%, compared to 67% in the previous quarter [23][24] Business Line Data and Key Metrics Changes - Core revenue, which accounted for 74% of total revenue, decreased by 6% year-over-year, while adjacent revenue increased by 6% [23] - Monthly Recurring Revenue (MRR) bookings grew by 2.4% sequentially and 6.4% year-over-year [9] - Larger strategic opportunities saw a 39% sequential increase in deals over $10,000 of MRR, which are 72% above the FY25 quarterly average [9] Market Data and Key Metrics Changes - The overall size of the pipeline remained steady, but new pipeline creation increased by 39% quarter-over-quarter [8] - The volumetric business now represents 62% of the 90-day forward pipeline, up from 55% in Q4 [8] - The company’s prem business grew over 60% year-over-year, benefiting from larger players exiting the segment [10] Company Strategy and Development Direction - The company is transitioning to a higher-margin recurring revenue model, which now represents over 90% of total revenue [6] - A new segment structure has been introduced, dividing revenue into core and adjacent categories to provide greater transparency [10] - The company plans to invest approximately $2 million in incremental SG&A to accelerate customer acquisition and partner enablement [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting fiscal FY26 guidance, expecting sequential growth in Q2 and year-over-year growth in Q3 and Q4 [12][26] - The management highlighted the importance of larger deal sizes and growing recurring revenue as indicators of entering a new phase of sustainable, profitable growth [12] - The company is exploring selective AI-driven software acquisitions to strengthen its vertical focus in various sectors [10] Other Important Information - The company continues to generate strong cash flow while strategically reinvesting in growth initiatives [10] - The capital allocation strategy includes paying down debt, reducing leverage, and returning value to shareholders through share repurchases [20][21] Q&A Session Summary Question: Growth investments and timing - Management indicated that the $2 million incremental growth spending will focus on increasing field capacity and marketing efforts to enhance brand coverage [28][30] Question: Pipeline tied to new partner relationships - Management reported a 6% increase in pipeline over the last six weeks and a 39% increase in new pipeline creation, indicating significant growth from new paths to market [32][33] Question: Decline in services revenue - Management acknowledged the decline in services revenue due to longer sales cycles but expects sequential growth starting in Q2 as older contracts complete [36][37] Question: Targeting larger customers - Management highlighted improvements in sales cycles and implementation timelines due to a disciplined approach and enhanced product offerings [44][46] Question: Average revenue per customer growth - The increase in average revenue per customer by 19% year-over-year was attributed to upselling and the effectiveness of the bundling strategy [58] Question: Gross margin expectations - Management noted that gross margin was impacted by a higher mix of product revenue but expects improvements as the year progresses [61][62] Question: Backlog growth - Management indicated that backlog remained consistent quarter-over-quarter, with expectations for growth in upcoming quarters [69][70] Question: Large MRR opportunities - Management clarified that large MRR opportunities include both wholesale solutions and bundled offerings, with significant deals already closed [73][74]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $270 million, an increase of $24 million from Q1 2024, but a decrease of $37 million from Q4 2024 [6][15][19] - Product revenues were $145 million, up $12 million year-over-year but down $37 million sequentially [7][16] - Service revenues were $125 million, an increase of $12 million from the previous year and flat compared to the prior quarter [7][16] - Non-GAAP gross margin for Q1 2025 was 42.1%, a decrease of 530 basis points from the prior quarter [7][16] - Non-GAAP earnings per share for Q1 2025 was $0.26, compared to $0.03 in the same period last year and $0.60 in the prior quarter [8][17] - Non-GAAP EBITDA was $24 million, an increase of $13 million year-over-year but a decrease of $23 million from the previous quarter [8][18] Business Line Data and Key Metrics Changes - The XT Amplify program contributed to revenue growth, alongside SaaS and XPath services, particularly in specialty pharmacy services [15][16] - The company continues to see strong customer interest in its long-term innovation roadmap, particularly in medication management solutions [5][6] Market Data and Key Metrics Changes - The demand environment tracked well with expectations, showing market share gains and continued interest in the company's product offerings [5][6] - The company is focused on expanding its market share across inpatient and outpatient settings, including specialty and retail pharmacies [5][6] Company Strategy and Development Direction - The company aims to capture greater market share in various healthcare settings and grow its predictable recurring revenue [5][6] - The strategy includes expanding the Omnisphere cloud-based platform and integrating AI technologies across the continuum of care [5][6] - The company is committed to optimizing its supply chain and mitigating tariff impacts through dual sourcing and near-shoring efforts [9][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current tariff environment and emphasized the importance of supply chain optimization [9][13] - The company remains optimistic about long-term growth strategies aligning with the vision of the Autonomous Pharmacy [13][27] - Management noted that the first quarter typically has the lowest revenue and profitability, with expectations for growth throughout the year [17][19] Other Important Information - The anticipated impact from tariffs for 2025 is approximately $40 million to non-GAAP EBITDA, leading to adjustments in guidance [9][24] - The company continues to generate solid free cash flow, with cash and cash equivalents at $387 million as of Q1 2025 [19][20] Q&A Session Summary Question: Can you describe the outlook for tariff distribution between Omnicell and customers? - Management indicated that currently, they are not passing significant price increases to customers but may adjust discounts in the future [30][31] Question: What is the cadence of the $40 million tariff impact? - The total impact is expected to be $40 million for the year, with about $5 million in Q2 and the remainder in the second half, particularly in Q4 [36][38] Question: Are there any fundamentals driving reacceleration in demand for pharmacy IT? - Management noted that specialty pharmacy is a top topic among providers, leading to more strategic discussions about revenue generation and operational efficiency [45][47] Question: What are the assumptions behind the new EBITDA guidance range? - The guidance changes account for tariffs, with mitigation actions including relocating supply chains and evaluating pricing strategies [52][56] Question: How long will it take to reduce supply chain exposure to China? - Management stated that while some components will still flow through China, they are taking actions to move sourcing to other regions over time [63][64] Question: How is the hospital buying environment characterized? - Management reported no slowdown in revenue or installation processes, indicating a positive environment despite potential macroeconomic challenges [80][84]