Omnicell, Inc. Q2 FY2024 Earnings Call

Good morning and thank you for standing by. My name is Aaron, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Omnicell Second Quarter 2024 Financial Results Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. Thank you. With that, I would like to turn the call over to Kathleen Nemeth, Senior Vice President.

Good morning. And welcome to the Omnicell second 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 performance or other statements regarding Omnicell’s plans, strategy, objectives, goals, expectations, planned investments, expense management, products, services or solutions, results of our holistic review initiative, our ability to deliver more consistent performance and drive long-term success 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, in 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 the date specified on the call. Except as required by law, we do not assume any obligation to update or otherwise release publicly any revisions to our forward-looking statements. Our results were released this morning and are posted in 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 releases posted on our Investor Relations website. With respect to forward-looking non-GAAP measures we do not provide a reconciliation of forward-looking non-GAAP measures to the comparable GAAP measures on a forward-looking basis as these items are inherently uncertain and difficult to estimate and cannot be predicted without unreasonable effort. With that I will turn the call over to Randall. Randall?

Thank you, Kathleen. Good morning. And thank you all for joining us to discuss our financial results for the second quarter of 2024 and our outlook for the remainder of the year. We had a strong quarter and we remain confident in our ability to position the company for continued long-term success. As I shared with you on our previous two earnings calls, we have been working to improve the company’s financial performance, while also investing in and releasing innovative medication management solutions for our XT point-of-care platform. Today, I am pleased to share that we are progressing on both initiatives. Also, we have completed our holistic review initiative, which has validated our confidence in our refreshed strategy, which focuses on innovations around our XT platform and offering services that are expected to increase our recurring revenue. At the same time, we have identified several areas of opportunity to take actions that are intended to further streamline our processes and that we believe will drive synergies across our businesses. We expect these actions to enable us to progress toward our goal of more consistent performance. Based on what we are seeing, the macroeconomic landscape is showing early signs of improvement and the demand for Omnicell’s medication management XT point-of-care solutions and Advanced Services offerings is tracking in line with our initial expectations for the year. Accordingly, we are updating our previously provided 2024 annual guidance metrics, based on our strong first half performance and our current visibility of the business. Next, turning to our second quarter results. We delivered solid results that exceeded the upper end of our guidance ranges, which we believe reflects strong demand for Omnicell’s products and services, and sound execution by our team. Our second quarter 2024, total revenue was $277 million, representing a sequential increase of $31 million or 12% over the prior quarter and a decrease of $22 million or 7%over second quarter 2023. Second quarter 2024 earnings per share in accordance with GAAP were a profit of $0.08 per share, compared to a loss of $0.34 per share in the prior quarter and a profit of $0.08 per share in the second quarter of 2023. Our second quarter 2024 non-GAAP earnings per share were $0.51, compared with $0.03 per share in the prior quarter and $0.57 per share in the same period last year. Second quarter 2024 non-GAAP EBITDA was $40 million, an increase of $29 million compared to the previous quarter, but a decrease of $7 million when compared to the same period last year. Nchacha will provide more details of the drivers for this quarter’s results, as well as further details regarding our outlook for the remainder of the year. We are investing in next-generation upgrades and outcomes-based solutions for our XT fleet of automated medication dispensing systems, as well as making investments in Specialty Pharmacy Services. We are enthusiastic about the multiyear journey we have embarked upon here at Omnicell and are particularly pleased with the early customer feedback we are receiving. In mid-April, we announced XT Amplify, a multiyear innovation program that is intended to maximize value for hospitals, health systems and post-acute care facilities that have invested in Omnicell’s XT automated dispensing system, while also seeking to drive enhanced clinical and operational outcomes at the point-of-care and within pharmacies. We are pleased to report that XT Amplify appears to be resonating well with the market, and the program is demonstrating a strong next-step forward for us in our journey to deliver outcome-centric innovations. We also have further announcements slated for the next several quarters and look forward to sharing these with our current and future customers as well as all of you. As we indicated last quarter, XT Amplify is just the beginning of our reinvigorated focus on new products and services, which we expect to drive long-term growth. We are also seeing strong demand for our Advanced Services, which are designed to drive improved medication management outcomes across the full care continuum. Omnicell Advanced Services were 22% of our revenue for the first and second quarters of 2024, an increase from 18% of our revenue for the second quarter of 2023. We continue to anticipate that Advanced Services will represent 21% of our total revenue for the full year 2024. We anticipate total recurring revenue, which includes Consumables and Technical Services, to represent approximately 50% of total revenue for the full year 2024. Now, turning to a few select highlights of our customer wins this quarter. As health systems continue to consolidate through mergers and acquisitions, we find the need to standardize medication management care across a growing enterprise is more important than ever. A nationally ranked academic medical center in Illinois and longtime customer has selected Omnicell point-of-care and infrastructure solutions to standardize and scale their medication management capabilities. This includes replacing competitive solutions as they merge new facilities into the health system and upgrading their existing fleet of Omnicell systems. An integrated health system spanning Iowa, Wisconsin, and Illinois has selected Omnicell as their long-term partner to seamlessly automate and manage medications across their 16 facilities. This includes replacing previous generation systems with XT automated dispensing systems while also upgrading existing XT units with XTExtend, a new console designed to provide high level security and an enhanced nursing user experience. XTExtend is an integral component of the XT Amplify innovation program announced earlier this year. As well, we are excited about a new long-term engagement with one of the largest providers of critical illness recovery hospitals, inpatient rehabilitation hospitals, outpatient rehabilitation centers and occupational health clinics in the U.S. Medication safety is a top priority for this company, and our controlled substance dispensers within our XT automated dispensing product portfolio are expected to provide greater visibility to their controlled substances. This should also help identify narcotic discrepancies and enable them to better manage diversion events throughout the enterprise. Being able to provide the right medication at the right time should facilitate accurate and timely dispensing, provide complete audit trails, and save time for their pharmacists, nurses and technicians. Advanced Services also delivered solid performance this quarter. One highlight is that a multi-hospital system in Southeast Pennsylvania selected Omnicell’s Central Pharmacy Dispensing Service in an effort to enable streamlined medication dispensing operations at their two main facilities. Adopting the XR2 robot within their Central Pharmacy as a standard-of-care should help to streamline medication storing, picking and dispensing. It is also intended to optimize inventory management, which should drive enhanced clinical and operational outcomes. Our EnlivenHealth brand, part of our Advanced Services portfolio, continues to deliver solutions designed to help retail pharmacies and health systems optimize patient care and drive sustainable growth. Later today, we’ll be announcing that a strategic partner has selected EnlivenHealth’s Scope of Practice and Reimbursement Snapshot, a first-of-its-kind solution, that is designed to provide their independent pharmacy members with access to up-to-date information regarding the clinical services they can provide in their state and reimbursement details for those services. We believe that providing this new service emphasizes our commitment to elevating pharmacies to the forefront of healthcare by contributing to clinical service expansion and providing greater access to patient care through local independent pharmacies across the U.S. And finally, Omnicell’s Specialty Pharmacy Services grew by opening numerous new managed pharmacy locations and optimizing performance at existing pharmacies in the first half of 2024. Omnicell’s Specialty Pharmacy Services seeks to help customers expand their outpatient pharmacy programs, deliver high quality patient care and maximize pharmacy performance through technology and expert services, including 340B third-party administrator solutions. This is an area of investment for Omnicell and we are encouraged by the growth and market potential. In summary, Omnicell delivered a strong second quarter. We recognize there is more work to do as we take actions that are intended to improve our financial performance and deliver consistent results. I am very proud of the team’s laser focus on outcome-centric innovation, customer success and our purpose to be the healthcare providers’ most trusted partner to enable the Autonomous Pharmacy transformation. Our Omnicellians’ dedication is something that inspires me on a daily basis and I look forward to continuing to see the positive impact we are striving to deliver for our customers and for our communities. Now let me turn it over to Nchacha for the financial update. Nchacha?

Thank you, Randall. As Randall noted, we had a strong second quarter. I am going to walk you through some of the drivers for our second quarter 2024 performance, as well as our outlook for the remainder of the year. We are pleased to see that the demand environment is tracking in line with our initial expectations. The drivers for our second quarter results included a healthy number of installs for our point-of-care suite of products, as well as strong demand for Omnicell Specialty Pharmacy Services. We have taken, and will continue to take, what we believe is a prudent and cautious approach to expense management as we roll out our exciting innovation agenda. The disciplined approach we took to managing our expenses helped contribute to our strong bottom-line results in the second quarter of 2024. I am so proud of our Omnicell team who continue to demonstrate their commitment to our promise and our guiding principles on a daily basis. Their commitment is fundamental to delivering improved patient outcomes. Our second quarter 2024 total revenues were $277 million, an increase of $31 million or 12% over the prior quarter and a decrease of $22 million or 7% over second quarter of 2023. The revenue decrease over the prior year reflects the impact of the macroeconomic environment and timing of the XT product life cycle. While the macroeconomic landscape is showing early signs of health system budgets improving, it will take some time to be reflected in our revenues as health system customer budgets become available and are converted to bookings and ultimately revenues upon implementation. Product revenues were $157 million, an increase of 17% over the previous quarter and down 17% compared to second quarter of 2023. Services revenues were $120 million, an increase of 7% over the previous quarter and an increase of 9% over second quarter 2023. Both Technical Services and Advanced Services contributed to the growth over the second quarter of 2023, reflecting the growing Technical Services install base and impact of our pricing actions, as well as customer demand for our Advanced Services. Total revenues in the quarter were $17 million above the top end of our previously disclosed second quarter 2024 guidance range, with product revenues accounting for approximately $12 million of the overachievement and services revenue accounting for the remaining $5 million. Revenues in the quarter were aided by strong performance of Omnicell’s medication management XT point-of-care solutions and Advanced Services offerings, particularly Omnicell Specialty Pharmacy Services. Non-GAAP gross margin for second quarter 2024 was 44.2%, an increase of 440 basis points from the prior quarter, primarily due to higher volume leverage and what we believe is our continued prudent expense management. A full reconciliation of our GAAP to non-GAAP results are included in each of our first quarter 2024 and second quarter 2024 earnings press releases, which are posted on our Investor Relations website. Our second quarter 2024 earnings per share in accordance with GAAP were a profit of $0.08 per share, compared to a loss of $0.34 per share in the prior quarter and a profit of $0.08 per share in the second quarter of 2023. As we have mentioned, it is management’s goal to return to consistent GAAP profitability. Our second quarter 2024 non-GAAP earnings per share were $0.51, compared with $0.03 per share in the prior quarter and $0.57 per share in the same period last year. Second quarter non-GAAP EBITDA was $40 million, an increase of $29 million compared to the previous quarter, but a decrease of $7 million when compared to the same period last year. Second quarter 2024 non-GAAP EBITDA and non-GAAP earnings per share exceeded our expectations due to revenue execution and timing, as well as strong cost and operating expense management as we continue to take what we believe is a prudent approach with our investment decisions. At the end of the second quarter of 2024, our cash and cash equivalents balance was $557 million, up from $512 million as of March 31, 2024. Non-GAAP free cash flow during the second quarter of 2024 was $45 million as we continue to see strong cash collections and working capital management. In terms of accounts receivable, days sales outstanding for the quarter was 81 days, a decrease of 13 days over the prior quarter. We are pleased with the strong collections in the quarter. Inventories as of June 30, 2024, were $93 million, a decrease of $10 million from the prior quarter and a decrease of $37 million from June 30, 2023. The $10 million decrease in second quarter 2024 inventories includes approximately $6 million for an inventory write down related to the planned RDS restructuring we announced previously. Now turning to our guidance. First, based on our strong results delivered in second quarter 2024 and our current visibility for the remainder of the year, we are updating our full year 2024 outlook. For full year 2024, we anticipate bookings to be in the range of $775 million to $875 million. Total revenues are expected to be in the range of $1.070 billion to $1.110 billion. Non-GAAP EBITDA is expected to increase to the range of $105 million to $125 million. Non-GAAP EPS is expected to increase to the range of $1.20 to $1.50. Regarding our outlook for the third quarter of 2024, we are providing the following guidance. We expect total third quarter 2024 revenues to be between $275 million and $285 million with product revenues to be between $159 million and $164 million, and service revenues between $116 million and $121 million. Given our second quarter performance and our expectations for the third quarter, we expect second half 2024 revenue trends to conform with historic seasonal patterns in which second half total revenues are slightly above first half total revenues. We expect third quarter 2024 non-GAAP EBITDA to be between $28 million and $34 million. We expect third quarter 2024 non-GAAP earnings per share to be between $0.34 per share and $0.44 per share. Non-GAAP EBITDA and non-GAAP EPS guidance for third quarter 2024 reflects employee salary merit increases issued in early third quarter 2024, which were the first broad salary increases in two years, as well as some seasonal expenses. For full year 2024, we are continuing to assume an effective blended tax rate of approximately 19% in our non-GAAP earnings per share guidance. Before I conclude, I would like to note that, beginning in 2025, we anticipate providing you with additional information on our annual bookings expectations. Specifically, beginning in 2025, we plan to begin providing a breakout of our product bookings and an annual recurring revenue metric for our recurring services business. We believe this will assist in understanding and modeling our business, and as we continue to pivot toward driving recurring revenue, we expect it to be an important internal metric as we manage our business. In summary, we are pleased with our results for the second quarter of 2024. And I would now like to open the call for questions.

Thank you. Our first question comes from the line of Stan Berenshteyn with Wells Fargo. Your line is live.

Yes. Hi. Thank you for taking my questions. Maybe first on product revenue. It was nice to see the quarter to be by $14 million. But looking at full year guidance, looks like a midpoint of the guidance range actually came down by $7 million. Can you just walk us through what drove the beat in the quarter and what contributed to the guidance revision? Thanks.

Yes. Stan, thanks for the question. So what contributed to our revenue was increased demand. We saw strong demand in our point-of-care product portfolio, as well as increased demand or strong performance from our Specialty Pharmacy Services business. In terms of the full year, we’re very confident about our guidance, because we do have good visibility today to our implementation plan, as well as what we consider to be a very healthy backlog and so we do feel that we are in line to deliver our guidance for the full year.

So for the second quarter was the beat driven more of a timing issue where you’ve got some business upfront and then for the guidance range, was the top end of the guidance range revised down just as a function of bookings that you expected to burn that might not burn, kind of how should we think about the puts and takes on that?

No. So what we’ve provided from a guidance standpoint is primarily driven by what we believe will be continued strong demand for our Specialty Pharmacy Services business and the product revenues we do believe will continue to perform well through the second half of the year. But it’s again primarily driven by the implementation schedule that we have visibility to in the second half, but the first half was clearly driven by our strong performance from a point-of-care standpoint.

Got it. Okay. And then on the holistic review, it seems like you found some opportunities to save some costs. Can you size for us what kind of opportunities you found and maybe what the timeline to capture those synergies would be?

Yes. We’re really looking at continuing to improve the performance in the second half of the year and so we do expect that the cost savings will continue to contribute to our overall performance. We’re fully focused on prudent expense management and we do expect that this will continue through the end of the year.

Okay. And then maybe just a quick one…

Hey, Stan.

I’m sorry, go ahead, Kathleen.

No. No. Stan, it’s Kathleen. I just want to go back to your product question, the initial one and point out that from where we sit today, based on where we were at the beginning of the year, we’re less reliant on bookings to close the GAAP product revenue. So the demand environment thus far has been good and so we have confidence in the second half of the year from the product revenue standpoint.

Got it. Helpful. And then maybe just a very quick one, would just love to get an update on the demand environment for your compounding and Central Pharmacy Robotics Solution? Thanks.

Yeah. I think there’s a lot of interest in that area because there’s a need to solve a lot of the problem. With the new guidance that was given at the end of last year, we’re finding ourselves having to continue to adjust some of the features and functions of our robot in order to help meet the efficiencies needed to get the ROI. And so we still continue to deploy those robots but more slowly as we continue to build out the feature set that will help meet those regulations, so a lot of interest still getting bookings but the deployment is slower.

Thanks so much.

Thank you, Stan for the four questions. Next question?

Our next question is from the line of Scott Schoenhaus with KeyBanc. Your line is live.

Hey, guys. Thanks for taking my question and good quarter. You talked about the XT Amplify a lot and you’re seeing strong demand. Can I just ask you can provide more color there, the healthy demand you’re seeing, how much of that on the product side is embedded in your guidance? I guess maybe context of how much of it is currently and then how much of it is embedded in your guidance for this year? And then I have a follow-up question again on the IVX cation and compounding, but first, I wanted to just drill more to the XT Amplify?

The XT Amplify represents our commitment to investing in the XT fleet. As we roll out this product, it instills confidence in customers to not only upgrade their systems but also to expand, as noted in a couple of examples during the call. This year, the XT Amplify itself is not expected to significantly impact revenues, so the bookings for the XT Amplify products will likely take effect next year. However, it encourages customers to upgrade their older G Series to the XT Series today, as they recognize our investment in the XT systems. Consequently, the XT Amplify is contributing to our backlog.

Really helpful, Randy. So, I guess, the natural follow-up there is and where are you on your upgrade cycle for the XT Series now versus last quarter that would be helpful?

I don't have a specific number right now, but we can look into that for you. We are nearing the end of the XT Series, and there are still several customers who haven't upgraded all their G Series yet, which is leading to an increase in demand. As we complete the transition from the XT Series, we expect to see most of this demand unfold over the next 24 months.

Fair two questions. Thanks, guys.

Thanks, Scott.

Thank you.

Our next question is from the line of Matt Hewitt with Craig-Hallum Capital Group. Your line is live.

Good morning and congratulations on the strong quarter. Maybe first up, if you could talk a little bit about the XTExtend pipeline and I don’t know if you’re ready to talk a little bit about backlog, but obviously it seems like there’s been a strong reception. And if I’m correct, the turnaround of the implementations of the XTExtend should be much faster allowing for faster revenue conversion. Is that correct?

Yes, that's correct. The pipeline has been growing quickly since the announcement. Along with the gradual improvement in the macroeconomic environment, it's important for us not only to sell the products but also for hospitals to have the necessary personnel to assist with installations. We particularly noticed this in the second quarter, where everything we had planned went smoothly without any delays, allowing us to operate more efficiently and predictably. We believe this environment will persist throughout the year. You’re also right about the XT console upgrades; they require less manpower. Often, we synchronize server upgrades with the IT department, which can take some time, but it doesn’t demand many people, and this is typically factored into the Amplify upgrade.

And I would also add that, Matt, that it does take time to get into the capital approval process, so it is part of that process in addition to the IT, as Randy mentioned.

Got it. And then my second question is regarding gross margins. Obviously a nice pop in product gross margins here this quarter. Is that something that we should anticipate kind of building from here as your volumes continue to recover or was there anything one-time in nature that hit in the second quarter? Thank you.

Yes, Matt. We do expect our gross margin to continue to improve over time, especially as our Advanced Services business continues to scale. But most importantly, as we said during the prepared remarks, with our multiyear innovation strategy, we do expect that we will see some improvement in our margins as our business continues to grow.

And then also thank you.

Okay. Great. Thanks, Matt. Next question?

Next question is from the line of David Larsen with BTIG. Your line is live.

Hi. Randy, can you please talk a bit about Advanced Services and just remind us what are the key products within Advanced Services? I mean I think you highlighted that on Page 2 of the press report I think you list a couple of them. And what is the revenue contribution and the EBITDA margin for Advanced Services in totality, please? Thanks very much.

Yeah. Thanks for the question, David. Yeah. We have three major components in the Advanced Services: Specialty Pharmacy, which is one of our fastest growing and building that we commented in the remarks. We’re really pleased with that product line, which is setting up Specialty Pharmacies inside of hospitals, as well as helping them to execute their 340B program locally, as well as using our third-party 340B services as kind of a combination that we use there. Secondly, is our EnlivenHealth, which is primarily focused at retail and outpatient pharmacies. We continue to see that grow, we’ve signed up some nice customers and we believe that ARR is going to continue to grow, and that’s some more relatively high gross margin business. And then lastly is the Advanced Services portion of products that are robotic, so IV and robots that are placed in pharmacies to run the XR2. Those as well are growing as customers continue to buy these systems and place them and put them in place. So those are the three major components of our Advanced Services, and we feel really good about both the growth and their scaling to get margin.

What percentage of revenue does Advanced Services contribute, and what is the EBITDA margin for it? Additionally, could you clarify the components of what you described as tech-enabled services and consumables? It seems there is another segment of recurring revenue apart from Advanced Services. I’m trying to understand the total recurring revenue, the portion attributed to Advanced Services, and the EBITDA margin for those areas. Thank you.

To clarify, the three services I mentioned earlier fall under Advanced Services. We also offer Tech Services, which are substantial fixed services but are not included in Advanced Services. Additionally, we have Consumables products, which are also separate from Advanced Services. The Advanced Services represent new offerings we've developed over recent years to provide more solutions for our customers, allowing us to address problems that cannot be resolved without them being classified as a service.

Yes. The EBITDA is currently growing and we expect it to continue to grow as the Advanced Services businesses expand.

Yeah. And just, specifically, Dave, so Advanced Services, we expect this year to be about 21% of our revenue. That’s just for the Advanced Services part. The others that you mentioned, Consumables and then our Tech Services, which you can think about more like field service brings the total recurring revenues to about 50%. So, 21% or so for Advanced Services, with the remainder being Consumables and Technical Services, bringing the total to 50% of revenue for the year for 2024.

Great. Thanks very much.

Thanks for your question. Our next question comes from the line of Bill Sutherland with The Benchmark Company. Your line is live.

Thank you. Randy, I’m curious this deal that you just mentioned with Select Medical, is that to introduce XT to their systems?

Yes. It was a competitive swap, yes, it was.

Good for you. Okay. And then just one housekeeping question, Nchacha. At the midpoint on the EBITDA guidance, it implies that the second quarter will be the biggest EBITDA quarter of the year. I'm trying to understand the cadence. Thanks.

Yes. Our second quarter EBITDA is primarily driven again by the line of sight that we have today to our planned implementations and so we do expect this to be in line with our historical patterns.

Yeah. In Q3, we have some extra expenses, right, and pay increases and seasonal expenses in the second half of the year. Yeah.

Okay. I figured it was something like that and then it looks like just doing the math at the midpoint for the year, fourth quarter EBITDA is kind of in line with third quarter. So, anything I should think about relative to that?

No. I mean, we do feel confident about our second half of the year including our EBITDA.

Okay. Thanks, everybody.

Thanks.

Thank you.

Our next question is from the line of Stephanie Davis with Barclays. Your line is live.

Hi, guys. This is Anna Kruszenski on for Stephanie. Thank you for taking the questions and congrats on the quarter. I was hoping to talk a little bit about guidance and your visibility for the rest of the year. And just what are the key swing factors that could get you to the high versus low end of the range?

Yes. As mentioned in our prepared remarks, we are very confident about our full year guidance, particularly for the second half of the year, mainly due to our visibility regarding planned implementations. Given our strong performance in the first half, we enter the second half with a robust backlog and expect our results to align with historical trends. We are confident that we will meet the guidance we have provided.

Yeah. If I could add one other component there is that, because hospitals are not as constrained on the employee side and more ready to accept these installations. We have hardened schedules for the next nine months, and we believe we won’t see any disruptions. And so probably the high end of the guidance is about keeping to those schedules that these healthcare systems have put in place and our new processes have really kicked in to allow us to give us this longer-term view.

Got it. That’s super helpful and actually kind of leaped into my follow-up. I was wondering to what extent the improving industry labor trends such as lower contract labor mix did impact the higher revenue outlook. And just how are you thinking about the industry labor trends at your customers for the rest of the year?

I see this from several perspectives. Nursing is always a sensitive area, and the features, functions, and innovations we offer that assist nursing are very important. XT Amplify provides functionalities that truly support nurses, which is one reason it connects well with the market. On the technology and pharmacy sides, those involved in implementing the system have experienced some relief, instilling confidence in pharmacies about their ability to adopt these systems and achieve positive outcomes. As we notice this pressure easing, we can secure commitments from customers for more extended periods regarding our initiatives. It's important to note that when we install robots, there are additional preparations needed, such as floor adjustments and electrical installations, which go beyond what automated dispensing cabinets require. The fact that they have the labor, time, money, and willingness to make these improvements is definitely evolving.

Got it. Thank you so much for all the color.

Thank you for your question. And ladies and gentlemen, that will conclude the Q&A portion of today’s call. I would like to turn the call back over to Mr. Lipps for closing remarks.

Well, thank you for joining us today and it’s sure is nice to see the company return to a healthy position to which we can create a multiyear growth and expansion strategy. I really want to thank the Omnicell team for their focus over the last six months to nine months to get us to this point, and it’s just exciting to see all of these new products and new customers coming on board. Thanks very much.

Thank you. And ladies and gentlemen, that will conclude today’s call. Thank you for joining. We’ll see you next time. Have a great day.