Good day, and thank you for standing by. Welcome to the Omnicell's First Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Kathleen Nemeth. Please go ahead.

Thank you, operator. Good afternoon, and welcome to the Omnicell first quarter 2021 financial results call. On the call, with me today, are Randall Lipps, Omnicell's Chairman, President, CEO and Founder; Scott Seidelmann, Executive Vice President and Chief Commercial Officer; and Peter Kuipers, Executive Vice President and Chief Financial Officer. This call will include forward-looking statements 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 today, in the Omnicell annual report on Form 10-K filed with the SEC on February 24, 2021, and in other more recent reports filed with the SEC. Please be aware that you should not undue reliance on any forward-looking statements made today. The date of this conference call is April 29, 2021, and all forward-looking statements made on this call are based on the beliefs of Omnicell as of this date only. Future events or simply the passage of time may cause these beliefs to change, and we undertake no obligation to update these forward-looking statements. Finally, this conference call is the property of Omnicell, Inc., and any taping, other duplication or rebroadcast without the expressed written consent of Omnicell is prohibited. We have refreshed and expanded the Investor Relations section of our website. where you can find our first corporate sustainability report and other information. On our call today, Randall will provide an update on our business. After Randall's remarks, Scott will provide perspective on the healthcare industry and our key customer wins. Finally, Peter will cover our results for the first quarter, our guidance for the second quarter and our total year guidance. Our first quarter financial results are included in our earnings announcement, which was released earlier today and is posted in the Investor Relations section of our website at omnicell.com. Additionally, we'd 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 earnings announcement. I will now turn the call over to Randall.

Good afternoon, and thanks for joining us today. Well, Omnicell is off to a solid start for the year, and I'm proud of the outstanding results delivered by the team this quarter. We exceeded the top end of our guidance ranges for revenue, non-GAAP EBITDA, and non-GAAP EPS, posting record revenues of $252 million and non-GAAP earnings per share of $0.83 for the first quarter. We believe the evolved results reflect our customers' trust in Omnicell and the recognition of the significant benefits inherent in vision of the autonomous pharmacy. Our first quarter performance also reflects excellent operational execution and financial discipline, with a non-GAAP EBITDA of $51 million, and strong free cash flow of $44 million. Peter will review the financial results and the guidance for the second quarter and the full year in more detail later in the call. Let's put about one year now since the COVID-19 pandemic fundamentally altered our society and our daily life. During this time, we have focused our efforts on supporting our healthcare partners through this unprecedented time. We successfully pivoted virtual installs at hospital sites, and like many companies, we implemented remote work practices. We've learned a lot over the last year and we believe the industry now recognizes that medication management is a mission-critical element of their care delivery model. It's been a privilege to support our customers as they work through modernize and optimize their medication management systems, and we are confident that Omnicell is well-positioned to enable them accomplish this effectively and efficiently. Now turning to recent customer successes. We increased our number of long-term sole-source contracts during the first quarter with the top 300 U.S. health systems. One of the new wins is the largest single sole-source agreement in Omnicell's history. A top 10 U.S. health system…

Thank you, Randy. Before we discuss some of the customer highlights and our progress this quarter, I want to briefly expand on the point that Randy just mentioned regarding the organizational work that we have done over the last few years. Once we translated the autonomous pharmacy vision into a strategy, we clearly -- we needed to evolve our organization design from one focus on delivering primarily single hardware product to one that could deliver new products and technology-enabled services built on the cloud. We significantly changed our organizational design by elevating our account management structure and nationalizing our sales and customer organization structure that has been recognized by Gartner as the best in class for the market to buy. And we also added professional services, product management, customer success and software engineering function. And through that transformed organizational design, we recruited even leaders with expertise in technology-enabled services, task, customer experience and software development. So today, we are fortunate to have a world-class commercial leadership team, which is largely responsible for our exciting issued results. The combination of our strategy, transform the organization design and new leadership in helping us to realize the vision of the autonomous pharmacy. Practically, that progress can be seen in the continued expansion of our long-term customer partnerships and competitive conversion. As Randy mentioned, we increased the number of sole-source agreements in the first quarter, bringing our total to 147. Our 146 sole-source agreement was a top 10 health system, which selected Omnicell to deliver medication management solutions across its network of more than 65 hospitals and 560 facilities in the U.S. the largest contract in our Company's history. Additionally, we signed our 147 agreement in Q2 with a North Carolina-based four-hospital system. And our second quarter is off to a solid start with…

Thank you, Scott. Our strong first quarter commercial, operational and financial results demonstrate the strength of our business model and our strategy is working. Healthcare system partners are embracing the vision of the fully autonomous pharmacy, resulting in an increasing percentage of high visibility, high flexibility, recurring revenue for Omnicell. The customers see the value in our platform solutions and are partnering with us as they advance their pharmacy automation workloads. I'm very pleased with the progress we're making at furthering efficient autonomous pharmacy and a proud solid execution by nearly 3,000 Omnicell team members who continued consistently with us. Turning now to our financial results. First quarter of '21 revenues $252 million and increase of $3 million over the prior quarter, up 10% over the first quarter 2020, and above our guidance range. First quarter earnings per share in accordance with GAAP was $0.30 per share compared to $0.37 per share in the fourth quarter of 2020, and [$0.26] per share in the first quarter of last year. A full reconciliation of our GAAP and non-GAAP results is included in our first quarter earnings press release that's posted on our website. First quarter non-GAAP earnings per share were $0.83 compared to $0.91 per share in the previous quarter and $0.66 in the same period last year. First quarter non-GAAP EPS results exceeded our expectations due to stronger revenue drove several expense items such as travel and the timing of headcount divisions. Non-GAAP gross margin for the first quarter was 50.6%, a slight decrease from the previous quarter, primarily due to revenue mix and increased trade expense. Year-over-year, this represents an increase of 120 basis points, driven by volume leverage, supply chain initiatives and favorable product mix. The non-GAAP EBITDA margin for the first quarter was 20.1%, expanded by 250…

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

Hi. Thank you, guys, so much. And this is [Jess] on for Sean. I think we're interested to know just and how exactly the COVID vaccine management solution was developed? And if you could talk just a little bit about the innovation process for your customers asking you for this? And how was this rolled out? And maybe just, was it more a new customer driver? Was an incremental revenue driver at existing customers and any details on that would be helpful?

Sure. I'll take that. This is Scott Seidelmann. I think the question, Jess, focus really was -- really around what was the innovation process around the development of our COVID vaccination solution, which is we launched as CareScheduler under the brand name. First of all, CareScheduler, what's that actually is. So in life and health platform and [indiscernible] pharmacies and retail pharmacists to automate their workflows frankly to let them focus on things, and actually treating the patient as supposed doing things -- the administrative things. Clearly, one of the things that we heard loud and clear from our pharmacy -- retail pharmacy customers as COVID on aisle, and frankly, the scope of practice for pharmacists is expand picking clear that pharmacies we're going to have to start compiling the vaccination. Once that just simply do not have the tools to do that in the past, in some cases around pretty basic capabilities division, now with COVID so I want to patients queuing up in pharmacy, etcetera. So we certainly are eager and continue to add value and add capabilities into that platform which create incremental value. So I think, kudos to the team that quite quickly over about a 6-month period. They identified the develop software and now, I think one aspect of your question was if we really rolled it out to new customers, net new customers on the platform, will be incremental for existing customers. The short answer is both predominantly existing customers right which is and typical SaaS platform fashion, we can charge an additional amount for the lower module and as they upgraded to that and have that capability we think about that through the customers. So it's really quite fast and I think like many things in doing the pandemic I was, we have been very proud of our team's ability not only to develop and bring the product to market. And actually get it deployed in between could be used by wider for that.

Yes. That's helpful. Can I just quickly one follow-up on that. So how live in-house driving patient engagement and communication pre Twilio or are they the essentially going from nothing to a comprehensive omnichannel solution?

So like I said, we might be form automated workflows pharmacy performance debt and one of those workloads one set of those work growth is enabling pharmacies to engage the patient and that will void in the form of IVR, voice in the IVR, our text message follow up communication, but we were providing the partnership enabled us to really upgrade the quality of those communication that margin look to add chat and other online and mobile, it really for us, instead of developing our for ourselves in modernizing we needed a partner with our best-in-class provider and get the market in the past. Yes it allows us sort of resources on solving problems, not delivering basic and activity people. So we're going to talk about this going to work on those complex workflows that be felt about.

Thank you.

And your next question comes from the line of Iris Long with Bearing Bird Capital Management.

Hi, guys, thanks for taking my question. So I guess a follow-up to and EnlivenHealth questions. I'm wondering if you guys can talk about how big is the retail pharmacy business as a percentage of your total revenue right now and then as we think about the guidance and as you continue to add more features to the platform. I guess what growth assumptions are you, do you have or what's the good assumption is embedded in the guidance?

Yes, this is Peter. So the retail pharmacy part of our business like is a smaller part of the business if you compare with you in the hospital side of the business. It is growing and maintenance maybe down and the line with the total company. Right now we are approaching I think discussed before even the software really engaged patients to pharmacists upon them. In the retail pharmacies.

Okay, got it. And then the pricing model there, is it just subscription model based on the number of module is that the right way to think about it?

Yes, it's a combination of the subscription model, it was in services and if we could generate out of all sort of its peers.

Okay, great. And then the other question I have is all only one, who that you guys are seeing strong customer interest. So I'm wondering if you can compare Omnicell One to maybe some of the other software solutions on the market what Omnicell One and then I guess the same similar question there, can you remind us what your pricing model and the pricing strategy going forward?

Sure,. The question-and-entitled Omnicell One compared to some of the other offerings in the market. I think [indiscernible] the one hand position from Omnicell want not to be a pure analytics in the sense that a lot of analytics capabilities and healthcare and the challenge would be capability healthcare, I couldn't be can actually probably working the challenges getting operator in the customer interaction react to that data and actually change in the Boston, they're not connected in many times because the workflow so complicated. So what we've done with Omnicell One is to really integrate analytics work with. Omnicell One is predicting that is a potential growth stock out shortage instead of just creating a dashboard that someone may or may not be attention to, Omnicell One actually send the notification to the pharmacy action were created the task in the work and so we think that on the one hand that connectivity between analytics and workflow is really been important. And I mentioned previously is extending that is that we have a customer success organization in former pharmacy in this little expert they get assigned to accounts that really in to customer success fashion are really trying to interpret some of the data and work very closely with customers to engage and provide better outcomes. So on the one hand, it is very much a true service on that sense that we're identifying outcomes are integrated in the workflow and there's an expert, it is on the customer during the different customer to achieve this outcome, we think that's highly differentiated. The second one, I think the second dimension that you breadth of offering to that. Omnicell One optimize inventory, optimize provider efficiency, optimizes what is the compliance with to that, it's very unique when compared to other service offerings. Now is a very deliberate in our approach to not offer those that were the modules be single for the subscription service the combined, and again truly subscription service. We're continuing to add that and add that functionality and that value will continue to grow with the customers and drive more demand in turn.

Great. If I may add one more question. So, talk a lot about competitive conversions. So I'm wondering what do you think is the main driver for FlexLock there and then how unchanged maybe compared to last year?

I think what I'd say hesitate from last year, but there is a couple of years ago or few years ago is more product base. And as we move to solution based company with a broader of product and now tech enabled those really well, talk about how we're going to digitize the entire quantity workflows, so that we can use the power of the cloud to do a lot of the work that just doesn't seem to get done, as you would think would happen and as complex pharmacy operation. And so we go in and talk about the whole out of our product offering and the second is We help them actually better performance not guidance then deploying the product, but by us working together day to day optimizing in the [indiscernible]. It's a different percent of success rate that they have not seen in the past with other ways of doing it. So, people want to better ourselves in the pandemic assured up the shortcoming of the core supply many resistant which mitigate is the proper share presentation, which has been at the right time had condition in the right point. So with that, I think there is a heightened sense what we going to digitize pharmacy in order to really get to where we one thing which is near protection and getting to do likewise near-perfection on regulation, safety, economics and make better decisions out of the basin get out behind the counter and get that will patient where clinical practice and maintain the difference in growth.

Great, thanks so much.

And your next question comes from the line of Scott Sean with Stephens.

Hi, Randall, Peter and team. Hey. So my first question is on the results and guidance. You guys beat the top line driven by greater than expected product revenues, came in about $4 million above the top end of your guidance range, but you didn't change your full-year product revenue guidance. Was this just a pull forward in timing of a contract that you anticipated to occur later throughout the year? I just wanted any additional color there.

Yes. So we're working I would say that as you know on a backlog going into the year -- going backlog at the end December 31, 2020, was up 57%, right. So, if you refer [indiscernible] in the revenue guidance, full year, we did achieve in the first quarter the top end of the guidance range, which a bit of timing, but it's also a fairly really in the year still look at updating full year guidance, so we might later in the year. But it's mostly aligned with customer timing of the communication. Does that make sense?

That makes sense.

Yes.

Yes. That makes sense, Peter, given your track record with achievable guidance. So Okay. Then on the service services side, can you talk more about 340B opportunities and the traction you're seeing and any cross-selling? I believe you stated last quarter that the 340BT enclosed multiple new opportunities in Q4. Is there any updates in these stats in the quarter? And maybe some color on the acceleration of other software platforms that we've been talking about in life and health, Omnicell One? Your guidance assumes more of a ramp in this service revenues in the back half of the year. Thanks for the questions.

Thank, Scott. And multiple questions there. So the 340B, we are very pleased with the addition to the Omnicell platform. We do have a rich pipeline and a really good momentum in cross-selling of 340B. We did announce the first cross-sell already within -- and now we talked 148 long-term sole-source partners within the top 300 U.S. health systems. And that is a really good opportunity there for those local source owners -- customers that do not have [340B] or have a different software vendor, very positive there, and ultimately that we'll be able to announce some more cost if we stay on additional cost on -- throughout the year, and of course, we go through [indiscernible] and health and we talked about in the script quite extensively. We had an early questioner as well, really growing nicely, long momentum. And then, we also talked about our stock -- talked a little bit earlier. We see some great momentum there as well. It's only [indiscernible], we're very confident in making progress to the long-term goal. So for this year, we're definitely on track as we move performance ratio as well and the pipeline, absolutely.

Great. Thanks. Looking forward to your continued execution, Peter and team. Thanks.

Yes. Thanks.

[Operator Instructions] Your next question comes from Matt Hewitt with Craig-Hallum Capital.

Good afternoon, and congratulations on a good start to the year.

Thank you.

First one is, and I think -- it seems like it's been a while since we've talked about the competitive landscape. Obviously, as you guys have expanded the services, got added more software, I feel like we don't talk about it much. But are you seeing anything from your peers? Are they trying to match or mimic the way that you've kind of expanded into other areas? Or has they, I won't say, given up, but I just feel like we're not hearing much about the competitive landscape much anymore?

Yes. Maybe I'll take one on service, and maybe Randy –

Well, it's not -- they're still there, there's always competition, and it just depends on what kinds of things our customers are looking for. But most customers are taking their strategic important medication management. And I think you take a strategic approach, you -- now you have to take a broader and more in-depth approach to figuring out how to digitize the whole pieces of the business. There are other companies that's got a vision for doing that. And I think people are notifying only what we have today than where we're going. And that's why you see these partnerships for seven, ten, 15 years is because it's not necessarily that we have every single product they want today, but they know that we're committed and that the Software-as-a-Service and tech-enabled services are places where we're going to continue to create value on the platform. And -- so to the extent that these customers are aligned with that vision with us and many are and maybe not everyone, but many of them are, and it allows us to really compete in a different space, and -- but I would never say there is the competition, but there's always some.

Got it.

I think we're doing what we're doing and it is a little different than what we were doing.

Understood. And then maybe shifting gears a little bit. With the ramps in the number of people vaccinated and obviously, pockets of the pandemic may be showing signs of slowing down. Is that enabling your sales and service teams to get back in and actually meet with the customers face-to-face? And then what can that mean from driving incremental sales? Thank you.

Yes. I think we're seeing more of that. I mean if you're vaccinated and under certain conditions, we can meet face to face. And I'm not saying everybody, but certainly, a lot are. But I think for many of our big customers out there, this is strategic. And so it's really beyond the question or how healthy the financial bottom line, the hospital with the strategic something they have to do, they know they need to do, and it's beyond just always meeting old-fashion way face-to-face. So we had a lot of engagement with our account base and with the marketplace, and I just don't feel at this time that's really a hindrance to our execution at all. And maybe in some ways getting a few more Zoom calls is a lot more efficient than going through people around. So we take it a little bit of advantage that. So I feel good about the pipeline, the momentum. We felt flexibility to do what they need good that we get these solutions from our customers if you like that.

No, that's great. Thank you for taking the questions.

Thank you.

Thank you, Matt.

You have a question from Bill Sutherland with the Benchmark Company.

Thanks. Hello, everybody. Well, I apologize upfront. I got on pretty late in the call, so if you covered it. But Peter, did you address the service gross margin in the first quarter? It was different than my model than in 4Q, I thought it could be a bit more 340B positive impact in it?

Yes. Of course. So on the service gross margin, we are looking at [indiscernible] services right for all the recurring revenue that is the current in service revenue, and the upfront [indiscernible] investments, if you will. And from a gross margin perspective, so we expect, both product more gross margin and service margins to increase during the year through the quarters directionally, and then also over the next couple of years.

And so I'm not sure I caught the first part of your answer. Peter. So the first quarter is just -- is there anything other than just -- I don't know cause the noise?

It's tailing and investment, if you will, right, as we build out the scale of these service offerings as well.

Oh, I see. Okay. Thanks.

And then performance if you have seen historically, the benefit-cost -- the benefit-cost in the first half of the year is always higher, right?

Added -- just adding a few more people earlier on in the year with continuous demand has been before, so that kind of hit just a little bit more in the first quarter.

Yes. So that's also look kind of through me because the R&D was lower than I expected, as a percent of revenue. Anyway. One of the thought I had on the 340B the customers that they have already, are there any discussions with their customers that might lead to sole-source deals for your other family solutions?

Yes. I think we're -- we are looking essentially the base and that we're looking -- our channel certainly, is quite powerful ability to introduce these solutions to a much broader set of customers that through the sole-source arrangement and as Randy pointed out the comprehensive strategic portfolio, there is certainly demand to add that. So we are certainly, the teams are also working to say are their customers that 340B had that we don't currently serve guidance is going to be a much, much smaller ways just given the breadth and depth of our customer base. But certainly, looking to exploring them.

Yes. I was thinking it would mostly go one way. But first may -- they could -- it could lead to some sole-source deals too. Thanks for taking the questions. We'll catch up later.

Thank you, Bill.

Thanks, Bill.

I would now like to turn the conference over to Randall Lipps for closing remarks.

Well, thanks for joining us today. We're certainly pleased with the strong start for the year. And as the need for increased automation and digitization of processes goes, our solutions are more strategically relevant than ever for these customers. Our robust and our continued momentum underscores that Omnicell remains the customers' choice, and we are excited to continue to build on our platform as we advance the vision of Omnicell. Thanks for joining us today. See you next time.

Thanks, everyone.

This does conclude today’s conference call. Thank you for your participation. You may now disconnect your lines.