Bill Sutherland

Bill Sutherland asked for granularity on the strong Annual Recurring Revenue (ARR) growth drivers, both historically for 2025 and for the 2026 guidance. He also inquired if the success of XT Extend and its role as an on-ramp to OmniSphere changes the calculus for the number of cabinets refreshed versus replaced by Titan, and the overall impact of this new go-to-market strategy.

Answer

Baird Radford, EVP and CFO, attributed historical ARR strength to strong performance in technical services (break-fix for connected devices) and securing contractual pricing opportunities, along with solid performance in consumables and specialty businesses, which are expected to continue driving ARR in 2026. Randall Lipps, Chairman, President, CEO, and Founder, explained that connecting to OmniSphere (via Titan or newer XT platforms) allows for subscription fees, reducing customer costs for on-premise equipment and generating a new, healthy revenue stream, accelerating OmniSphere adoption.

Bill Sutherland from The Benchmark Company inquired about the strong Annual Recurring Revenue (ARR) performance and guidance, seeking granularity on the historical and future growth drivers. He also asked how the success of XT Extend and customer excitement for OmniSphere might change the calculus for hardware refresh versus replacement by Titan XT, and the impact on the new go-to-market strategy.

Answer

Baird Radford, EVP and CFO, attributed historical ARR strength to strong technical services performance in 2025, securing contractual pricing opportunities, and continued nice performance in consumables and specialty businesses, which are expected to drive 2026 guidance. Randall Lipps, Chairman, President, CEO, and Founder, explained that connecting to OmniSphere (via Titan XT or newer XT platforms) allows Omnicell to generate new, healthy subscription fees by hosting data and managing cybersecurity, shifting focus from just hardware to a more sustainable, higher-margin recurring revenue stream.

Bill Sutherland of The Benchmark Company LLC asked a two-part question about tariffs: whether the guidance assumes the 30% tariff rate remains, and for an update on the progress of shifting subassembly work out of China.

Answer

Nnamdi Njoku, EVP & COO, confirmed that the company is making good progress on its supply chain mitigation efforts to build resiliency for 2026. Nchacha Etta, EVP & CFO, later clarified that the full-year guidance does assume the 30% tariff rate announced in the second quarter.

Bill Sutherland inquired about the evolution of discussions with payers regarding the Independent Dispute Resolution (IDR) process, specifically if payers are seeking more direct negotiations, and the potential financial impact on margins if claims move away from IDR wins.

Answer

CEO Tom Vo confirmed that payers are increasingly initiating discussions for network rate contracts, which Nutex Health evaluates seriously. CFO Jon Bates added that avoiding IDR fees (24-26% of arbitration revenue) could result in a nominal net impact on the bottom line, even with potentially slightly less revenue, as the cost savings offset revenue differences. He noted it's still early to fully assess the long-term financial implications.

Bill Sutherland inquired about Nutex Health's ongoing discussions with payers regarding the Independent Dispute Resolution (IDR) process and the potential financial impact on margins if more productive negotiation talks lead to in-network contracts.

Answer

CEO Tom Vo confirmed increased engagement from payers for in-network contract negotiations. CFO Jon Bates noted that avoiding IDR fees (24-26% of arbitration revenue) could result in a nominal net impact on the bottom line, as similar revenue with reduced costs would lead to a comparable financial position, though it's still an early stage.

Bill Sutherland sought clarification on competition in the commercial digital segment, asked about the pipeline and sales conversion strength in the education group, and confirmed the expected full-year operating income margin for education. He also inquired about the percentage of Huron's business with an AI focus, the sufficiency of internal resources to meet AI demand, and the potential for small AI-focused acquisitions.

Answer

CEO Mark Hussey clarified there was no significant change in the competitive environment for commercial digital. CFO John Kelly confirmed strong sales conversions in education, though not record-breaking in Q3, and reiterated the full-year education operating income margin guidance of 23%-25%. Mark Hussey and John Kelly viewed AI and automation as a net positive, with John Kelly estimating 15%-20% of digital revenue directly related to AI projects, and a broader impact across other offerings. They believe Huron's high digital fluency among consultants makes the transition to advanced AI technology an easier leap, suggesting internal resources are sufficient.

Bill Sutherland asked about the percentage of Huron's business with an AI focus, the sufficiency of internal resources to meet demand, and the potential for small AI-focused acquisitions.

Answer

Mark Hussey, CEO and President, views AI and automation as a net positive, leveraging Huron's role as a trusted implementation partner. John Kelly, CFO, noted that 15-20% of digital revenue (over 40% of total revenue) is directly AI-related, with AI increasingly integrated into many projects. He added that Huron's high digital fluency among consultants makes the transition to advanced AI easier, positioning them well for talent.

Bill Sutherland of The Benchmark Company inquired if the high Q2 utilization rates are at the upper end of a sustainable range, asked about the key drivers of record sales in the Education segment, and questioned the impact of healthcare industry consolidation on Huron's business.

Answer

CFO John Kelly confirmed that current utilization rates are near the top of the sustainable range and that hiring is underway to add capacity. He attributed the record Education sales to strong demand for strategy and operations offerings that help clients navigate disruption. CEO Mark Hussey stated that healthcare consolidation continues to be a market driver, creating opportunities for Huron in strategic evaluation and post-merger integration.

Bill Sutherland asked about the current labor market conditions, specifically regarding the availability of nursing home staff and HCSG's ability to hire and train facility managers, assessing if labor availability could impact future growth. He also sought clarification on the allocation of the $50 billion Rural Health Transformation Fund from the ABBA, particularly for post-acute and SNF facilities.

Answer

CCO Matthew McKee affirmed a strong labor market with stabilized wage growth and record application levels for HCSG, indicating no hindrance to growth. He noted that while the skilled nursing industry is still below pre-pandemic job levels, it's trending positively. CEO Ted Wahl explained that the Rural Health Transformation Fund allocation will vary by state and empower the entire healthcare continuum, with formal application processes to be detailed in future guidance.

Bill Sutherland asked about the current labor market conditions, specifically regarding nursing home staff availability, HCSG's ability to hire and train facility managers, and any potential impacts on the company's growth trajectory.

Answer

CCO Matthew McKee affirmed a strong labor market, with the healthcare sector leading in hiring. He noted skilled nursing job gains, though still below pre-pandemic levels, are expected to recover by mid-2026. McKee stated HCSG has stabilized wage growth, record application levels, and sufficient staffing to support growth, viewing labor challenges as an opportunity for HCSG's value proposition. CEO Ted Wahl added that the ABBA's $50 billion Rural Health Transformation Fund allocation will vary by state and empower the entire healthcare continuum, with formal application processes to be revealed later.

Bill Sutherland of The Benchmark Company LLC inquired about HeartBeam's commercial strategy, progress on its early access program, the search for a Chief Commercial Officer, and the nature of potential strategic partnerships.

Answer

CEO Rob Eno explained that the beta program is progressing well, leading to software enhancements, and confirmed the initial commercial launch will target concierge practices in California and Florida. He noted a Chief Commercial Officer candidate is identified, but the hiring is being timed to manage cash burn. Eno also stated that no government policies negatively impact their plans and that strategic partner interest is growing from entities that can help scale the business, including those in data, AI, and complementary diagnostics.

Bill Sutherland of The Benchmark Company LLC sought clarification on the financial structure of the new joint venture, asking if it involved an equity investment. He also questioned if further operating efficiency improvements were planned, the current state of the M&A pipeline, and whether the 'One Big Beautiful bill' would have any impact on operations.

Answer

CFO Hardik Mehta confirmed the joint venture is a true equity investment, not merely a partnership agreement. CEO & Chairman Greg Crawford stated that while core efficiencies are in place, significant margin uplift is expected from integrating the new acquisitions. Crawford also described the M&A pipeline as strong with a mix of traditional and partnership deals and affirmed they anticipate no operational impact from the mentioned bill.

Bill Sutherland asked for the healthcare revenue breakdown, details on the internal training program, an update on the international nurse pipeline, and whether the current engineering gross margin is sustainable.

Answer

The company provided the school vs. non-school revenue figures ($37.2M vs $5.6M). They described their internal training program for school staff but kept details private for competitive reasons. The international nurse program has a large pipeline pending immigration changes. Engineering gross margins are expected to be volatile, with the primary focus being on gross profit dollar growth rather than the margin percentage itself.

Bill Sutherland from The Benchmark Company LLC asked for the revenue breakout between school and non-school healthcare, details on the internal healthcare training program, an update on the international nurse pipeline, and whether the current Engineering gross margin level is sustainable.

Answer

Kevin Miller, CFO, provided the healthcare revenue split ($37.2M school, $5.6M non-school) and explained the internal training program focuses on developing candidates like paras and RBTs. He noted that while 15-20 international nurses might arrive soon, a larger pipeline of 500 awaits immigration policy changes. Regarding Engineering margins, he stated that while the quarter was strong, margins remain volatile due to mix shift, and the primary focus is on gross profit dollars.

Asked about the reason for the decline in lives under value-based contracts, upcoming contract renewals, whether guidance relies on new contract wins, and the potential impact of the trend towards at-home cancer care.

Answer

The decline in lives was due to a terminated contract with low-reimbursement lives. There are no significant contract renewals imminent. The 2025 guidance does not depend on new pipeline conversions, so any wins would be upside. The company views the trend of at-home care as a positive future opportunity that aligns with their model.

Inquired whether future growth will be driven by market share gains versus overall market expansion, the reality of hospitals building internal flexible workforces, and whether potential winter orders are incremental to the Q4 outlook.

Answer

Executives confirmed growth will primarily come from market share gains via MSP/VMS wins, though underlying market growth is possible. They noted that while some hospitals are building internal float pools, many lack the technology, creating an opportunity for their Intellify platform. They also clarified that potential winter orders are not factored into their current models and would represent upside.

Inquired about the status of the clinic rationalization process, expectations for the total office count, improvements in employee churn, and the current level of contract labor utilization.

Answer

The company is actively managing its clinic portfolio, pruning underperformers while focusing on maximizing the current fleet through upgrades and consolidations, with a small number of new clinics planned. The list of clinics on the 'watch list' is shrinking. They expect to continue improving hiring and retention. Contract labor is at 7% of headcount, and they anticipate continued reliance on contractors through 2024. There is still room for productivity growth through standardized expectations and process innovation.

Bill Sutherland asked for clarification on the assumptions for the Medicare rate that were built into the 2023 EBITDA bridge provided earlier in the call.

Answer

Executive VP and CFO Scott Ginn clarified that the preliminary EBITDA bridge to a $288-$290 million baseline assumed flat pricing. He stated that this figure was established before factoring in any potential changes from the final Medicare rate rule, future growth, or wage inflation.