Gene Mannheimer

Eugene Mannheimer from Freedom Capital Markets asked if the Titan XT adoption cycle is expected to follow a bell curve shape, similar to previous cycles with revenue peaking in years 3-5, or if a more linear pace of adoption is anticipated. He also inquired about Omnicell's ability to gain market share against its primary competitor, comparing the expected experience to prior product cycles.

Answer

Randall Lipps, Chairman, President, CEO, and Founder, stated that while typically a bell shape, the Titan XT cycle will differ due to additional plug-and-play products off OmniSphere, de-emphasizing a sole hardware focus. This strategy aims for a more sustainable, higher-margin business with recurring revenues, creating a 'wave of products' rather than just a single product cycle. He emphasized that Omnicell's market opportunity has never been better, with the right enterprise, cloud-based, multi-tenant platform solution for complex health systems, enabling them to manage medications across expanding inpatient and outpatient settings, positioning Omnicell to win more market share.

Eugene Mannheimer asked if the Titan adoption cycle is expected to follow a bell curve shape, similar to the last cycle, or a more linear pace, considering the impact of additional OmniSphere products. He also inquired if Omnicell's experience in competitive conversions, and its ability to gain market share against its primary competitor, would be similar to what was observed in their competitor's last product cycle a decade ago.

Answer

Randall Lipps, Chairman, President, CEO, and Founder, expects a more bell-shaped curve for Titan but with a difference, as additional OmniSphere products will de-emphasize the hardware-only cycle, moving towards a more sustainable, higher-margin business with recurring revenues. He believes Omnicell's market opportunity has never been better, with the right enterprise, cloud-based, multi-tenant product for complex health systems, enabling them to manage medications across a broad range of institutions and positioning Omnicell to win more market share.

Gene Mannheimer from Freedom Capital Markets inquired about the customer adoption and rollout of the Omnisphere platform and its expected impact on recurring revenue. He also asked if new innovations like MedTrak and MedVision are unique or responses to competitors.

Answer

Randall Lipps, CEO, described Omnisphere as a key, hardened enterprise platform that the entire customer base will migrate to over several years, driving recurring revenue. He explained that new products like MedTrak and MedVision are generally unique solutions designed to solve specific customer problems and are, most importantly, fully integrated into the Omnisphere platform, a key customer demand.

Eugene M. Mannheimer asked for clarity on the quarterly cadence of the projected $40 million tariff impact for 2025, questioning if it would be most heavily weighted in Q4. He also inquired if recent XT wins were delayed from the previous quarter and asked for an update on the current demand cycle for XT upgrades.

Answer

CFO Nchacha Etta detailed that after a $5 million impact in Q2, the remaining $30-35 million would hit in the second half of the year. Executive Kathleen Nemeth added there could be a bias towards Q4 due to higher revenue. CEO Randall Lipps clarified that the recent customer wins were new, not delayed, and were driven by the strategic appeal of the XT Amplify roadmap.

Eugene Mannheimer requested more detail on the Annual Recurring Revenue (ARR) metric, asking if it's broken down by component and how much of the guided amount is expected to convert to revenue in the next 12 months. He also asked about the implementation process for OmniSphere, questioning if it requires running redundant systems.

Answer

CFO Nchacha Etta confirmed ARR is composed of SaaS/Expert Services, technical services, and consumables, and that most of the year-end balance should convert to revenue in the following 12 months. CEO Randall Lipps clarified that the OmniSphere implementation is designed for minimal disruption, allowing the new cloud infrastructure to run alongside legacy systems without creating double workloads. Customers can migrate their connected devices when they are ready.

Gene Mannheimer asked about the lack of specific arbitration revenue breakdown, the historical inpatient utilization compared to current levels, the reason for a slight decrease in mature hospital visits, and the future modeling of stock-based compensation.

Answer

CFO Jon Bates explained that arbitration revenue is now integrated into the business, with collection percentages improving from 70% to 80%, contributing to the overall revenue uptick. CEO Tom Vo stated inpatient utilization was 'a lot less' two years ago, with the current 25-30% reflecting a successful initiative. Tom Vo also noted that the slight decrease in mature hospital visits was a 'head-scratcher,' possibly due to a lower COVID spike this year compared to last. Jon Bates indicated that the major portion of earn-outs is complete, and while the Q3 stock-based compensation number is a projection, future figures should improve as remaining earn-outs mature.

Gene Mannheimer inquired about the specific breakdown of arbitration revenue, the historical inpatient utilization rates, the reason for a slight decrease in mature hospital visits, and the future modeling of stock-based compensation.

Answer

CFO Jon Bates explained that arbitration revenue is now integrated into core business reporting, noting collection percentages improved from 70-75% to 80%. CEO Tom Vo stated inpatient utilization was 'a lot less' two years ago, aiming for higher growth. CEO Tom Vo and CFO Jon Bates attributed the slight decrease in mature hospital visits to unknown factors, possibly a lower COVID spike in Q3 2025 compared to Q3 2024. CFO Jon Bates indicated that the major portion of earnouts is complete, suggesting Q3 2025's lower stock-based compensation might be a more representative projection, with potential for further improvement as remaining earnout periods mature.

Gene Mannheimer asked for clarification on the factors contributing to the Q2 2025 EBITDA margin compression and sought to confirm the organic revenue per visit growth rate when excluding the impact of IDR revenue.

Answer

CFO John Bates attributed the lower EBITDA margin to pre-opening costs for new hospitals and higher arbitration-related expenses. He confirmed that organic revenue per visit, excluding IDR, saw low single-digit growth and noted that the overall revenue per visit has stabilized around $4,200 over the last year.

Gene Mannheimer of Freedom Capital inquired about the components of arbitration payments, specifically regarding penalties, and the potential impact on future year-over-year comparisons. He also asked about the drivers of mature hospital volume growth, questioning the role of seasonality, and requested the opening timeline for the three new hospitals.

Answer

CFO Jon Bates clarified that current arbitration awards do not include penalties for payers, though proposed legislation could change this. CEO Dr. Tom Vo and COO Josh DeTillio attributed strong volume growth less to seasonality and more to sustained business development efforts and growing community reputation. Dr. Vo specified the three new hospitals in Texas (Houston, San Antonio, Sherman) are planned for Q3 and Q4 2025.

Gene Mannheimer sought confirmation that the dispute resolution process should be viewed as an ongoing part of business rather than a one-time event. He asked if the Q3/Q4 revenue figures from IDR could serve as a reliable forward-looking ballpark, how far back the retroactive claims went, and whether the disputed claims were concentrated with specific payers.

Answer

Chairman and CEO Dr. Tom Vo affirmed that the IDR process is an ongoing tool to collect fair payment that should have been received initially. CFO Jon Bates advised that while a trend is emerging, it is too early to commit to a specific run-rate number. He clarified that most retroactive revenue was from Q2 and Q3 2024, and that the underpayment issue is pervasive across the board, not limited to specific payers.

Gene Mannheimer asked about the strong patient care revenue growth, which included SaaS, Build, and non-recurring elements, specifically inquiring what customers were buying in the non-recurring cases given the gradual nature of SaaS Build. He also asked if the expected 200 basis points of EBITDA margin expansion for next year would primarily be due to continued cost efficiencies or an acceleration of revenue growth.

Answer

CFO Vinay Bassi explained that non-recurring patient care revenue includes implementation revenues, regulatory-related consulting work, and occasional hardware sales or ancillary products, noting an uptick compared to the prior year. Regarding the 200 basis points EBITDA margin expansion for 2026, Vinay Bassi stated it would primarily be driven by continued cost optimization efforts, including more complex solutions like patient care support, tech support, cloud ops, and ROI-driven product assessments, along with net savings from global workforce optimization. CEO Chris Fowler added that this reflects a strategic 'three layers of the cake' approach: financial improvement, stabilization and acceleration of financial health business (including global transitions), and now focusing on sales growth and quality of bookings under new leadership.

Gene Mannheimer of Freedom Capital Markets asked for the identity of the third-party consultant mentioned and inquired about where attriting clients are going, specifically whether they are choosing alternative vendors or insourcing.

Answer

President and CEO Chris Fowler stated that the company would not disclose the name of the consultant, though CFO Vinay Bassi added it is a 'top notch' firm. Regarding client attrition, Fowler explained that while it's a mixed bag, the vast majority of departing clients are choosing to bring their RCM capabilities back in-house. He views this as an opportunity, believing the door remains open to win those customers back in the future.

Gene Mannheimer of Freedom Capital Markets asked for the name of the third-party consultant TruBridge is working with and inquired about the destination of clients who have attrited, specifically whether they are moving to competitors or insourcing.

Answer

President and CEO Chris Fowler declined to name the consultant but CFO Vinay Bassi characterized the firm as 'top notch' and 'best of the best'. Regarding client attrition, Mr. Fowler stated that while it's a 'mixed bag,' the 'vast majority are going back in house.' He suggested this is sometimes due to new leadership at the facility or hesitation with the offshore model, which he views as an opportunity to win those clients back in the future.

Gene Mannheimer from Freedom Capital Markets asked for the name of the third-party consultant and inquired where attriting clients are going.

Answer

President and CEO Chris Fowler stated that they would not disclose the name of the consultant. Regarding client attrition, he explained that the vast majority of departing CBO clients are bringing their operations back in-house, which he views as a future opportunity to win them back. CFO Vinay Bassi added that the consultant is a top-tier firm with relevant expertise.

Gene Mannheimer of Freedom Capital Markets asked for the name of the third-party consultant TruBridge is working with and inquired about where clients who attrit are going, whether to competitors or insourcing.

Answer

President and CEO Chris Fowler declined to name the third-party consultant but stated that on the attrition front, the vast majority of departing CBO clients are bringing their revenue cycle management back in-house. Fowler views this as an opportunity to win those clients back in the future. CFO Vinay Bassi added that the consultant is a 'top notch' firm with relevant expertise.

Eugene Mannheimer asked about AccessOne's historical growth rate and the potential for Phreesia to accelerate it post-acquisition.

Answer

Balaji Gandhi (CFO) stated that Phreesia acquired AccessOne with the intent to grow it and will invest in it, but cannot provide historical growth numbers before the transaction closes.

Gene Mannheimer inquired about AccessOne's historical growth rate and whether Phreesia expects to accelerate it post-acquisition.

Answer

CFO Balaji Gandhi stated that Phreesia acquired AccessOne with the intent to grow and invest in it, but could not provide historical growth numbers for the company.

Gene Mannheimer asked about the expected cash conversion rate going forward and the anticipated cadence of payment processing revenue for the remainder of the fiscal year.

Answer

CFO Balaji Gandhi advised that the conversion rate of operating cash flow to free cash flow for the rest of fiscal 2026 should be similar to what was seen in Q1. For payment processing, he confirmed the historical seasonal pattern is expected to continue, with a bump early in the calendar year that then flattens out.

Gene Mannheimer asked for an update on the company's plan to hire approximately 40 new employees in sales and related functions this year. He also questioned if the Q1 SoHo ARPA of $14.83 should be considered the low point for the year.

Answer

CEO Scott Turicchi confirmed that hiring is proceeding as planned, primarily in go-to-market areas, but will be managed cautiously based on economic conditions. CRO Johnny Hecker added that hiring is focused on upmarket sales, implementation, and customer success to drive future growth. Regarding SoHo ARPA, Turicchi explained that while the base is fundamentally around $15, the metric is influenced by various promotions and brand mix, so it could fluctuate within a narrow band and potentially tick lower in subsequent quarters.

Questioned the drivers behind the decline in maintenance ARR, asking if there was any unusual churn, and also inquired about the new partnership with RamSoft.

Answer

The company confirmed the decline in maintenance ARR is by design, driven by successful migrations of customers to subscription and cloud offerings, with no unusual churn in the quarter. The RamSoft partnership is a very new reseller agreement, and more details will be shared in the future.

Eugene Mannheimer from Dougherty & Company asked for clarification on the company's revenue trajectory for the year, specifically questioning if a previously discussed run rate implied a significant pickup in Q4 surgeries. He also inquired about the current number of revenue-producing surgeons and the specialties of those with outstanding offers.

Answer

Chris Romandetti, Chairman, President and CEO, clarified that the company was not issuing specific guidance for Q4 revenue or surgery volume. He reiterated that the goal was to exit 2018 at a run rate that would support 5,000 surgeries for the following year, emphasizing a new focus on profitability over pure volume. He confirmed that any Q4 volume increase would come from existing sites, not new ones. Romandetti stated there are currently 10 surgeons on staff and declined to disclose the specialties of potential new hires for competitive reasons.