Q4 2023 Omnicell Inc Earnings Call
Participants
Kathleen Nemeth; Senior Vice President, Investor Relations; Omnicell Inc
Randall Lipps; Founder, Executive Chairman, President & CEO; Omnicell Inc.
Nchacha Etta; EVP & CFO; Omnicell Inc.
Stan Berenshteyn; Analyst; Wells Fargo Securities, LLC
Anne Samuel; Analyst; JPMorgan Chase & Co.
Scott Schoenhaus; Analyst; KeyBanc Capital Markets Inc.
Allen Lutz; Analyst; Bank of America Corporation
Matt Hewitt; Analyst; Craig-Hallum Capital Group LLC.
David Larsen; Analyst; BTIG, LLC
Stephanie Davis; Analyst; Barclays Bank PLC.
Bill Sutherland; Analyst; The Benchmark Company, LLC.
Jessica Tassan; Analyst; Piper Sandler & Co.
Presentation
Operator
Good morning, and welcome to the Omnicell fourth quarter and full year 2023 financial results call. Please note that today's call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answers. I'd like to join please star one on your telephone keypad. I will now turn the call over to Kathleen Nemeth, Senior Vice President, Investor Relations. You may begin your conference.
Kathleen Nemeth
Good morning and welcome to the Omnicell fourth quarter and full year 2023 financial results conference call. On the call with me today are Randall Lipps, Omnicell Chairman President, CEO and Founder, and Tata Executive Vice President and Chief Financial Officer.
This call will contain forward-looking statements, including statements related to financial projections or other statements regarding Omnicell's plans, strategy objectives, goals, expectations, cost savings actions, holistic review of the business 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 and the Omnicell annual report on Form 10 K filed with the SEC on March first, 2023, 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 statement. Our results were released this morning and are posted on the Investor Relations section of our website at ir dot 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 release issued today.
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 or on a forward-looking basis as these items are inherently uncertain and difficult to estimate and cannot be predicted without unreasonable.
With that, I will turn the call over to Randall. Randall.
Randall Lipps
Good morning, and thank you all for joining us today. I will walk through our high level performance for the fourth quarter and fiscal 2023, including some key customer wins. Chutta will also provide an update on the current demand environment and our Q1 and full year 2024 outlook.
Beginning with our results we delivered overall 2023 financial results, roughly in line with the original guidance we provided in February 2023.
Now solver bookings for full year 2023 were down 19% for the prior year and missed our original guidance for the fourth quarter. Total GAAP revenues were $259 million, down 13% from the prior year. Total non-GAAP EBITDA for the fourth quarter was $24 million above our fourth quarter guidance due to strong expense management versus $26 million for the prior year. Gaap earnings per share was a loss of $0.32 per share versus a loss of $0.64 for the prior year.
Now let me be clear. We do not view our recent performance as acceptable. Although we have taken various actions to improve our performance, we intend to take further action. For example, over the past few years, we launched a number of advanced services that are gaining traction with customers and beginning to scale. We also previously announced a heightened focus on managing costs, including an approximate 7% reduction in our workforce announced last quarter.
These already announced cost actions are expected to result in $50 million of savings on an annualized basis by the end of 2024. But we recognize we have more to do our results. Tell us there is a need for a thoughtful evaluation of where we can potentially make further changes to improve from our operations and go-to-market initiatives to our product portfolio. And accordingly, we have decided to undertake a holistic review of the business with the assistance of an outside consultant in an effort to determine how we can best optimize our operations and investments. The Omnicell strength has been demonstrated repeatedly over the years, and we believe our core point of care business remains critical. The health system's ability to safely and efficiently manage medication across the continuum of care. We intend to continue to evolve as a company to improve our performance and deliver returns to our shareholders.
We are moving forward with this work with determination and urgency, we will continue to transform the pharmacy care delivery model and advance the industry vision of the Autonomous Pharmacy. However, we are committed to ensuring we deliver strong returns for shareholders as we work to achieve this mission, I look forward to updating you on the progress. For example, I'd like to share this data here as we realize a number of items, there are signals that are gaining traction with customers and any wide-scale wins impact how you also proved reserves are now seeing heightened focus on managing costs. But as we move diluting and one and probably some of our vendors to sell more data in our label as they announced last quarter, industry leading already announced the offering.
Operator
Yes, pardon the interruption, we are experiencing a technical difficulty. Please allow a moment for the conference to continue.
Kathleen Nemeth
Yes, thank you. Operator, will you continue the recording.
Randall Lipps
for us that has resulted in excluding CAD year-over-year.
Industry-wide headwinds impacting hospital and health system seem to persist in 2023. But as we move into 2024, we are seeing some encouraging signs of stabilization. Industry research indicates that 2024 and CapEx budgets could increase year over year. In turn, some forecasts are predicting that health systems will start moving forward with long delayed capital projects in 2024. However, we believe challenges may persist across the industry, including continuing high labor costs and operating costs and therefore, we will continue to take what we believe is a cautious approach to managing our business. We continue to believe that Omnicell is an essential part of the solution for the industry, we think we are uniquely positioned to capture incremental market share as hospital cost pressures alleviate and the macro economic environment improves. As I mentioned, our lower year over year bookings create challenges for 2024, and we expect revenue and non-GAAP EBITDA profit to decline from 2023. However, as we work to transform the pharmacy care delivery model through a combination of automation, intelligence and type technology-enabled services. We believe that the solutions we are able to deliver to customers are more important than ever.
The total addressable market for medication management remains large. Omnicell has successfully increased our installed base of point-of-care connected devices through market share gains over the previous three years. We are very enthusiastic about and encouraged by the opportunities to deliver product and service enhancements within the XT installed base. We recently launched the XT console upgrade, which is designed to enhance data and network security and improve nursing efficiency an overall user experience for our XT. cabinets and showcased this solution at ASHP. 2023 midyear meeting in December, the XT console upgrade as part of a broader strategy toward a planned XT. product refresh. We are investing in the XT platform to bring a multiyear initiative that provides key products and services to drive medication management outcomes this year. Our innovation pipeline related to the XT platform is anticipated to begin to provide key product enhancements and services designed to improve medication management. Our XT. fleet of products are focused on delivering outcomes. Health systems are asking us for and related to patient safety and efficiencies. As I mentioned, our innovation pipeline is very strong within point of care and we believe we are beginning to see the signs of stabilization in 2024. We are very excited about these initiatives because they will amplify what our customers I've already purchased.
Now turning to some important customer wins during the quarter, health systems continue to find value and long-term collaboration with Omnicell as evidenced by two multiyear sole-source agreements. This includes an Illinois-based health system, which has expanded a multiyear sole-source agreement to convert the automated dispensing cabinet footprint across multiple locations to Omnicell's XT automated dispensing system.
Standardizing their technology strategy with Omnicell solutions should position this health system well for future expansion. Most recently in January, we were pleased to participate in the grand opening of Tennessee based ballot else. New consolidated distribution center which will support medication distribution for Ballad Health hospitals across the Appalachian Highlands region. This new facility is anchored by our central pharmacy dispensing solution, which includes three XR2 robots, along with Omnicell carousels and packagers, which are intended to help ballot help optimize inventory management. It allows pharmacy staff to focus on higher-value tasks, Chris Dan, our VP and Chief Pharmacy Officer for Ballad Health has long been an advocate of technology-driven pharmacy care as a member of the automation pharmacy advisory board. During the event she commented, it's not just technology, it's about advancing patient care, streamlining operations and embracing for the future where our health professionals a little more time, what truly matters. And that, of course, is the well-being of our patients. We could not agree more with this sentiment and are proud to be leading the effort to enable our customers to get closer to achieving the industry vision of the Autonomous Pharmacy.
We also continue to take steps to enhance our corporate governance with the recent election of a highly invoked net to the Board of Directors. Eileen is a widely respected leader with significant experience in the software technology and healthcare industries, with a track record of creating value for shareholders, accelerating growth, driving an operational excellence and developing global businesses. We are thrilled to have her join the Board well for my lead. Now let me be clear. We have hard work ahead of us, but we are taking the steps we believe are necessary to strengthen our financial performance, accelerate profitable growth and drive shareholder value. We will we remain confident in Omnicell's long-term opportunities and continue to believe that the Company is uniquely positioned to transform the pharmacy care delivery model and ultimately help enable our customers achieve better outcomes and increase their ROI. And that with that sets out, I will turn it over to you for more details on the quarter. Nchacha?
Nchacha Etta
Thanks, Randall, and thank you all for being here today. We will discuss our full year 2023 financial performance. The current demand environment and our Q1 and full year 2024 outlook. Over the last three quarters, we have taken a hard look at our business and products along with our go-to-market market strategy. And I've given a lot of thought to how we can strengthen and refine certain processes, as Randall mentioned, to better understand the opportunities in front of us and ways we can strengthen our financial performance, we have decided to undertake a comprehensive review of our business and engaged a consultant to assist in looking at everything from growth opportunities and further operational improvements. Productivity enhancements and refinements in our product portfolio during 2024. We will also we also intend to reevaluate the financial and key performance metrics we report, including bookings and backlog, and we will consider potential new metrics we may be able to share in an effort to provide additional transparency and information to our stockholders. We look forward to updating you on our progress with that, let me get into the results for the fourth quarter and full year 2023 as well as our outlook for 2024.
For the fourth quarter 2023, total GAAP revenues were $259 million, slightly above the midpoint of the guidance range we provided during our third quarter 2023 earnings call. To low revenues in the quarter were down 13% compared to the fourth quarter of 2022, reflecting the lower point of care revenues, primarily as a result of ongoing health care systems, capital budget and labor constraints. Services revenue were $113 million, an increase of 12% versus the fourth quarter 2022, primarily driven by growth in technical services as a result of strong execution growth in the installed base and decisive pricing actions.
Non-gaap gross margin for the fourth quarter 2023 was 43.6%, a decrease of 210 basis points from the prior quarter compared to the third quarter of 2023. Non-gaap product gross margin decreased 450 basis points, while non-GAAP services gross margin expanded modestly. The decrease in product gross margin is primarily based on the impact of the lower revenue and mix product within the quarter, a full reconciliation of our GAAP to non-GAAP results are included in our fourth quarter 2023 and Q3 2023 earnings press release, which are posted on our Investor Relations website.
Fourth quarter 2023 earnings per share in accordance in accordance with GAAP were a loss of $0.32 compared to earnings of $0.12 per share in the prior quarter and a loss of $0.64 per share in Q4 2022. Our fourth quarter 2023 GAAP earnings per share include $10 million of severance related expense associated with our 2023 cost savings plan.
Fourth quarter 2023 non-GAAP earnings per share was $0.33 compared to $0.62 per share in the prior quarter, and $0.33 per share in the same period last year. Our fourth quarter 2023 non-GAAP EBITDA was $24 million, a decrease of $17 million compared to the previous quarter, which reflects the impact of lower product revenue in the fourth quarter, partially offset by cost savings actions taken in the quarter.
Our fourth quarter 2023. Non-gaap EBITDA and non-GAAP earnings per share exceeded the guidance range we provided during our third quarter earnings call due to strong cost management across our organization.
Turning now to review our full year 2023 results. Bookings for full year 2023 were $854 million compared to our original full year 2023 guidance of $1 billion to $1.1 billion provided in February 2023 and $1.054 billion for the full year 2022, a decrease of 19% on the prior quarter.
2023 bookings were lower than original full year guidance, primarily driven by lower than expected orders for our advanced services, particularly tech enables services, which includes CPDS. and IBCS. Additionally, our Point of Care bookings, including XT cabinets, were lower than original expectations as the result of health care system customers continue to delay capital budget decisions and XT cabinet bookings continue to moderate as a result of timing in our XT upgrade cycle.
Summarize the majority of the lower than expected bookings in 2023 was the result of lower demand for CBTCPDS. and IVCS. and other advanced services. Our total book backlog was $1,143 million as of December 31, 2023, compared to $1,215 million as of December 31, 2022.
Product backlog includes connected devices such as XT Series, automated dispensing systems and a product portion of our central pharmacy dispensing services and IV compounding service. Product backlog as of December 31, 2023 was $611 million, of which $378 million is short term out of backlog, which we expect to convert to revenue within 12 months.
Product backlog decreased by $186 million over the prior year as a result of lower 2023 bookings. Advanced Services backlog includes only the service portion of our advanced services, multi-year contracts. We have a stated minimum commitment. We didn't pay agreements while we partner closely with our customers when providing advanced services and the majority of our advanced services are provided under multiyear contracts. Only a portion of those contracts have is at minimum commitments.
Advanced services backlog as of December 31st, 2023 was $532 million, of which $72 million is short-term advanced services backlog, which is expected to convert to revenue within 12 months. Advanced Services backlog increased $130 million or 27% over the prior year. Full year 2023 GAAP revenues with $1,147 million, a decrease of $149 million or 11% from 2022. The decrease in revenue over the prior year reflect the impact of lower bookings as I just outlined, our 2020 throughput product revenues were $709 million, And our 2023 services revenue were $439 million. Within the full year 2023 services revenue. I think our services revenue with $226 million and advanced services revenue were $230 million.
2023. Advanced Services revenues increased 14% over the prior year. Our full year 2023 earnings per share in accordance with GAAP were a loss of $0.45 per share. Our full year 2023 non-GAAP earnings per share were $1.91 per share, a decrease of $1.9 per share from 2022.
For the full year 2023, we delivered non-GAAP EBITDA of $138 million, a decrease of $55 million from 2022, which is double that by 2023 guidance range we provided in the third quarter of 2023 year over year decrease in earnings per share and EBITDA was mostly driven by lower revenue during the year, partially offset by cost savings actions, including the benefit from cost savings plans we announced in November 2022 and November 2023. Although our full year 2022, bookings on revenues were lower than expected when we provided the original guidance in February 2023. We are pleased with the results of the cost savings plans that we announced in November 2023, together with other factors, including ongoing cost savings initiatives implemented throughout the year.
The implementation of the 2023 cost savings plan drove non-GAAP EPS and EBITDA to be above the original guidance and non-GAAP EPS and EBITDA guidance. However, we believe there is more work to be done on this front and as I mentioned, we are actively working to identify opportunities to further streamline our costs. We believe the favorable profitability during the year demonstrates our commitment to taking actions designed to bolster the continued profitability of our business during this challenging customer and product periods.
At the end of Q4 2023, our cash balance was $468 million, up $21 million from $447 million as of September 30, 2023. Our full year 2023 non-GAAP free cash flow was $126 million compared to $17 million for the prior year, which includes the benefit of reductions in accounts receivable and inventory during the year, reflecting strong working capital management. As we communicated in our November 2023 earnings call, we continue to be mindful of the upcoming. We need 25 maturity of our convertible senior notes and are considering various options to maintain strategic flexibility for our company and in an effort to minimize potential dilution for our stockholders. In the meantime, we believe we are in very good position with the current convertible senior notes, which have a 0.25 coupon interest rates. In short, we remain confident in our capital structure and I believe it will support the ongoing execution of our growth strategy.
In terms of accounts receivable, days sales outstanding for the fourth quarter 2023 was 90 days, an increase of six days over the prior quarter and a reduction of previous comparison of quarter 2022. Inventories as of December 31st, 2023 were $110 million, a decrease of $37 million from December 31, 2022. Our group global supply chain team continues to make great progress managing inventory levels.
Now moving to our 2020 for full year and third quarter guidance. We would like to start by commenting on the current demand environment we are seeing within point of care, we are encouraged by the opportunities to offer new and innovative product enhancements on a larger installed base, including the XT console upgrade Randox noted in his opening remarks. We believe that with these new innovations, we should see a modest increase in point-of-care product bookings in 2024.
Our core franchise is strong. Our channel is a durable source of future opportunities, and we are excited by our innovation pipeline Based on these expectations, we expect our full year 2024 bookings to range between $750 million to $875 million. We expect our full year 2024 total revenues to range between $1.045 billion and $1.120 billion. We expect product revenues to range between $605 million to $650 million
. We expect services revenue to range between $440 million and $470 million. We expect services revenues from advanced services to range between $220 million and $235 million. We also expect services revenue from technical services to range between $220 million and $235 million.
The revenue guidance reflects our expectation for the continued impact of a challenging environment while our health system customers and timing of our XT product lifecycle, the midpoint, the full year 2024 revenue guidance implies unexpected year-over-year product revenue decline, partially offset by a modest increase in our band services revenue when compared to 2023. As we have shared in the past, Advent services provide a stable reoccurring revenue stream and for a majority of our services we have multiyear contracts for partnerships with our health systems and retail customers as we continue to book new orders, the increase in the installed base will continue to contribute to advanced services revenue growth.
Please refer to our fourth quarter 2023 earnings release published on our Investor Relations website.
Quite a summary of the full year 2024 revenue guidance company. We expect full year 2024 non-GAAP EBITDA to range between $90 million and $120 million. We expect full year 2024 non-GAAP earnings per share to be between $0.90 and $1.40 per share. For the full year 2024, we are assuming an effective blended tax rate of approximately 19% in our non-GAAP earnings per share guidance.
Full year 2024 non-GAAP EBITDA and non-GAAP earnings per share guidance includes the expected impact of a full year of higher gross margin percentage to decrease as a result of the lower point of care revenue, partially offset by the benefit of the recently implemented cost savings plan. We continue to expect approximately $50 million of annualized cost savings as a result of the cost actions announced in November 2023, of which around 75% is expected to be in operating expenses, a majority of the benefit from the cost actions is anticipated to realize to be realized in the beginning of the first quarter of 2024 with a smaller portion of the savings expected as we progress through the year.
As a reminder, the cost actions are expected to be partially offset by year-over-year inflation as well as lower gross margin due to anticipated product mix for the first quarter 2024. We are providing the following guidance. We expect total first quarter 2024 revenues to be between $232 million and $242 million, with product revenues to be between $128 million and $133 million and services revenue to be between $104 million and $109 million.
We expect first quarter 2024 non-GAAP EBITDA to be between a loss of $2 million and earnings of $4 million. And we expect therefore that we need to meaningful non-GAAP earnings per share to be between a loss of $0.10 per share and breakeven per share.
In summary, we continue to execute against our long-term growth strategy and navigate a challenging macroeconomic environment. We are seeing challenges for our customers, including the impact of the macroeconomic environment and labor challenges, and we expect these headwinds to continue into 2024. However, we are confident that the approach we are taking to managing the business position Omnicell to deliver on our commitments over the long term. The team has built a strong foundation from which we expect to continue our momentum in transforming the pharmacy care delivery model, and we're taking actions intended to improve our performance. We remain focused on driving value for our stockholders as we look to execute on our strategy and work towards to capture that opportunities, we see ahead of us. We continue to endeavor to drive long term profitable growth and success at Omnicell.
I want to conclude by thanking our employees for their continued hard work and commitment to Omnicell. With that, I would like to open the call for questions.
Question and Answer Session
Operator
Thank you. At this time I would like to remind everyone in the call, please press star one. Stan Berenshteyn, Wells Fargo. Please go ahead.
Stan Berenshteyn
Hi, good morning. Thanks for taking my questions. Maybe a couple things on the bookings guidance first and touch on I heard, if I heard you correctly, you said point of care product bookings is expected to increase in 2024. And if that's the case, can you help us understand what's driving the decrease in overall bookings guidance for the year?
Nchacha Etta
Thanks for the question. We are continuing to see our customers be more cautious as they consider implementing new workflows that they stress are already thinly stretched nursing IT and IT staff, which potentially impact the timing of contract signing and implementing new capital and software projects. While we are expecting a modest improvement in demand for our Point of Care Solutions. As a result of new innovations and services, we still expect moderation of sales of our XT cabinet based on where we are currently in the XT upgrade cycle. However, in advanced services, we continue to work with our customers to navigate the complex regulatory environment for our IV robotics. Please keep in mind that, however, there's a lot of interest in IV services, which is quite strong, and we believe the long-term trends remain favorable.
Stan Berenshteyn
Okay. That was --? Sorry, go ahead.
Nchacha Etta
I am saying we expect our full-year bookings in order to again be between the range of $750 million and $875 million. But we're very excited about our innovation within the XT platform.
Stan Berenshteyn
Okay. So what about on advanced services? Are the bookings for advanced services expected to be positive or negative for the year?
Nchacha Etta
As I mentioned earlier, we continue to see our customers navigate a complex regulatory environment within our IV robotics.
Stan Berenshteyn
Okay. And so you say you're saying that point of care seeing modest increase in demand, but XT sales are expected to decline. So on a net basis on our product bookings, just to be clear, our product bookings overall are expected to be negative in 2020 for a positive.
Nchacha Etta
Slightly positive.
Stan Berenshteyn
Okay. So that would imply advanced services has to be negative, right to get to overall bookings guidance negative?
Nchacha Etta
That's correct.
Stan Berenshteyn
Okay. Okay. Appreciate that. And then just in terms of the guidance range at, you know, it's pretty wide, $[125] million. Can you just walk us through what factors are from the guidance range Rite Aid.
Nchacha Etta
We provide a very a, you know, reasonable guidance that we believe you know, is what we think we can achieve for the year.
Randall Lipps
Yes, I think they think the as we introduce new innovation throughout this year. And this is a big innovation year for us. As you know, the uptake on that innovation and adoption by our customers is and that's why we see the lift in product bookings and how fast it can be implemented is it's varied. So we're just at the beginning of the first phase of the XT upgrade cycle, which means every XT customer is in play now within offering. And as we continue to innovate, we'll have to see how those new products, how quickly they can the uptake. And this is a big year at the beginning of the cycle of these new XT products and platform that will get a lot of customer attention issues. Do you have enough time this year to get it in the pipeline and get it sold and then eventually when does it revenue.
Operator
Anne Samuel, JPMorgan.
Anne Samuel
Yes, thanks so much for taking the question on the maybe in the advanced services business unit. Can you parse out maybe what some of those key challenges are? Is it is it still issues around hiring the pharmacy technicians or is it something in a broader within the industry backdrop around demand?
Randall Lipps
Well, I think I'd be a lot of interest and demand is just making our way through the regulatory environment is by state. It's not just federal as by state. So to achieve that, you have to take the proper steps to get there. So that's the biggest dampener there. And super CPDS. it's really a lot of our customers are looking at where to deploy robotics. Is it in a consolidated service center like pallet or is it at a large hospital? And so the strategies that the customers are looking at are slightly changing for what they have been in the past. And so they're not ready to dive into new innovation until they sort of get there a big hospital network strategy built on how they're going to dispense medication across a broad group of hospitals and clinics. And because of that, I think you know we're had a lot of discussions, but they're moving pretty slow.
Anne Samuel
That's really helpful. Thank you. And then maybe just one more on the bookings. And can you just remind us of the time line of converting bookings into revenue, how long that takes, you know, if we were to start to see a pickup in the macro and maybe some improvement in your bookings, how long would it take for us to see that translate into revenue?
Randall Lipps
Well, it's a good question because this is one of the things that I discussed about coming up with new metrics because bad bookings can be confusing. But the easiest thing is to look at product product generally is 12 to 18 months for installation. It may be shorter than 12 months in many cases. So that's a key driver for the business or the near term part of the business.
Bookings and advanced services are a multitude of different monetization of the stream over either three, five, even 10 years. And so it kind of confuses when those backlog will hit the P&L, but they are generally longer than 12 months and three to five years. So it's not the same impact that the key for us and the way to look at our P&L is we gave guidance on advanced services this year for the revenue. So that is the revenue piece of the advanced services. The product backlog then is monetized in six 12, maybe as much as 18 months. So that's more of the near term revenue, CCP, advanced service product revenue and the product revenue and that that steers you pretty close to how the business works.
Anne Samuel
Perfect. Thank you so much.
Operator
Scott Schoenhaus, KeyBanc.
Scott Schoenhaus
(technical difficulty) product bookings or the product guidance are for revenue and bookings. So are you assuming any revenue contribution and this year from that new XT series console that you talked about as a growth opportunity?
And then secondly, on advanced services, you talked about the regulatory environment pressuring advanced services demand for the IVX, but are you also seeing any slowdown in maybe the retail side in Life & Health? Thank you.
Randall Lipps
Well, I think 11 out is a different business model, mostly SaaS. We did have some churn in the business, but we're not necessarily seeing a slowdown in interest or or the value that the product line brings. We are seeing yes, we believe that and that advanced services for IV is certainly a bigger impact. If IV were where we would want it to be be probably righting the ship on the advanced service side.
Scott Schoenhaus
And then your guidance on the product side for revenues, does it assume any contribution from the new consequence.
Randall Lipps
Small amount in the back half of the year.
Operator
Allen Lutz, Bank of America.
Allen Lutz
Good morning and thanks for the questions. One for Randy or in Changsha on the strategic review, trying to get a sense of where this is focus or is it more on the operational cost structure? It could result in the divestiture of assets. And just can you elaborate a little bit more on the scope here? Is basically everything on the table and then trying to understand the timing here? Is this something where we should expect a resolution in 2024?
Randall Lipps
It's just a holistic operational and go-to-market review, right? I mean, we've got a lot of great products we've either launched or acquired over the last several years, and it's just time to do reveal on those. And it's been a long time since Omnicell has had this type of year in decline. So it just makes sense to do that. Is this for the year.
Nchacha Etta
Yes, I'll just add to that. I'll just add to that, that our results tells us that there is a need for significant and thoughtful evaluation of where we can make changes to improve our performance from operations to go to market initiatives as well as our overall product portfolio. And while the cost savings that we've taken already on the way we need to evaluate opportunities for additional and of that will enhance value creation for our shareholders.
Allen Lutz
Great. And then on the product bookings, curious from a follow up to some other questions here. I'm curious if the driver just to kind of break out some of the drivers around the expectation for higher bookings growth and from the product side in 2024, would you say what's as we think about changes to hospital budgets that you're seeing a new XT. console upgrade. I'm just curious, are those the two things that are providing them the greater confidence here as we go through 2024? And just curious what you're seeing today as it relates to your conversations with hospitals?
Randall Lipps
And yes, definitely the macro environment has improved over time. There's still some headwinds there. But the XT product line, which is the point of care product line is a big contributor of what's in product upgrading. The cycle of the XT. line is something we did before, right? We went from G3 and G4 console upgrade. Now we've got the XT console that's going to be upgrade the next version, which is a natural thing for customers to do so a playbook that we've run before.
So we're really confident that this will resonate with customers extend and their investment they made in the XT product line to bring them more value and provide more security. Some of these keyboards and screens are seven, eight years old that need to be replaced. So there's also there's a lot of logic there for customers and a little bit more willingness we see for them to invest until this is not just a pharmacy piece. It's something that that will help nursing, which is a very sensitive area. Our providers these days.
Operator
Matt Hewitt, Craig-Hallum Capital Group.
Matt Hewitt
Good morning and thank you for taking the questions. Maybe a couple on the new, the new console upgrade and Ray, thanks for explaining. I mean, it sounds like it's like the G4. When I think back over a couple of your prior upgrade cycles, you had an external driver that helped kind of expedite the process. I think, you know, at one point it was the EHR Meaningful Use and you guys were the only ones that had approval for that. And so that helped drive adoption of a new cabinet. And then at one point, it was the windows of 2000 sunsetting. What do you see as a driver for this new console upgrade? Is it on the cybersecurity side? Is there something else that could help externally kind of drive customers to adopt this new platform.
Randall Lipps
Yeah. In itself it definitely allows you to access the latest operating systems, which of course, everybody is concerned about. And so it is more secure. It's also more efficient for nurses to use it. There's some efficiency enhancements as well is going to be a platform which we will get continue to innovate on that will allow them access to these new innovations you'll have to have the new console to access these additional innovations as we go along. And probably the biggest driver is, is that if you made an investment in XT. you want to be able to lengthen the life of that frame.
And in order to do that, you have to do the console upgrade because we're not going to allow the continual use of an older piece of equipment when it gets out of date. And so to get that refresh from the frame, you've got to upgrade the console. So it's something that they're used to. It's something that we've done over the years. They understand. And we've had a lot of discussions and pipeline on it. So that sort of just the very, very early returns. I'd say we're pretty pleased with how it's going right or it's expected to go.
Matt Hewitt
That's great. And then maybe a similar question or related question with it just being a software upgrade, should that result in a shorter sales cycle, unlike when you're ripping and replacing the full cabinet because this is just software, does that result in a shorter sales cycle or shorter implementation cycle and therefore maybe help a little bit sooner?
Randall Lipps
Yes, let me just be clear. It is a hardware console is like that the interaction screen and keyboard they use, but it's a fairly simple exchange in less than an hour to pull out the old and put in the new and then it has the new software and it's ready to go. So it is a little bit simpler to make the sale and a little bit simpler to revenue as well because you're not doing you're not doing a forklift of our other major product line is just upgrading and enhancing the one that's already there with a little bit of hardware and a lot of software.
Operator
[David Larsen], BTIG.
David Larsen
Can you talk about on your own sort of cost inflation trends along the lines of like steel and freight and your own labor. And then I think you are implementing some price increases for your base to help offset that. And how are those being received by or by your customers and how far along are we in that process?
Nchacha Etta
We continue to monitor our supply chain with and the geopolitical environment and the impact that has on our business and you know, inflation has normalized in recent quarters, but we as we take pricing actions, you know, we we believe that this will be well received by our vendors.
David Larsen
Okay. And then with the XT. sort of upgrade on, Randy, I think we had been talking about like being maybe 70% or more of the way through sort of this fall XT. upgrade process. And on previous calls, I think what I'm hearing from you now is that it's a full reset. Everybody is going to have to go through this new XT. upgrade for this new console. Can you talk a little bit about the pricing for that, please? Like how much of a lift should we expect to see per per customer?
Randall Lipps
Just got full load and we're looking at the expanded portfolio to take to the customer, which we will announce it throughout the year or this broader innovation is going to work, but it's about as these console upgrades generally are about a third of the price of the unit.
Okay.
David Larsen
So it sounds like it will be actually very, very material, quite frankly, which is obviously a good thing. And then just my last one is for the 1Q revenue guide that looks low, so I like how Nchahcha beat the guide this quarter? That's correct. And that's great. Are you being conservative with the 1Q revenue guide or what is causing the seasonality here? And I guess my concern is if you're not being conservative, then you're kind of expecting a pretty good lift in the back half of the year. So any color there would be great.
Nchacha Etta
Yes. Look, we've provided a plan that we believe we can manage the Company to. And we remain optimistic about our innovation within the XT platform, which includes a console upgrade, and we expect a modest improvement in demand for our point of care as we go into 2024.
Operator
Stephanie Davis, Barclays.
Stephanie Davis
Yes, thank you for taking my question. I am I heard in the prepared remarks, things that you're talking about exiting into your long-term growth strategy. So I wanted to revisit I know at the Analyst Day last year, you talked a lot about moving from more of a services and software play away from just hardware alone. Advanced Services was part of that from where are you in that transformation? And is that still of the long-term targets?
Randall Lipps
Yes. Obviously, advanced services is very key, but we'll always have product as part of our business model and a big portion of that business model over the past few years, which generate a lot of growth and a lot of revenue has been the point of care. And so that is impacting our model more than we'd like obviously right now. But to get our model back in balance, we need to be able to have those product revenues, particularly from point of care start to drive our growth and increased earnings. And but there's a lot of ways we can offer those products. They don't have to be as a product sale alone we don't really want to be doing product sales alone. We want to do those product sales enhanced with services around them.
But so it's really key for us to move from selling products at to really helping our customers run the day-to-day operations in their medication processes so they can achieve success, but it does include the offering and the sale of products either embedded into service or sold as a service surrounded by services. So I don't know if that answers your question directly, but it's kind of it's the same. It's we're moving forward toward managing our customers' businesses day-to-day with these enhanced services and the revenues that are driving that can be in the form of traditional product revenues, but always adding on advanced services to get the results and the outcome.
Stephanie Davis
No, that's helpful. That's helpful. And as you go through the strategic review and kind of shape that discussion, what business versus plus nine are there any incremental end markets like the retail pharmacy side of the house that might be more compelling to get into given some of the headwinds?
Randall Lipps
Yeah. I think there's always in the clinics and, you know, outpatient, there's some a lot of growth there and concerns there that that there aren't quite the tool sets that they have on the inpatient side. So a lot of our customers want us to help them figure those out. And certainly those those kind of markets are in our view and either in investing or make-or-buy so it absolutely does make a lot of sense to proceed at.
Operator
Bill Sutherland, The Benchmark Company.
Bill Sutherland
Good morning, everybody. A rail you just mentioned make-or-buy. I was actually going to ask you what you're right. Any thoughts on the capital deployment side and particularly with the cash you're building quite nicely?
Randall Lipps
Yes, I'll let Nchacha comment on the refinancing of the debt, but I should I should have said that they probably won't be looking at acquisitions. So we get sort of the debt side of it addressed here and there, and that's not to that's not too far off in the distant future. I don't know how much or what do you want to say anything else about that.
Nchacha Etta
Yeah. We continue to be mindful of the upcoming 2025 maturity of the convertible senior notes, and we are considering various options to maintain strategic flexibility for our company and in an effort to minimize any potential dilution to our stockholders.
Bill Sutherland
Sort of the quarterly cadence, particularly on earnings, non-GAAP earnings, from the Q4 Q1 guidance for the full year quite a lift. Is it going to be kind of a should we think of it kind of ratably improving or is it more back half loaded?
Nchacha Etta
I'll say back up a little bit to a certain extent.
Bill Sutherland
Okay. And then Randy said not too long ago on the conference call, the regulatory headwinds, which are state by state on IBEX out and kind of you kind of thought that most of the important states at least would be but work through during the course of this year. I think that's what you said is that is that the case so that we can really expect AVX to be taking off in '25?
Randall Lipps
In '25, we'll have to see how it goes. But I think I think '25 is going to be a much better year for Ivy just because we had through some of those states. Some of the things that impacted of the IV is what drugs you can mix on site and how long the stability was. And so our original thesis for some of our sites where we were making proposals, the ROIs are as high. So we had to go back and reformulate those and then get hospitals to get engaged on those again. So I think we'll have worked through most of that by the end of this year.
Operator
Jessica Tassan, Piper Sandler.
Jessica Tassan
Hi, guys. Thank you for the question. And I thought the new deck was really helpful, slide 14 and especially so I wanted to just get kind of clarity on the the enhancement of the XT cycle via console versus the upgrade cycle? And I guess what's the thought process on launching the new console during the end of the XP cycle as opposed to just introducing the new console and cabinet kind of bundled together as a new and new product cycle entirely?
Randall Lipps
Well, this has just been our tradition and it's also been part of our brand is that if you buy a frame from us, it's good for 10 years, but it includes an upgrade of a console about halfway through to get new enhancements and really replacement of the old hardware or the interface console sold customers kind of expected and it generates good revenue for us and it extends the life of their asset is easy. It makes sense for them to purchase and keeps customers engaged with us as we move on to product transitions and product rollouts of new products and services.
So I would say half our customers in the last three years have just installed or XT. So if you can say it's not the timing to come out with a new piece of hardware or told frame at this point. And so this would be the next logical move for us in our go-to-market as well.
Historically this is this makes a lot of sense, and that's probably the reason we've kind of had this dip on it tailed off in the XT., and we're taking off on the console upgrades is we probably had some of those XT cabinet sales were pulled in from the pandemic process. And so it really created a slack in the rope. And now that we're getting the XC console going, which is what people expect about this time. It should help us even out and move forward on a more consistent basis to drive revenue and profit and have I got it.
Jessica Tassan
That's helpful. So the customers who have already implemented the XT have not paid for the console yet, but they've agreed extensively or implicitly to upgrading the console whenever relief. Does that fair? And is this kind of a incremental market share driver or a way to drive revenue numbers of today?
Randall Lipps
This is all for the equity base. And it's, you know, it's quite large for us, right, because of our footprint that we've gained over the last three or four years. So this is a sale into our captured customers equity base that we have today.
Jessica Tassan
Okay, and got it. And then I just wanted to quickly follow up on your commentary about the booking net in '23 versus the preliminary guide, still about $159 at the midpoint. If we imagine that the majority of that attributable to and do a miss in central dispensing and the IV compounding robot, it just suggests that there were pretty significant expectations for those two products in the '23 bookings guide of you guys thought about or changed your philosophy around guidance for those new products in 24 and just kind of increased the level of conservatism given that there are new products with --?
Randall Lipps
Yes. So yes, that's a great point. And I think you see that in our our bookings guide that is lower and that reflects those conclusions you just had. So I think that's that's implied in there.
Operator
There are no further questions at this time. We apologize for the technical difficulties during today's conference. I will now turn the call back over to Randall Lipps for any closing remarks.
Randall Lipps
We'll thanks for joining us today, and we've got a lot to do in 24, but we're really excited about our innovation road path that we believe is really going to drive growth in earnings over the long term, we really have stepped up our focus on our go to market on our innovation consistently even quarter to quarter as we move forward. So look for seeing of these new innovations as they come out and how they fit into our roadmap and what they mean to customers and what they mean to our revenue and earnings. It's really in a way it's really exciting that to get to the next phase, which is the upgrade phase and even more rollout of our equity and debt service lines. I also want to thank the Omnicell employees for working extremely hard as we continue to deliver great value for our customers and for each other and get our company going back to growth and back to profitability. Thanks, everyone. Cheers.
Operator
That concludes today's conference. You may now disconnect.
