OM Outset Medical Inc

Outset Medical, Inc. (Nasdaq: OM) (“Outset” or the “Company”), a medical technology company pioneering a first-of-its-kind technology to reduce the cost and complexity of dialysis, today reported financial results for the second quarter ended June 30, 2024.

“During the quarter, the number of treatments performed each month on Tablo continued at record levels, as utilization remained high and gross margin materially expanded as it has each quarter for more than 3 years,” said Leslie Trigg, Chair and Chief Executive Officer. “These results reflect the strength and differentiation of Tablo and the positive impact it is having on the lives of patients and providers.

“At the same time, new console placements were below our expectations and will be lower than we originally forecasted for the year. We are taking clear steps to improve our execution and grow the business over the long term to bring the benefits of Tablo to even more providers and dialysis patients.”

Second Quarter 2024 Financial Results

Revenue for the second quarter was $27.4 million compared to $36.0 million in the second quarter of 2023, driven by a decline in product revenue to $19.2 million. Service and other revenue was $8.2 million, an increase of 21.5% compared to $6.7 million in the second quarter of 2023. Recurring revenue from the sale of Tablo cartridges and service increased by 24% as compared to the prior-year period.

Total gross profit was $9.8 million, compared to $7.7 million for the second quarter of 2023. Total gross margin was 35.7%, compared to 21.4% in the second quarter of 2023. On a non-GAAP basis, gross margin improved to 37.3% from 22.5% in the second quarter of 2023. Product gross profit was $8.7 million, compared to $7.1 million in the second quarter of 2023. Product gross margin was 45.1%, compared to 24.3% in the second quarter of 2023. Service and other gross profit was $1.1 million, compared to $0.6 million in the second quarter of 2023. Service and other gross margin was 13.6%, compared to 8.7% in the second quarter of 2023.

Operating expenses declined 21% from the prior-year period to $40.5 million, including research and development (R&D) expenses of $9.7 million, sales and marketing (S&M) expenses of $18.1 million, and general and administrative (G&A) expenses of $12.7 million. This compared to operating expenses of $51.2 million in the second quarter of 2023, including R&D expenses of $14.9 million, S&M expenses of $25.0 million, and G&A expenses of $11.3 million.

Excluding stock-based compensation expense and severance and related charges, net of adjustments to compensation accrual, non-GAAP operating expenses were $31.2 million, including R&D expenses of $7.5 million, S&M expenses of $15.5 million, and G&A expenses of $8.2 million.

Net loss was $34.5 million, or $(0.66) per share, compared to net loss of $44.0 million, or $(0.90) per share, for the same period in 2023. On a non-GAAP basis, net loss was $24.7 million, or $(0.47) per share, compared to non-GAAP net loss of $33.9 million, or $(0.69) per share for the same period in 2023.

Total cash, including restricted cash, cash equivalents and short-term investments, was $198.2 million as of June 30, 2024.

Full Year 2024 Financial Guidance

Outset now expects 2024 revenue to be approximately $110 million, revised from a prior range of $145 million to $153 million, and non-GAAP gross margin to be in the low-to-mid 30% range, revised from prior guidance in the low-30% range for 2024 and exiting the year in the mid-30% range for the fourth quarter.

Webcast and Conference Call Details

Outset will host a conference call today, August 7, 2024, at 2:00 p.m. PT / 5:00 p.m. ET to discuss its second quarter 2024 financial results. Those interested in listening to the conference call may do so by registering online. Once registered, participants will receive dial-in numbers and a unique pin to join the call. Participants are encouraged to register more than 15 minutes before the start of the call. A live webcast of the conference call will be available on the Investor Relations section of the Company's website at https://investors.outsetmedical.com. The webcast will be archived on the website following the completion of the call.

Use of Non-GAAP Financial Measures

The Company may report non-GAAP results for gross profit/loss, gross margin, operating expenses, operating margins, net income/loss, basic and diluted net income/loss per share, other income/loss, and cash flows. These non-GAAP financial measures are in addition to, and not a substitute for, or superior to, financial measures calculated in accordance with GAAP. As listed in the itemized reconciliations between GAAP and non-GAAP financial measures included in this press release, the Company’s GAAP financial measures include stock-based compensation expense, as well as severance and related charges net of the reversal of compensation accruals for impacted employees. Stock-based compensation is a non-cash expense, and severance and related charges arise outside the ordinary course of continuing operations and are not reflective of the Company's current operating performance. As such, management has excluded the effects of these items in non-GAAP measures to assist investors in analyzing and assessing past and future operating performance and period-to-period comparisons. There are limitations related to the use of non-GAAP financial measures because they are not prepared in accordance with GAAP, may exclude significant expenses required by GAAP to be recognized in the Company’s financial statements, and may not be comparable to non-GAAP financial measures used by other companies. The Company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between GAAP and non-GAAP results are presented in the Appendix A of this press release.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are based on management’s current assumptions and expectations of future events and trends, which affect or may affect the Company’s business, strategy, operations or financial performance, and actual results and other events may differ materially from those expressed or implied in such statements due to numerous risks and uncertainties. Forward-looking statements include, but are not limited to, statements about the Company’s possible or assumed future results of operations and financial position, including expectations regarding projected revenues, gross margin, operating expenses, capital expenditures, cash burn, cash position, profitability and outlook; statements regarding the anticipated impacts and benefits of the Company’s cost reduction actions, initiatives to optimize the commercial organization and restructurings; statements regarding the Company’s overall business strategy, plans and objectives of management; the Company’s expectations regarding the market sizes and growth potential for Tablo and the total addressable market opportunities for Tablo; continued execution of the Company’s initiatives designed to expand gross margins; the Company’s ability to respond to and resolve any reports, observations or other actions by the Food and Drug Administration or other regulators in a timely and effective manner; as well as the Company’s expectations regarding the impact of macroeconomic factors on the Company, its customers and suppliers. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could cause actual results or other events to differ materially from those contemplated in this press release can be found in the Risk Factors section of the Company’s public filings with the Securities and Exchange Commission, including its latest annual and quarterly reports. Because forward-looking statements are inherently subject to risks and uncertainties, you should not rely on these forward-looking statements as predictions of future events. These forward-looking statements speak only as of their date and, except to the extent required by law, the Company undertakes no obligation to update these statements, whether as a result of any new information, future developments or otherwise.

About Outset Medical, Inc.

Outset is a medical technology company pioneering a first-of-its-kind technology to reduce the cost and complexity of dialysis. The Tablo® Hemodialysis System, FDA cleared for use from the hospital to the home, represents a significant technological advancement that transforms the dialysis experience for patients and operationally simplifies it for providers. Tablo serves as a single enterprise solution that can be utilized across the continuum of care, allowing dialysis to be delivered anytime, anywhere and by anyone. The integration of water purification and on-demand dialysate production enables Tablo to serve as a dialysis clinic on wheels, with 2-way wireless data transmission and a proprietary data analytics platform powering a new holistic approach to dialysis care. Tablo is a registered trademark of Outset Medical, Inc.

Outset Medical, Inc.

Condensed Statements of Operations

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

19,238

 

 

 

$

29,330

 

 

 

$

39,666

 

 

 

$

57,109

 

 

Service and other revenue

 

 

8,150

 

 

 

 

6,710

 

 

 

 

15,890

 

 

 

 

12,398

 

 

Total revenue

 

 

27,388

 

 

 

 

36,040

 

 

 

 

55,556

 

 

 

 

69,507

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenue (2)

 

 

10,567

 

 

 

 

22,212

 

 

 

 

23,148

 

 

 

 

43,029

 

 

Cost of service and other revenue

 

 

7,039

 

 

 

 

6,125

 

 

 

 

14,411

 

 

 

 

12,347

 

 

Total cost of revenue

 

 

17,606

 

 

 

 

28,337

 

 

 

 

37,559

 

 

 

 

55,376

 

 

Gross profit (1)

 

 

9,782

 

 

 

 

7,703

 

 

 

 

17,997

 

 

 

 

14,131

 

 

Gross margin (1)

 

 

35.7

 

%

 

 

21.4

 

%

 

 

32.4

 

%

 

 

20.3

 

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (2)

 

 

9,734

 

 

 

 

14,906

 

 

 

 

22,369

 

 

 

 

28,699

 

 

Sales and marketing (2)

 

 

18,128

 

 

 

 

24,985

 

 

 

 

39,176

 

 

 

 

49,318

 

 

General and administrative (2)

 

 

12,684

 

 

 

 

11,290

 

 

 

 

24,128

 

 

 

 

23,077

 

 

Total operating expenses

 

 

40,546

 

 

 

 

51,181

 

 

 

 

85,673

 

 

 

 

101,094

 

 

Loss from operations

 

 

(30,764

)

 

 

 

(43,478

)

 

 

 

(67,676

)

 

 

 

(86,963

)

 

Interest income and other income, net

 

 

2,471

 

 

 

 

2,668

 

 

 

 

5,569

 

 

 

 

5,316

 

 

Interest expense

 

 

(6,010

)

 

 

 

(3,103

)

 

 

 

(11,978

)

 

 

 

(6,045

)

 

Loss before provision for income taxes

 

 

(34,303

)

 

 

 

(43,913

)

 

 

 

(74,085

)

 

 

 

(89,059

)

 

Provision for income taxes

 

 

151

 

 

 

 

133

 

 

 

 

313

 

 

 

 

325

 

 

Net loss

 

$

(34,454

)

 

 

$

(44,046

)

 

 

$

(74,398

)

 

 

$

(89,384

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.66

)

 

 

$

(0.90

)

 

 

$

(1.45

)

 

 

$

(1.79

)

 

Shares used in computing net loss per share, basic and diluted

 

 

51,880

 

 

 

 

48,951

 

 

 

 

51,391

 

 

 

 

49,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Gross profit and gross margin by source consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

8,671

 

 

 

$

7,118

 

 

$

16,518

 

 

$

14,080

 

Service and other revenue

 

 

1,111

 

 

 

 

585

 

 

 

 

1,479

 

 

 

 

51

 

 

Total gross profit

 

$

9,782

 

 

 

$

7,703

 

 

 

$

17,997

 

 

 

$

14,131

 

 

Gross margin

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

 

45.1

 

%

 

 

24.3

 

%

 

 

41.6

 

%

 

 

24.7

 

%

Service and other revenue

 

 

13.6

 

%

 

 

8.7

 

%

 

 

9.3

 

%

 

 

0.4

 

%

Total gross margin

 

 

35.7

 

%

 

 

21.4

 

%

 

 

32.4

 

%

 

 

20.3

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Include stock-based compensation expense and severance and related charges, net as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

Stock-based compensation expense

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Cost of revenue

 

$

531

 

 

 

$

403

 

 

 

$

796

 

 

 

$

761

 

 

Research and development

 

 

2,293

 

 

 

 

2,824

 

 

 

 

4,625

 

 

 

 

5,439

 

 

Sales and marketing

 

 

2,494

 

 

 

 

3,545

 

 

 

 

3,953

 

 

 

 

6,143

 

 

General and administrative

 

 

4,502

 

 

 

 

3,333

 

 

 

 

8,649

 

 

 

 

6,300

 

 

Total stock-based compensation expense

 

$

9,820

 

 

 

$

10,105

 

 

 

$

18,023

 

 

 

$

18,643

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

Severance and related charges, net*

 

June 30,

 

 

June 30,

 

 

 

2024†

 

 

2023

 

 

2024

 

 

2023

 

Cost of revenue

 

$

(78

)

 

 

$

—

 

 

 

$

201

 

 

 

$

—

 

 

Research and development

 

 

(29

)

 

 

 

—

 

 

 

 

963

 

 

 

 

—

 

 

Sales and marketing

 

 

99

 

 

 

 

—

 

 

 

 

892

 

 

 

 

—

 

 

General and administrative

 

 

(41

)

 

 

 

—

 

 

 

 

370

 

 

 

 

—

 

 

Total severance and related charges, net

 

$

(49

)

 

 

$

—

 

 

 

$

2,426

 

 

 

$

—

 

 

* Net of adjustments to compensation accrual

 

 

 

 

 

 

 

 

 

 

 

 

† These amounts represent the change in estimated accrual from March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Outset Medical, Inc.

Condensed Balance Sheets

(in thousands, except per share amounts)

 

 

 

June 30,

 

December 31,

 

 

2024

 

2023

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

37,859

 

 

$

68,509

 

Short-term investments

 

 

156,989

 

 

 

134,815

 

Accounts receivable, net

 

 

34,121

 

 

 

32,980

 

Inventories

 

 

61,599

 

 

 

49,215

 

Prepaid expenses and other current assets

 

 

4,569

 

 

 

5,700

 

Total current assets

 

 

295,137

 

 

 

291,219

 

Restricted cash

 

 

3,329

 

 

 

3,329

 

Property and equipment, net

 

 

10,873

 

 

 

13,273

 

Operating lease right-of-use assets

 

 

4,675

 

 

 

5,375

 

Other assets

 

 

520

 

 

 

605

 

Total assets

 

$

314,534

 

 

$

313,801

 

Liabilities and stockholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

5,255

 

 

$

5,827

 

Accrued compensation and related benefits

 

 

11,431

 

 

 

19,005

 

Accrued expenses and other current liabilities

 

 

9,747

 

 

 

13,459

 

Accrued warranty liability

 

 

2,199

 

 

 

3,712

 

Deferred revenue, current

 

 

13,108

 

 

 

11,727

 

Operating lease liabilities, current

 

 

1,693

 

 

 

1,593

 

Total current liabilities

 

 

43,433

 

 

 

55,323

 

Accrued interest

 

 

1,762

 

 

 

896

 

Deferred revenue

 

 

130

 

 

 

101

 

Operating lease liabilities

 

 

3,616

 

 

 

4,482

 

Term loans

 

 

196,994

 

 

 

130,113

 

Total liabilities

 

 

245,935

 

 

 

190,915

 

Commitments and contingencies

 

 

 

 

Stockholders' equity:

 

 

 

 

Preferred stock, $0.001 par value; 5,000 shares authorized, and no shares issued and outstanding as of June 30, 2024 and December 31, 2023

 

 

—

 

 

 

—

 

Common stock, $0.001 par value; 300,000 shares authorized as of June 30, 2024 and December 31, 2023; 52,084 and 50,317 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

 

 

52

 

 

 

50

 

Additional paid-in capital

 

 

1,104,994

 

 

 

1,084,515

 

Accumulated other comprehensive income (loss)

 

 

(302

)

 

 

68

 

Accumulated deficit

 

 

(1,036,145

)

 

 

(961,747

)

Total stockholders' equity

 

 

68,599

 

 

 

122,886

 

Total liabilities and stockholders' equity

 

$

314,534

 

 

$

313,801

 

Outset Medical, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

2024

 

2023

Net cash used in operating activities

 

$

(79,247

)

 

$

(72,932

)

Net cash (used in) provided by investing activities

 

 

(20,090

)

 

 

29,796

 

Net cash provided by financing activities

 

 

68,687

 

 

 

6,320

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(30,650

)

 

 

(36,816

)

Cash, cash equivalents and restricted cash at beginning of the period

 

 

71,838

 

 

 

76,533

 

Cash, cash equivalents and restricted cash at end of the period (1)

 

$

41,188

 

 

$

39,717

 

 

 

 

 

 

 

 

 

 

 

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying condensed balance sheets that sum to the total of the amounts shown in the accompanying condensed statements of cash flows (in thousands):

 

 

 

June 30,

 

 

2024

 

2023

Cash and cash equivalents

 

$

37,859

 

 

$

36,388

 

Restricted cash

 

 

3,329

 

 

 

3,329

 

Total cash, cash equivalents and restricted cash*

 

$

41,188

 

 

$

39,717

 

 

 

 

 

 

* The total cash, including restricted cash, cash equivalents and investment securities as of June 30, 2024 was $198.2 million; compared to $226.1 million as of June 30, 2023.

Appendix A

Outset Medical, Inc.

Results of Operations – Non-GAAP

(in thousands, except per share amounts)

(unaudited)

 

Reconciliation between GAAP and non-GAAP net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

GAAP net loss per share, diluted

 

$

(0.66

)

 

 

$

(0.90

)

 

 

$

(1.45

)

 

 

$

(1.79

)

 

Stock-based compensation expense

 

 

0.19

 

 

 

 

0.21

 

 

 

 

0.35

 

 

 

 

0.38

 

 

Severance and related charges, net

 

 

—

 

 

 

 

—

 

 

 

 

0.05

 

 

 

 

—

 

 

Non-GAAP net loss per share, diluted

 

$

(0.47

)

 

 

$

(0.69

)

 

 

$

(1.05

)

 

 

$

(1.41

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation between GAAP and non-GAAP net loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

GAAP net loss, diluted

 

$

(34,454

)

 

 

$

(44,046

)

 

 

$

(74,398

)

 

 

$

(89,384

)

 

Stock-based compensation expense

 

 

9,820

 

 

 

 

10,105

 

 

 

 

18,023

 

 

 

 

18,643

 

 

Severance and related charges, net

 

 

(49

)

 

 

 

—

 

 

 

 

2,426

 

 

 

 

—

 

 

Non-GAAP net loss, diluted

 

$

(24,683

)

 

 

$

(33,941

)

 

 

$

(53,949

)

 

 

$

(70,741

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation between GAAP and non-GAAP results of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

GAAP gross profit

 

$

9,782

 

 

 

$

7,703

 

 

 

$

17,997

 

 

 

$

14,131

 

 

Stock-based compensation expense

 

 

531

 

 

 

 

403

 

 

 

 

796

 

 

 

 

761

 

 

Severance and related charges, net

 

 

(78

)

 

 

 

—

 

 

 

 

201

 

 

 

 

—

 

 

Non-GAAP gross profit

 

$

10,235

 

 

 

$

8,106

 

 

 

$

18,994

 

 

 

$

14,892

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

 

35.7

 

%

 

 

21.4

 

%

 

 

32.4

 

%

 

 

20.3

 

%

Stock-based compensation expense

 

 

1.9

 

 

 

 

1.1

 

 

 

 

1.4

 

 

 

 

1.1

 

 

Severance and related charges, net

 

 

(0.3

)

 

 

 

—

 

 

 

 

0.4

 

 

 

 

—

 

 

Non-GAAP gross margin

 

 

37.3

 

%

 

 

22.5

 

%

 

 

34.2

 

%

 

 

21.4

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development expense

 

$

9,734

 

 

 

$

14,906

 

 

 

$

22,369

 

 

 

$

28,699

 

 

Stock-based compensation expense

 

 

(2,293

)

 

 

 

(2,824

)

 

 

 

(4,625

)

 

 

 

(5,439

)

 

Severance and related charges, net

 

 

29

 

 

 

 

—

 

 

 

 

(963

)

 

 

 

—

 

 

Non-GAAP research and development expense

 

$

7,470

 

 

 

$

12,082

 

 

 

$

16,781

 

 

 

$

23,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

 

$

18,128

 

 

 

$

24,985

 

 

 

$

39,176

 

 

 

$

49,318

 

 

Stock-based compensation expense

 

 

(2,494

)

 

 

 

(3,545

)

 

 

 

(3,953

)

 

 

 

(6,143

)

 

Severance and related charges, net

 

 

(99

)

 

 

 

—

 

 

 

 

(892

)

 

 

 

—

 

 

Non-GAAP sales and marketing expense

 

$

15,535

 

 

 

$

21,440

 

 

 

$

34,331

 

 

 

$

43,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

 

$

12,684

 

 

 

$

11,290

 

 

 

$

24,128

 

 

 

$

23,077

 

 

Stock-based compensation expense

 

 

(4,502

)

 

 

 

(3,333

)

 

 

 

(8,649

)

 

 

 

(6,300

)

 

Severance and related charges, net

 

 

41

 

 

 

 

—

 

 

 

 

(370

)

 

 

 

—

 

 

Non-GAAP general and administrative expense

 

$

8,223

 

 

 

$

7,957

 

 

 

$

15,109

 

 

 

$

16,777

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP total operating expense

 

$

40,546

 

 

 

$

51,181

 

 

 

$

85,673

 

 

 

$

101,094

 

 

Stock-based compensation expense

 

 

(9,289

)

 

 

 

(9,702

)

 

 

 

(17,227

)

 

 

 

(17,882

)

 

Severance and related charges, net

 

 

(29

)

 

 

 

—

 

 

 

 

(2,225

)

 

 

 

—

 

 

Non-GAAP total operating expense

 

$

31,228

 

 

 

$

41,479

 

 

 

$

66,221

 

 

 

$

83,212

 

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240807985057/en/

Investor Contact Jim Mazzola Investor Relations jmazzola@outsetmedical.com