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Outset Medical Reports Third Quarter 2023 Financial Results

Reiterates Updated 2023 Revenue Guidance of Approximately $130 Million

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 third quarter ended September 30, 2023.

Revenue for the third quarter was $30.4 million, a 9% increase over revenue of $27.8 million in the third quarter of 2022, and gross margin was 23.6%, or 25.6% on a non-GAAP basis, compared to 16.4% on a non-GAAP basis in the third quarter of 2022. Total cash, including restricted cash, cash equivalents and short-term investments, was $197 million as of September 30, 2023.

“Our third quarter results were in line with the expectations we set in October, and our focus remains on ensuring the benefits of Tablo reach as many providers and patients as possible this year and well into the future,” said Leslie Trigg, Chair and Chief Executive Officer. “All of the structural tailwinds for Tablo remain firmly in place, and we have high confidence in our ability to generate sustained long-term growth, achieve our gross margin goals, and reach profitability.”

Third Quarter 2023 Financial Results

Revenue for the quarter was $30.4 million, including product revenue of $23.5 million, an increase of 8.2% compared to $21.7 million in the third quarter of 2022, and service and other revenue of $6.8 million, an increase of 13.4% compared to $6.0 million in the third quarter of 2022.

Total gross profit was $7.2 million, compared to $4.3 million for the third quarter of 2022. Total gross margin was 23.6%, compared to 15.6% in the third quarter of 2022. On a non-GAAP basis, gross margin improved to 25.6% from 16.4% in the third quarter of 2022. Product gross profit was $6.7 million, compared to $2.1 million of product gross profit in the third quarter of 2022. Product gross margin was 28.4%, compared to 9.7% in the third quarter of 2022. Service and other gross profit was $0.5 million, compared to $2.2 million of service and other gross profit in the third quarter of 2022. Service and other gross margin was 6.8%, compared to 37.0% in the third quarter of 2022.

Operating expenses were $52.6 million, including research and development (R&D) expenses of $16.1 million, sales and marketing (S&M) expenses of $24.7 million, and general and administrative (G&A) expenses of $11.8 million. This compared to operating expenses of $45.3 million, including R&D expenses of $13.1 million, S&M expenses of $22.3 million, and G&A expenses of $10.0 million in the third quarter of 2022.

Excluding stock-based compensation expense, non-GAAP operating expenses were $42.3 million, including R&D expenses of $13.3 million, S&M expenses of $21.0 million, and G&A expenses of $8.1 million.

Net loss was ($46.2) million, or ($0.93) per share, compared to net loss of ($40.8) million, or ($0.85) per share, for the same period in 2022. On a non-GAAP basis, net loss was ($35.3) million, or ($0.71) per share, compared to non-GAAP net loss of ($33.4) million, or ($0.70) per share for the same period in 2022.

Full Year 2023 Financial Guidance

Outset reiterated its 2023 revenue guidance of approximately $130 million and its previous gross margin guidance for the year to be in the low-20% range, exiting the fourth quarter in the mid-20% range.

Webcast and Conference Call Details

Outset will host a conference call today, November 7, 2023, at 2:00 p.m. PT / 5:00 p.m. ET to discuss its third quarter 2023 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. The Company’s financial measures under GAAP include stock-based compensation expense, as listed in the itemized reconciliations between GAAP and non-GAAP financial measures included in this press release. Management has excluded the effects of this non-cash expense item 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, profitability and outlook; 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; our ability to respond to and resolve any reports, observations or other actions by the Food and Drug Administration (FDA) 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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

23,531

 

 

 

$

21,739

 

 

 

$

80,640

 

 

 

$

67,024

 

 

Service and other revenue

 

 

6,831

 

 

 

 

6,022

 

 

 

 

19,229

 

 

 

 

16,344

 

 

Total revenue

 

 

30,362

 

 

 

 

27,761

 

 

 

 

99,869

 

 

 

 

83,368

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenue (2)

 

 

16,837

 

 

 

 

19,632

 

 

 

 

59,866

 

 

 

 

60,460

 

 

Cost of service and other revenue

 

 

6,368

 

 

 

 

3,793

 

 

 

 

18,715

 

 

 

 

10,348

 

 

Total cost of revenue

 

 

23,205

 

 

 

 

23,425

 

 

 

 

78,581

 

 

 

 

70,808

 

 

Gross profit (1)

 

 

7,157

 

 

 

 

4,336

 

 

 

 

21,288

 

 

 

 

12,560

 

 

Gross margin (1)

 

 

23.6

 

%

 

 

15.6

 

%

 

 

21.3

 

%

 

 

15.1

 

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (2)

 

 

16,076

 

 

 

 

13,059

 

 

 

 

44,775

 

 

 

 

37,411

 

 

Sales and marketing (2)

 

 

24,720

 

 

 

 

22,276

 

 

 

 

74,038

 

 

 

 

65,851

 

 

General and administrative (2)

 

 

11,815

 

 

 

 

10,000

 

 

 

 

34,892

 

 

 

 

30,493

 

 

Total operating expenses

 

 

52,611

 

 

 

 

45,335

 

 

 

 

153,705

 

 

 

 

133,755

 

 

Loss from operations

 

 

(45,454

)

 

 

 

(40,999

)

 

 

 

(132,417

)

 

 

 

(121,195

)

 

Interest income and other income, net

 

 

2,573

 

 

 

 

805

 

 

 

 

7,889

 

 

 

 

1,384

 

 

Interest expense

 

 

(3,213

)

 

 

 

(567

)

 

 

 

(9,258

)

 

 

 

(1,470

)

 

Loss before provision for income taxes

 

 

(46,094

)

 

 

 

(40,761

)

 

 

 

(133,786

)

 

 

 

(121,281

)

 

Provision for income taxes

 

 

86

 

 

 

 

20

 

 

 

 

411

 

 

 

 

231

 

 

Net loss

 

$

(46,180

)

 

 

$

(40,781

)

 

 

$

(134,197

)

 

 

$

(121,512

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.93

)

 

 

$

(0.85

)

 

 

$

(2.72

)

 

 

$

(2.54

)

 

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

 

 

49,913

 

 

 

 

48,129

 

 

 

 

49,364

 

 

 

 

47,835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

6,694

 

 

 

$

2,107

 

 

 

$

20,774

 

 

 

$

6,564

 

 

Service and other revenue

 

 

463

 

 

 

 

2,229

 

 

 

 

514

 

 

 

 

5,996

 

 

Total gross profit

 

$

7,157

 

 

 

$

4,336

 

 

 

$

21,288

 

 

 

$

12,560

 

 

Gross margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

 

28.4

 

%

 

 

9.7

 

%

 

 

25.8

 

%

 

 

9.8

 

%

Service and other revenue

 

 

6.8

 

%

 

 

37.0

 

%

 

 

2.7

 

%

 

 

36.7

 

%

Total gross margin

 

 

23.6

 

%

 

 

15.6

 

%

 

 

21.3

 

%

 

 

15.1

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Include stock-based compensation expense as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Cost of revenue

 

$

620

 

 

 

$

210

 

 

 

$

1,381

 

 

 

$

493

 

 

Research and development

 

 

2,793

 

 

 

 

1,919

 

 

 

 

8,232

 

 

 

 

4,885

 

 

Sales and marketing

 

 

3,765

 

 

 

 

2,870

 

 

 

 

9,908

 

 

 

 

7,440

 

 

General and administrative

 

 

3,715

 

 

 

 

2,431

 

 

 

 

10,015

 

 

 

 

7,032

 

 

Total stock-based compensation expense

 

$

10,893

 

 

 

$

7,430

 

 

 

$

29,536

 

 

 

$

19,850

 

 

 
 

Outset Medical, Inc.

Condensed Balance Sheets

(in thousands, except per share amounts)

 

 

 

September 30,

 

December 31,

 

 

2023

 

2022

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

36,297

 

 

$

73,222

 

Short-term investments

 

 

157,701

 

 

 

214,280

 

Accounts receivable, net

 

 

35,493

 

 

 

28,070

 

Inventories

 

 

48,257

 

 

 

51,476

 

Prepaid expenses and other current assets

 

 

6,026

 

 

 

6,597

 

Total current assets

 

 

283,774

 

 

 

373,645

 

Restricted cash

 

 

3,329

 

 

 

3,311

 

Property and equipment, net

 

 

13,774

 

 

 

15,876

 

Operating lease right-of-use assets

 

 

5,713

 

 

 

6,117

 

Other assets

 

 

961

 

 

 

1,166

 

Total assets

 

$

307,551

 

 

$

400,115

 

Liabilities and stockholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

2,880

 

 

$

603

 

Accrued compensation and related benefits

 

 

21,544

 

 

 

21,519

 

Accrued expenses and other current liabilities

 

 

12,160

 

 

 

16,227

 

Accrued warranty liability

 

 

4,068

 

 

 

3,620

 

Deferred revenue, current

 

 

10,828

 

 

 

8,662

 

Operating lease liabilities, current

 

 

1,544

 

 

 

1,318

 

Total current liabilities

 

 

53,024

 

 

 

51,949

 

Accrued interest

 

 

680

 

 

 

113

 

Deferred revenue

 

 

99

 

 

 

151

 

Operating lease liabilities

 

 

4,901

 

 

 

5,576

 

Term loan

 

 

96,784

 

 

 

96,336

 

Total liabilities

 

 

155,488

 

 

 

154,125

 

Commitments and contingencies

 

 

 

 

Stockholders' equity:

 

 

 

 

Preferred stock, $0.001 par value; 5,000 shares authorized, and no shares issued and outstanding as of September 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000 shares authorized as of September 30, 2023 and December 31, 2022; 50,173 and 48,465 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

 

50

 

 

 

48

 

Additional paid-in capital

 

 

1,075,413

 

 

 

1,035,456

 

Accumulated other comprehensive loss

 

 

(253

)

 

 

(564

)

Accumulated deficit

 

 

(923,147

)

 

 

(788,950

)

Total stockholders' equity

 

 

152,063

 

 

 

245,990

 

Total liabilities and stockholders' equity

 

$

307,551

 

 

$

400,115

 

 

Outset Medical, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

2023

 

2022

Net cash used in operating activities

 

$

(106,931

)

 

$

(111,222

)

Net cash provided by (used in) investing activities

 

 

59,601

 

 

 

(14,547

)

Net cash provided by financing activities

 

 

10,423

 

 

 

7,298

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(36,907

)

 

 

(118,471

)

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

 

 

76,533

 

 

 

215,659

 

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

 

$

39,626

 

 

$

97,188

 

 

 

 

 

 

 

 

 

 

 

(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):

 

 

 

September 30,

 

 

2023

 

2022

Cash and cash equivalents

 

$

36,297

 

 

$

63,877

 

Restricted cash

 

 

3,329

 

 

 

33,311

 

Total cash, cash equivalents and restricted cash*

 

$

39,626

 

 

$

97,188

 

 

 

 

 

 

* The total cash, including restricted cash, cash equivalents and investment securities as of September 30, 2023 was $197.3 million; compared to $260.8 million as of September 30, 2022.

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

GAAP net loss per share, diluted

 

$

(0.93

)

 

 

$

(0.85

)

 

 

$

(2.72

)

 

 

$

(2.54

)

 

Stock-based compensation expense

 

 

0.22

 

 

 

 

0.15

 

 

 

 

0.60

 

 

 

 

0.41

 

 

Non-GAAP net loss per share, diluted

 

$

(0.71

)

 

 

$

(0.70

)

 

 

$

(2.12

)

 

 

$

(2.13

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation between GAAP and non-GAAP net loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

GAAP net loss, diluted

 

$

(46,180

)

 

 

$

(40,781

)

 

 

$

(134,197

)

 

 

$

(121,512

)

 

Stock-based compensation expense

 

 

10,893

 

 

 

 

7,430

 

 

 

 

29,536

 

 

 

 

19,850

 

 

Non-GAAP net loss, diluted

 

$

(35,287

)

 

 

$

(33,351

)

 

 

$

(104,661

)

 

 

$

(101,662

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation between GAAP and non-GAAP results of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

GAAP gross profit

 

$

7,157

 

 

 

$

4,336

 

 

 

$

21,288

 

 

 

$

12,560

 

 

Stock-based compensation expense

 

 

620

 

 

 

 

210

 

 

 

 

1,381

 

 

 

 

493

 

 

Non-GAAP gross profit

 

$

7,777

 

 

 

$

4,546

 

 

 

$

22,669

 

 

 

$

13,053

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

 

23.6

 

%

 

 

15.6

 

%

 

 

21.3

 

%

 

 

15.1

 

%

Stock-based compensation expense

 

 

2.0

 

 

 

 

0.8

 

 

 

 

1.4

 

 

 

 

0.6

 

 

Non-GAAP gross margin

 

 

25.6

 

%

 

 

16.4

 

%

 

 

22.7

 

%

 

 

15.7

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development expense

 

$

16,076

 

 

 

$

13,059

 

 

 

$

44,775

 

 

 

$

37,411

 

 

Stock-based compensation expense

 

 

(2,793

)

 

 

 

(1,919

)

 

 

 

(8,232

)

 

 

 

(4,885

)

 

Non-GAAP research and development expense

 

$

13,283

 

 

 

$

11,140

 

 

 

$

36,543

 

 

 

$

32,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

 

$

24,720

 

 

 

$

22,276

 

 

 

$

74,038

 

 

 

$

65,851

 

 

Stock-based compensation expense

 

 

(3,765

)

 

 

 

(2,870

)

 

 

 

(9,908

)

 

 

 

(7,440

)

 

Non-GAAP sales and marketing expense

 

$

20,955

 

 

 

$

19,406

 

 

 

$

64,130

 

 

 

$

58,411

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

 

$

11,815

 

 

 

$

10,000

 

 

 

$

34,892

 

 

 

$

30,493

 

 

Stock-based compensation expense

 

 

(3,715

)

 

 

 

(2,431

)

 

 

 

(10,015

)

 

 

 

(7,032

)

 

Non-GAAP general and administrative expense

 

$

8,100

 

 

 

$

7,569

 

 

 

$

24,877

 

 

 

$

23,461

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP total operating expense

 

$

52,611

 

 

 

$

45,335

 

 

 

$

153,705

 

 

 

$

133,755

 

 

Stock-based compensation expense

 

 

(10,273

)

 

 

 

(7,220

)

 

 

 

(28,155

)

 

 

 

(19,357

)

 

Non-GAAP total operating expense

 

$

42,338

 

 

 

$

38,115

 

 

 

$

125,550

 

 

 

$

114,398

 

 

 

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