SAN JOSE, Nov. 06, 2024 (GLOBE NEWSWIRE) -- 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, 2024.
"During the quarter, we made significant progress, achieving sequential revenue growth, expanding the Tablo footprint in both the acute and home care settings, boosting gross margin compared to last year and reaching a record level of recurring revenue,” said Leslie Trigg, Chair and Chief Executive Officer. "Meanwhile, we continued implementing our sales transformation, which is showing promising early results and is poised to significantly enhance our growth with acute-care providers.”
Third Quarter 2024 Financial Results
Revenue for the third quarter of $28.7 million increased 5% compared to $27.4 million in the second quarter and declined 6% from $30.4 million in the third quarter of 2023. Product revenue of $20.3 million rose 6% from $19.2 million in the second quarter and declined 14% from $23.5 million in the third quarter of 2023. Service and other revenue was $8.4 million, roughly even with $8.2 million in the second quarter and an increase of 22% compared to $6.8 million in the third quarter of 2023. Recurring revenue from the sale of Tablo cartridges and service reached $21 million, an increase of 4% from the second quarter and 17% as compared to the prior-year period.
Total gross profit of $9.8 million was even with the second quarter and up 37% from $7.2 million for the third quarter of 2023. Total gross margin of 34.3% declined 1.4 percentage points from 35.7% in the second quarter and rose nearly 11 percentage points compared to 23.6% in the third quarter of 2023. On a non-GAAP basis, gross margin of 36.4% declined less than 1 percentage point from 37.3% in the second quarter and rose nearly 11 percentage points from 25.6% in the third quarter of 2023. Product gross profit of $8.8 million increased 1% from $8.7 million in the second quarter and 31% compared to $6.7 million in the third quarter of 2023. Product gross margin of 43.2% declined 1.9 percentage points from 45.1% in the second quarter and increased nearly 15 percentage points from 28.4% in the third quarter of 2023. Service and other gross profit of $1.0 million was roughly even with the second quarter and doubled from $0.5 million in the third quarter of 2023. Service and other gross margin of 12.5% declined 1.1 percentage points compared to 13.6% in the second quarter and increased 5.7 percentage points from 6.8% in the third quarter of 2023.
Operating expenses of $33.7 million declined nearly 17% from the second quarter and 36% from the prior-year period. Research and development (R&D) expenses were $8.1 million, sales and marketing (S&M) expenses were $15.4 million, and general and administrative (G&A) expenses were $10.1 million. This compared to operating expenses of $52.6 million in the third quarter of 2023, including R&D expenses of $16.1 million, S&M expenses of $24.7 million, and G&A expenses of $11.8 million.
Excluding stock-based compensation expense and severance and related charges, net of adjustments to compensation accrual, non-GAAP operating expenses were $26.5 million, including R&D expenses of $6.6 million, S&M expenses of $13.6 million, and G&A expenses of $6.3 million.
Net loss was $27.9 million, or $(0.55) per share, compared to net loss of $46.2 million, or $(0.93) per share, for the same period in 2023. On a non-GAAP basis, net loss was $20.2 million, or $(0.39) per share, compared to non-GAAP net loss of $35.3 million, or $(0.71) per share for the same period in 2023.
Total cash, including restricted cash, cash equivalents and short-term investments, was $179.0 million as of September 30, 2024.
Full Year 2024 Financial Guidance
Outset increased 2024 revenue guidance to approximately $112 million from prior guidance of approximately $110 million, and non-GAAP gross margin guidance to the mid-30% range from the low-to-mid 30% range.
Webcast and Conference Call Details
Outset will host a conference call today, November 6, 2024, at 2:00 p.m. PT / 5:00 p.m. ET to discuss its third 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.
Investor Contact
Jim Mazzola
Investor Relations
| Outset Medical, Inc. Condensed Statements of Operations (in thousands, except per share amounts)(unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue: | ||||||||||||||||
| Product revenue | $ | 20,305 | $ | 23,531 | $ | 59,971 | $ | 80,640 | ||||||||
| Service and other revenue | 8,361 | 6,831 | 24,251 | 19,229 | ||||||||||||
| Total revenue | 28,666 | 30,362 | 84,222 | 99,869 | ||||||||||||
| Cost of revenue: | ||||||||||||||||
| Cost of product revenue (2) | 11,532 | 16,837 | 34,680 | 59,866 | ||||||||||||
| Cost of service and other revenue | 7,314 | 6,368 | 21,725 | 18,715 | ||||||||||||
| Total cost of revenue | 18,846 | 23,205 | 56,405 | 78,581 | ||||||||||||
| Gross profit (1) | 9,820 | 7,157 | 27,817 | 21,288 | ||||||||||||
| Gross margin (1) | 34.3 | % | 23.6 | % | 33.0 | % | 21.3 | % | ||||||||
| Operating expenses: | ||||||||||||||||
| Research and development (2) | 8,139 | 16,076 | 30,508 | 44,775 | ||||||||||||
| Sales and marketing (2) | 15,417 | 24,720 | 54,593 | 74,038 | ||||||||||||
| General and administrative (2) | 10,103 | 11,815 | 34,231 | 34,892 | ||||||||||||
| Total operating expenses | 33,659 | 52,611 | 119,332 | 153,705 | ||||||||||||
| Loss from operations | (23,839 | ) | (45,454 | ) | (91,515 | ) | (132,417 | ) | ||||||||
| Interest income and other income, net | 2,149 | 2,573 | 7,718 | 7,889 | ||||||||||||
| Interest expense | (6,068 | ) | (3,213 | ) | (18,046 | ) | (9,258 | ) | ||||||||
| Loss before provision for income taxes | (27,758 | ) | (46,094 | ) | (101,843 | ) | (133,786 | ) | ||||||||
| Provision for income taxes | 182 | 86 | 495 | 411 | ||||||||||||
| Net loss | $ | (27,940 | ) | $ | (46,180 | ) | $ | (102,338 | ) | $ | (134,197 | ) | ||||
| Net loss per share, basic and diluted | $ | (0.55 | ) | $ | (0.93 | ) | $ | (1.98 | ) | $ | (2.72 | ) | ||||
| Shares used in computing net loss per share, basic and diluted | 50,501 | 49,913 | 51,685 | 49,364 | ||||||||||||
| (1) Gross profit and gross margin by source consisted of the following: | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Gross profit | ||||||||||||||||
| Product revenue | $ | 8,773 | $ | 6,694 | $ | 25,291 | $ | 20,774 | ||||||||
| Service and other revenue | 1,047 | 463 | 2,526 | 514 | ||||||||||||
| Total gross profit | $ | 9,820 | $ | 7,157 | $ | 27,817 | $ | 21,288 | ||||||||
| Gross margin | ||||||||||||||||
| Product revenue | 43.2 | % | 28.4 | % | 42.2 | % | 25.8 | % | ||||||||
| Service and other revenue | 12.5 | % | 6.8 | % | 10.4 | % | 2.7 | % | ||||||||
| Total gross margin | 34.3 | % | 23.6 | % | 33.0 | % | 21.3 | % | ||||||||
| (2) Include stock-based compensation expense and severance and related charges, net as follows: | ||||||||||||||||
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