Outset Medical Reports First Quarter 2021 Financial Results

May 5, 2021 at 4:01 PM EDT

SAN JOSE, Calif.--(BUSINESS WIRE)--May 5, 2021-- 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 first quarter ended March 31, 2021.

Recent Highlights

  • Recorded net revenue of $22.9 million in the first quarter of 2021, a 219% increase compared to $7.2 million in the first quarter of 2020
  • Achieved gross margin of 1.3% for the first quarter of 2021, compared to (49.6%) in the first quarter of 2020
  • Appointed global consumer brand builder Andrea Saia to the Board of Directors
  • Completed public offering, which included approximately 2.9 million primary shares, raising approximately $149.7 million in net proceeds to Outset

“Our first quarter was marked by strong revenue performance, continued operational execution, and substantial progress across our strategic initiatives,” said Leslie Trigg, President and Chief Executive Officer. “Demand for Tablo is both increasing and extending beyond the acute and subacute care settings, with a growing number of customers preparing for home care programs. With strong interest in Tablo, a robust backlog and clear visibility on the timing of console placements, we are confident in our positioning for consistent strong performance in 2021 and beyond.”

First Quarter 2021 Financial Results

Revenue for the first quarter of 2021 was $22.9 million, representing an increase of 219% compared to $7.2 million in the first quarter of 2020. Product revenue for the first quarter of 2021 was $18.2 million, representing an increase of 207% compared to $5.9 million in the first quarter of 2020. Service and other revenue for the first quarter of 2021 was $4.7 million, representing an increase of 272% compared to $1.3 million in the first quarter of 2020.

Total gross profit for the first quarter of 2021 was $0.3 million, compared to a gross loss of ($3.6) million for the first quarter of 2020. Total gross margin for the first quarter of 2021 was 1.3%, compared to (49.6%) in the first quarter of 2020. Product gross loss for the first quarter of 2021 was ($2.4) million, compared to ($3.6) million of product gross loss in the first quarter of 2020. Product gross margin for the first quarter of 2021 was (13.0%), compared to (61.4%) in the first quarter of 2020. Service and other gross profit for the first quarter of 2021 was $2.7 million, compared to $0.1 million of service and other gross profit in the first quarter of 2020. Service and other gross margin for the first quarter of 2021 was 56.4%, compared to 5.7% in the first quarter of 2020.

Operating expenses for the first quarter of 2021 were $30.0 million, including research and development (R&D) expenses of $7.6 million, sales and marketing (S&M) expenses of $13.1 million, and general and administrative (G&A) expenses of $9.2 million. This compared to operating expenses of $16.6 million, including R&D expenses of $5.8 million, S&M expenses of $7.3 million, and G&A expenses of $3.5 million in the first quarter of 2020.

Excluding stock-based compensation expense, non-GAAP operating expenses for the first quarter of 2021 were $24.2 million, including R&D expenses of $6.4 million, S&M expenses of $11.4 million, and G&A expenses of $6.4 million.

First quarter 2021 net loss was ($30.0) million, or ($0.70) per share, compared to net income of $4.2 million, or $0.74 per share, for the same period in 2020. On a non-GAAP basis, net loss for the first quarter of 2021 was ($24.2) million, or ($0.56) per share, compared to non-GAAP net income of $4.7 million, or $0.84 per share for the same period in 2020.

Total cash, including restricted cash, cash equivalents and short-term investments, was $310.8 million as of March 31, 2021. Further, the Company generated approximately $149.7 million in net proceeds from the April 2021 public offering.

Full Year 2021 Financial Guidance

Outset projects revenue for the full year 2021 to range from $92 million to $97 million, which represents approximately 84% to 94% growth over the Company’s fiscal year 2020 revenue. This compares to prior 2021 revenue guidance of $89 million to $94 million.

Webcast and Conference Call Details

Outset will host a conference call today, May 5, 2021, at 2:00 p.m. PT / 5:00 p.m. ET to discuss its first quarter 2021 financial results. The dial-in numbers are (833) 614-1409 for domestic callers and (914) 987-7130 for international callers. The conference ID is 6787514. 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 flow. 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, profitability and outlook, statements regarding the Company’s overall business strategy, plans and objectives of management, as well as the Company’s expectations regarding the continuing impact of the COVID-19 pandemic on the Company and its operations as well as the impact on 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 Outset’s public filings with the Securities and Exchange Commission, including Outset’s 424(B)(4) filed on April 12, 2021 in connection with the Company’s public offering. 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

 
   

March 31,

 
   

2021

   

2020

 

Revenue:

           

Product revenue

 

$

18,210

 

   

$

5,926

 

 

Service and other revenue

 

 

4,706

 

   

 

1,264

 

 

Total revenue

 

 

22,916

 

   

 

7,190

 

 

Cost of revenue:

           

Cost of product revenue (2)

 

 

20,577

 

   

 

9,562

 

 

Cost of service and other revenue

 

 

2,050

 

   

 

1,192

 

 

Total cost of revenue

 

 

22,627

 

   

 

10,754

 

 

Gross profit (1)

 

 

289

 

   

 

(3,564

)

 

Gross margin (1)

 

 

1.3

%

 

 

(49.6

)%

 

Operating expenses:

           

Research and development (2)

 

 

7,570

 

   

 

5,838

 

 

Sales and marketing (2)

 

 

13,149

 

   

 

7,282

 

 

General and administrative (2)

 

 

9,246

 

   

 

3,526

 

 

Total operating expenses

 

 

29,965

 

   

 

16,646

 

 

Loss from operations

 

 

(29,676

)

   

 

(20,210

)

 

Other income (expense):

           

Interest income and other income, net

 

 

112

 

   

 

460

 

 

Interest expense

 

 

(422

)

   

 

(1,001

)

 

Change in fair value of redeemable convertible

preferred stock warrant liability

 

 

 

   

 

101

 

 

Loss before provision for income taxes

 

 

(29,986

)

   

 

(20,650

)

 

Provision for income taxes

 

 

39

 

   

 

 

 

Net loss

 

$

(30,025

)

   

$

(20,650

)

 
             

Net income (loss) attributable to common stockholders (3):

           

Basic

 

$

(30,025

)

   

$

3,387

 

 

Diluted

 

$

(30,025

)

   

$

4,161

 

 

Net income (loss) per share attributable to common stockholders:

           

Basic

 

$

(0.70

)

   

$

0.77

 

 

Diluted

 

$

(0.70

)

   

$

0.74

 

 

Weighted-average shares used in computing net income (loss) per share attributable to common stockholders:

           

Basic

 

 

42,760

 

   

 

4,388

 

 

Diluted

 

 

42,760

 

   

 

5,630

 

 

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

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

 

2020

 

Gross profit

 

 

 

 

 

 

 

 

 

Product

 

$

(2,367

)

 

 

$

(3,636

)

Service and other

 

 

2,656

 

 

 

 

72

 

Total gross profit

 

$

289

 

 

 

$

(3,564

)

Gross margin

 

 

 

 

 

 

 

 

 

Product

 

 

(13.0

)%

 

 

 

(61.4

)%

Service and other

 

 

56.4

%

 

 

 

5.7

%

Total gross margin

 

 

1.3

%

 

 

 

(49.6

)%

 

 

 

 

 

 

 

 

 

 

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

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

 

2020

 

Cost of revenue

 

$

75

 

 

 

$

19

 

Research and development

 

 

1,165

 

 

 

 

118

 

Sales and marketing

 

 

1,742

 

 

 

 

82

 

General and administrative

 

 

2,870

 

 

 

 

361

 

Total stock-based compensation expenses

 

$

5,852

 

 

 

$

580

 

 

 

 

 

 

 

 

 

 

 

(3) A reconciliation of the net loss to net income (loss) attributable to common stockholders is as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

 

2020

 

Net loss

 

$

(30,025

)

 

 

$

(20,650

)

Adjustment to redemption value on redeemable convertible preferred stock

 

 

 

 

 

 

(362

)

Deemed dividend on settlement of accrued dividend(4)

 

 

 

 

 

 

42,530

 

Undistributed earnings allocated to participating securities(4)

 

 

 

 

 

 

(18,131

)

Net income (loss) attributable to common stockholders, basic

 

$

(30,025

)

 

 

$

3,387

 

Undistributed earnings reallocated to dilutive potential common shares

 

 

 

 

 

 

774

 

Net income (loss) attributable to common stockholders, diluted

 

$

(30,025

)

 

 

$

4,161

 

                   

(4) Deemed dividend on settlement of accrued dividend and undistributed earnings allocated to participating securities arose as a result of the terms and conditions associated with the Company's redeemable convertible preferred stock outstanding as of March 31, 2020. These terms and conditions were described in the Company's previous SEC filings, including the 424(b) prospectus filed on September 16, 2020 in connection with the Company's initial public offering.

 

 

Outset Medical, Inc.

Condensed Balance Sheets

(in thousands, except per share amounts)

         
   

March 31,

 

December 31,

   

2021

 

2020

 

 

(Unaudited)

 

 

Assets

       

Current assets:

       

Cash and cash equivalents

 

$

251,767

 

 

$

294,972

 

Short-term investments

 

 

25,717

 

 

 

19,898

 

Accounts receivable, net

 

 

12,110

 

 

 

6,468

 

Inventories

 

 

24,554

 

 

 

18,384

 

Prepaid expenses and other current assets

 

 

7,578

 

 

 

6,189

 

Total current assets

 

 

321,726

 

 

 

345,911

 

Restricted cash

 

 

33,311

 

 

 

33,311

 

Property and equipment, net

 

 

15,548

 

 

 

14,998

 

Operating lease right-of-use assets

 

 

8,004

 

 

 

8,253

 

Other assets

 

 

1,240

 

 

 

1,356

 

Total assets

 

$

379,829

 

 

$

403,829

 

Liabilities and stockholders' equity

       

Current liabilities:

       

Accounts payable

 

$

6,651

 

 

$

4,948

 

Accrued compensation and related benefits

 

 

12,602

 

 

 

16,845

 

Accrued expenses and other current liabilities

 

 

8,183

 

 

 

7,903

 

Accrued warranty liability

 

 

2,860

 

 

 

2,913

 

Deferred revenue, current

 

 

3,540

 

 

 

3,201

 

Operating lease liabilities, current

 

 

984

 

 

 

882

 

Total current liabilities

 

 

34,820

 

 

 

36,692

 

Accrued interest, noncurrent

 

 

359

 

 

 

240

 

Deferred revenue, noncurrent

 

 

536

 

 

 

570

 

Operating lease liabilities, noncurrent

 

 

7,773

 

 

 

8,044

 

Term loan, noncurrent

 

 

29,696

 

 

 

29,674

 

Total liabilities

 

 

73,184

 

 

 

75,220

 

Commitments and contingencies

       

Stockholders' equity:

       

Preferred stock, $0.001 par value; 5,000 shares authorized, and no shares issued and outstanding as of March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000 shares authorized as of March 31, 2021 and December 31, 2020; 42,888 and 42,722 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

 

 

43

 

 

 

43

 

Additional paid-in capital

 

 

830,694

 

 

 

822,624

 

Accumulated other comprehensive (loss) income

 

 

(8

)

 

 

1

 

Accumulated deficit

 

 

(524,084

)

 

 

(494,059

)

Total stockholders' equity

 

 

306,645

 

 

 

328,609

 

Total liabilities and stockholders' equity

 

$

379,829

 

 

$

403,829

 

Outset Medical, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

       
   

Three Months Ended March 31,

 
   

2021

 

2020

 

Net cash used in operating activities

 

$

(38,616

)

 

$

(24,893

)

 

Net cash (used in) provided by investing activities

 

 

(6,807

)

 

 

19,159

 

 

Net cash provided by financing activities

 

 

2,218

 

 

 

126,770

 

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(43,205

)

 

 

121,036

 

 

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

 

 

328,283

 

 

 

37,669

 

 

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

 

$

285,078

 

 

$

158,705

 

 
           
           

(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):

 
 
   

March 31,

 

 

 

2021

 

2019

 

Cash and cash equivalents

 

$

251,767

 

 

$

157,962

 

 

Restricted cash

 

 

33,311

 

 

 

743

 

 

Total cash, cash equivalents and restricted cash(2)

 

$

285,078

 

 

$

158,705

 

 
           

(2) The total cash, including restricted cash, cash equivalents and short-term investments as of March 31, 2021 was $310.8 million; compared to $169.8 million as of March 31, 2020.

 
 

Appendix A

Outset Medical, Inc.

Results of Operations – Non-GAAP

(in thousands, except per share amounts)

(unaudited)

 

Reconciliation between GAAP and non-GAAP net income (loss) per share attributable to common stockholders:

   

Three Months Ended

   

March 31,

 

 

2021

   

2020

GAAP net income (loss) per share to common stockholders, diluted

 

$

(0.70

)

   

$

0.74

 

Stock-based compensation expense

 

$

0.14

 

   

$

0.10

 

Non-GAAP net income (loss) per share to common stockholders, diluted

 

$

(0.56

)

   

$

0.84

 

           

Reconciliation between GAAP and non-GAAP net income (loss) attributable to common stockholders:

   

Three Months Ended

   

March 31,

   

2021

   

2020

GAAP net income (loss) attributable to common stockholders, diluted

 

$

(30,025

)

   

$

4,161

 

Stock-based compensation expense

 

 

5,852

 

   

 

580

 

Non-GAAP net income (loss) per share attributable to common
stockholders, diluted

 

$

(24,173

)

   

$

4,741

 

           

Reconciliation between GAAP and non-GAAP results of operations:

         
   

Three Months Ended

   

March 31,

 

 

2021

   

2020

GAAP gross profit

 

$

289

 

   

$

(3,564

)

Stock-based compensation expense

 

 

75

 

   

 

19

 

Non-GAAP gross profit

 

$

364

 

   

$

(3,545

)

 

         

GAAP gross margin

 

 

1.3

%

 

 

(49.6

)%

Stock-based compensation expense

 

 

0.3

 

   

 

0.3

 

Non-GAAP gross margin

 

 

1.6

%

 

 

(49.3

)%

 

         

GAAP research and development expense

 

$

7,570

 

   

$

5,838

 

Stock-based compensation expense

 

 

(1,165

)

   

 

(118

)

Non-GAAP research and development expense

 

$

6,405

 

   

$

5,720

 

 

         

GAAP sales and marketing expense

 

$

13,149

 

   

$

7,282

 

Stock-based compensation expense

 

 

(1,742

)

   

 

(82

)

Non-GAAP sales and marketing expense

 

$

11,407

 

   

$

7,200

 

 

         

GAAP general and administrative expense

 

$

9,246

 

   

$

3,526

 

Stock-based compensation expense

 

 

(2,870

)

   

 

(361

)

Non-GAAP general and administrative expense

 

$

6,376

 

   

$

3,165

 

 

         

GAAP total operating expense

 

$

29,965

 

   

$

16,646

 

Stock-based compensation expense

 

 

(5,777

)

   

 

(561

)

Non-GAAP total operating expense

 

$

24,188

 

   

$

16,085

 

             

 

Investor Contact
Lynn Lewis or Brian Johnston
Gilmartin Group
investors@outsetmedical.com

Media Contact
Nicole Shannon
Director, Marketing Communications for Outset Medical
nshannon@outsetmedical.com

Source: Outset Medical, Inc.