om-10q_20210630.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-39513

 

Outset Medical, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

20-0514392

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

3052 Orchard Dr.

San Jose, California

95134

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (669) 231-8200

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

OM

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes      No  

As of July 30, 2021, the registrant had 46,313,196 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

1

Item 1.

Financial Statements (Unaudited)

 

1

 

Condensed Balance Sheets

 

1

 

Condensed Statements of Operations

 

2

 

Condensed Statements of Comprehensive Loss

 

3

 

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

 

4

 

Condensed Statements of Cash Flows

 

6

 

Notes to Condensed Financial Statements

 

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

23

Item 4.

Controls and Procedures

 

23

PART II.

OTHER INFORMATION

 

24

Item 1.

Legal Proceedings

 

24

Item 1A.

Risk Factors

 

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

24

Item 3.

Defaults Upon Senior Securities

 

24

Item 4.

Mine Safety Disclosures

 

24

Item 5.

Other Information

 

24

Item 6.

Exhibits

 

25

Signatures

 

26

 


 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Outset Medical, Inc.

Condensed Balance Sheets

(in thousands, except per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

274,274

 

 

$

294,972

 

Short-term investments

 

 

121,934

 

 

 

19,898

 

Accounts receivable, net

 

 

16,411

 

 

 

6,468

 

Inventories

 

 

28,882

 

 

 

18,384

 

Prepaid expenses and other current assets

 

 

6,459

 

 

 

6,189

 

Total current assets

 

 

447,960

 

 

 

345,911

 

Restricted cash

 

 

33,311

 

 

 

33,311

 

Property and equipment, net

 

 

15,275

 

 

 

14,998

 

Operating lease right-of-use assets

 

 

7,752

 

 

 

8,253

 

Other assets

 

 

515

 

 

 

1,356

 

Total assets

 

$

504,813

 

 

$

403,829

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,364

 

 

$

4,948

 

Accrued compensation and related benefits

 

 

15,308

 

 

 

16,845

 

Accrued expenses and other current liabilities

 

 

9,256

 

 

 

7,903

 

Accrued warranty liability

 

 

3,073

 

 

 

2,913

 

Deferred revenue, current

 

 

4,373

 

 

 

3,201

 

Operating lease liabilities, current

 

 

1,069

 

 

 

882

 

Total current liabilities

 

 

35,443

 

 

 

36,692

 

Accrued interest, noncurrent

 

 

479

 

 

 

240

 

Deferred revenue, noncurrent

 

 

515

 

 

 

570

 

Operating lease liabilities, noncurrent

 

 

7,496

 

 

 

8,044

 

Term loan, noncurrent

 

 

29,718

 

 

 

29,674

 

Total liabilities

 

 

73,651

 

 

 

75,220

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000 shares authorized, and no shares issued and outstanding as of June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000 shares authorized as of June 30, 2021 and December 31, 2020; 46,225 and 42,722 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

46

 

 

 

43

 

Additional paid-in capital

 

 

985,436

 

 

 

822,624

 

Accumulated other comprehensive (loss) income

 

 

(28

)

 

 

1

 

Accumulated deficit

 

 

(554,292

)

 

 

(494,059

)

Total stockholders' equity

 

 

431,162

 

 

 

328,609

 

Total liabilities and stockholders' equity

 

$

504,813

 

 

$

403,829

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

1


Outset Medical, Inc.

Condensed Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

20,628

 

 

$

9,697

 

 

$

38,838

 

 

$

15,623

 

Service and other revenue

 

 

4,588

 

 

 

2,045

 

 

 

9,294

 

 

 

3,309

 

Total revenue

 

 

25,216

 

 

 

11,742

 

 

 

48,132

 

 

 

18,932

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenue

 

 

22,077

 

 

 

15,291

 

 

 

42,654

 

 

 

24,853

 

Cost of service and other revenue

 

 

2,087

 

 

 

1,215

 

 

 

4,137

 

 

 

2,407

 

Total cost of revenue

 

 

24,164

 

 

 

16,506

 

 

 

46,791

 

 

 

27,260

 

Gross profit

 

 

1,052

 

 

 

(4,764

)

 

 

1,341

 

 

 

(8,328

)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

8,032

 

 

 

6,053

 

 

 

15,602

 

 

 

11,891

 

Sales and marketing

 

 

13,204

 

 

 

9,244

 

 

 

26,353

 

 

 

16,526

 

General and administrative

 

 

9,722

 

 

 

4,848

 

 

 

18,968

 

 

 

8,374

 

Total operating expenses

 

 

30,958

 

 

 

20,145

 

 

 

60,923

 

 

 

36,791

 

Loss from operations

 

 

(29,906

)

 

 

(24,909

)

 

 

(59,582

)

 

 

(45,119

)

Interest income and other income, net

 

 

164

 

 

 

67

 

 

 

276

 

 

 

527

 

Interest expense

 

 

(431

)

 

 

(1,032

)

 

 

(853

)

 

 

(2,033

)

Change in fair value of redeemable convertible preferred stock

   warrant liability

 

 

 

 

 

(631

)

 

 

 

 

 

(530

)

Loss before provision for income taxes

 

 

(30,173

)

 

 

(26,505

)

 

 

(60,159

)

 

 

(47,155

)

Provision for income taxes

 

 

35

 

 

 

 

 

 

74

 

 

 

-

 

Net loss

 

$

(30,208

)

 

$

(26,505

)

 

$

(60,233

)

 

$

(47,155

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders, basic and diluted

 

$

(30,208

)

 

$

(26,505

)

 

$

(60,233

)

 

$

(4,987

)

Net loss per share attributable to common stockholders,

   basic and diluted

 

$

(0.66

)

 

$

(4.58

)

 

$

(1.36

)

 

$

(0.98

)

Weighted-average shares used in computing net loss per share

   attributable to common stockholders, basic and diluted

 

 

45,680

 

 

 

5,784

 

 

 

44,228

 

 

 

5,086

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

2


Outset Medical, Inc.

Condensed Statements of Comprehensive Loss

(Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(30,208

)

 

$

(26,505

)

 

$

(60,233

)

 

$

(47,155

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities

 

 

(20

)

 

 

13

 

 

 

(29

)

 

 

(22

)

Comprehensive loss

 

$

(30,228

)

 

$

(26,492

)

 

$

(60,262

)

 

$

(47,177

)

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

3


 

Outset Medical, Inc.

Condensed Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands)

 

 

 

 

Redeemable Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

(Deficit)

 

Balance as of December 31, 2020

 

 

 

 

$

 

 

 

 

42,722

 

 

$

43

 

 

$

822,624

 

 

$

1

 

 

$

(494,059

)

 

$

328,609

 

Issuance of common stock through employee

  stock purchase plan

 

 

 

 

 

 

 

 

 

80

 

 

 

 

 

 

1,838

 

 

 

 

 

 

 

 

 

1,838

 

Stock option exercises

 

 

 

 

 

 

 

 

 

86

 

 

 

 

 

 

380

 

 

 

 

 

 

 

 

 

380

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,852

 

 

 

 

 

 

 

 

 

5,852

 

Unrealized loss on available-for-sale

  securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9

)

 

 

 

 

 

(9

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,025

)

 

 

(30,025

)

Balance as of March 31, 2021

 

 

 

 

$

 

 

 

 

42,888

 

 

$

43

 

 

$

830,694

 

 

$

(8

)

 

$

(524,084

)

 

$

306,645

 

Issuance of common stock upon follow-on

  public offering, net of issuance costs

 

 

 

 

 

 

 

 

 

2,946

 

 

 

3

 

 

 

149,082

 

 

 

 

 

 

 

 

 

149,085

 

Issuance of common stock for settlement of

  RSUs

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option exercises

 

 

 

 

 

 

 

 

 

390

 

 

 

 

 

 

1,723

 

 

 

 

 

 

 

 

 

1,723

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,937

 

 

 

 

 

 

 

 

 

3,937

 

Unrealized loss on available-for-sale

  securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20

)

 

 

 

 

 

(20

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,208

)

 

 

(30,208

)

Balance as of June 30, 2021

 

 

 

 

$

 

 

 

 

46,225

 

 

$

46

 

 

 

985,436

 

 

$

(28

)

 

$

(554,292

)

 

$

431,162

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

4


 

Outset Medical, Inc.

Condensed Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands)

 

 

 

 

Redeemable Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

(Deficit)

 

Balance as of December 31, 2019

 

 

147,214

 

 

$

409,446

 

 

 

 

922

 

 

$

1

 

 

$

357

 

 

$

22

 

 

$

(372,567

)

 

$

(372,187

)

Issuance of Series E redeemable convertible

  preferred stock, net of issuance costs

 

 

57,782

 

 

 

126,758

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock on

  settlement of accrued dividend

 

 

 

 

 

(41,763

)

 

 

 

4,850

 

 

 

5

 

 

 

41,758

 

 

 

 

 

 

 

 

 

41,763

 

Deemed dividend on settlement of

  accrued dividend

 

 

 

 

 

(42,530

)

 

 

 

 

 

 

 

 

 

42,530

 

 

 

 

 

 

 

 

 

42,530

 

Stock option exercises

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

580

 

 

 

 

 

 

 

 

 

580

 

Unrealized loss on available-for-sale

  securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35

)

 

 

 

 

 

(35

)

Adjustment to redemption value on

  redeemable convertible preferred stock

 

 

 

 

 

362

 

 

 

 

 

 

 

 

 

 

(362

)

 

 

 

 

 

 

 

 

(362

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,650

)

 

 

(20,650

)

Balance as of March 31, 2020

 

 

204,996

 

 

$

452,273

 

 

 

 

5,776

 

 

$

6

 

 

$

84,877

 

 

$

(13

)

 

$

(393,217

)

 

$

(308,347

)

Stock option exercises

 

 

 

 

 

 

 

 

 

26

 

 

 

 

 

 

80

 

 

 

 

 

 

 

 

 

80

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

683

 

 

 

 

 

 

 

 

 

683

 

Unrealized gain on available-for-sale

  securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,505

)

 

 

(26,505

)

Balance as of June 30, 2020

 

 

204,996

 

 

$

452,273

 

 

 

 

5,802

 

 

$

6

 

 

$

85,640

 

 

$

 

 

$

(419,722

)

 

$

(334,076

)