SEC Filing | Outset Medical, Inc.

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10-Q

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 September 30, 2021


☐		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

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.

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 October 29, 2021, the registrant had 47,094,315 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	24
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION	25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
Signatures		29

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Outset Medical, Inc.

Condensed Balance Sheets

(in thousands, except per share amounts)


	September 30,			December 31,
	2021			2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	230,508		$	294,972
Short-term investments		142,535			19,898
Accounts receivable, net		19,302			6,468
Inventories		34,297			18,384
Prepaid expenses and other current assets		6,659			6,189
Total current assets		433,301			345,911
Restricted cash		33,311			33,311
Property and equipment, net		14,532			14,998
Operating lease right-of-use assets		7,494			8,253
Other assets		166			1,356
Total assets	$	488,804		$	403,829
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	2,702		$	4,948
Accrued compensation and related benefits		17,759			16,845
Accrued expenses and other current liabilities		11,389			7,903
Accrued warranty liability		3,234			2,913
Deferred revenue, current		5,212			3,201
Operating lease liabilities, current		1,109			882
Total current liabilities		41,405			36,692
Accrued interest, noncurrent		600			240
Deferred revenue, noncurrent		109			570
Operating lease liabilities, noncurrent		7,199			8,044
Term loan, noncurrent		29,740			29,674
Total liabilities		79,053			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 September 30, 2021 and December 31, 2020		—			—
Common stock, $0.001 par value; 300,000 shares authorized as of September 30, 2021 and December 31, 2020; 47,018 and 42,722 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		47			43
Additional paid-in capital		994,486			822,624
Accumulated other comprehensive (loss) income		(20	)		1
Accumulated deficit		(584,762	)		(494,059	)
Total stockholders' equity		409,751			328,609
Total liabilities and stockholders' equity	$	488,804		$	403,829

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

Outset Medical, Inc.

Condensed Statements of Operations

(Unaudited)

(in thousands, except per share amounts)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenue:
Product revenue	$	21,824		$	10,812		$	60,662		$	26,435
Service and other revenue		4,494			2,944			13,788			6,253
Total revenue		26,318			13,756			74,450			32,688
Cost of revenue:
Cost of product revenue		20,526			17,265			63,180			42,118
Cost of service and other revenue		2,846			1,617			6,983			4,024
Total cost of revenue		23,372			18,882			70,163			46,142
Gross profit		2,946			(5,126	)		4,287			(13,454	)
Operating expenses:
Research and development		9,729			9,175			25,331			21,066
Sales and marketing		15,726			13,344			42,079			29,870
General and administrative		7,629			13,088			26,597			21,462
Total operating expenses		33,084			35,607			94,007			72,398
Loss from operations		(30,138	)		(40,733	)		(89,720	)		(85,852	)
Interest income and other income (expense), net		99			(3	)		375			524
Interest expense		(431	)		(428	)		(1,284	)		(2,461	)
Change in fair value of redeemable convertible preferred stock warrant liability		—			437			—			(93	)
Loss on extinguishment of term loan		—			(1,567	)		—			(1,567	)
Loss before provision for income taxes		(30,470	)		(42,294	)		(90,629	)		(89,449	)
Provision for income taxes		—			—			74			—
Net loss	$	(30,470	)	$	(42,294	)	$	(90,703	)	$	(89,449	)

Net loss attributable to common stockholders, basic and diluted	$	(30,470	)	$	(42,294	)	$	(90,703	)	$	(47,281	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.65	)	$	(3.44	)	$	(1.96	)	$	(6.30	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		46,588			12,299			46,252			7,508

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

Outset Medical, Inc.

Condensed Statements of Comprehensive Loss

(Unaudited)

(in thousands)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net loss	$	(30,470	)	$	(42,294	)	$	(90,703	)	$	(89,449	)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities		8			1			(21	)		(21	)
Comprehensive loss	$	(30,462	)	$	(42,293	)	$	(90,724	)	$	(89,470	)

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

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
Issuance of common stock through employee stock purchase plan		—		—		36		—		1,596	—			—				1,596
Issuance of common stock for settlement of RSUs		—		—		1		—		—		—			—			—
Stock option exercises		—		—		756		1		4,590		—			—			4,591
Stock-based compensation expense		—		—		—		—		2,864		—			—			2,864
Unrealized income on available-for-sale securities		—		—		—		—		—		8						8
Net loss		—		—		—		—		—		—			(30,470	)		(30,470	)
Balance as of September 30, 2021		—	$	—		47,018	$	47	$	994,486	$	(20	)	$	(584,762	)	$	409,751

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

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		—