UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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. ☐
Item 2.02 Result of Operations and Financial Condition.
On May 3, 2023, Outset Medical, Inc. (the “Company”) issued a press release and will hold its first quarter 2023 earnings conference call announcing the Company’s financial results for the quarter ended March 31, 2023. A copy of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.
The information contained in this Item 2.02 and Exhibit 99.1 hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number |
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Description |
99.1 |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Outset Medical, Inc.
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Date: May 3, 2023 |
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By: |
/s/Nabeel Ahmed |
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Nabeel Ahmed |
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Chief Financial Officer |
Exhibit 99.1
Outset Medical Reports First Quarter 2023 Financial Results
Increases Revenue and Gross Margin Guidance for 2023
San Jose, CA – May 3, 2023 – 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, 2023.
Recent Highlights
“We had a strong start to 2023, with revenue growth ahead of our expectations and gross margins expanding for the 8th consecutive quarter,” said Leslie Trigg, Chair and Chief Executive Officer. “The momentum we had exiting 2022 carried through the first quarter of 2023 with the benefits of Tablo continuing to resonate with acute-care and home providers.”
First Quarter 2023 Financial Results
Revenue for the first quarter of 2023 was $33.5 million, representing an increase of 9.5% compared to $30.6 million in the first quarter of 2022. Product revenue was $27.8 million, representing an increase of 8.2% compared to $25.7 million in the first quarter of 2022. Service and other revenue was $5.7 million, representing an increase of 16.4% compared to $4.9 million in the first quarter of 2022.
Total gross profit was $6.4 million, compared to $4.4 million for the first quarter of 2022. Total gross margin was 19.2%, compared to 14.5% in the first quarter of 2022. On a non-GAAP basis, gross margin improved to 20.3% from 14.8% in the first quarter of 2022. Product gross profit was $7.0 million, compared to $2.6 million of product gross profit in the first quarter of 2022. Product gross margin was 25.1%, compared to 10.0% in the first quarter of 2022. Service and other gross loss was ($0.5) million, compared to $1.9 million of service and other gross profit in the first quarter of 2022. Service and other gross margin was (9.4)%, compared to 38.6% in the first quarter of 2022.
Operating expenses were $49.9 million, including research and development (R&D) expenses of $13.8 million, sales and marketing (S&M) expenses of $24.3 million, and general and administrative (G&A) expenses of $11.8 million. This compared to operating expenses of $40.9 million, including R&D expenses of $10.8 million, S&M expenses of $20.4 million, and G&A expenses of $9.7 million in the first quarter of 2022.
Excluding stock-based compensation expense, non-GAAP operating expenses were $41.7 million, including R&D expenses of $11.2 million, S&M expenses of $21.7 million, and G&A expenses of $8.8 million.
Net loss was ($44.0) million, or ($0.90) per share, compared to net loss of ($36.9) million, or ($0.78) per share, for the same period in 2022. On a non-GAAP basis, net loss was ($35.4) million, or ($0.72) per share, compared to non-GAAP net loss of ($31.9) million, or ($0.67) per share for the same period in 2022.
Total cash, including restricted cash, cash equivalents and short-term investments, was $252.5 million as of March 31, 2023.
Full Year 2023 Financial Guidance
Outset now projects revenue for 2023 to range from $144 million to $150 million, which represents approximately 25% to 30% growth over the Company's fiscal year 2022 revenue. This updated guidance compares to prior 2023 revenue guidance
of $140 million to $150 million. In addition, the Company expects gross margin for the year to be in the low-20% range, up from its prior guidance of approximately 20%, and exiting the fourth quarter in the mid-20% range.
Webcast and Conference Call Details
Outset will host a conference call today, May 3, 2023, at 2:00 p.m. PT / 5:00 p.m. ET to discuss its first 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 (including sales into the home market and such sales as a percentage of revenues), gross margin, operating expenses, capital expenditures, 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 reduce the cost of producing and shipping our products, expand gross margins, further secure supply continuity and otherwise mitigate supply chain challenges and its ability to achieve projected cost reductions and other anticipated benefits from these initiatives at the levels or within the timeframe estimated; 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
Outset Medical
858-342-8272
jmazzola@outsetmedical.com
Media Contact
Nicole Shannon
Director, Marketing Communications for Outset Medical
nshannon@outsetmedical.com
Outset Medical, Inc.
Condensed Statements of Operations
(in thousands, except per share amounts)
(unaudited)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Revenue: |
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Product revenue |
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$ |
27,779 |
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$ |
25,664 |
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Service and other revenue |
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5,688 |
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4,886 |
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Total revenue |
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33,467 |
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30,550 |
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Cost of revenue: |
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Cost of product revenue (2) |
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20,817 |
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23,110 |
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Cost of service and other revenue |
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6,222 |
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2,998 |
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Total cost of revenue |
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27,039 |
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26,108 |
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Gross profit (1) |
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6,428 |
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4,442 |
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Gross margin (1) |
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19.2 |
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% |
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14.5 |
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% |
Operating expenses: |
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Research and development (2) |
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13,793 |
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10,831 |
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Sales and marketing (2) |
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24,333 |
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20,377 |
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General and administrative (2) |
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11,787 |
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9,709 |
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Total operating expenses |
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49,913 |
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40,917 |
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Loss from operations |
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(43,485 |
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(36,475 |
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Interest income and other income, net |
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2,648 |
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120 |
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Interest expense |
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(2,942 |
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(422 |
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Loss before provision for income taxes |
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(43,779 |
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(36,777 |
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Provision for income taxes |
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192 |
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115 |
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Net loss |
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$ |
(43,971 |
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$ |
(36,892 |
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Net loss per share, basic and diluted |
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$ |
(0.90 |
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$ |
(0.78 |
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Shares used in computing net loss per share, basic and diluted |
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48,783 |
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47,487 |
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(1) Gross profit and gross margin by source consisted of the following: |
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Gross profit |
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Product revenue |
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$ |
6,962 |
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$ |
2,554 |
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Service and other revenue |
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(534 |
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1,888 |
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Total gross profit |
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$ |
6,428 |
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$ |
4,442 |
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Gross margin |
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Product revenue |
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25.1 |
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% |
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10.0 |
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% |
Service and other revenue |
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(9.4 |
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% |
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38.6 |
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% |
Total gross margin |
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19.2 |
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% |
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14.5 |
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% |
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(2) Include stock-based compensation expense as follows: |
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Cost of revenue |
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$ |
358 |
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$ |
93 |
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Research and development |
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2,615 |
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1,158 |
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Sales and marketing |
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2,598 |
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1,706 |
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General and administrative |
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2,967 |
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2,049 |
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Total stock-based compensation expense |
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$ |
8,538 |
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$ |
5,006 |
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Outset Medical, Inc.
Condensed Balance Sheets
(in thousands, except per share amounts)
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March 31, |
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December 31, |
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2023 |
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2022 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
36,386 |
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$ |
73,222 |
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Short-term investments |
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212,827 |
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214,280 |
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Accounts receivable, net |
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34,314 |
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28,070 |
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Inventories |
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47,733 |
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51,476 |
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Prepaid expenses and other current assets |
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6,015 |
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6,597 |
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Total current assets |
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337,275 |
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373,645 |
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Restricted cash |
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3,311 |
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3,311 |
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Property and equipment, net |
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15,189 |
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15,876 |
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Operating lease right-of-use assets |
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5,823 |
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6,117 |
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Other assets |
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1,067 |
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1,166 |
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Total assets |
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$ |
362,665 |
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$ |
400,115 |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
1,988 |
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$ |
603 |
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Accrued compensation and related benefits |
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14,419 |
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21,519 |
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Accrued expenses and other current liabilities |
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13,893 |
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16,227 |
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Accrued warranty liability |
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3,569 |
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3,620 |
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Deferred revenue, current |
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9,038 |
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8,662 |
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Operating lease liabilities, current |
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1,361 |
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1,318 |
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Total current liabilities |
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44,268 |
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51,949 |
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Accrued interest |
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295 |
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113 |
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Deferred revenue |
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116 |
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151 |
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Operating lease liabilities |
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5,220 |
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5,576 |
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Term loan |
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96,480 |
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96,336 |
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Total liabilities |
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146,379 |
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154,125 |
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Commitments and contingencies |
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Stockholders' equity: |
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Preferred stock, $0.001 par value; 5,000 shares authorized, and no shares issued and outstanding as of March 31, 2023 and December 31, 2022 |
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— |
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— |
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Common stock, $0.001 par value; 300,000 shares authorized as of March 31, 2023 and December 31, 2022; 49,216 and 48,465 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively |
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49 |
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48 |
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Additional paid-in capital |
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1,049,271 |
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1,035,456 |
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Accumulated other comprehensive loss |
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(113 |
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(564 |
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Accumulated deficit |
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(832,921 |
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(788,950 |
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Total stockholders' equity |
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216,286 |
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245,990 |
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Total liabilities and stockholders' equity |
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$ |
362,665 |
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$ |
400,115 |
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Outset Medical, Inc.
Condensed Statements of Cash Flows
(in thousands)
(unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Net cash used in operating activities |
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$ |
(44,756 |
) |
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$ |
(38,335 |
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Net cash provided by (used in) investing activities |
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2,643 |
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(33,390 |
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Net cash provided by financing activities |
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5,277 |
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3,723 |
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Net decrease in cash, cash equivalents and restricted cash |
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(36,836 |
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(68,002 |
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Cash, cash equivalents and restricted cash at beginning of the period |
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76,533 |
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215,659 |
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Cash, cash equivalents and restricted cash at end of the period (1) |
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$ |
39,697 |
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$ |
147,657 |
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(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): |
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March 31, |
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2023 |
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2022 |
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Cash and cash equivalents |
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$ |
36,386 |
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$ |
114,346 |
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Restricted cash |
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3,311 |
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33,311 |
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Total cash, cash equivalents and restricted cash* |
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$ |
39,697 |
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$ |
147,657 |
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* The total cash, including restricted cash, cash equivalents and investment securities as of March 31, 2023 was $252.5 million; compared to $335.6 million as of March 31, 2022. |
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Appendix A
Outset Medical, Inc.
Results of Operations – Non-GAAP
(in thousands, except per share amounts)
(unaudited)
Reconciliation between GAAP and non-GAAP net loss per share: |
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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GAAP net loss per share, diluted |
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$ |
(0.90 |
) |
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$ |
(0.78 |
) |
|
Stock-based compensation expense |
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0.18 |
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0.11 |
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Non-GAAP net loss per share, diluted |
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$ |
(0.72 |
) |
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$ |
(0.67 |
) |
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Reconciliation between GAAP and non-GAAP net loss: |
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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GAAP net loss, diluted |
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$ |
(43,971 |
) |
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$ |
(36,892 |
) |
|
Stock-based compensation expense |
|
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8,538 |
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5,006 |
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Non-GAAP net loss, diluted |
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$ |
(35,433 |
) |
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$ |
(31,886 |
) |
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Reconciliation between GAAP and non-GAAP results of operations: |
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Three Months Ended |
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|
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March 31, |
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|
|
2023 |
|
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|
2022 |
|
|
||
GAAP gross profit |
|
$ |
6,428 |
|
|
|
$ |
4,442 |
|
|
Stock-based compensation expense |
|
|
358 |
|
|
|
|
93 |
|
|
Non-GAAP gross profit |
|
$ |
6,786 |
|
|
|
$ |
4,535 |
|
|
|
|
|
|
|
|
|
|
|
||
GAAP gross margin |
|
|
19.2 |
|
% |
|
|
14.5 |
|
% |
Stock-based compensation expense |
|
|
1.1 |
|
|
|
|
0.3 |
|
|
Non-GAAP gross margin |
|
|
20.3 |
|
% |
|
|
14.8 |
|
% |
|
|
|
|
|
|
|
|
|
||
GAAP research and development expense |
|
$ |
13,793 |
|
|
|
$ |
10,831 |
|
|
Stock-based compensation expense |
|
|
(2,615 |
) |
|
|
|
(1,158 |
) |
|
Non-GAAP research and development expense |
|
$ |
11,178 |
|
|
|
$ |
9,673 |
|
|
|
|
|
|
|
|
|
|
|
||
GAAP sales and marketing expense |
|
$ |
24,333 |
|
|
|
$ |
20,377 |
|
|
Stock-based compensation expense |
|
|
(2,598 |
) |
|
|
|
(1,706 |
) |
|
Non-GAAP sales and marketing expense |
|
$ |
21,735 |
|
|
|
$ |
18,671 |
|
|
|
|
|
|
|
|
|
|
|
||
GAAP general and administrative expense |
|
$ |
11,787 |
|
|
|
$ |
9,709 |
|
|
Stock-based compensation expense |
|
|
(2,967 |
) |
|
|
|
(2,049 |
) |
|
Non-GAAP general and administrative expense |
|
$ |
8,820 |
|
|
|
$ |
7,660 |
|
|
|
|
|
|
|
|
|
|
|
||
GAAP total operating expense |
|
$ |
49,913 |
|
|
|
$ |
40,917 |
|
|
Stock-based compensation expense |
|
|
(8,180 |
) |
|
|
|
(4,913 |
) |
|
Non-GAAP total operating expense |
|
$ |
41,733 |
|
|
|
$ |
36,004 |
|
|
|
|
|
|
|
|
|
|
|
||