Outset Medical Reports Second Quarter 2021 Financial Results

By: Outset Medical, Inc. via Business Wire

August 05, 2021 at 16:05 PM EDT

2021 Revenue Guidance Range Updated to $97 million to $100 million

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 second quarter ended June 30, 2021.

Recent Highlights

Recorded net revenue of $25.2 million in the second quarter of 2021, a 115% increase compared to $11.7 million in the second quarter of 2020
Achieved gross margin of 4.2% in the second quarter of 2021 compared to (40.6%) in the second quarter of 2020
Appointed former Amazon AWS Health AI executive Jean-Olivier Racine as Chief Technology Officer
Appointed Edwards Life Sciences Corporate VP Katie Szyman to the Board of Directors
Announced several multi-year sales agreements with innovative dialysis care providers to drive home hemodialysis adoption with Tablo

“In the first half of 2021, we delivered best-in-class revenue growth and steady gross margin improvement driven by a team that is dedicated to, and united around, transforming the dialysis experience for patients and providers,” said Leslie Trigg, President and Chief Executive Officer. “With new home console bookings up substantially in the second quarter, and both current and new customers purchasing Tablo for acute use, our integrated commercial strategy is working as expected. We remain confident in our ability to execute on each of our key strategic initiatives for 2021 and in our long-term growth prospects.”

Second Quarter 2021 Financial Results

Revenue for the second quarter of 2021 was $25.2 million, representing an increase of 115% compared to $11.7 million in the second quarter of 2020. Product revenue for the second quarter of 2021 was $20.6 million, representing an increase of 113% compared to $9.7 million in the second quarter of 2020. Service and other revenue for the second quarter of 2021 was $4.6 million, representing an increase of 124% compared to $2.0 million in the second quarter of 2020.

Total gross profit for the second quarter of 2021 was $1.0 million, compared to a gross loss of ($4.8) million for the second quarter of 2020. Total gross margin for the second quarter of 2021 was 4.2%, compared to (40.6%) in the second quarter of 2020. Product gross loss for the second quarter of 2021 was ($1.4) million, compared to ($5.6) million of product gross loss in the second quarter of 2020. Product gross margin for the second quarter of 2021 was (7.0%), compared to (57.7%) in the second quarter of 2020. Service and other gross profit for the second quarter of 2021 was $2.5 million, compared to $0.8 million of service and other gross profit in the second quarter of 2020. Service and other gross margin for the second quarter of 2021 was 54.5%, compared to 40.6% in the second quarter of 2020.

Operating expenses for the second quarter of 2021 were $31.0 million, including research and development (R&D) expenses of $8.0 million, sales and marketing (S&M) expenses of $13.2 million, and general and administrative (G&A) expenses of $9.7 million. This compared to operating expenses of $20.1 million, including R&D expenses of $6.1 million, S&M expenses of $9.2 million, and G&A expenses of $4.8 million in the second quarter of 2020.

Excluding stock-based compensation expense, non-GAAP operating expenses for the second quarter of 2021 were $27.1 million, including R&D expenses of $7.4 million, S&M expenses of $12.2 million, and G&A expenses of $7.5 million.

Second quarter 2021 net loss was ($30.2) million, or ($0.66) per share, compared to net loss of ($26.5) million, or ($4.58) per share, for the same period in 2020. On a non-GAAP basis, net loss for the second quarter of 2021 was ($26.3) million, or ($0.57) per share, compared to non-GAAP net loss of ($25.8) million, or ($4.46) per share for the same period in 2020.

Total cash, including restricted cash, cash equivalents and short-term investments, was $429.5 million as of June 30, 2021. The Company generated approximately $149.1 million in net proceeds from its April 2021 public offering.

Full Year 2021 Financial Guidance

Outset projects revenue for the full year 2021 to range from $97 million to $100 million, which represents approximately 94% to 100% growth over the Company’s fiscal year 2020 revenue. This updated guidance compares to prior 2021 revenue guidance of $92 million to $97 million.

Webcast and Conference Call Details

Outset will host a conference call today, August 5, 2021, at 2:00 p.m. PT / 5:00 p.m. ET to discuss its second 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 7927579. 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, 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 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.

Outset Medical, Inc. Condensed Statements of Operations (in thousands, except per share amounts) (unaudited)
	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⁽²⁾		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⁾		1,052				(4,764	)			1,341				(8,328	)
Gross margin ⁽¹⁾		4.2		%		(40.6	)	%		2.8		%		(44.0	)	%
Operating expenses:
Research and development ⁽²⁾		8,032				6,053				15,602				11,891
Sales and marketing ⁽²⁾		13,204				9,244				26,353				16,526
General and administrative⁽²⁾		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	)
Other income (expense):
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 ⁽³⁾	$	(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


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

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2021				2020				2021				2020
Gross profit
Product revenue	$	(1,449	)		$	(5,594	)		$	(3,816	)		$	(9,230	)
Service and other revenue		2,501				830				5,157				902
Total gross profit	$	1,052			$	(4,764	)		$	1,341			$	(8,328	)
Gross margin
Product revenue		(7.0	)	%		(57.7	)	%		(9.8	)	%		(59.1	)	%
Service and other revenue		54.5		%		40.6		%		55.5		%		27.3		%
Total gross margin		4.2		%		(40.6	)	%		2.8		%		(44.0	)	%

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

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2021				2020				2021				2020
Cost of revenue	$	62			$	20			$	137			$	39
Research and development		643				134				1,808				252
Sales and marketing		1,052				101				2,794				183
General and administrative		2,180				428				5,050				789
Total stock-based compensation expenses	$	3,937			$	683			$	9,789			$	1,263

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

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2021				2020				2021				2020
Net loss	$	(30,208	)		$	(26,505	)		$	(60,233	)		$	(47,155	)
Adjustment to redemption value on redeemable convertible preferred stock		—				—				—				(362	)
Deemed dividend on settlement of accrued dividend*		—				—				—				42,530
Net loss attributable to common stockholders, basic and diluted	$	(30,208	)		$	(26,505	)		$	(60,233	)		$	(4,987	)

* Deemed dividend on settlement of accrued dividend arose as a result of the terms and conditions associated with the Company's redeemable convertible preferred stock outstanding prior to the Company's initial public offering ("IPO"). 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 IPO.

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
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

Outset Medical, Inc. Condensed Statements of Cash Flows (in thousands) (unaudited)
	Six Months Ended June 30,
	2021			2020
Net cash used in operating activities	$	(69,457	)	$	(44,059	)
Net cash (used in) provided by investing activities		(104,267	)		25,471
Net cash provided by financing activities		153,026			126,797
Net (decrease) increase in cash, cash equivalents and restricted cash		(20,698	)		108,209
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⁾	$	307,585		$	145,878


⁽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:

	June 30,
	2021			2020
Cash and cash equivalents	$	274,274		$	141,871
Restricted cash		33,311			4,007
Total cash, cash equivalents and restricted cash^*	$	307,585		$	145,878

* The total cash, including restricted cash, cash equivalents and short-term investments as of June 30, 2021 was $429.5 million; compared to $148.4 million as of June 30, 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 loss per share attributable to common stockholders:

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2021				2020				2021				2020
GAAP net loss per share to common stockholders, diluted	$	(0.66	)		$	(4.58	)		$	(1.36	)		$	(0.98	)
Stock-based compensation expense		0.09				0.12				0.22				0.25
Non-GAAP net loss per share to common stockholders, diluted	$	(0.57	)		$	(4.46	)		$	(1.14	)		$	(0.73	)

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

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2021				2020				2021				2020
GAAP net loss attributable to common stockholders, diluted	$	(30,208	)		$	(26,505	)		$	(60,233	)		$	(4,987	)
Stock-based compensation expense		3,937				683				9,789				1,263
Non-GAAP net loss attributable to common stockholders, diluted	$	(26,271	)		$	(25,822	)		$	(50,444	)		$	(3,724	)

Reconciliation between GAAP and non-GAAP results of operations:

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2021				2020				2021				2020
GAAP gross profit	$	1,052			$	(4,764	)		$	1,341			$	(8,328	)
Stock-based compensation expense		62				20				137				39
Non-GAAP gross profit	$	1,114			$	(4,744	)		$	1,478			$	(8,289	)

GAAP gross margin		4.2		%		(40.6	)	%		2.8		%		(44.0	)	%
Stock-based compensation expense		0.2				0.2				0.3				0.2
Non-GAAP gross margin		4.4		%		(40.4	)	%		3.1		%		(43.8	)	%

GAAP research and development expense	$	8,032			$	6,053			$	15,602			$	11,891
Stock-based compensation expense		(643	)			(134	)			(1,808	)			(252	)
Non-GAAP research and development expense	$	7,389			$	5,919			$	13,794			$	11,639

GAAP sales and marketing expense	$	13,204			$	9,244			$	26,353			$	16,526
Stock-based compensation expense		(1,052	)			(101	)			(2,794	)			(183	)
Non-GAAP sales and marketing expense	$	12,152			$	9,143			$	23,559			$	16,343

GAAP general and administrative expense	$	9,722			$	4,848			$	18,968			$	8,374
Stock-based compensation expense		(2,180	)			(428	)			(5,050	)			(789	)
Non-GAAP general and administrative expense	$	7,542			$	4,420			$	13,918			$	7,585

GAAP total operating expense	$	30,958			$	20,145			$	60,923			$	36,791
Stock-based compensation expense		(3,875	)			(663	)			(9,652	)			(1,224	)
Non-GAAP total operating expense	$	27,083			$	19,482			$	51,271			$	35,567

View source version on businesswire.com: https://www.businesswire.com/news/home/20210805006038/en/

Contacts

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

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Outset Medical Reports Second Quarter 2021 Financial Results

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