Outset Medical Reports Third Quarter 2020 Financial Results

SAN JOSE, Calif.--(BUSINESS WIRE)-- Outset Medical, Inc. (Nasdaq: OM) (“Outset”), 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 third quarter ended September 30, 2020.

Third Quarter 2020 & Recent Highlights

  • Recorded net revenue of $13.8 million in the third quarter of 2020, a 423% increase compared to $2.6 million in the third quarter of 2019
  • Awarded a second contract from the U.S. Department of Health and Human Services to deploy Tablo for preparedness, and response to, disasters and public health emergencies
  • Sent the first patient home on Tablo since receiving FDA approval on March 31, 2020
  • Appointed Steve Williamson as Chief Commercial Officer
  • Completed initial public offering of approximately 10.3 million shares, raising $254.8 million in net proceeds

“Our commercial momentum continued to accelerate in the third quarter as we signed new contracts with some of the largest national and regional health systems in the country,” said Leslie Trigg, President and Chief Executive Officer. “While the acute market is expected to drive our near-term revenue growth, we also reached an exciting milestone in successfully supporting Tablo patients at home for the first time. In addition to our commercial progress, we have continued to significantly expand gross margins through the successful execution of our cost reduction initiatives.”

Third Quarter 2020 Financial Results

Revenue for the third quarter of 2020 was $13.8 million, representing an increase of 423% compared to $2.6 million in the third quarter of 2019. Product revenue for the third quarter of 2020 was $10.8 million, representing an increase of 349% compared to $2.4 million in the third quarter of 2019. Service and other revenue for the third quarter of 2020 was $2.9 million, representing an increase of 1,232% compared to $0.2 million in the third quarter of 2019.

Total gross loss for the third quarter of 2020 was ($5.1) million, compared to a gross loss of ($5.3) million for the third quarter of 2019. Total gross margin for the third quarter of 2020 was (37.3%), compared to (201.3%) in the third quarter of 2019. Product gross loss for the third quarter of 2020 was ($6.5) million, compared to ($3.9) million of product gross loss in the third quarter of 2019. Product gross margin for the third quarter of 2020 was (59.7%), compared to (163.6%) in the third quarter of 2019. Service and other gross profit for the third quarter of 2020 was $1.3 million, compared to ($1.4) million of service and other gross loss in the third quarter of 2019. Service and other gross margin for the third quarter of 2020 was 45.1%, compared to (612.2%) in the third quarter of 2019.

Operating expenses for the third quarter of 2020 were $35.6 million, including research and development (R&D) expenses of $9.2 million, sales and marketing (S&M) expenses of $13.3 million, and general and administrative (G&A) expenses of $13.1 million. This compared to operating expenses of $13.2 million, including R&D expenses of $5.7 million, S&M expenses of $5.0 million, and G&A expenses of $2.4 million in the third quarter of 2019.

Excluding stock-based compensation expense, non-GAAP operating expenses for the third quarter 2020 were $21.8 million, including R&D expenses of $6.1 million, S&M expenses of $10.7 million, and G&A expenses of $5.0 million.

Third quarter net loss was ($42.3) million, or ($3.44) per share, compared to a net loss of ($16.7) million, or ($18.93) per share, for the same period in 2019. On a non-GAAP basis, net loss for the third quarter 2020 was ($28.4) million, or ($2.31) per share, compared to a non-GAAP net loss of ($16.4) million, or ($18.67) per share for the same period in 2019.

Total cash, including restricted cash, cash equivalents and short-term investments, as of September 30, 2020 was $377.5 million including $254.8 million of net proceeds from the Company’s initial public offering.

Webcast and Conference Call Details

Outset will host a conference call today, November 11, 2020, at 2:00 p.m. PT / 5:00 p.m. ET to discuss its third quarter 2020 financial results. The dial-in numbers are (833) 614-1409 for domestic callers and (914) 987-7130 for international callers. The conference ID is 1960049. 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 in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company’s financial measures under GAAP include substantial charges such as stock-based compensation, 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 item in non‐GAAP measures to assist investors in analyzing and assessing past and future operating performance. 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 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. 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 may differ materially from those expressed or implied in such statements due to numerous risks and uncertainties. Forward-looking statements may include information concerning the impact of the COVID-19 pandemic on the Company and its operations, the Company’s possible or assumed future results of operations, including descriptions of the Company’s revenues, profitability, outlook and overall business strategy. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could cause actual results 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 September 16, 2020 in connection with the company’s initial 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. All statements other than statements of historical fact are forward-looking statements. Except to the extent required by law, the Company undertakes no obligation to update or review any estimate, projection, or forward-looking statement. Actual results may differ from those set forth in this press release due to the risks and uncertainties inherent in the Company’s business.

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

 

 

Nine Months Ended

 

 

 

 

September 30,

 

 

September 30,

 

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

10,812

 

 

$

2,409

 

 

$

26,435

 

 

$

7,501

 

 

Service and other revenue

 

 

2,944

 

 

 

221

 

 

 

6,253

 

 

 

492

 

 

Total revenue

 

 

13,756

 

 

 

2,630

 

 

 

32,688

 

 

 

7,993

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenue (1)

 

 

17,265

 

 

 

6,350

 

 

 

42,118

 

 

 

18,950

 

 

Cost of service and other revenue (1)

 

 

1,617

 

 

 

1,574

 

 

 

4,024

 

 

 

4,065

 

 

Total cost of revenue

 

 

18,882

 

 

 

7,924

 

 

 

46,142

 

 

 

23,015

 

 

Gross profit

 

 

(5,126

)

 

 

(5,294

)

 

 

(13,454

)

 

 

(15,022

)

 

Gross margin

 

 

(37.3

)

%

 

(201.3

)

%

 

(41.2

)

%

 

(187.9

)

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (1)

 

 

9,175

 

 

 

5,708

 

 

 

21,066

 

 

 

16,698

 

 

Sales and marketing (1)

 

 

13,344

 

 

 

5,009

 

 

 

29,870

 

 

 

13,376

 

 

General and administrative (1)

 

 

13,088

 

 

 

2,439

 

 

 

21,462

 

 

 

6,641

 

 

Total operating expenses

 

 

35,607

 

 

 

13,156

 

 

 

72,398

 

 

 

36,715

 

 

Loss from operations

 

 

(40,733

)

 

 

(18,450

)

 

 

(85,852

)

 

 

(51,737

)

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income and other income, net

 

 

(3

)

 

 

569

 

 

 

524

 

 

 

2,111

 

 

Interest expense

 

 

(428

)

 

 

(1,047

)

 

 

(2,461

)

 

 

(3,237

)

 

Change in fair value of redeemable convertible preferred stock warrant liability

 

 

437

 

 

 

3,546

 

 

 

(93

)

 

 

4,030

 

 

Loss on extinguishment of term loan

 

 

(1,567

)

 

 

 

 

 

(1,567

)

 

 

 

 

Loss before provision for income taxes

 

 

(42,294

)

 

 

(15,382

)

 

 

(89,449

)

 

 

(48,833

)

 

Provision for income taxes

 

 

 

 

 

20

 

 

 

 

 

 

20

 

 

Net loss

 

$

(42,294

)

 

$

(15,402

)

 

$

(89,449

)

 

$

(48,853

)

 

Net loss attributable to common stockholders, basic and diluted

 

$

(42,294

)

 

$

(16,666

)

 

$

(47,281

)

 

$

(66,015

)

 

Net loss per share attributable to common stockholders, basic and diluted

 

$

(3.44

)

 

$

(18.93

)

 

$

(6.30

)

 

$

(78.77

)

 

Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted

 

 

12,299

 

 

 

880

 

 

 

7,508

 

 

 

838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

 

September 30,

 

 

September 30,

 

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

Cost of revenue

 

$

142

 

 

$

1

 

 

$

181

 

 

$

3

 

 

Research and development

 

 

3,074

 

 

 

43

 

 

 

3,326

 

 

 

266

 

 

Sales and marketing

 

 

2,645

 

 

 

44

 

 

 

2,828

 

 

 

119

 

 

General and administrative

 

 

8,047

 

 

 

148

 

 

 

8,836

 

 

 

248

 

 

Total stock-based compensation expenses

 

$

13,908

 

 

$

236

 

 

$

15,171

 

 

$

636

 

 

Outset Medical, Inc.

Condensed Balance Sheets

(in thousands, except per share amounts)

 

 

 

September 30,

2020

 

 

December 31,

2019

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

311,327

 

 

$

36,926

 

Short-term investments

 

 

32,888

 

 

 

33,152

 

Accounts receivable, net

 

 

7,082

 

 

 

3,914

 

Inventories

 

 

11,810

 

 

 

4,596

 

Prepaid expenses and other current assets

 

 

4,717

 

 

 

1,058

 

Total current assets

 

$

367,824

 

 

$

79,646

 

Restricted cash

 

 

33,311

 

 

 

743

 

Property and equipment, net

 

 

14,412

 

 

 

7,895

 

Operating lease right-of-use assets

 

 

8,498

 

 

 

 

Other assets

 

 

1,977

 

 

 

82

 

Total assets

 

$

426,022

 

 

$

88,366

 

Labilities, redeemable convertible preferred stock and stockholders' equity (deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,062

 

 

$

4,960

 

Accrued compensation and related benefits

 

 

10,850

 

 

 

6,956

 

Accrued expenses and other current liabilities

 

 

8,959

 

 

 

2,909

 

Accrued warranty liability

 

 

3,258

 

 

 

1,702

 

Deferred revenue, current

 

 

4,132

 

 

 

883

 

Operating lease liabilities, current

 

 

782

 

 

 

 

Term loan, current

 

 

 

 

 

7,500

 

Total current liabilities

 

 

33,043

 

 

 

24,910

 

Accrued interest, noncurrent

 

 

119

 

 

 

217

 

Deferred revenue, noncurrent

 

 

566

 

 

 

134

 

Operating lease liabilities, noncurrent

 

 

8,309

 

 

 

 

Redeemable convertible preferred stock warrant liability

 

 

 

 

 

4,285

 

Term loan, noncurrent

 

 

29,652

 

 

 

21,561

 

Total liabilities

 

 

71,689

 

 

 

51,107

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.001 par value; no shares authorized and no shares issued and outstanding as of September 30, 2020; 154,592 shares authorized and 147,214 shares issued and outstanding as of December 31, 2019

 

 

 

 

 

409,446

 

Stockholders' equity (deficit):

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000 shares authorized, and no shares issued and outstanding as of September 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000 and 240,000 shares authorized as of September 30, 2020 and December 31, 2019, respectively; 42,701 and 922 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

 

 

42

 

 

 

1

 

Additional paid-in capital

 

 

816,306

 

 

 

357

 

Accumulated other comprehensive income

 

 

1

 

 

 

22

 

Accumulated deficit

 

 

(462,016

)

 

 

(372,567

)

Total stockholders' equity (deficit)

 

 

354,333

 

 

 

(372,187

)

Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)

 

$

426,022

 

 

$

88,366

 

Outset Medical, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

 
       

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

Net cash used in operating activities

 

$

(73,175

)

 

$

(55,100

)

Net cash provided by (used in) investing activities

 

 

(6,411

)

 

 

61,501

 

Net cash provided by financing activities

 

 

386,555

 

 

 

143

 

Net increase in cash and cash equivalents

 

 

306,969

 

 

 

6,544

 

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

 

 

37,669

 

 

 

33,415

 

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

 

$

344,638

 

 

$

39,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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):

 

 

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

Cash and cash equivalents

 

$

311,327

 

 

$

39,216

 

Restricted cash

 

 

33,311

 

 

 

743

 

Total cash, cash equivalents and restricted cash*

 

$

344,638

 

 

$

39,959

 

 

 

 

 

 

 

 

 

 

* The total cash, including restricted cash, cash equivalents and short-term investments, as of September 30, 2020 was $377.5 million; compared to $86.4 million as of September 30, 2019.

 

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

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

GAAP net loss per share to common stockholders, diluted

 

$

(3.44

)

 

$

(18.93

)

 

$

(6.30

)

 

$

(78.77

)

Stock-based compensation expense

 

 

1.13

 

 

 

0.26

 

 

 

2.02

 

 

 

0.76

 

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

 

$

(2.31

)

 

$

(18.67

)

 

$

(4.28

)

 

$

(78.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

GAAP net loss attributable to common stockholders, diluted

 

$

(42,294

)

 

$

(16,666

)

 

$

(47,281

)

 

$

(66,015

)

Stock-based compensation expense

 

 

13,908

 

 

 

236

 

 

 

15,171

 

 

 

636

 

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

 

$

(28,386

)

 

$

(16,430

)

 

$

(32,110

)

 

$

(65,379

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix A

Outset Medical, Inc.

Results of Operations – Non-GAAP (continued)

(in thousands, except per share amounts)

(unaudited)

   

Reconciliation between GAAP and non-GAAP results of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2020

 

2019

 

2020

 

2019

 

GAAP gross profit

 

$

(5,126)

 

$

(5,294)

 

$

(13,454)

 

$

(15,022)

 

Stock-based compensation expense

 

 

142

 

 

1

 

 

181

 

 

3

 

Non-GAAP gross profit

 

$

(4,984)

 

$

(5,293)

 

$

(13,273)

 

$

(15,019)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

 

(37.3)

%

 

(201.3)

%

 

(41.2)

%

 

(187.9)

%

Stock-based compensation expense

 

 

1.0

 

 

0.0

 

 

0.6

 

 

0.0

 

Non-GAAP gross margin

 

 

(36.3)

%

 

(201.3)

%

 

(40.6)

%

 

(187.9)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development expense

 

$

9,175

 

$

5,708

 

$

21,066

 

$

16,698

 

Stock-based compensation expense

 

 

(3,074)

 

 

(43)

 

 

(3,326)

 

 

(266)

 

Non-GAAP research and development expense

 

$

6,101

 

$

5,665

 

$

17,740

 

$

16,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

 

$

13,344

 

$

5,009

 

$

29,870

 

$

13,376

 

Stock-based compensation expense

 

 

(2,645)

 

 

(44)

 

 

(2,828)

 

 

(119)

 

Non-GAAP sales and marketing expense

 

$

10,699

 

$

4,965

 

$

27,042

 

$

13,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

 

$

13,088

 

$

2,439

 

$

21,462

 

$

6,641

 

Stock-based compensation expense

 

 

(8,047)

 

 

(148)

 

 

(8,836)

 

 

(248)

 

Non-GAAP general and administrative expense

 

$

5,041

 

$

2,291

 

$

12,626

 

$

6,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP total operating expense

 

$

35,607

 

$

13,156

 

$

72,398

 

$

36,715

 

Stock-based compensation expense

 

 

(13,766)

 

 

(235)

 

 

(14,990)

 

 

(633)

 

Non-GAAP total operating expense

 

$

21,841

 

$

12,921

 

$

57,408

 

$

36,082

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contacts

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

 
 

Source: Outset Medical, Inc.

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