Outset Medical (OM) 6 Nov 242024 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the 2024 Third Quarter Outset Medical Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jim Mazzola of Investor Relations. Please go ahead.

Okay. afternoon, good and you, everyone. Thank third Welcome conference XXXX to our call. quarter

intent uncertainties a It Trigg, during me archived Chief section implied. Chief issued found these the Securities on today based today's outsetmedical.com. can or with results be or pages XXXX. call today, Outset Chair is update relate of the estimates Financial statements. statements material release made or our that market call will close of materially are that We the to Ahmed, are those Here be to will events be and anticipated all assumptions expectations our Nabeel on is Investors Leslie protected assumes These could from and Litigation under forward-looking being on which Private various and after cause predictions our the and Executive Officer. to obligation events website. involve and of actual Reform future of Investor news no This Officer; recorded differ current of Act and statements risks

For refer a and Factors our the I'll turn annual description to list of over uncertainties the Leslie. section to with public and Outset's filings Risk reports. Exchange our business, Commission, risks With that, associated Securities and with and including quarterly please latest of the call

thank pandemic, dialysis very as to Tablo to and we aftermath services vulnerable providers selflessly I stepped and us. the And the joining afternoon, up We Helene in areas. want by for recovering Good patients their acute and care population Milton. health you several who closely providers recognizing Hurricane care with begin customers Jim. dialysis health of everyone, care are with saw patients. Thanks, during the of serve worked in to still affected offer

support the its continues community thoughts the the recovery storms. from these and health heroes dialysis with care Southeastern Our and remain as U.S.

results. our to Moving

business revenue our the quarter demonstrated of model. This recurring strength

Our quarterly subacute strong setting, a and to margin scale expansion. in return and growth, gross sequential the acute year-over-year

of driven record stronger revenue for and million implied, quarter was another recurring and expansion revenue. our than guidance quarter $XX.X new Third by customers,

console prior grew revenue quarter, both year XXXX. we XX% the Year-to-date revenue last and factors same XX%, all-time discussed treatment the While revenue XX% high. of to increased grew pushing period lower were for service recurring an sales than the over recurring revenue

We our for XX also consoles nearly by selling gross saw prices QX last and from margin expand points XX%, improved non-GAAP of year. by average percentage

marked quarter third commercial The also good on progress transformation. our

mainstream more last within system we that deeper of process identified has adopters gain get This how highlighted in with quarter, to, the sell the setting the transformation there. We a larger approach. need to requires use buy-in. broadly the learned to who within we've enterprise established success we C-suite the acute a As in and stakeholders in base across X involved I shifts sell, we commitment sell commercial and to our change

First, have and infusing set. team enterprise our an team we've our sales commercial sales profile capital who with retooled skill by individuals

management been capital process with rigorous the and forecast sales every X The all process discipline. our fourth of rigor accountability sales elements high sales injected implemented And We leadership and new and timing entered to capital changes we and Second, specificity, transformation implemented. sales the made, quarter with has complete. close. inspection been third, capital have this largely key our of forecasting inspection teams the new along we sales improve to a and way step at

in of the While saw QX. full dividends we expect the we transformation manifest signs positive of in to sales the part XXXX, of first impact early

end markets. our to Turning

providers to using to impressive year number in-sourcing and and worked XX% rollouts with grew the continued We programs. ongoing results made at their prior in-source health see and regional to we sites new stand service period, dialysis we the quarter, of During acute the progress with these have systems care eager with Tablo up acute success line. to from continue following several subacute Overall, of providers large programs. implementation

line costs. rapid in For South-Central the provider example, quality in in-sourcing the of our of while experienced XXX% improve waste supported These and a team XXX-bed care dialysis treatments. results implementation a a at dialysis growth the treatment in a XX% increase service where reducing U.S., help and hospital the increase following successful

rehabilitation longer of in transferred the program, our no We of the resulted up home with a hospital of the providers. stand providers with one inpatient base. the facility segments treatments XX,XXX we services which installed installed performing new use again as setting, a dialysis to rollout fastest-growing than as Tablo and percent roughly of subacute Tablo saw continued from rates system-wide also of Subacute in and other the in nation's In which rural existing community Tablo another XX% uses be to base, now in revenue end providers Tablo helped a industry-leading dialysis ramped treatment. In in-sourcing represents needed a patients new a comprise retention its facilities XXX mid-teens now smaller increase more market, for year. largest we per one

the XX% device. above XX% Our hemodialysis the versus retention home average with XX-day incumbent rate remained reported

now at our remains dialyzing at Tablo dialyzing home Our than average for tenure more approximately been X years. X at patient than XX%. home longest-tenured patients rate with Tablo at year opt-off has for year, cumulative more is with X The and

We're we are of Kidney satisfaction a evidence months. extremely most XX mean this the to Score end-stage from this Real-world Tablo Tablo likely to likely a majority other are to Nephrology The X disease and patient extremely depth showed home patients XX activities, during patient number very caregiver feel Tablo to recommend home in has the hemodialysis with offering of Week Net strong from Society better X.X helps showing Tablo these affinity size indicating of not save registry with Promoter of the proud program to our home program meeting, at in to patient Tablo type see months, X.X indicating data. locations Tablo, recommend for study the High not at data vast X On cases, ago, patients. expansion kidney home also able Two continued family. number study scale locations programs new quality Promoter of increased weeks spend of care better, We American they and Net only average who patients of and driving from published real and lives in months of back Annual but likely the providers Scores money, And at data. only it also some not measurable are XX% expansion Tablo. and daily XX and has improve manage home last patients. Tablo also of grow. home has go more on and time work. to report impact the the

In record recently reached such fact, they're on not one home home XX done. program patients a Tablo, and

back we performance on period quarter's reflect challenges shareholders, the is a of and QX we Outset been X mindful And with the we tough performance, confidence. X for and look XXXX and while toward quarter's are what's As of last year. disappointments

facilities are of and base installed hundreds nurses using have Tablo thousands of trained. physicians consoles, thousands X,XXX been Our of is of nationwide, tens approaching

that, on compelling and per we Our run are results want fuels abstracts, reduce to growth, to operational bottom year, X margin thank paying their which we evidence entire more Nabeel. are expand than profitability. ahead we've with revenue well. team I recurring look confidence to off delivering, cash to Gross operating treatments Tablo I the the model. will to speaks meaningful of to rating business turn base And the XX expenses continues over million to and toward which decisive our for as clinical, taken is has progress commitment in the of our grown usage strength breakeven. form of publications and goal steps turn it our financial nearly in and And shared the and and reach drive our line lower lower to expenses with

from million sequentially service from Tablo prior X% from X% basis, to driven console for for grew declined partially period. million treatment of by sequentially X% Product in and million, other by from Thanks, XX% Tablo prior declined previously recurring revenue. $XX continued of of reached X% $XX.X everyone. year year-over-year. service treatment a due third million the from $XX.X increased revenue the the revenue XX% service quarter and primarily year. lower discussed, recurring revenue Recurring and sale and the grew Service and million strong an in of sales second utilization. the offset On cartridges sequentially, we Leslie. Revenue $XX.X million reasons quarter and $X.X year-over-year revenue X% and Hello, increase $XX.X of revenue the XX%

availability acute ASP Plus our strong end pricing, result TabloCart disciplined Tablo of customers see acute Pro also our to uptake strong continue We all Prefiltration and a with of as with markets the customers. of across with offering

Leslie As of XX% ASP quarter third console from XXXX. mentioned, the increased

margin, underlying operating our today's Gross and in reflect gross Now, which by strong to percentage nearly of Please measures and earnings the point. from XX.X%. margin gross and moving of quarter gross margin to down of both non-GAAP other dynamics non-GAAP to the gross expenses, GAAP percentage by reconciliation was which of margin year XXXX, product was last points second XX.X% reminder, in XX.X% with Compared refer X our service as margin results. found a XX to increased release.

expanded I inventory as plan of Absent sales like to margin lower primarily a of manufacturing renewals, allow last amount our console our X of may the build sequentially to which remind a in quarter, mentioned contract take into to revenues. due bit our points. combine significant overhead, I'd levels, both of short-term, as we As we a manufacturing unit of to gross a absorption reduce fluctuate moment lower to expect would have basis move economics our on treatment a of next will margin into result the to year. gross cash by which absorption investors efforts recurring X us percentage service of reduced conserve and the and quarter-to-quarter overhead

recurring our treatments than margin installed incremental service our of a differently, of XXX%. million benefits gross we renewal incremental and to actions or taken. we've quarter as given Non-GAAP revenue on the and better Our year sequential on consists margin profitability. margin. declining gross as high and XX% our from operating fixed expense third largely million $XX.X XX% as basis. in a ongoing share on XX% north And of XX% our period, leverage that which the Operating from loss team, XX% margin base the than service positive our $XX.X Net lower to people, foundation loss further the net sequentially year-over-year the reflecting approaches is second driven was the and compared service Said margin and XXXX, second restructuring to gross be cost, expenses the per our of gross contract prior of our is focus of currently our by grows of drive quarter each by cost continues is to cornerstone This XX%. from and materially expectations, lower from lower by came path gross results materially. management $X.XX drive the quarter was

We the balance cash $XXX sheet. short-term million quarter to ended equivalents, Moving cash. in restricted cash, investments with third and our

usage. our achieving reduce will entire XXXX goal bring expected by our OpEx profitability cash inventory work usage team cash roughly believe done to and on to reducing the to levels contribute down XXXX laser-focused Our we've that of half is materially relative and

Turning to of approximately our approximately our now prior year million. $XXX $XXX XXXX. guidance of expect outlook up full million, from for We revenue

our As to we would consistently With reminder, well what expect base similar half. to is reported as a revenue has that strong it second to done. recurring the revenue console in continue we assumption for utilization, is the first half perform

be margin. from service gross margin cost is base, range and prior ASP, by gross a low margin mid-XX% of guidance expansion to console the installed recurring the to for now full to We programs. mid-XX%. over continued Turning larger revenue our driven down non-GAAP the year gross expect leverage Again, in in strength

be moat will $XXX over our competitive even profitability At $XXX million. integrated quarter proposition non-GAAP We expenses time, our revenue at more cash continue long-term to profile. again becoming position, our open just million, I same of across large we're Operator, run X operations. our on achieving that, strong demonstrated managing which value products reducing in the our think commitment bullish this With our XXXX puts by the wide prudently service, finally, operating operating expenses offering remain we roughly with anticipate that ready Q&A. to lines. broad for and OpEx efficient And and end and for rate markets, please growth

first Stifel. line Our Rick question the of Wise Instructions] [Operator comes from of

in this positive to see the good quarter. It's progress

Let guidance. start me off the just with

both enterprise make TabloCart, But you this lower potentially now we solid quarter, of full us and other et Nabeel of guidance there.? positive progress sequentially highlighting you did help the sales et the effects more cetera. You understand, Can shift, year that conservatism? down, revenue Leslie cetera, of give million a a Are of need little the directional some $XXX fourth quarter implies is third understand? Just sort color us than this on things going to cost there just quarter.

Rick, Yes. Ahmed. it's Nabeel

were our we with performance. So QX pleased first,

thoughtful year really was QX in through and to pass intent to about fourth And wanted we relative the overperformance the quarter. Our we expectations. full be our to as thought

think we side thinking we or that should of translated the want fourth are Thoughtful factors means Nabeel, be the err on as other conservatism about about quarter? there you to

jump think in have the Leslie. is remain I evidence conservative it's our Rick, we of turn. say to Yes. quarter I'd X the Maybe bit that outlook more until than in. we're intent making a I'll

time I a to chapter new see think an for turning the Outset. and were we replicated quarter. back seeing country important will more a point more on make as really too, to we beginning changes progress. success need equivalently kind X QX we for But the the and run pleased than of of And little just across the look that sure to commercial we're organization bit the

QX kind XXXX. than here one until very is our confidence, that turn. conservative the the for quarter we evidence really of thought this in outlook more of let's at So, That have determine our we are making and confidence to said, was, hey, my stay team's for high, large both

ways size of be just And we you quarter, Where order you something last change said you details? and you touched you us, various third that Did XX% more. the order well. Can went you. you that provide includes today comprehensive did today? had additional it through the Got highlighted does in in on as that or the your pipeline. the order think progress, pipeline deals anything quality stand some $X Leslie, Is I help And million that metric increase at pipeline on? review, there? quarter? as should focusing The

lot get pipeline we We do larger. Well, about of it one and is enthusiasm me to into as continues of the confidence gives the and setup that a large XXXX. think a that's points have

the deals I new how the later we're the stages. focused are how think in on what deals the in is you and when stages sales particularly look at pipeline, process, our many of are process, of earlier sales many those

course, of of later the time. within the probability Of the higher in period close are that have stages a defined deals

position so, XXXX in sales the And before. nearly we not half sit opportunities later of as of for that And a here that's the in stages pipeline are actually our that been today, in we've process.

is will do aligned XX-month sales encouraging of tenure 'XX think the other last have about indicator. the sales the point profile that early, first that reps the implemented. leading 'XX bullishness as do of point used are duration And of We changes We full our nice, And us. So, following. but as new to that corner the another in word 'XX, thoughts and believe thing growth that of challenges behind sales is X- the an have couple into Nabeel turned these the of in quarters part in capital again, our see are I have to 'XX. kind a I the out I'll cycle about

quarters. We and mentioned, process, now I implemented, implemented. very, stages TabloCart rigor into valuable us of changes total the the So, the recurring future to that large of forward sales is been which the approximately available. this revenue sales this revenue at I been our only going forecast later and XX% as inspection think, online nice some process. percentage in pipeline, And sales continues visibility foundation look of that already strengthen, back a has have gives the

the just were perspective. how the for and one impact you a a company. alluded Did hurricanes last me helpful just because to it hurricane Very And with as dealing you quick quarter? either one or have delay that you any any feel hurtful you impact this in call to program implementation in Did a together starts starting or way out? home on want

short The effect. is we've Rick. one home We no starts. course, answer the had Of quarters strongest for new of seen

dialysate. the know, One on you treatments. of the it is It of does Tablo does advantages pre-made bags in rely of makes time real on it dialysate demand as that not during

this. advantageous that's so in and helpful circumstances like And very

our the hurricanes or So patients Outset have effect any directly. did on no, not

in to though. step providers I an the hope provide help to have and did to customer remarks, As our and I some prepared in of support alluded we opportunity some

Our next the question comes of of Shagun RBC Markets. Capital Singh from line

back Shagun. Kohn the Avi continuing is double quarter I before, any can growth there half you line And provide to follow in revenue color quarter reiterate guess for your that your sales you indicated or the Is process. figures? or is visibility XXXX. you to This didn't up pipeline nearly I later strong To understand the on XXXX it's like LRP. pipeline is your of any Is to of said, on top stage getting get there for larger. and last maybe you digits? like any

couple a Yes. things. giving Avi, One, so of guidance not at look, we're point. this

in in guidance give sort year early course of QX we as do. will of next due We always

year. how you to we our more about what there's reason business a grow about all, bit give want do why from context growth no would think And First next we a I of not maybe perspective.

as expect in in range. $XX Those are that we means, grows. with shared, a growth kind revenue you this of previously to And if revenues million if you base on to the recurring and we've hold means based that can installed the grow total sales on one, that year-over-year guidance basis. 'XX we revenues, expected grow console XXXX recurring be recurring our flat So, start revenue roughly even as

And a total meaningful way. growth so, take console lot get unit year-over-year of to it a in you revenue moving doesn't

I So, hope that helps.

I'll add Yes. that. to

I kind that. that's growing, I I X X and think at again, already a When Avi, and fully quarter we're acknowledge perspective. is of where quarter, look great

to new we're customers However, regional and And seeing national like of I'm I look both post-acute, and very already time. distribution buying where customers at Tablo good home. that acute, seeing when expanding, and the mix rehabs facilities for growth, is between a first players we really healthy what LTACs, players, existing in-source skilled nursing large

so, I'm expect conviction and year do at sales growth our looking the organ from to continued ability that's return in year as in XXXX. And to the QX to full full -- growth benefit changes, we already activity that in see our that informs happening QX in the process healthy

of Kalia question the next our Co. Suraj line And comes & Oppenheimer from of

on Congrats the progress.

the about versus biz, at us growth So, least rough Could subacute Leslie, you characterize where just buckets, the say, is the math within the home directionally product overall growth rates for of for XX% XX%, was? acute. is the respective about these rate let's is and reps is remaining composite

to can Maybe over it add some Nabeel, color. I kick Yes. I'll then and

Hey, Suraj. Yes.

total consistent the contribution we last about being our So, couple for our been of of our business, talked XX% years. home revenues. That's roughly

And suggests it this that's year just how thought well different. nothing we as be so would and have about

-- a bit in maybe little little a give chime just on on I'll color bit home. more

emerging we're dialysis second I through encouraging reiterate, for to nursing just Suraj, good that is talked midsized seeing the front, But is the before. growth us the home We've about newer facilities. One channel really growth two skilled the channels. organizations. through think On

SNF activity through the SNF is those within proposition arena. the XXXX the continued for SNF The clinical lot value we are operator rolled economic the course, for to of there patient. pretty as out, the We nursing more because a would so have most see sign number through a benefits operator. implementations strong contracts and, And importantly, of to skilled strong expect for facility have significant

of both view XXXX. in a those in do dividends us channels I of paying for lot home So,

line Marie the Our of of comes next BTIG. Thibault from question

bit I wanted about quarter. pricing. Nice little ask to a

ASPs think I XX% say year-over-year. heard increased I you console

in you curious product able deals that with So, uptake of to that TabloCart, quarter? has the about mind, closing that any these were instrumental large this I'm been of get closed how in

for drivers a pleased Yes. growth. Marie, see third, they're couple markets. meaningful software And and that to we end to see did maintained were while. is We to pretty a baked our into that TabloCart. of we us. some offering There's with we Tablo of of sale. contributes respect them to in this end of sort our that haven't one, also way. discounting, the quarter now And come Pro see have a have we don't return of for with all ASP TabloCart always back two, do here the year-over-year ASP were prefiltration really for margin across move pricing see the fully deals disciplined Number in of Plus with then gross do That's has did We lot sort we and and we overperformance to rates. ASP, attach XX% strong a expecting Number XQ. of done move continue available our

for talked Thank on That's margin Okay. gross dynamics you One you about, quick follow-up Nabeel. the reassuring. here wonderful.

that should of plan. anniversarying it or that of normal Is dynamics console think the some build margin kind to of return we the XXXX, sort of through see maybe changes? partway fair to related straighten reduced cadence, Some out gross the those

forward the that really not a result over I for absorption now. Yes, talked track XX% 'XX will about. future. committed though, Marie, to gross not-too-distant fashion XQ we the and remain I achieving of is guidance What on margin the here a right we as giving say, linear relatively in move was We're

comes question TD from the Cowen. of Jennings Josh line next of Our

this. if worked We inning implementation this already we the better that -- quarter. organization It very new this had that the in? are with impact is apologize there you hoping just to to through get better-than-expected sales had call, seems approach? QX and I was you we a but new about overlapping a an on enterprise And of should sales -- of are I where understanding. transformation just thinking like I you're the What any as be the is executing transformation quickly, strategy? missed

Yes.

see. Let's

results, see sales a right mentioned success right in to in our 'XX. talent right They the first like at run and you and have compliment that need kind part and the foremost, fully of really, replicated really I we to the across good team. lot organization rigorous new methodology tools the process places, that and this and in the think period in deliver the I the in your really So, to sure had a I the of this complete expertise job we've time, time, we for first model, some more the the in would time relatively will. putting of under and sales prepared getting Implementing to order of deeper point. infused making done inspection At transition of intended continue place short remarks forecast the will a if consistently say country. just stage, this the just this be that changes enterprise that in to leverage simply continue I'd

QX, QX. saw indicator leading in nice results certainly and we some benefit we expect some However, in again definitely

so would say, I So, good. so far

way QX. previous Can you answers on provided Excellent. maybe benefit one follow just pipeline And opportunities in their Or part up still out? of working deals the about through deals then of and XXXX? that fallen the benefit talk or just to kind Nabeel's are any these want deals specifically? in revenue-generating have a of pipeline QX some And in that TabloCart, on just and minor

Sure.

on to Of course. Yes, happy I'm that. comment

any no, pipeline. the on QX through and short moving the exit answer deals deals So, is did in not we see pipeline the

those opportunities of remain active. All

decision-making sales of with pipeline Our deals. to XXX-plus larger consoles the months that In X call, consists about of and to how last XX I deals that remains our talked cycle are house XX actually stable, about of percentage it's over gotten quarter's larger of because also has organization. those up Tablo bigger conversions require across the consensus of it, time. kind deals These broad parts But network fairly do a that course, of more with are hospitals. of bigger very you significant across bigger whole worth end

I so XX the cycle hasn't on deals -- And of months, the edge but the that those outer for would is changed. say large sales

I accessory remains high. many is new proposition. to the larger promises. and proposition larger with On Tablo care, adopt evidence other deals on it as But I The improved and the and its helpful now Tablo why and the we interest reason grown is earlier cost-reduction. value close to of the yes, will Tablo hundreds in that than back we've of customers some as as news X I sites, at a it promises. on because customers have regard customer expand is been demand The proposition smaller certainly TabloCart be value And delivering do and delivers think customers will hand, is good forward to efficiencies. in TabloCart, it operational have here. With It of the its of unchanged. And essential our existing to Tablo value here months. look improved going so part remains Tablo's core continue mix think important too clinical pipeline an It the XXXX, is #X economic base has

showing I'm closing turn like for at time. remarks. I'd Leslie no back to to now this questions further Trigg it

in every again. to forward all patients. you lives making joining in We meaningful a Thanks here and November, have you by to look difference today. thanking the great day dialysis investor at and that of conferences you, would close thanks seeing they're the of Great. like for many team our of to very entire for upcoming Thank I the evening.

conference. today's This your in participation for you Thank conclude program. does the

disconnect. now may You