Outset Medical, Inc. Q3 FY2024 earnings call

• Recurring revenue business model strength: Q3 revenue was stronger than guidance, driven by new and expansion customers, with recurring revenue at an all-time high, up 23% year-to-date. Gross margin expanded nearly 11 percentage points year-over-year. • Commercial transformation: 3 shifts in commercial approach included retooling the commercial team, implementing a new capital sales process, and injecting rigorous sales management inspection. Early signs of positive impact were seen in Q3. • End markets: Acute care sites using Tablo grew 15% year-over-year; a large inpatient rehab provider rolled out Tablo in over 100 facilities; home end market had industry-leading retention rates, 90-day retention above 90%, and high patient satisfaction with Net Promoter Scores of 9.2 at 6 months and 9.3 at 12 months. • Installed base and progress: Approaching 6,000 consoles, over 70 publications/abstracts, and running at nearly 1 million treatments per year.

Third quarter revenue was $28.7 million. Product revenue was $20.3 million (69.9% of total revenue) and grew 6% sequentially but declined 14% year-over-year. Service and other revenue was $8.4 million (29.3% of total revenue), increasing 3% sequentially and 22% year-over-year. Recurring revenue from Tablo cartridges and service reached $21 million, a 4% sequential increase and 17% year-over-year increase. Console average selling prices improved by 18% year-over-year.

• 2024 revenue now expected to be approximately $112 million, up from prior guidance of ~$110 million. • Full-year non-GAAP gross margin expected in the mid-30% range, higher than prior low to mid-30% guidance. • 2025 cash usage expected to be roughly half of 2024 cash usage, driven by reduced operating expenses and inventory level reductions.

Q: Rick Wise asked about Q4 conservatism, pipeline, and hurricane impact.

A: Leslie Trigg said they are being conservative until more evidence of turning the corner, pipeline has nearly half in later sales stages, and hurricanes had no effect on Outset or patients.

Q: Avi Kohn asked about 2025 growth visibility.

A: Nabeel Ahmed said no guidance yet, but recurring revenues expected to grow in 2025 as installed base grows, allowing total revenue growth even with flat console sales.

Q: Suraj Kalia asked about growth rates in segments.

A: Leslie Trigg mentioned home growth from midsized dialysis organizations and skilled nursing facilities.

Q: Marie Thibault asked about pricing and TabloCart.

A: Nabeel Ahmed said ASP growth was due to disciplined pricing, strong Tablo Pro Plus attach rates, and TabloCart availability helping close deals.

Q: Josh Jennings asked about sales transformation and TabloCart pipeline.

A: Leslie Trigg said sales transformation is ongoing, pipeline deals remain active, and TabloCart is still an important part of the mix with a stable sales cycle.