Outset Medical, Inc. Q2 FY2025 earnings call

• Commercial transformation: The company has restructured, retrained, and enhanced its commercial organization, including retooling the capital sales team and implementing a new sales process with greater specificity and accountability.
• Revenue growth: Second quarter revenue of $31.4 million was driven by strong Tablo console sales and consistent utilization. Console sales increased sequentially and year-over-year.
• End markets: In acute care, Tablo is in use at over 900 acute and subacute sites in the US, and the company closed a new enterprise agreement with a large national health system. In the home market, progress was made with agreements with midsized dialysis organizations.
• Gross margin: Non-GAAP gross margin expanded to 38.4%, and the company is on track to reach a 50% gross margin milestone. Excluding manufacturing overhead factors, gross margin is approaching 40% and product gross margin is approaching 50%.
• Operational expenses: Non-GAAP operating expenses declined 19% in the second quarter of 2025 compared to the prior year, resulting in a non-GAAP operating loss of $13.4 million, 36% lower than the prior year.
• Cash position: The company ended the quarter with $187.4 million in cash, cash equivalents, short-term investments, and restricted cash, with low cash use reflecting progress on gross margin, operating expenses, and inventory levels.

In the second quarter of 2025, Outset Medical reported revenue of $31.4 million, which grew 15% over the same period last year. Product revenue was $23.1 million, consisting of console revenue of $8.9 million and consumable revenue of $14.2 million, representing a 20% increase from the prior year. Service and other revenue was $8.3 million, up 2% from the prior year. Recurring revenue from Tablo consumables and service was $22.5 million, a 11% increase year-over-year. Non-GAAP gross margin reached 38.4%, expanding more than 1 percentage point from the previous year.

• Revenue guidance for 2025 has been raised from $115 million to $125 million to a range of $122 million to $126 million.
• Expect gross margin for the full year to be in the high 30% range, with gross margin expected to exit the year above 40% in the fourth quarter of 2025, excluding manufacturing overhead impacts.
• Anticipate cash use to increase next year as inventory purchasing and production ramp up, but the company remains on track for cash flow breakeven and profitability.

• Tariff exposure: Tablo, TabloCart, and Tablo cartridges are currently exempt from tariffs under exemptions for equipment supporting the chronically disabled, but there remain uncertainties and contingencies regarding potential tariff impacts.

Q: Rick Wise asked about guidance and the commercial strategy transition.

A: Leslie Trigg stated the company is confident in the setup for the second half of 2025, citing commercial transformation paying off, pipeline growth, and high console utilization.

Q: Marie Thibault inquired about deal strength and ASPs.

A: Leslie Trigg mentioned ASP strength from TabloCart and PRO+ software, and durable pipeline from enterprise deals with large potential console placements.

Q: Josh Jennings asked about the enterprise channel opportunity.

A: Leslie Trigg discussed low market penetration in acute and post-acute care, a large total addressable market, and interconnectivity fueling growth.

Q: Mo asked about commercial organization transformation and cash burn outlook.

A: Leslie Trigg talked about commercial team restructuring and tools, while Renee Gaeta mentioned 2026 cash burn may see elevation as production ramps up but remains on track overall.