Company Overview - Outset Medical is a California-based med tech company focused on improving dialysis care, aiming to enhance patient outcomes while reducing costs and complexity [2] Market Presence - The company operates in the $2.5 billion acute and post-acute market, with over 1,000 hospitals using its product, Tablo, to deliver approximately 1 million treatments annually [2] - Tablo has been utilized for over 3.5 million treatments in the U.S. [2] - Outset Medical is also establishing a presence in the $8.9 billion home dialysis market, which has been underserved [3]

Outset Medical (NasdaqGS:OM) FY Conference January 14, 2026 07:30 PM ET Company ParticipantsLeslie Trigg - Chair and CEORenee Gaeta - CFODenise Liu - Healthcare Investment Banking AssociateConference Call ParticipantsNone - Analyst 3None - Analyst 1None - Analyst 2Denise LiuHi everyone, my name is Denise Liu. I am an Associate here in Healthcare Investment Banking at JPMorgan. We're excited to be continuing the annual healthcare conference today with Leslie Trigg, Chair and CEO of Outset Medical. We'll have ...

Outset Medical Conference Call Summary Company Overview - **Company**: Outset Medical (NasdaqGS:OM) - **Industry**: Medical Devices, specifically focused on dialysis technology Key Points and Arguments Company Transformation and Performance - Outset Medical has undergone significant transformation over the past 12 months, improving various aspects of its organization and commercial operations [1][2] - The company has resolved FDA issues, leading to a more mature regulatory organization [2] - A shift to an enterprise-based sales model has been implemented, focusing on large hospital systems, resulting in a 20% increase in average order size over the last three months [2] Product and Technology - The Tablo technology has received positive feedback from customers, demonstrating its effectiveness in reducing adverse patient events and improving the quality of dialysis care [3] - Over one million Tablo treatments have been conducted, showcasing its robust capabilities [3] Financial Performance and Guidance - Despite positive developments, the company reported disappointing quarterly results and lowered guidance for 2025, leading to a reduction in 2026 projections [4][5] - The company missed consensus estimates by approximately $1.3 million due to delays in closing a large deal and mismatches in order timing for consumables [7][8] Sales and Order Dynamics - The company is working on improving the predictability and timing of deal closures, which has been a challenge since 2023 [20][22] - There is a need for better communication and alignment with customers regarding inventory management and purchasing patterns [12][14] - The fourth quarter has shown normalization in the relationship between utilization and purchase data, indicating a return to expected trends [17][19] Revenue Strategy - Outset Medical aims to increase recurring revenue from consumables and services, with a focus on EMR integration as a future revenue driver [21][32] - The company has seen strong customer satisfaction scores and is focused on enhancing service margins, targeting a gross margin of 50% [39][40] Market Position and Competition - The market for acute care dialysis is substantial, with Outset Medical positioned ahead of competitors, facing minimal competition [49][50] - The company is confident in its ability to improve capital sales predictability and achieve profitability [50][51] Future Outlook - The company plans to enhance its marketing efforts to promote the clinical value of Tablo, focusing on improving patient care outcomes [36][37] - Guidance for 2026 will be provided at the beginning of the year, with a focus on addressing current challenges and leveraging strong recurring revenue streams [44][45] Additional Important Insights - The transition in sales leadership is being managed carefully to minimize disruption, with a strong existing sales team in place [28][30] - The integration of EMR systems is expected to become a significant revenue source in the future, although it is currently a small part of the revenue picture [32][33] - The company is actively working on generating case studies and white papers to highlight the clinical benefits of its technology [36][37]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $29.4 million, representing a 3% growth compared to Q3 2024 [14][18] - Non-GAAP gross margin reached 39.9%, an increase of 350 basis points year-over-year [20] - Non-GAAP operating loss was $10.4 million, a 35% improvement from the prior year [22] - Cash used during the quarter was approximately $6 million, reflecting improved gross margin and lower operating expenses [22][23] Business Line Data and Key Metrics Changes - Tablo console sales increased by 8% in Q3 2025 [12] - Product revenue was $20.6 million, slightly ahead of $20.3 million in the prior year [18] - Recurring revenue from Tablo consumables and service was $21.1 million, slightly above Q3 2024 [18] Market Data and Key Metrics Changes - The average size of sales opportunities increased by over 20% [12] - Hospital demand for insourcing dialysis with Outset's technology continues to grow, indicating a strong market opportunity [11][26] Company Strategy and Development Direction - The company is focusing on enterprise-wide insourcing, managing large opportunities across multiple hospitals [10][11] - Aiming to reach a gross margin milestone of 50% through disciplined expense management and revenue growth [12][20] - The company is committed to improving sales execution and forecasting to better anticipate deal dynamics [34][45] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that Q3 results fell short of expectations due to timing shifts in large deals [10][30] - There is confidence in the long-term growth potential, with a focus on improving execution under new sales leadership [45][49] - The company expects to see treatment revenue normalize in 2026 as ordering patterns align with actual utilization [19][50] Other Important Information - The resignation of the Head of Sales may cause internal disruption, but the company has a strong sales leadership team in place [12][14] - The company ended the quarter with $182 million in cash and equivalents, indicating sufficient capital for future operations [22][23] Q&A Session Summary Question: What factors contributed to the guidance trim? - Management indicated that a large console opportunity shifted from Q3 to Q4, impacting guidance [28][30] Question: How is the company addressing the sales leadership transition? - The search for a new sales leader is underway, with a focus on candidates with capital equipment and enterprise sales experience [36][39] Question: What is the outlook for 2026? - Management believes that 2025 serves as a good proxy for 2026, with expectations for improved execution and growth [45][82] Question: Are there any concerns about order cancellations? - Management confirmed that no deals have fallen out of the pipeline, and the sales team is actively working on closing remaining opportunities [70][71] Question: What is the status of the home channel and SNF opportunities? - The home channel has shown stable retention rates and growth, with positive feedback from patients using Tablo [75][76]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $29.4 million, representing a 3% growth compared to Q3 2024 [13][21] - Non-GAAP gross margin reached nearly 40% in Q3 2025, with a 350 basis point increase year-over-year [19][21] - Non-GAAP operating loss was $10.4 million, over 35% lower than the operating loss of $16.1 million in the prior year [20][21] Business Line Data and Key Metrics Changes - Tablo console sales increased by 8% in Q3 2025, with a significant growth in the average size of sales opportunities, which increased by more than 20% [12][17] - Product revenue was $20.6 million, slightly ahead of $20.3 million in the prior year, with consumable sales at $12.2 million [17][21] - Recurring revenue from Tablo consumables and service was $21.1 million, slightly ahead of Q3 2024 [17] Market Data and Key Metrics Changes - The demand for insourcing dialysis with Outset's technology continues to grow, supported by clinical, operational, and financial benefits [11][12] - The company is approaching 1,000 acute sites using Tablo, with a run rate of a million treatments per year [23] Company Strategy and Development Direction - The company is focusing on enterprise-wide insourcing and managing large opportunities that span multiple hospitals within health systems [11][23] - The strategy includes optimizing inventory levels and gradually increasing production to mitigate gross margin impacts [19][20] - The company aims to reach a gross margin milestone of 50% in the future [12][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that while progress has been made, there is still work to be done in transforming the sales process and improving execution [10][12] - The resignation of the Head of Sales may cause internal disruption, but the team remains committed to customer service [13][21] - Management remains optimistic about future growth, citing strong customer demand and a growing pipeline of larger deals [41][42] Other Important Information - The company revised its 2025 revenue guidance to a range of $115 million to $120 million, down from $122 million to $126 million [21][22] - Cash balances at the end of the quarter were $182 million, with a projected cash use of less than $50 million in 2025 [20][21] Q&A Session Summary Question: What factors contributed to the guidance trim? - Management indicated that a large console opportunity shifted from Q3 to Q4, and the departure of the Head of Sales was also a consideration in the revised guidance [26][27] Question: Can you elaborate on console revenues and order timing? - Console revenues showed positive growth, but management expressed frustration with execution and the ability to predict deal timing [29][30] Question: What qualities are being sought in a new sales leader? - The company is looking for someone with a background in capital equipment and enterprise sales, who can strategically lead and coach the sales team [32][34] Question: What is the growth outlook for 2026? - Management has not provided specific guidance for 2026 but remains optimistic about growth potential, emphasizing that demand continues to grow [40][42] Question: Are there any order cancellations or drops in the pipeline? - Management confirmed that no deals have fallen out of the pipeline, and the sales team is actively working to close pending opportunities [63][64]

Company Overview - The company operates in one of the largest markets in healthcare, maintaining a highly differentiated technology that has not seen new advancements in several decades [2] - There is a lack of competitors in the market, providing a wide open runway for continued growth [2] Growth and Development - Since the 2020 IPO, the company's product, Tablo, is now utilized in over 900 locations, indicating significant growth [3]

Company Overview - The company operates in one of the largest markets in healthcare, maintaining a highly differentiated technology that has not seen new advancements in several decades [2] - The competitive landscape remains sparse, providing a wide open runway for continued growth [2] Growth and Development - Since the 2020 IPO, the usage of the company's product, Tablo, has expanded significantly, now being utilized in over 900 locations [3]

Core Insights - The health care sector is experiencing a trend of oversold stocks, presenting potential buying opportunities for undervalued companies [1] - The Relative Strength Index (RSI) is a key indicator used to identify oversold conditions, with a value below 30 indicating potential buying opportunities [1] Company Summaries - **Exact Sciences Corp (EXAS)**: Reported strong quarterly results with a focus on earlier detection. Despite positive performance, the stock fell approximately 21% over the past month, with an RSI of 22.9 and a closing price of $40.99 [8] - **Tandem Diabetes Care Inc (TNDM)**: Announced mixed second-quarter results and narrowed FY25 sales guidance below estimates. The stock declined around 27% in the last five days, with an RSI of 22.7 and a closing price of $11.23 [8] - **Outset Medical Inc (OM)**: Reported better-than-expected second-quarter results and raised FY25 sales guidance. The stock fell about 34% over the past month, with an RSI of 29.6 and a closing price of $12.80 [8]

Market Overview - The annual spending on U S ESRD (End-Stage Renal Disease) patients is $73 billion, with $41 billion paid by Medicare[13] - Dialysis for ESRD patients accounts for 7% of the entire Medicare budget, while comprising only 1% of the Medicare population[13] - There are 600,000 dialysis patients in the U S receiving 90 million annual dialysis treatments[15] - Outset estimates the U S TAM (Total Addressable Market) for Tablo at $11 4 billion, including $2 5 billion for the acute and post-acute market and $8 9 billion for the home market[35, 65] Tablo System Advantages - Tablo offers potential cost savings of 50% – 80% in dialysis treatment, with a potential payback period of less than 1 year[49] - Tablo reduces the cost of acute dialysis to approximately $300 per treatment[49] - Tablo requires less than 25 hours of training per patient, significantly less than historical devices that require 100 hours[72, 74] - Tablo eliminates dialysate prep time, unlike historical devices that require 16–24 hours of prep time per week[72, 74] Commercial Progress - Outset has trained >10,000 nurses and 1,000 physicians[59] - Outset has secured contracts with 10 of the 10 largest subacute providers and 8 of the 8 top national health systems[56, 58] - Outset has recurring revenue of >60%[85] Financial Position - Outset estimates a cash position of $210 million entering 2025[90] - Outset received $169 million in gross proceeds from a January 2025 equity financing[90]