Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Outset Medical Inc (OM, Financial) reported a strong third quarter revenue of $28.7 million, surpassing their guidance due to new and expansion customers.
- Recurring revenue reached an all-time high, with treatment revenue growing 14% and service revenue increasing 22% year-over-year.
- The company achieved an 18% improvement in average selling prices for consoles and a nearly 11% point expansion in non-GAAP gross margin from the previous year.
- Outset Medical Inc (OM) successfully implemented a commercial transformation, enhancing their sales process and team to better engage with enterprise adopters.
- The company reported high patient satisfaction and retention rates for their Tablo home dialysis program, with a 90-day retention rate above 90% and a mean net promoter score of 9.2 at six months.
Negative Points
- Year-over-year revenue declined by 6% due to lower console sales, despite the growth in recurring revenue.
- The company remains conservative in its outlook for the fourth quarter, implying a potentially lower sequential revenue compared to the third quarter.
- Gross margin may fluctuate in the short term due to lower absorption of manufacturing overhead and efforts to reduce inventory levels.
- The sales cycle for large deals remains lengthy, requiring more consensus decision-making across organizations, which could delay revenue recognition.
- Despite improvements, the company acknowledges the challenges and disappointments faced over the past year, indicating ongoing recovery efforts.
Q & A Highlights
Q: The full-year revenue guidance implies a potentially lower fourth quarter than the third quarter. Is this conservatism, or are there other factors at play?
A: Nabeel Ahmed, CFO, explained that the intent was to pass through the overperformance in Q3 relative to expectations and to remain thoughtful about the full year and fourth quarter. Leslie Trigg, CEO, added that they are staying conservative in their outlook until they have more than one quarter of evidence that they are making a turn, despite high confidence for Q4 and 2025.
Q: Can you provide more details on the order pipeline and its progress?
A: Leslie Trigg, CEO, noted that the pipeline is large and continues to grow, with nearly half of the opportunities for 2025 in the later stages of the sales process. This is a new position for the company, indicating a positive leading indicator for future growth.
Q: Did the hurricanes have any negative impact on the quarter, such as delaying home starts or program implementation?
A: Leslie Trigg, CEO, confirmed that the hurricanes had no effect on Outset Medical's operations or patients directly. They had one of the strongest quarters for new home starts, and the company's technology, which does not rely on pre-made bags of dialysate, was advantageous in such circumstances.
Q: Is there any visibility to growth getting back to double digits in 2025?
A: Nabeel Ahmed, CFO, stated that while they are not providing guidance yet, there is no reason why they would not grow next year. Recurring revenues are expected to grow as the install base grows, which means total revenue can grow even if console sales remain flat year-over-year.
Q: Can you discuss the impact of Tablo Cart on closing large deals and its role in the pipeline?
A: Nabeel Ahmed, CFO, mentioned that Tablo Cart with prefiltration is fully available for sale and contributed to the overperformance in Q3. Leslie Trigg, CEO, added that no deals exited the pipeline in Q3, and Tablo Cart remains an important part of the mix, with the core value proposition of Tablo continuing to drive customer adoption and expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
