Outset Medical, in its recent earnings call, reported a 9% increase in third quarter revenue to $30.4 million, lower than anticipated due to the impact of an FDA warning letter. The company's customers have deferred purchases of the Tablo console, resulting in market confusion. Despite these setbacks, Outset Medical projects confidence in Tablo's long-term potential and aims to achieve a 50% gross margin and profitability.
Key takeaways from the earnings call include:
- The FDA warning letter has led to deferred purchases of the Tablo console and market confusion.
- Outset Medical has submitted a 510(k) for TabloCart with prefiltration and is working with the FDA to gain clearance.
- The impact of the warning letter and the pause in TabloCart shipments is expected to continue through the end of the year.
- Hospitals and health systems deferring purchase decisions and the rising interest rate environment will likely extend the sales cycle into 2024.
- Despite the current challenges, Outset Medical remains optimistic about Tablo's long-term opportunities and is aiming for a 50% gross margin, reduced cash burn, and profitability.
InvestingPro data shows that the market cap of Outset Medical is $168.79 million and the revenue for Q2 2023 is $129.28 million, indicating a significant growth potential. The company's stock has taken a big hit over the last six months, with a 6-month price total return of -81.23%, according to InvestingPro.
During the call, it was noted that hospitals are under pressure due to their capital budgets and concerns over rising interest rates. This has led to increased scrutiny and justification for allocating capital to specific projects. Customers are evaluating multiple leasing partners and options, negotiating terms, and facing longer approval processes. Despite these challenges, the company has not lost any deals, although some deal closures have been delayed.
InvestingPro Tips suggest that Outset Medical holds more cash than debt on its balance sheet and that the company's liquid assets exceed short-term obligations. This financial stability may provide some reassurance to investors amid the current market volatility.
The company is being cautious in its Q4 forecast and expects the capital spending environment to potentially extend the sales cycle into 2024. In terms of GLP-1, the company does not anticipate any impact on its business and sees potential for growth in the prevalent and chronic kidney disease populations. More details on the company's outlook for 2024 will be provided in the November call.
Outset Medical's CEO, Leslie Trigg, discussed the potential of GLP-1 to reduce cardiovascular disease and events, the leading cause of mortality among dialysis patients. This could potentially lower the mortality rate and increase the prevalent population over time. The company sees ample opportunity for long-term growth in the CKD population, which currently stands at 37 million in the US. More information on the 2024 outlook will be provided in the November call.
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