Outset Medical (OM) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $27.4M, down 24% year-over-year and below expectations due to elongated sales cycles and lower console sales, but recurring revenue and treatment sales grew over 24% year-over-year.

• Gross margin expanded to 35.7% from 21.4% year-over-year, with non-GAAP gross margin at 37.3%, driven by a higher mix of consumables and services.

• Net loss narrowed to $34.5M ($0.66/share) from $44.0M ($0.90/share) in Q2 2023; non-GAAP net loss was $24.7M ($0.47/share), 27% lower year-over-year.

• Operating expenses declined 21% year-over-year and 11% sequentially, reflecting cost controls and restructuring.

• The company is restructuring its commercial team and sales process to better address enterprise customers, expecting several quarters for full implementation.

Financial highlights

• Product revenue was $19.2M (console: $7.2M, down 22% sequentially; consumables: $12.1M, up 25% YoY), down 34% year-over-year.

• Service and other revenue was $8.2M, up 22% year-over-year.

• Non-GAAP gross margin: 37.3% (up 14+ pts YoY); product margin at 44.8%.

• Net loss per share was $(0.66) (GAAP), $(0.47) (non-GAAP), improved from $(0.90) and $(0.69) in Q2 2023.

• Operating cash outflow was $79.2M for the first half of 2024.

Outlook and guidance

• FY 2024 revenue guidance revised to ~$110M, with H2 similar to H1 due to ongoing sales transformation.

• FY 2024 non-GAAP gross margin now guided to low- to mid-30% range.

• FY 2024 OpEx expected at ~$120M, with 2025 run rate OpEx targeted at ~$100M.

• Management expects continued operating losses in the near term as investments are made to support anticipated growth.

• Long-term growth expected to resume post-transition, with recurring revenue to remain over half of total revenue.