10-Q 1 om-20230630.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39513

 

Outset Medical, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

20-0514392

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

3052 Orchard Dr.

San Jose, California

95134

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (669) 231-8200

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

OM

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of July 26, 2023, the registrant had 49,790,212 shares of common stock, $0.001 par value per share, outstanding.

 


Table of Contents

 

 

Page

PART I.

FINANCIAL INFORMATION

 

1

Item 1.

Financial Statements (Unaudited)

 

1

Condensed Balance Sheets

 

1

Condensed Statements of Operations

 

2

Condensed Statements of Comprehensive Loss

 

3

 

Condensed Statements of Stockholders’ Equity

 

4

Condensed Statements of Cash Flows

 

6

Notes to Condensed Financial Statements

 

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

22

Item 4.

Controls and Procedures

 

22

PART II.

OTHER INFORMATION

 

23

Item 1.

Legal Proceedings

 

23

Item 1A.

Risk Factors

 

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

24

Item 3.

Defaults Upon Senior Securities

 

24

Item 4.

Mine Safety Disclosures

 

24

Item 5.

Other Information

 

24

Item 6.

Exhibits

 

25

Signatures

 

26

 

 

 


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Outset Medical, Inc.

Condensed Balance Sheets

(in thousands, except per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,388

 

 

$

73,222

 

Short-term investments

 

 

186,403

 

 

 

214,280

 

Accounts receivable, net

 

 

36,902

 

 

 

28,070

 

Inventories

 

 

44,495

 

 

 

51,476

 

Prepaid expenses and other current assets

 

 

5,216

 

 

 

6,597

 

Total current assets

 

 

309,404

 

 

 

373,645

 

Restricted cash

 

 

3,329

 

 

 

3,311

 

Property and equipment, net

 

 

14,539

 

 

 

15,876

 

Operating lease right-of-use assets

 

 

6,042

 

 

 

6,117

 

Other assets

 

 

1,128

 

 

 

1,166

 

Total assets

 

$

334,442

 

 

$

400,115

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,217

 

 

$

603

 

Accrued compensation and related benefits

 

 

17,461

 

 

 

21,519

 

Accrued expenses and other current liabilities

 

 

12,650

 

 

 

16,227

 

Accrued warranty liability

 

 

4,168

 

 

 

3,620

 

Deferred revenue, current

 

 

10,854

 

 

 

8,662

 

Operating lease liabilities, current

 

 

1,474

 

 

 

1,318

 

Total current liabilities

 

 

48,824

 

 

 

51,949

 

Accrued interest

 

 

484

 

 

 

113

 

Deferred revenue

 

 

89

 

 

 

151

 

Operating lease liabilities

 

 

5,308

 

 

 

5,576

 

Term loan

 

 

96,629

 

 

 

96,336

 

Total liabilities

 

 

151,334

 

 

 

154,125

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000 shares authorized, and no shares issued and outstanding as of June 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000 shares authorized as of June 30, 2023 and December 31, 2022; 49,629 and 48,465 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

 

 

50

 

 

 

48

 

Additional paid-in capital

 

 

1,060,418

 

 

 

1,035,456

 

Accumulated other comprehensive loss

 

 

(393

)

 

 

(564

)

Accumulated deficit

 

 

(876,967

)

 

 

(788,950

)

Total stockholders' equity

 

 

183,108

 

 

 

245,990

 

Total liabilities and stockholders' equity

 

$

334,442

 

 

$

400,115

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

1


Outset Medical, Inc.

Condensed Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

29,330

 

 

$

19,621

 

 

$

57,109

 

 

$

45,285

 

Service and other revenue

 

 

6,710

 

 

 

5,436

 

 

 

12,398

 

 

 

10,322

 

Total revenue

 

 

36,040

 

 

 

25,057

 

 

 

69,507

 

 

 

55,607

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenue

 

 

22,212

 

 

 

17,718

 

 

 

43,029

 

 

 

40,828

 

Cost of service and other revenue

 

 

6,125

 

 

 

3,557

 

 

 

12,347

 

 

 

6,555

 

Total cost of revenue

 

 

28,337

 

 

 

21,275

 

 

 

55,376

 

 

 

47,383

 

Gross profit

 

 

7,703

 

 

 

3,782

 

 

 

14,131

 

 

 

8,224

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

14,906

 

 

 

13,521

 

 

 

28,699

 

 

 

24,352

 

Sales and marketing

 

 

24,985

 

 

 

23,198

 

 

 

49,318

 

 

 

43,575

 

General and administrative

 

 

11,290

 

 

 

10,784

 

 

 

23,077

 

 

 

20,493

 

Total operating expenses

 

 

51,181

 

 

 

47,503

 

 

 

101,094

 

 

 

88,420

 

Loss from operations

 

 

(43,478

)

 

 

(43,721

)

 

 

(86,963

)

 

 

(80,196

)

Interest income and other income, net

 

 

2,668

 

 

 

459

 

 

 

5,316

 

 

 

579

 

Interest expense

 

 

(3,103

)

 

 

(481

)

 

 

(6,045

)

 

 

(903

)

Loss before provision for income taxes

 

 

(43,913

)

 

 

(43,743

)

 

 

(87,692

)

 

 

(80,520

)

Provision for income taxes

 

 

133

 

 

 

96

 

 

 

325

 

 

 

211

 

Net loss

 

$

(44,046

)

 

$

(43,839

)

 

$

(88,017

)

 

$

(80,731

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.90

)

 

$

(0.92

)

 

$

(1.79

)

 

$

(1.69

)

Shares used in computing net loss per share, basic and diluted

 

 

48,951

 

 

 

47,882

 

 

 

49,085

 

 

 

47,686

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

2


Outset Medical, Inc.

Condensed Statements of Comprehensive Loss

(Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

Net loss

 

$

(44,046

)

 

$

(43,839

)

 

$

(88,017

)

 

$

(80,731

)

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities

 

 

(280

)

 

 

(306

)

 

 

171

 

 

 

(771

)

 

Comprehensive loss

 

$

(44,326

)

 

$

(44,145

)

 

$

(87,846

)

 

$

(81,502

)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

3


Outset Medical, Inc.

Condensed Statement of Stockholders’ Equity

(Unaudited)

(in thousands)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2022

 

48,465

 

 

$

48

 

 

$

1,035,456

 

 

$

(564

)

 

$

(788,950

)

 

$

245,990

 

Issuance of common stock through employee stock
  purchase plan

 

307

 

 

 

1

 

 

 

4,593

 

 

 

 

 

 

 

 

 

4,594

 

Issuance of common stock for settlement of RSUs

 

282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option exercises

 

162

 

 

 

 

 

 

684

 

 

 

 

 

 

 

 

 

684

 

Stock-based compensation expense

 

 

 

 

 

 

 

8,538

 

 

 

 

 

 

 

 

 

8,538

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

451

 

 

 

 

 

 

451

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(43,971

)

 

 

(43,971

)

Balance as of March 31, 2023

 

49,216

 

 

$

49

 

 

$

1,049,271

 

 

$

(113

)

 

$

(832,921

)

 

$

216,286

 

Issuance of common stock for settlement of RSUs

 

165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option exercises

 

248

 

 

 

1

 

 

 

1,042

 

 

 

 

 

 

 

 

 

1,043

 

Stock-based compensation expense

 

 

 

 

 

 

 

10,105

 

 

 

 

 

 

 

 

 

10,105

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

(280

)

 

 

 

 

 

(280

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(44,046

)

 

 

(44,046

)

Balance as of June 30, 2023

 

49,629

 

 

$

50

 

 

$

1,060,418

 

 

$

(393

)

 

$

(876,967

)

 

$

183,108

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

4


Outset Medical, Inc.

Condensed Statement of Stockholders’ Equity

(Unaudited)

(in thousands)

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2021

 

47,241

 

 

$

47

 

 

$

1,000,212

 

 

$

(184

)

 

$

(625,994

)

 

$

374,081

 

Issuance of common stock through employee stock
  purchase plan

 

55

 

 

 

 

 

 

2,063

 

 

 

 

 

 

 

 

 

2,063

 

Issuance of common stock for settlement of RSUs

 

88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option exercises

 

328

 

 

 

1

 

 

 

1,659

 

 

 

 

 

 

 

 

 

1,660

 

Stock-based compensation expense

 

 

 

 

 

 

 

5,006

 

 

 

 

 

 

 

 

 

5,006

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

(465

)

 

 

 

 

 

(465

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,892

)

 

 

(36,892

)

Balance as of March 31, 2022

 

47,712

 

 

$

48

 

 

$

1,008,940

 

 

$

(649

)

 

$

(662,886

)

 

$

345,453

 

Issuance of common stock for settlement of RSUs

 

52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option exercises

 

233

 

 

 

 

 

 

1,042

 

 

 

 

 

 

 

 

 

1,042

 

Stock-based compensation expense

 

 

 

 

 

 

 

7,414

 

 

 

 

 

 

 

 

 

7,414

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

(306

)

 

 

 

 

 

(306

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(43,839

)

 

 

(43,839

)

Balance as of June 30, 2022

 

47,997

 

 

$

48

 

 

$

1,017,396

 

 

$

(955

)

 

$

(706,725

)

 

$

309,764

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

5


 

Outset Medical, Inc.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(88,017

)

 

$

(80,731

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

18,643

 

 

 

12,420

 

Depreciation and amortization

 

 

2,898

 

 

 

2,586

 

Non-cash lease expense

 

 

603

 

 

 

544

 

Non-cash interest expense

 

 

914

 

 

 

282

 

Accretion (amortization) of discount (premium) on investments, net

 

 

(3,353

)

 

 

1,035

 

Provision for inventories

 

 

868

 

 

 

808

 

Other non-cash items

 

 

180

 

 

 

29

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(8,919

)

 

 

964

 

Inventories