Outset Medical Q2 2025 Earnings Report

Outset Medical EPS Results

• Actual EPS: N/A
• Consensus EPS: -$1.76
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Outset Medical Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $29.40 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Outset Medical Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 5:00PM ET

Outset Medical (NASDAQ:OM), a medical technology company, engages in the development of a hemodialysis system for hemodialysis in the United States. The company offers Tablo Hemodialysis System, a compact console with integrated water purification, on-demand dialysate production, and software and connectivity capabilities for dialysis care in acute and home settings; and manufactures, supports, and distributes for Tablo console, Tablo cartridge, and other consumables. It also provides Tablo Data Ecosystem, including TabloHub, a customer-facing portal; MyTablo, a patient-facing portal; and TabloDash, an internal data analytics platform. The company was formerly known as Home Dialysis Plus, Ltd. and changed its name to Outset Medical, Inc. in January 2015. Outset Medical, Inc. was incorporated in 2003 and is headquartered in San Jose, California.

Outset Medical Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 revenue reached $31.4 million (+15% YoY) with recurring revenue of $22.5 million (+11%) and sequential console sales growth, prompting an upwardly revised 2025 guidance to $122 million–$126 million.
• Positive Sentiment: Non-GAAP gross margin expanded to 38.4% (+110 bps) with product margin at 48.9%, non-GAAP operating expenses fell 19%, and operating loss improved 36%, supporting a target of under $50 million cash burn in 2025.
• Positive Sentiment: A transformed commercial organization—with a new enterprise sales process, enhanced tools, and retrained teams—drove better forecast accuracy, a larger and more advanced pipeline, and higher opportunity-to-contract conversion rates.
• Positive Sentiment: Tableau is now deployed at over 900 acute and subacute US sites, signed a major enterprise agreement covering 100+ facilities, and holds contracts with the top five MDOs, opening access for ~15,000 home dialysis patients.
• Neutral Sentiment: Management remains cautious of potential federal funding cuts and tariff uncertainties—though exemptions currently apply—and underscores the inherent risks in all forward-looking statements.

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the Outset Medical's Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one, 1 on your telephone.

[Operator]

You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jim Mazzola, Head of Investor Relations.

[Jim Mazzola, Head - IR at Outset Medical]

Good afternoon, everyone, and welcome to our second quarter twenty twenty five earnings call. Here with me today are Leslie Trigg, Chair and Chief Executive Officer and Renee Guyetta, Chief Financial Officer. We issued a news release after the close of market today, which can be found on the investor pages of outsetmedical.com. This call is being recorded and will be archived on the Investors section of our website. It is our intent that all forward looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995.

[Jim Mazzola, Head - IR at Outset Medical]

These statements relate to expectations or predictions of future events, are based on our current estimates and various assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied. Outset assumes no obligation to update these statements. For a full list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section about the public filings with the Securities and Exchange Commission, including our latest annual and quarterly reports.

[Leslie Trigg, Chair & CEO at Outset Medical]

Thanks, Jim. Good afternoon, everyone, and thank you for joining us. I would like to begin by extending a warm welcome to Renee, who joined us in early June. She has very quickly rolled up her sleeves, immersed herself in the business, and has already become a valuable strategic and operational partner. Turning to the second quarter results, we are pleased to report another strong quarter today and to raise our guidance range for the year.

[Leslie Trigg, Chair & CEO at Outset Medical]

With the progress we made during the 2024 and now through the 2025, we have momentum that reflects the growing demand for the clinical, financial, and operational benefits that Tableau can deliver, as well as the internal work we have done to improve our commercial execution. Revenue in the second quarter of thirty one point four million dollars grew 15% over last year, driven by another quarter of strong Tableau console sales and consistent utilization. A key goal for this year was to sustainably reignite console growth, and with two quarters down, our team is executing very well. Console sales again increased sequentially and also grew over the second quarter of last year. We also continued to see consistent utilization across the Tableau installed base, which contributed to recurring revenue of $22,500,000 in the quarter, 11% over the second quarter of last year.

[Leslie Trigg, Chair & CEO at Outset Medical]

This included a 17% increase in consumable revenue. Once Tableau consoles are placed, they're used, and this utilization keeps us right on track to exit the fourth quarter on a run rate of more than $100,000,000 annually in recurring revenue. Gross margin expansion remains a cornerstone of our path to profitability and an area where we again executed well during the quarter. Non GAAP gross margin reached 38.4%, expanding more than one percentage point from last year, even as we managed through the lower absorption of manufacturing overhead that we've previously discussed. This progress keeps us right on path to the next milestone of 50%.

[Leslie Trigg, Chair & CEO at Outset Medical]

Turning to our end markets, our results in the quarter were again driven by penetration within acute care providers. Including new console placements during the quarter, Tableau is now in use at more than 900 acute and subacute sites in The United States. Additionally, we closed a new enterprise agreement with one of the largest national health systems in the country during the second quarter, which provides access to well over 100 facilities with the potential to place many hundreds of Tableau consults. What is gratifying to us is to see the strong support in sourcing with Tableau has earned among dialysis nursing community. With examples of better patient care at a substantially lower cost, nurse leaders have emerged as huge champions for insourcing.

[Leslie Trigg, Chair & CEO at Outset Medical]

In fact, the former CNO of one of our hospital customers that implemented insourcing with Tableau recently joined outset as our Chief Nursing Officer. On several recent customer visits, I've had the opportunity to hear nurse leaders talk about how insourcing their dialysis service line with Tableau has dramatically reduced their rate of hospital acquired infections and improved overall patient care by enabling, as several nursing leaders have put it, high nurse retention compared to the staffing challenges their outsourced providers struggled with and an ability for their hospital nursing teams to care for the whole patient versus solely delivering a dialysis treatment. In the home end market, we also made excellent progress during the quarter. Interest in Tableau from patients and their providers is growing steadily in this very large market. While we still expect home to evolve more gradually than the acute end market, we made another important advance during the quarter by finalizing an agreement with the third largest mid sized dialysis organization.

[Leslie Trigg, Chair & CEO at Outset Medical]

Through this agreement, approximately 15,000 dialysis patients across 30 states will have access to Tableau. We now have agreements with all five of the largest MDOs in The United States. The success we are having commercially is a direct result of the work we took to transform our sales organization and process. Our progress includes restructuring, retraining, and enhancing our commercial organization, including by retooling our capital sales team and infusing an enterprise sales skill set. Second, we implemented an entirely new capital sales process with high specificity, accountability, and discipline.

[Leslie Trigg, Chair & CEO at Outset Medical]

And third, we injected rigorous sales management inspection and tools at every step to improve capital sales forecasting and timing of close. We continue to see positive indicators that these efforts are paying off. For example, console sales in the second quarter returned to levels we last saw in early twenty twenty four. Forecast accuracy has improved. Our pipeline grew again in the second quarter, both sequentially and year over year.

[Leslie Trigg, Chair & CEO at Outset Medical]

As we've grown the pipeline, we have also seen growth in the percentage of opportunities progressing to the later stage of the sales process, and most importantly, we continue to see strong conversion of opportunities to sales. As I said last quarter, our team has become proficient at educating stakeholders at all levels of an enterprise about the benefits Tableau can deliver not only financially, but also clinically and operationally. During the quarter, we added new customers adopting Tableau for the first time and also saw existing customers expand their use to new locations. As we look ahead to the rest of the year, we remain confident in our pipeline and strong market demand. While we continue to closely monitor any impact from proposed federal funding cuts in healthcare, customers tell us that the financial and clinical case for insourcing with Tableau remains compelling as they prioritize their capital expenditures for 2025.

[Leslie Trigg, Chair & CEO at Outset Medical]

Insourcing with Tableau saves hospitals money, has a relatively low acquisition cost, and a short payback period. This customer feedback fuels our confidence in our plan for the rest of the year. From an operational perspective, we are pleased with how average selling price and utilization trended. We believe ASP strength indicates that customers see Tableau appropriately priced for the value expected, and consistent utilization reinforces that once a unit is installed, it's used, and provides a long tail of recurring revenue. Related to utilization, our manufacturing site has now produced more than 1,500,000 tableau disposable treatments since we brought production in house in 2023.

[Leslie Trigg, Chair & CEO at Outset Medical]

This is important as we seek to deliver the highest levels of quality and gain scale to reduce production costs. As we've talked about for several quarters, our team is focused not only on reductions in cost of goods sold, but also in operating expenses. And the actions we took to remove approximately $80,000,000 of annualized spend, again delivered leverage in the quarter with another record low non GAAP operating loss. We also used approximately 60% less cash than in the prior year period, keeping us right on track with our goal to use less than $50,000,000 this year. I want to reiterate that we are aggressively executing against a clear path to cash flow breakeven and then profitability.

[Leslie Trigg, Chair & CEO at Outset Medical]

This path begins with top line growth and gross margin expansion. It includes disciplined spend management, and it shows up in both the significant reduction in cash use we project for 2025 and in the leverage we see to the bottom line. Lastly, from an operational perspective, I want to reiterate our prior comments about tariff exposure. Tableau, Tableau Cart, and Tableau Cartridges remain exempt from tariffs under a special exemption pertaining to equipment that supports the chronically disabled. Additionally, we continue to have tariff exemption under the USMCA and further contingencies such that we continue to expect no impact from proposed or implemented tariffs at this time.

[Leslie Trigg, Chair & CEO at Outset Medical]

I'll close by reiterating our optimism for the opportunity ahead. We operate in two large end markets and the competitive moat around Tableau continues to deepen. Our growing installed base is extending our reach across the country. Our proprietary know how around in sourcing allows us to partner with hospitals as a solution, not just a product. Our exceptional field service team drives the customer satisfaction score consistently above 95%.

[Leslie Trigg, Chair & CEO at Outset Medical]

Our portfolio of referenceable customers continues to grow, helping to drive market adoption. At the midpoint of an important year for Outset, our focus has not wavered from three vital priorities: one, grow console revenue two, expand gross margin and three, drive to profitability. With two quarters to go, we fully understand the importance of continued consistent execution during this pivotal year. We are confident about our outlook and believe we are set up very well for the second half and into 2026. Providers, including the largest health systems in the country, are seeing the enormous clinical, financial, and operational advantages that insourcing with Tableau can deliver.

[Leslie Trigg, Chair & CEO at Outset Medical]

The market opportunity remains wide open for us and we continue to gain ground. I want to close by thanking our entire team for their commitment to the patients we serve, in addition to their commitment to driving growth, managing spend, and reaching our shared goal of profitability. And with that, I will turn it over to Renee.

[Renee Gaeta, CFO at Outset Medical]

Thank you, Leslie, and good afternoon, everyone. I have enjoyed digging into the business during the two months since I joined outset in early June, and I'm very happy to walk you through our financial results today. I look forward to meeting more of you in the coming weeks. Revenue for the second quarter of thirty one point four million dollars grew 15% over the 2024. The increase was driven largely by console volume and mix, including sales to acute customers, which carry a higher average selling price due to the additional features attached to each unit.

[Renee Gaeta, CFO at Outset Medical]

Product revenue of $23,100,000 consisting of console revenue of $8,900,000 and consumable revenue of $14,200,000 grew 20% from $19,200,000 in the prior year. Importantly, console revenue grew sequentially and year over year. Service and other revenue of $8,300,000 grew 2% from $8,200,000 in the prior year period. Recurring revenue from the sale of Tableau consumables and service was $22,500,000 an increase of 11% over the 2024. Next, I'll walk through our gross margin and operating expenses for the quarter.

[Renee Gaeta, CFO at Outset Medical]

Please refer to the table in today's earnings release for a reconciliation of GAAP to non GAAP measures. Non GAAP gross margin expanded another 110 basis points from last year, reaching 38.4% for the quarter even with a 100 basis point headwind from the under absorption of manufacturing overhead. Product gross margin increased nearly 400 basis points year over year to 48.9%. Service and other gross margin was 6.9% compared to 13.6% we reported in the 2024, due to the short term investments we made in parts supply. We are making progress against our plan to optimize inventory levels and gradually increase production, which further mitigates the gross margin impact of the manufacturing under absorption we have discussed all year.

[Renee Gaeta, CFO at Outset Medical]

For the year, I expect a headwind of approximately 150 basis points, which will have a diminishing effect in 2026. Excluding these factors, gross margin is approaching 40%, and product gross margin is approaching 50%. All to say, we are right on track towards our next milestone of 50 gross margin. Moving to operating expenses. We continue to see the positive impact of reductions the company primarily made during the 2024.

[Renee Gaeta, CFO at Outset Medical]

For the quarter, non GAAP operating expenses declined 19% to $25,400,000 compared to the 2024. Non GAAP operating loss was $13,400,000 36% below the operating loss of $21,000,000 in the prior year period. Net loss of $18,500,000 was 46% lower than the 2024. These measures reflect the positive results of our drive to profitability. Moving to our balance sheet.

[Renee Gaeta, CFO at Outset Medical]

We ended the quarter with $187,400,000 in cash, cash equivalents, short term investments and restricted cash. Low cash use this year reflects the progress we are making on gross margin, operating expenses and inventory levels. We anticipate cash use will step up entering next year as we increase inventory purchasing and ramp production, with the first quarter of any year expected to be our highest cash consuming quarter due to incentive compensation payouts. We continue to believe our cash balances are sufficient through cash flow breakeven. Turning to our guidance for 2025.

[Renee Gaeta, CFO at Outset Medical]

As Leslie mentioned, we are pleased to be in a position to raise our revenue guidance for the year from $115,000,000 to $125,000,000 to a range of $122,000,000 to $126,000,000 We are very confident in our outlook and yet intend to maintain a level of conservatism as we monitor the macro environment and work through this year of execution. Moving down the income statement. We continue to expect gross margin for the full year in the high 30% range. Excluding the impact of under absorption, we continue to anticipate gross margin exiting the year above 40% in the 2025. Although gross margin may fluctuate on a quarter to quarter basis as a result of our product mix, we continue to expect the past 52% will be driven by higher margin reoccurring revenue across a larger installed base, service leverage and our console cost down program.

[Renee Gaeta, CFO at Outset Medical]

We anticipate operating expenses in 2025 in the low $90,000,000 range. The combination of revenue growth, gross margin expansion and expense discipline means that we continue to expect to use under $50,000,000 in cash in 2025, which is less than half we used in 2024. With that, I think we're ready for Q and A. Operator, please open the lines.

[Operator]

Thank you. At this time, we will conduct a question and answer session. Our first question comes from Rick Wise at Stifel.

[Rick Wise, Managing Director - Medical Technology & Supplies at Stifel Financial Corp]

Good afternoon, everybody. Great to see another, I think maybe the fourth quarter in a row of steady progress on all your key business priorities. It's great to see that. If I could start off just, Leslie, on your guidance, and not to use your words against you, but you said, I think I'm quoting you, you said we're set up very well for the '25. And if I'm doing the back of the envelope math correctly, maybe I'm not, but it seems like at the midpoint of the guide looking forget the differences between third and fourth quarter, it sounds like the midpoint would be sort of make the second half roughly very roughly equivalent to the first half sales level.

[Rick Wise, Managing Director - Medical Technology & Supplies at Stifel Financial Corp]

But it feels like momentum is growing. Am I thinking about this correctly? It maybe help us understand what maybe keeping you, I'll say, thoughtfully conservative.

[Leslie Trigg, Chair & CEO at Outset Medical]

Sure. Hi, Rick, happy to do that. First and foremost, we really are happy with the way the year has shaped up to date. Taking a quick step back, we kicked off the 2025 year by conveying that we did intend to remain conservative throughout 'twenty five from a guidance standpoint as we stayed focused on what we know is a really important year of execution for the company. But having said that, it was great to see very strong console and recurring revenue performance in the first half of this year, combining that with, and you did hear me correctly, what we believe is a very good setup for the second half of the year.

[Leslie Trigg, Chair & CEO at Outset Medical]

We were pleased to raise the range both on the top and the bottom by a full $7,000,000 which effectively raises the low end above what was the midpoint of our guidance at the beginning of the year. So I think that's all very, very good news. Let me say a little bit more about another part of your question, kind of why we believe the setup for 2H, and I'd say beyond 2H is good. I'll try to keep it short, but three short points. One, this commercial transformation is absolutely taking root.

[Leslie Trigg, Chair & CEO at Outset Medical]

The changes and the improvements we made to the team and the tools and the processes is really paying off from pipeline management to forecasting to our ability to convert opportunities to contracting. In short, it's all better. I think the second short point is that demand is growing. Our pipeline did grow again, both sequentially and year over year. And also equally as important, the deals are progressing.

[Leslie Trigg, Chair & CEO at Outset Medical]

We have more deals in the pipeline that are in the later stages versus the earlier stages, and we have good diversification in that pipeline. More and more of these deals are at the enterprise level, which by definition means sort of a very robust number of consoles per deal. So that's good. And then three, console utilization remains high. And this is a real point of pride for us, because more than anything else, I've always believed that console utilization is a direct reflection of how good of a job we're doing, how good of a job is Tableau doing.

[Leslie Trigg, Chair & CEO at Outset Medical]

Are we and the team fulfilling the promises that we're making to both patients and providers and strong utilization suggests that that answer is yes. And of course, the utilization continues to feed the foundation, a very consistent, very predictable recurring revenue, which is a strong place to operate from. So, all in, Rick, you heard it correctly, we do feel really good and feel that we're entering 2H with a strong setup. And at the same time, we remain very committed to what we said we were going do at the end the year, which was a commitment to guidance conservatism. And we're going to stay focused on executing through the next two quarters here to deliver on it.

[Rick Wise, Managing Director - Medical Technology & Supplies at Stifel Financial Corp]

Great, I appreciate all the detail there. And maybe just sort of one factor of many underpinning all those comments is the commercial strategy transition. I was hoping you could give us some additional color on where are we? I think previously, if I remember correctly, you said that you thought the Salesforce transition would be sort of fully productive after quarter you just reported. I mean, are we past the sort of stand up phase, if you will?

[Rick Wise, Managing Director - Medical Technology & Supplies at Stifel Financial Corp]

Help us understand that or if there's more to go, what would get you to? Yeah, we're past that. And and maybe help us maybe I'd be curious to hear your thoughts about how a now more fully trained on it productive Salesforce factors into your rest of '25 outlook and maybe how that sets you up even for next year from that perspective? Thanks so much.

[Leslie Trigg, Chair & CEO at Outset Medical]

Sure. Yeah, happy to comment on that more. In a nutshell, the commercial organization looks and feels and operates very differently today in all of the best ways as a result of the changes and the improvements that we've made here over the last couple of quarters. And that showed up for us in a really nice way, both the first quarter and again in the second quarter as these new tools and the new sales process really again aimed at success at the enterprise sales level did contribute to these are some of the things we look at, Rick improved forecast accuracy, more demonstrated visibility, predictability and control over how deals where are deals exactly in the sales process and how are those deals progressing. The ability of the team to convert those opportunities to contracts and ultimately to revenue has also improved.

[Leslie Trigg, Chair & CEO at Outset Medical]

We're obviously going to stay extremely vigilant in monitoring how everything is going, but the headline value here, I think, is so far so good. And we're really happy with the progress and the evidence that we have seen to date and have confidence in how it's going to continue to translate here through the remainder of the year.

[Rick Wise, Managing Director - Medical Technology & Supplies at Stifel Financial Corp]

Thanks again.

[Leslie Trigg, Chair & CEO at Outset Medical]

Yeah, thank you.

[Operator]

Our next question comes from Marie Thibault at BTIG.

[Marie Thibault, MD & Medical Technology and Digital Health Analyst at BTIG]

Good evening. Thanks for taking the questions and congrats on a very nice quarter. Wanted to ask here a little bit more on some of the deal strength that you saw in the quarter. Absolutely understand that your deal pipeline is diversified, lot coming from kind of enterprise sales. But just trying to understand how sustainable some of it is.

[Marie Thibault, MD & Medical Technology and Digital Health Analyst at BTIG]

And also, there was some commentary about strong ASPs on consoles. Of these new deals, is there a lot of uptake of some of your newer products or newer upgrades where you're able to get some of those higher ASPs, things like Tableau cart and others?

[Leslie Trigg, Chair & CEO at Outset Medical]

Yes, thanks for the question Marie, and yes is the answer. But let me give you a little bit more color behind it. We did have ASP strength due to a really nice attach rate, both on, or said differently, uptake for Tableau Card and the Tableau Pro Plus software, which did help fuel the ASP strength. Also, would be remiss if I didn't mention that our team continues to do a great job on ASP discipline. And I think the ASP strength is reflective of the results that the technology and sort of the proprietary ecosystem around it is driving for customers.

[Leslie Trigg, Chair & CEO at Outset Medical]

Customers, particularly in the acute and the post acute setting, think is the nature of the question, really are experiencing and continuing to share actually more and more with their peers, very, very tangible cost reduction, operational efficiencies. And I'll say, what is continuing to emerge are these clinical outcomes. More and more hospitals are reporting significantly lower CLABSI rates, lower rates of hospital acquired infections when they have moved from an outsourced model to an in source model. And so between, I think that the way that we think about the pricing structure around Tableau, the team's discipline in executing around it, and the accessories and some of the software options, all of those were key contributors to ASP strength. Now, going to the beginning part of your question on sort of how durable I think and guide me if I'm not getting the first part your question right, but

[Marie Thibault, MD & Medical Technology and Digital Health Analyst at BTIG]

Yeah.

[Leslie Trigg, Chair & CEO at Outset Medical]

Yeah, kind of the durability and the sustainability of the pipeline and sort of forward looking console sales. The console revenue that we saw this quarter and that we expect to see in 2H is driven not only by strong ASP, but let me be clear, by very strong console placements and strong console uptake. So that's a really important point one. Point two, when we look forward into the pipeline, and I'll touch on this very large enterprise agreement that we signed this quarter, As I mentioned in the prepared remarks, that's dozens of facilities potentially and hundreds of consoles over time potentially. And so with several of our existing customers and new customers at the enterprise level, we do take a view that this could provide a pretty interesting growth rate for us for many quarters to come in the future.

[Marie Thibault, MD & Medical Technology and Digital Health Analyst at BTIG]

That's really encouraging, Leslie. Great to hear. And then I guess I'd like to ask a little bit about your hiring of a chief nursing officer during the quarter. Know, great to see someone who believes in the Tableau story so much that they wanna join the company. What will be her focus?

[Marie Thibault, MD & Medical Technology and Digital Health Analyst at BTIG]

Is it, increasing home utilization? Is it increasing utilization in the acute care setting? Is it helping inside sales? What's kind of the focus of that role?

[Leslie Trigg, Chair & CEO at Outset Medical]

Yeah, I'm really glad you asked about that. What we've learned, and I think we've talked about this a little bit in prior calls, one of the things that we learned as a team really over the last twelve to eighteen months was just how critically important the role of the chief nursing officer is in moving from outsourcing to insourcing of dialysis. We were finding over time that more and more of our sales processes were involving a CNO audience. They are the folks at the executive level that do ultimately own the implementation of the move from outsourcing to insourcing. And so it was really critically important that our team focus on the Chief Nursing Officer at any given hospital and that we become really good at explaining how the move really serves them and their nursing team.

[Leslie Trigg, Chair & CEO at Outset Medical]

And so now looking forward in this new hire of a Chief Nursing Officer, she will be really focused first and foremost on working with our sales organization and sharing her own experience in successfully moving from outsourcing to insourcing with many of the customers, the potential new customers in our pipeline, and partnering with those CNOs to really explain and help them with the change management around that, and helping them understand kind of the key steps along the way from outsource to in source and what her keys to success were that did allow her hospital materially lower their cost of dialysis, their complexity of dialysis, and also drive some pretty meaningful clinical improvements for patient care.

[Marie Thibault, MD & Medical Technology and Digital Health Analyst at BTIG]

Very good. Thank you.

[Jim Mazzola, Head - IR at Outset Medical]

Thanks, Marie.

[Operator]

Our next question comes from Josh Jennings at TD Cowen.

[Josh Jennings, Managing Director at TD Cowen]

Hi, good afternoon. Great to see the strong quarter and the updated guidance. Leslie and Renee, would love to just touch on the enterprise channel or IDN opportunity. And I know you've had some big wins over the years and those wins seem to continue in the '5 and pipeline is filling up with opportunities as sales pipeline up with opportunities as well. Maybe just talk about the penetration in this IDN or enterprise channel the go forward opportunity a little bit more?

[Josh Jennings, Managing Director at TD Cowen]

I think you've touched on already in some of your answers, Leslie, but I'd love to hear your build and just how big of an opportunity from here you see that enterprise channel. Clearly, it's a large one.

[Leslie Trigg, Chair & CEO at Outset Medical]

Yes, sure. Thanks for the question, Josh. I'm happy to. So despite the successes that we've had here for the last couple of quarters in pipeline expansion and in closing new deals, we are still I would still call it in early innings in terms of the runway. If we look at the total addressable market in the acute and subacute, just to recap on terms, in subacute, we include LTACs, rehabs principally in that TAM number.

[Leslie Trigg, Chair & CEO at Outset Medical]

We would consider ourselves to be kind of in the low double digits in terms of market penetration. So that's what really excites me the most is we've come a long way. And with 900 sites now using Tableau, both acute and post acute, it is kind of amazing that we're only low double digit penetrated, which tells me we have a lot of exciting opportunity ahead with a team now that is really ready and capable to go after it. I think that another thing I think about in terms of the TAM is there's a lot of interconnectivity to think about too. Many health systems own LTACs, many health systems own rehabs, Many of these health systems have or are getting into the skilled nursing facility area.

[Leslie Trigg, Chair & CEO at Outset Medical]

Nephrologists that round in hospitals also round in the outpatient setting of home and have patients at home. And so, we really benefit greatly from the interconnect ivity, both at the clinician level and also at the IDN level, which I think is helping to kind of fuel this flywheel. Another, I'll give you one last observation that I found pretty interesting, Josh, is we have for the last twelve to eighteen months seen a fair amount of executive leadership migration, executive leaders moving from one hospital to another, or one health system to another. And that has really started to pay dividends for us as well, not that we had anything to do with that, but you can imagine as the CNO moves from hospital A to hospital B and hospital A has successfully outsourced with Tableau and seen the benefits at their first hospital, they're kind of bringing that experience, that confidence and conviction to their next hospital executive leadership role. So we have actually experienced some tailwinds and some benefits that I think is only going to continue as this footprint for us grows in the acute and post acute space and in sourcing with Tableau becomes an interesting idea to the standard of care, which we fully intend to deliver on here in the coming future.

[Josh Jennings, Managing Director at TD Cowen]

Excellent. And sorry for another relatively high level question, but you mentioned partnering up with number three, their largest dialysis provider for patient access to Tableau. I was hoping you could just provide a roadmap or help us think through the tailwinds for home hemo in second half twenty twenty five and into 2026. Clearly that's a nice tailwind for outset, but maybe the market and then any other tailwinds for with the home hemo opportunity, how that's opening up, how you see it opening up and any tailwinds for Alsets home franchise specifically? Thank you.

[Leslie Trigg, Chair & CEO at Outset Medical]

Yes, sure. I'm happy to. I always love talking about home. We have continued to make good progress in the home end market, both with the, we call it mid sized dialysis organization or MDOs, and then the skilled nursing facilities or SNFs. And that continues to contribute about 15% to 20% of our revenue, which is exactly in line with the expectations that we shared in the beginning of the year.

[Leslie Trigg, Chair & CEO at Outset Medical]

Our overarching goals for home growth as we set up 2025 were first and foremost, and at the risk of beating a dead horse. I'm really passionate about this topic around retention. I've always believed that sustainable longer term growth has to start with an industry leading retention rate, so that you're always growing from a strong foundation. We have maintained 90% or greater retention during the first ninety days, which all of the data suggests is sort of the leading indicator of longer term retention at home, and we have maintained very, very differentiatedly high retention rates at twelve months as well. So the backbone of our growth is retention, regardless of the channel through which it comes.

[Leslie Trigg, Chair & CEO at Outset Medical]

Our second goal was to achieve partnerships with all of the largest MDOs in the country. And as of Q2, we now can check that box. We continue to see more location growth depth. Job number one is to contract with the largest MDOs, and then job number two, over time, is to deepen the utilization and offer Tableau in more and more and more of their locations. And that's the next phase that we're focused on now that we have achieved the contracts that we were hoping to achieve.

[Leslie Trigg, Chair & CEO at Outset Medical]

And then the third thing is to begin our entry into SNF. That was the third goal for 2025. That does remain a very large, but also obviously very new to us market. The trappings are all there in the sense that the value proposition, it actually is quite similar to acute. Lower and less complicated dialysis, which delivers a dramatically higher quality of life and treatment benefit for patients.

[Leslie Trigg, Chair & CEO at Outset Medical]

And so we've gotten a good start to capitalizing on that here in 2025. As I mentioned, we're seeing some good kind of tailwind even through our acute partnerships into SNFs, in addition to SNFs that wanna directly manage dialysis in house and through service providers that are specifically focused on coming in house into the SNFs and providing dialysis there. So that was a long answer, Josh, I apologize for that, but all to say that those were our three key goals to continue to develop this market and penetrate into it with Tableau over the longer term. But here in the near term, think the team is executing very well across all three of these vectors.

[Josh Jennings, Managing Director at TD Cowen]

Actually, maybe if I could just sneak one in and maybe too granular. How should investors think about the growth trajectory from here, second half twenty five into '26 for the home unit versus acute channel for outset? Should that be kind of on par or would home or acute outpace the other? Thanks.

[Leslie Trigg, Chair & CEO at Outset Medical]

Oh, sure, no problem. Yeah, broadly the same. I would think about it in the same way that we've always talked about acute and subacute as kind of our first wave of growth, and we are still very, very much in that first wave, as I mentioned, just only low double digits penetrated here. So, I would continue to expect acute, post acute to be in that 80%, 85% of our revenue range, with home as the remainder. So, we don't expect any changes in that mix as we look forward here.

[Josh Jennings, Managing Director at TD Cowen]

Great. Thank you again.

[Leslie Trigg, Chair & CEO at Outset Medical]

Of course.

[Operator]

Our next question comes from Shagun Singh at RBC.

[Analyst]

Thank you, operator, and good afternoon, everyone. Thanks for taking the question. This is Mo on for Shagun Singh. Congrats on the quarter. I was wondering if you could touch a little bit deeper on some of the internal work that has been done to transform the commercial organization.

[Analyst]

You talked about the restructuring a little bit. Can you maybe just tell us where you stand on those efforts and maybe try to quantify that a little bit? Thank you very much. And I'll have one follow-up.

[Leslie Trigg, Chair & CEO at Outset Medical]

Of course. Yes. I'm happy to. Sort of to top line it for you, the commercial organization itself is, I would almost say dramatically different than it was just a relatively short time ago. And again, credit to our commercial leader and her regional leadership team for implementing any number of changes and improvements.

[Leslie Trigg, Chair & CEO at Outset Medical]

We looked at, Mo, to answer your question a little bit more specifically, we restructured the team. We looked at a new enterprise skill set. I've talked in the past about how our original sales team was, I think, less able to capitalize on these enterprise level opportunities that we had earned the right to get in front of, and just had a little bit of a different skill set, probably a little bit more startup mode, as I would describe it. And so we needed capital sales professionals who had, to put it shortly, seen the movie before, and had success and a track record of end to end management of deals that were many dozens of tableaus and dozens of facilities that would all be making the move from outsourcing to insourcing. And so I would say all of the work around infusing our team with those new skill sets is behind us.

[Leslie Trigg, Chair & CEO at Outset Medical]

That work can be called complete. In addition to that, we introduced many new sales tools, data driven sales tools that under a new Vice President of Sales Enablement, who's done an absolutely terrific job at enabling our team to be more focused, more targeted, and more efficient through the pipeline management, the sales process management, and also given the commercial and the finance organization, data driven tools that have led to better forecasting and timing of flows. And lastly, we talked about introducing a new sales process. Again, this was aimed at a new segment of our audience, sort of more of our mainstream adopters versus the early adopters. And when these mainstream adopters are looking at moving from outsourcing to insourcing over, as I said, dozens and dozens of their hospital facilities, that's a different sales process.

[Leslie Trigg, Chair & CEO at Outset Medical]

It's a really different sales process than the work that we needed to do, let's say, in 2021, 2022, earlier in our commercial penetration. And so, we introduced an entirely new sales process with a very, very high level of inspection rigor and again, data driven tools to ensure that we were moving across the country in every territory through an enterprise level sales process in the same way. So I'll stop there. I this is a passion topic for me. I could go on and on, but I will I will stop there and and and hope that that gives you the color that you're looking for.

[Analyst]

Totally. Really appreciate it. And and just a quick follow-up. You touched earlier on your goal to use less than $50,000,000 of cash this year. Are you able to maybe talk a little bit more about what the outlook would be into 2026 for cash burn just directionally? Any comments on that?

[Renee Gaeta, CFO at Outset Medical]

Mo, this is Renee. Happy to take this one. You know, at this stage, we're we've given, I think, as much guidance as we're we're gonna give at this stage. We've been really pleased with the performance, as you can see just in q two, how much stepped down from Q1, and then we've given some sort of insight around what we expect for the back half of the year. You know, I wanted to give some comfort into 2026 and some high level view that, it might not be just $5,000,000 a quarter going forward.

[Renee Gaeta, CFO at Outset Medical]

We're going have a little bit of elevation as we, again, ramp production to continue to move towards sales growth, and we get back to sort of a normalized state on inventory production, as well as one off items that happened generally in Q1. At the moment, that's as much as we're gonna give. I think as we get to the end of the year, we're gonna absolutely be in a place to give additional guidance for 2026.

[Analyst]

That's extremely helpful. I really appreciate it, and congrats again. Thank you very much.

[Operator]

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Leslie Trigg for closing remarks.

[Leslie Trigg, Chair & CEO at Outset Medical]

Thanks, and thanks again to all of you for joining today. I'd really like to close by thanking our entire team for the meaningful difference that they're making every single day in the lives of dialysis patients and the providers who care for them. I hope you all have a great evening. Thanks again.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Participants

Executives

• Jim Mazzola, Head - IR
• Leslie Trigg, Chair & CEO
• Renee Gaeta, CFO
• Leslie Trigg, Chair & CEO

Analysts

• Rick Wise, Managing Director - Medical Technology & Supplies at Stifel Financial Corp
• Marie Thibault, MD & Medical Technology and Digital Health Analyst at BTIG
• Josh Jennings, Managing Director at TD Cowen
• Analyst