Outset Medical Inc

Previous wording

Our technology is designed to elevate the dialysis experience for patients and help providers overcome traditional care delivery challenges. Requiring only an electrical outlet and tap water to operate, Tablo® Hemodialysis System (Tablo) frees patients and providers from the burdensome infrastructure required to operate traditional dialysis machines. The integration of water purification and on-demand dialysate production in a single 35-inch compact console enables Tablo to serve as a dialysis clinic on wheels. With a simple-to-use touchscreen interface, two-way wireless data transmission and a proprietary data analytics platform, Tablo is a holistic approach to dialysis care. Unlike existing hemodialysis machines, which have limited clinical versatility across care settings, Tablo can be used seamlessly across multiple care settings and a wide range of clinical applications. Tablo is cleared by the FDA for use in the hospital, clinic, or home setting.

Current wording

Our technology is designed to elevate the dialysis experience for patients and help providers overcome traditional care delivery challenges. Requiring only an electrical outlet and tap water to operate, our Tablo® Hemodialysis System (Tablo) frees patients and providers from the burdensome infrastructure required to operate traditional dialysis machines. The integration of water purification and on-demand dialysate production in a single 35-inch compact console enables Tablo to serve as a dialysis clinic on wheels. With a simple-to-use touchscreen interface, two-way wireless data transmission and a proprietary data analytics platform, Tablo is a holistic approach to dialysis care. Unlike existing hemodialysis machines, which have limited clinical versatility across care settings, Tablo can be used seamlessly across multiple care settings and a wide range of clinical applications. Tablo is cleared by the FDA for use in the hospital, clinic, or home setting.

Previous wording

We have generated meaningful evidence to demonstrate that providers can realize significant operational efficiencies, including reducing the cost of their dialysis programs by up to 80% in the intensive care unit. In addition, Tablo has been shown to deliver robust clinical care. In studies and surveys we have conducted, patients have reported quality of life benefits on Tablo compared to other dialysis machines. We believe Tablo empowers patients, who have traditionally been passive recipients of care, to regain agency and ownership of their treatment.

Current wording

We have generated meaningful evidence to demonstrate that providers can realize significant operational efficiencies, including reducing the cost of their dialysis programs. In addition, Tablo has been shown to deliver robust clinical care. In studies and surveys we have conducted, patients have reported quality of life benefits on Tablo compared to other dialysis machines. We believe Tablo empowers patients, who have traditionally been passive recipients of care, to regain agency and ownership of their treatment.

Previous wording

Driving adoption of Tablo in the acute care setting has been our primary focus to date. We have invested in growing our economic and clinical evidence, built a veteran sales and clinical support team with significant expertise, and implemented a comprehensive training and customer experience program. Our experience in the acute care market has demonstrated Tablo’s clinical flexibility and operational versatility, while also delivering meaningful cost savings to the providers. We plan to continue leveraging our commercial infrastructure to broaden our installed base in the acute care market, as well as driving utilization and fleet expansion with our existing customers.

Current wording

Driving adoption of Tablo in the acute care setting has been our primary focus to date. We have invested in growing our economic and clinical evidence, built a veteran sales and clinical support team with significant expertise, and implemented a comprehensive training and customer experience program. Our experience in the acute care market has demonstrated Tablo’s clinical flexibility and operational versatility, while also delivering meaningful cost savings to the providers. In addition, we are also working with SNFs, LTACHs and other post-acute providers to raise awareness of Tablo’s economic and clinical benefits to them and to patients. We plan to continue leveraging our commercial infrastructure to broaden our installed base in the acute and post-acute care markets, as well as driving utilization and fleet expansion with our existing customers.

Previous wording

Tablo is also utilized for home-based dialysis. We believe our ability to reduce training time, patient dropout, and the supplies and infrastructure required to deliver dialysis in the home can drive efficiency and economic improvements to the home care model. In our home IDE trial, patients reported specific quality of life improvements compared to their experience on the incumbent home dialysis machine. To penetrate this market successfully, we continue to focus on refining our home distribution, logistics and support systems to help ensure they are ready for scale. We are also working with providers, patients, and payors to increase awareness and adoption of TCUs as a bridge to home-based therapy. To demonstrate the cost advantages of Tablo in the home setting, we are continuing to collect additional patient clinical experience and outcomes data.

Current wording

Tablo is also utilized for home-based dialysis. We believe our ability to reduce training time, patient dropout, and the supplies and infrastructure required to deliver dialysis in the home can drive efficiency and economic improvements to the home care model. In our home IDE trial, patients reported specific quality of life improvements compared to their experience on the incumbent home dialysis machine. To penetrate this market successfully, we have made investments in and continue to focus on refining our home distribution, logistics and support systems to help ensure they are ready for scale. We are also working with providers, patients, and payors to increase awareness and adoption of TCUs as a bridge to home-based therapy.

Previous wording

We generate revenue from the placement of Tablo consoles along with accessories, and shipping and handling charged to customers, which revenue is recognized up-front. For the years ended December 31, 2023, 2022, and 2021, sales of our consoles, which includes Tablo consoles and accessories, accounted for 47%, 56% and 63% of our revenue, respectively. We also earn recurring revenue from sales of consumables, including Tablo cartridge, and services, which generates significant total revenue over the life of Tablo console. For the years ended December 31, 2023, 2022, and 2021, sales of our consumables accounted for 32%, 25% and 19% of our revenue, respectively, and sales of service and other accounted for 21%, 19% and 18% of our revenue, respectively.

Current wording

We generate revenue from the placement of Tablo consoles along with accessories, and shipping and handling charged to customers, which revenue is recognized up-front. For the years ended December 31, 2024, 2023, and 2022, sales of our consoles, which includes Tablo consoles and accessories, accounted for 26%, 47% and 56% of our revenue, respectively. We also earn recurring revenue from sales of consumables, including Tablo cartridge, and services, which generates significant total revenue over the life of Tablo console. For the years ended December 31, 2024, 2023, and 2022, sales of our consumables accounted for 45%, 32% and 25% of our revenue, respectively, and sales of service and other accounted for 29%, 21% and 19% of our revenue, respectively.

Previous wording

We primarily sell our solutions through our direct sales organization, which covers most major metropolitan markets in the United States. Our sales organization is comprised of our capital sales team, responsible for generating new customer demand for Tablo, and our clinical sales team, responsible for driving utilization and fleet expansion of Tablo at existing customer sites. In addition, our field service team provides maintenance services and product support to our customers. Our field sales and service teams represent 48% of our total full-time employees as of December 31, 2023. The same sales organization and field service team drive Tablo penetration in both the acute and home markets. We believe the ability to leverage one team to serve both markets will result in significant productivity and cost optimization as we continue to scale our business.

Current wording

Tablo, and our clinical sales team, responsible for driving utilization and fleet expansion of Tablo at existing customer sites. In addition, our field service team provides maintenance services and product support to our customers. Our field sales and service teams represent 52% of our total full-time employees as of December 31, 2024. The same sales organization and field service team drive Tablo penetration in both the acute and home markets. We believe the ability to leverage one team to serve both markets will result in significant productivity and cost optimization as we continue to scale our business.

Previous wording

In July 2023, we received a warning letter (the “Warning Letter”) from the FDA that raised two observations. The first observation asserts that certain content reviewed by the FDA and found on our website promotes CRRT, a modality outside of the current indications for Tablo. The second observation asserts that TabloCart with Prefiltration requires prior 510(k) clearance for marketing authorization. TabloCart with Prefiltration is an accessory to Tablo launched in the third quarter of 2022. We believe the concern raised by the first observation regarding CRRT promotion has been effectively addressed through a thorough review of existing promotional materials and practices. We believe the concern raised by the second observation regarding TabloCart with Prefiltration has been effectively addressed with two actions. First, although we evaluated TabloCart with Prefiltration prior to marketing and distributing the product and concluded that no marketing authorization was necessary, we paused distribution of TabloCart with Prefiltration pending the FDA’s review and clearance of a 510(k) application. Second, we submitted to the FDA a 510(k) application for TabloCart with Prefiltration in September 2023. In addition, we have provided monthly updates to the FDA as to the status of these Warning Letter-related workstreams since July 2023, and believe we have taken appropriate measures to resolve the matters raised in the Warning Letter. We have not identified any safety issues with TabloCart with Prefiltration. While we remain committed to fully cooperating with the FDA to expeditiously and completely resolve the Warning Letter, we cannot guarantee that the FDA will be satisfied with our response or the remedial measures we have taken, nor can we give any assurances as to the timing of the resolution of such matters, including the clearance of the 510(k) application and our resumption of distribution of TabloCart with Prefiltration.

Current wording

In July 2023, we received a warning letter (the Warning Letter) from the FDA that raised two observations. The first observation asserted that certain content reviewed by the FDA and found on our website promotes Continuous Renal Replacement Therapy (CRRT), a modality outside of the current indications for Tablo. The second observation asserted that TabloCart with Prefiltration required prior 510(k) clearance for marketing authorization. TabloCart with Prefiltration is an accessory to Tablo launched in the third quarter of 2022. We took action to address the first observation regarding CRRT promotion through revision of processes and procedures and updates to existing labeling and promotional materials. We also took action to address the second observation regarding TabloCart with Prefiltration. Although we evaluated TabloCart with Prefiltration prior to marketing and distributing the product and concluded that no marketing authorization was necessary, we paused distribution of TabloCart with Prefiltration pending the FDA’s review and clearance of a 510(k) application for the same that we submitted in September 2023. In early May 2024, we received 510(k) clearance from the FDA for TabloCart with Prefiltration, and we have resumed distribution of TabloCart with Prefiltration. In February 2025, we were notified by the FDA that the issues cited in the Warning Letter have been addressed.

Previous wording

We plan to further broaden our installed base by continuing to target national and regional IDNs and health systems, sub-acute long-term acute care hospitals (LTACHs) and skilled nursing facilities (SNFs). In addition, we focus on driving utilization and fleet expansion with existing customers by providing an exceptional user experience delivered through our commercial team and a steady release of software enhancements that amplify Tablo’s operational reliability and clinical versatility. Our ability to successfully execute on this strategy, and thereby increase our revenue in the acute market, will depend on several factors. These factors include our ability to expeditiously resolve the Warning Letter, overcome the adverse impact in the field from the Warning Letter and our distribution pause on TabloCart with Prefiltration, as well as the success of our efforts to further evolve our commercial infrastructure and sales processes to support the growth of our business in the acute care market.

Current wording

We plan to further broaden our installed base by continuing to target national and regional IDNs and health systems, as well as SNFs, LTACHs and other post-acute providers. In addition, we focus on driving utilization and fleet expansion with existing customers by providing an exceptional user experience delivered through our commercial team and a steady release of software enhancements that amplify Tablo’s operational reliability and clinical versatility. Our ability to successfully execute on this strategy, and thereby increase our revenue in the acute market, will depend on several factors. These factors include our ability to recover from the adverse impact in the field from the Warning Letter as we resume distribution of TabloCart with Prefiltration, as well as the success of our efforts to further evolve our initiatives to optimize our commercial organization, infrastructure and sales processes to support the growth of our business in the acute and post-acute care markets as we focus more heavily on enterprise selling and transition beyond earlier stage adoption of Tablo.

Previous wording

We believe that a significant growth opportunity exists within the home hemodialysis market. We are partnering with innovative dialysis clinic providers, health systems and other adjacent healthcare providers who are motivated to grow their home hemodialysis population, and who share our vision of creating a seamless and supported transition to the home. We are also investing in market development over the longer term to expand the home hemodialysis market itself. The expansion of the home hemodialysis market and our ability to penetrate this market will be an important factor in driving the future growth of our business. In addition, the success of our efforts to expand within the home market, help grow new home programs and increase our revenue generated from home-based dialysis on the timeline that we anticipate will depend on several factors. These factors include our ability to further evolve our commercial infrastructure and sales processes as we scale our business in the home market.

Current wording

We believe that a significant growth opportunity exists within the home hemodialysis market. We are partnering with innovative dialysis clinic providers, health systems and other adjacent healthcare providers who are motivated to grow their home hemodialysis population, and who share our vision of creating a seamless and supported transition to the home. We are also investing in market development over the longer term to expand the home hemodialysis market itself. The expansion of the home hemodialysis market and our ability to penetrate this market will be an important factor in driving the future growth of our business. In addition, the success of our efforts to expand within the home market, help grow new home programs and increase our revenue generated from home-based dialysis on the timeline that we anticipate will depend on several factors. These factors the success of our initiatives to optimize and further evolve our commercial organization, infrastructure and sales processes as we scale our business in the home market.

Previous wording

Our ability to expand our gross margins depends on: first, our ability to reduce the cost of Tablo consoles; second, our ability to continue to sell Tablo cartridges, services, and accessories for Tablo consoles; and third, our ability to reduce the cost of service. Over the past three years, we have moved the production of Tablo consoles and a majority of Tablo cartridges in-house at our manufacturing facility in Tijuana, Mexico which we operate in collaboration with TACNA as part of our cost reduction activities. This has helped further our long-term gross margin expansion and supply continuity strategies while reducing the costs of Tablo console production and improving the flexibility of our operations. We will continue our cost reduction activities by using our design, engineering, supply chain and manufacturing capabilities to help further advance and improve the efficiency of our manufacturing processes, lowering the cost of parts and components and lowering our costs of production. Further, we will continue to utilize our cloud-based data system, as well as enhanced product performance, to better support our field service team and drive down service costs per console. In addition, our ability to expand gross margins will depend in part on our ability to control the average selling prices of our products and services, including by selling higher-margin accessories, consumables and services. Our ability to expand gross margins depends on our ability to successfully execute these strategies.

Current wording

Our ability to expand our gross margins depends on: first, our ability to continue to sell Tablo cartridges, services, and accessories for Tablo consoles; second, our ability to reduce the cost of service and third, our ability to reduce the cost of Tablo consoles. Our ability to expand gross margins will also depend in part on our ability to control the average selling prices of our products and services, including by selling higher-margin accessories, consumables and services. Further, we will continue to utilize our cloud-based data system, as well as enhanced product and support performance, to improve service margin and drive down service costs per console. In addition, over the past several years, we have moved the production of Tablo consoles and a majority of Tablo cartridges in-house to our manufacturing facility in Tijuana, Mexico which we operate in collaboration with TACNA as part of our cost reduction activities. This has helped further our long-term gross margin expansion and supply continuity strategies while reducing the costs of Tablo console production and improving the flexibility of our operations. We will continue our cost reduction activities by using our design, engineering, supply chain and manufacturing capabilities to help further advance and improve the efficiency of our manufacturing processes, lowering the cost of parts and components and lowering our costs of production. Our ability to expand gross margins depends on our ability to successfully execute these strategies, as well as the impact of macroeconomic factors described below, including the tariffs imposed by the new administration.

Previous wording

Global macroeconomic conditions, including inflationary pressures, rising interest rates, increased labor costs, labor shortages and global supply chain disruptions, may impact our business and results of operations, and those of our customers, manufacturing partners and suppliers. As the duration and severity of these macroeconomic conditions remain uncertain and depend on various factors, we cannot predict what effects these macroeconomic conditions will ultimately have on our business and results of operations, our customers, or our suppliers.

Current wording

Global macroeconomic conditions, including inflationary pressures, rising interest rates, increased labor costs, staffing shortages and global supply chain disruptions, may impact our business and results of operations, and those of our customers, manufacturing partners and suppliers. As the duration and severity of these macroeconomic conditions remain uncertain and depend on various factors, we cannot predict what effects these macroeconomic conditions will ultimately have on our business and results of operations, our customers, or our suppliers.

Previous wording

Beginning in the third quarter of 2023, we began to observe an increasing number of our existing and prospective customers deferring their decisions to purchase Tablo in an environment of rising interest rates and more cautious capital spending. These deferrals served to elongate our sales cycle and the timing of delivery and installations, which, in turn, contributed to an adverse impact on our bookings and revenues for the second half of 2023, and we expect these negative impacts to continue into 2024. During 2022, our existing and prospective customers faced shortages of skilled nurses and other clinical personnel as well as increased labor costs, combined with economic pressures resulting from general economic and financial market conditions, primarily escalating inflation, tightening hospital operating budgets and increased scrutiny of capital purchase decisions, all of which generally have the effect of lengthening the average sales cycle and elongating the timing of installations. These factors negatively impacted our customer base on pipeline development and installation schedules, which, in turn, negatively impacted our bookings, delayed our shipments and adversely impacted our revenues for 2022. We have generally seen some stabilization in these challenging labor market dynamics for healthcare providers in 2023 as compared to the prior year. Moreover, we believe Tablo offers automation and ease-of-use benefits over traditional machines that can enhance our existing and potential customers’ ability to support their patient populations despite staffing shortages. However, if our customers continue to face prolonged periods of rising interest rates, capital budget constraints, volatility, uncertainty, staffing shortages, rising costs and other financial pressures, whether due to general macroeconomic conditions or otherwise, it could ultimately adversely impact our ability to expand existing customer relationships or attract new customers of Tablo, timely collect amounts due, effectively manage our inventory levels, and have a material adverse effect on our bookings, revenues, results of operations, financial condition, and, ultimately, our future growth and profitability.

Current wording

Beginning in the third quarter of 2023, we began to observe an increasing number of our existing and prospective customers deferring their decisions to purchase Tablo in an environment of rising interest rates and more cautious capital spending. These deferrals served to elongate our sales cycle and the timing of delivery and installations, which, in turn, contributed to an adverse impact on our bookings and revenues starting in the second half of 2023 and through 2024. We may see disruption from this in future periods. Beginning in 2022, our existing and prospective customers faced shortages of skilled nurses and other clinical personnel as well as increased labor costs, combined with economic pressures resulting from general economic and financial market conditions, primarily escalating inflation, tightening hospital operating budgets and increased scrutiny of capital purchase decisions, all of which generally have the effect of lengthening the average sales cycle and elongating the timing of installations. These factors negatively impacted our customer base on pipeline development and installation schedules, which, in turn, negatively impacted our bookings, delayed our shipments and adversely impacted our revenues for 2022 and, to a lesser extent, 2023. We have generally seen some stabilization in these challenging labor market dynamics for healthcare providers during 2023 and thereafter as compared to 2022. Moreover, we believe Tablo offers automation and ease-of-use benefits over traditional machines that can enhance our existing and potential customers’ ability to support their patient populations despite staffing shortages. However, if our customers continue to face prolonged periods of rising interest rates, capital budget constraints, volatility, uncertainty, staffing shortages, cash flow challenges, rising costs and other financial pressures, whether due to general macroeconomic conditions, cybersecurity events or otherwise, it could ultimately adversely impact our ability to expand existing customer relationships or attract new customers of Tablo, timely collect amounts due, effectively manage our inventory levels, and have a material adverse effect on our bookings, revenues, results of operations, financial condition, and, ultimately, our future growth and profitability.

Previous wording

From a supply chain perspective, we have worked closely with our manufacturing partners and suppliers to enable us to source key components and maintain appropriate inventory levels to meet customer demand, and have not experienced material disruptions in our supply chain to date. However, macroeconomic factors such as rising inflation, increasing labor costs, and surges and shifts in consumer demand have disrupted the operations of certain of our third-party suppliers, resulting, in some cases, in increased lead times and higher component costs. We faced increased supply chain constraints during late 2021, resulting in increased transportation and related costs associated with delivering adequate supply of Tablo treatments to our customers from our contract manufacturing partner in Southeast Asia. During 2023, we saw moderation in these costs. Moreover, we believe that localizing production of a majority of Tablo cartridges in Mexico (to our Mexico-based contract manufacturer and, more recently, in-house at our manufacturing facility) has helped achieve cost reductions through lower freight costs, further our long-term gross margin expansion and supply continuity strategies and improve the flexibility of our operations. However, we may face increased supply chain constraints in the future, which could negatively impact our ability to meet customer demand on a timely basis, result in customer dissatisfaction and adversely impact our operating margins and results of operations.

Current wording

From a supply chain perspective, we have worked closely with our manufacturing partners and suppliers to enable us to source key components and maintain appropriate inventory levels to meet customer demand, and have not experienced material disruptions in our supply chain to date. However, macroeconomic factors such as rising inflation, increasing labor costs, and surges and shifts in consumer demand have disrupted the operations of certain of our third-party suppliers, resulting, in some cases, in increased lead times and higher component costs. We believe that localizing production of a majority of Tablo cartridges in Mexico (in-house at our manufacturing facility) has helped achieve cost reductions through lower freight costs, further our long-term gross margin expansion and supply continuity strategies and improve the flexibility of our operations. However, we may face increased supply chain constraints in the future, which could negatively impact our ability to meet customer demand on a timely basis, result in customer dissatisfaction and adversely impact our operating margins and results of operations. Moreover, increased tariffs imposed by the new administration, including on goods imported into the United States from Mexico and China, could adversely impact our supply chain and distribution costs, as well as our ability to achieve sustainable gross margins. While we do not believe we have exposure to these potential tariffs as Tablo, TabloCart and Tablo consumables are covered under a special exemption, we cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and other countries (including Mexico and China), what products may be subject to such actions, or what actions may be taken by the other countries in retaliation.

Previous wording

We plan to continue to invest in our research and development efforts to grow our economic and clinical evidence, enhance existing products and develop new products and service offerings and expect research and development expenses to vary over time, depending on the level and timing of the enhancement of the existing products and new product or service development initiatives. As a percentage of revenue, however, we expect research and development expenses to continue to decrease over the long-term primarily as, and to the extent, our revenue grows.

Current wording

We plan to continue to invest in our research and development efforts to grow our economic and clinical evidence, and enhance existing products to improve reliability and reduce costs. We expect research and development expenses to vary over time, depending on the level and timing of the enhancement of the existing products as well as cost reduction initiatives. As a percentage of revenue, however, we expect research and development expenses to continue to decrease over the long-term primarily as, and to the extent, our revenue grows.

Previous wording

Sales and marketing expenses primarily consist of personnel and related costs, including sales commissions and travel. Other sales and marketing expenses include marketing and promotional activities, government affairs, costs of outside consultants, customer services costs, and infrastructure costs including facilities, depreciation, and information technology. Shipping and handling costs, as well as the associated personnel expenses, are included in sales and marketing expenses.

Current wording

Sales and marketing expenses primarily consist of personnel and related costs, including sales commissions and travel. Other sales and marketing expenses include marketing and promotional activities, costs of outside consultants, customer services costs, and infrastructure costs including facilities, depreciation, and information technology. Shipping and handling costs, as well as the associated personnel expenses, are included in sales and marketing expenses.

Previous wording

As we continue to drive the expansion of Tablo, we expect shipping and handling costs to also increase. Additionally, we will continue to invest in infrastructure to support our growth. As a result, we expect sales and marketing expenses to increase in absolute dollars in future periods. As a percentage of revenue, however, we expect sales and marketing expenses to continue to decrease over the long-term primarily as, and to the extent, our revenue grows.

Current wording

As we continue to drive the expansion of Tablo, we expect shipping and handling costs to also increase. However, the full year impact of mid-year cost saving initiatives in 2024 will result in lower year over year spend. We plan to continue to invest in infrastructure to support our growth and expect sales and marketing expenses as a percentage of revenue to continue to decrease over the long-term primarily as, and to the extent, our revenue grows.

Previous wording

General and administrative expenses primarily consist of personnel and related costs, accounting and legal expenses, general corporate expenses, employee recruiting and training costs, and infrastructure costs including facilities, depreciation, and information technology. As a percentage of revenue, we expect general and administrative expenses to decrease over the long-term primarily as, and to the extent, our revenue grows.

Current wording

General and administrative expenses primarily consist of personnel and related costs, accounting and legal expenses, general corporate expenses, and infrastructure costs including facilities, depreciation, and information technology. As a percentage of revenue, we expect general and administrative expenses to decrease over the long-term primarily as, and to the extent, our revenue grows.

Previous wording

We expect our stock-based compensation expense allocated to cost of revenue, research and development expenses, sales and marketing expenses, and general and administrative expenses to increase in absolute dollars as we issue additional stock-based awards under our equity incentive plan and employee stock purchase plan to attract and retain employees.

Current wording

We expect our stock-based compensation expense allocated to cost of revenue, research and development expenses, sales and marketing expenses, and general and administrative expenses to fluctuate based on our stock price at particular points in time as we issue additional stock-based awards under our equity incentive plan and employee stock purchase plan to attract and retain employees.

Previous wording

Product revenue increased by $10.1 million, or 11%, for the year ended December 31, 2023 as compared to the prior year. The increase was primarily due to a $13.4 million increase in consumables revenue attributable to the growth in our console installed base. This increase was partially offset by a $3.3 million decrease in console revenue which was primarily comprised of a $1.7 million decrease in console leasing revenue due to the expiration of certain lease agreements and lower number of consoles sold in the current year as compared to the prior year.

Current wording

Product revenue decreased by $22.6 million, or 22%, for the year ended December 31, 2024 as compared to the prior year. The decrease was mainly due to a $31.5 million decrease in console revenue as a result of a lower number of consoles sold in 2024 as compared to the prior year. This decrease was partially offset by an $8.9 million increase in consumables revenue attributable to the growth in our console installed base.

Previous wording

Service and other revenue increased by $4.9 million, or 22%, for the year ended December 31, 2023 as compared to the prior year. The increase was primarily due to services associated with the growth in our console installed base, which was partially offset by a $4.1 million decrease in service revenue from leased consoles due to the expiration of certain lease agreements.

Current wording

Service and other revenue increased by $5.9 million, or 22%, for the year ended December 31, 2024 as compared to the prior year. The increase was primarily due to services associated with the growth in our console installed base.

Previous wording

Gross profit increased by $11.2 million, or 63%, for the year ended December 31, 2023 as compared to the prior year. The gross margin percentage improved by 6.7 percentage points for the year ended December 31, 2023 as compared to the prior year. This improvement in gross margin was primarily driven by the impact of cost reduction activities and a higher average selling price for both consoles and consumables. Such improvement was partially offset by the impact from the expiration of certain lease agreements.

Current wording

Gross profit increased by $9.6 million, or 33%, for the year ended December 31, 2024 as compared to the prior year. The gross margin percentage improved by 11.7 percentage points for the year ended December 31, 2024 as compared to the prior year. This improvement in gross margin was primarily driven by a higher mix of consumable and service and other revenue in 2024 as compared to the prior year. Consumables have a higher gross margin than consoles and had improved gross margin year over year. The higher consumable gross margin mainly resulted from a lower cost per unit as well as a higher average selling price for consumables.

Previous wording

The increase in interest income and other income, net, for the year ended December 31, 2023 as compared to the prior year was driven by higher interest rates.

Current wording

The decrease in interest income and other income, net, for the year ended December 31, 2024 as compared to the prior year was driven by the changes in interest rates.

Previous wording

The increase in interest expense for the year ended December 31, 2023 as compared to the prior year was due to the increase in interest rate and a full year of outstanding balance under the SLR Term Loan Facility in 2023 as compared to only two months of outstanding balance of such facility in 2022.

Current wording

The increase in interest expense for the year ended December 31, 2024 as compared to the prior year was due to the increase in interest rate and higher outstanding balance under the SLR Term Loan Facility in 2024 as compared to 2023.

Previous wording

Since our inception, we have incurred net losses and negative cash flows from operations. To date, we have financed our operations and capital expenditures primarily through sales of redeemable convertible preferred stock and common stock, revenue from sales, debt financings, and proceeds from employee exercises of stock options and employee stock purchase plan purchases.

Current wording

Since our inception, we have incurred net losses and negative cash flows from operations. To date, we have financed our operations and capital expenditures primarily through sales of equity securities, revenue from sales, debt financings, and proceeds from employee exercises of stock options and employee stock purchase plan purchases.

Previous wording

As of December 31, 2023, we had a total cash, cash equivalents, restricted cash and short-term investments balance of $206.7 million. In January 2024, we borrowed and received $66.5 million under the SLR Term Loan Facility (see the section entitled "Debt Obligations" below).

Current wording

As of December 31, 2024, we had a total cash, cash equivalents, restricted cash and short-term investments balance of $162.0 million. In January 2025, we entered into Securities Purchase Agreements with various investors pursuant to which we sold 843,908 shares of Series A Preferred Stock at a price of $200.00 per share in the Private Placement. Subject to the stockholder approval and beneficial ownership limitations, each share of Series A Preferred Stock will automatically convert into 250 shares of common stock for an aggregate of 210,977,000 shares of common stock. The gross proceeds from the Private Placement, before deducting placement agent fees and other offering expenses, were $168.8 million. An additional $3.9 million, for 19,432 shares of Series A Preferred Stock, will be invested by certain members of our Board of Directors and management upon shareholder approval.

Previous wording

We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term while we make investments to support our anticipated growth. We may raise additional capital through the issuance of additional equity financing, debt financings, including through refinancing our existing debt, or other sources. If this financing is not available to us at adequate levels or on acceptable terms, we may need to reevaluate our operating plans. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. If we raise additional capital through debt financing (including through our existing debt), we will be subject to an increase in our interest expense which may negatively affect our cash flow. We are subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. We believe that our existing cash, cash equivalents and short-term investments, cash generated from sales, and proceeds received from the debt financing described below under “Debt

Current wording

While we have taken actions to reduce operating expenses and working capital to align with anticipated revenue growth including implementing restructuring plans to streamline our overall organizational structure and renegotiating commitments with suppliers to reduce inventory, we expect to continue to incur operating losses in the near term while we make investments to support our anticipated growth. We may raise additional capital through the issuance of additional equity financing, debt financings, which may require refinancing or amending the terms of our existing debt, or other sources. If this financing is not available to us at adequate levels or on acceptable terms, we may need to further evaluate our operating plans. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. We are subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional capital through debt financing (including through our existing debt), we may be subject to an increase in our interest expense which may negatively affect our cash flow.

Previous wording

Obligations ‒ SLR Debt Financing”, will be sufficient to meet our anticipated needs for at least the next 12 months from the issuance date of this Annual Report.

Current wording

We believe that our existing cash, cash equivalents and short-term investments, cash generated from sales, and proceeds recently received from the debt financing described below under “Debt Obligations ‒ Perceptive Credit Agreement” as well as proceeds received from the Private Placement described in Note 13 to the financial statements will be sufficient to meet our anticipated needs for at least the next 12 months from the issuance date of this Annual Report.

Previous wording

Net cash used in operating activities of $145.7 million for the year ended December 31, 2022 was due to a net loss of $163.0 million and a net cash outflow from the change in our operating assets and liabilities of $21.1 million, partially offset by the primary non-cash adjustments for stock-based compensation expense of $27.2 million, depreciation and amortization of $5.2 million, provision for inventories of $2.6 million, loss on extinguishment of term loan of $1.4 million, non-cash lease expense of $1.1 million, accretion of discount on investments of $0.4 million, and non-cash interest expense of $0.4 million. The net cash outflow from operating assets and liabilities was primarily due to an increase in inventories due to the timing of inventory purchases including advance purchases of inventory to mitigate supply chain disruptions, a decrease in accrued compensation and related benefits, an increase in accounts receivable due to timing of collections, a decrease in accounts payable due to timing of vendor payments, an increase in prepaid expenses and other assets, and a decrease in operating lease liabilities. The net cash outflow from operating assets and liabilities was partially offset by an increase in deferred revenue due to the growth in service agreements and an increase in accrued expenses and other current liabilities.

Current wording

Net cash used in operating activities of $116.3 million for the year ended December 31, 2024 was due to a net loss of $128.0 million, a net cash outflow from the change in our operating assets and liabilities of $25.7 million, and amortization of premium on investments of $4.7 million, partially adjusted by the primary non-cash adjustments for stock-based compensation expense of $29.4 million, depreciation and amortization of $5.7 million, non-cash interest expense of $2.6 million, allowance for credit losses of $2.4 million, and non-cash lease expense of $1.4 million. The net cash outflow from operating assets and liabilities was primarily due to an increase in inventories, a decrease in accrued expenses and other current liabilities, an increase in accounts receivable due to timing of collections and billings, decreases in accounts payable, accrued compensation and related benefits, accrued warranty liabilities, and operating lease liabilities. The net cash outflow from operating assets and liabilities was partially offset by an increase in deferred revenue due to the growth in service agreements and a decrease in prepaid expenses and other assets.

Previous wording

Net cash used in investing activities of $66.3 million for the year ended December 31, 2022 was due primarily to purchases of investment securities of $261.2 million and purchases of property and equipment of $8.3 million, partially offset by the maturities of investment securities of $203.2 million.

Current wording

Net cash provided by investing activities of $103.9 million for the year ended December 31, 2024 was due to the sales and maturities of investment securities of $261.4 million, partially offset by purchases of investment securities of $156.6 million and purchases of property and equipment of $0.9 million.

Previous wording

Net cash provided by financing activities of $72.9 million for the year ended December 31, 2022 was due primarily to the net proceeds of $96.1 million from borrowings under the SLR Term Loan Facility and the proceeds of $8.0 million from employee exercises of stock options and employee stock purchase plan purchases, partially offset by the cash outflow of $31.2 million in repayment of the SVB Term Loan which included early prepayment and exit fees.

Current wording

Net cash provided by financing activities of $67.9 million for the year ended December 31, 2024 was due primarily to the net proceeds of $66.5 million from borrowings under the SLR Term Loan Facility and the proceeds of $2.3 million from employee exercises of stock options and employee stock purchase plan purchases. These cash inflow was partially offset by the payment of deferred financing costs.

Previous wording

On November 3, 2022 (the Closing Date), we entered into two senior secured credit facilities, which collectively provide for borrowings of up to $300.0 million as follows: (i) up to a $250.0 million term loan facility pursuant to a loan and security agreement (the SLR Loan Agreement) among SLR Investment Corp., as collateral agent (Agent), the lenders from time to time party thereto (the Term Loan Lenders) and us (the SLR Term Loan Facility) and (ii) up to a $50.0 million asset-based revolving credit facility pursuant to a credit agreement (the SLR Revolving Credit Agreement, together with the SLR Loan Agreement, the SLR Credit Facility Agreements) among Gemino Healthcare Finance, LLC d/b/a SLR Healthcare ABL, as lender (ABL Lender), and us (the SLR Revolver, together with the SLR Term Loan Facility, the SLR Credit Facilities).

Current wording

On November 3, 2022, we entered into two senior secured credit facilities, which collectively provide for borrowings of up to $300.0 million as follows: (i) up to a $250.0 million term loan facility pursuant to a loan and security agreement (the SLR Loan Agreement) among SLR Investment Corp., as collateral agent (SLR Agent), the lenders from time to time party thereto (the Term Loan Lenders) and us (the SLR Term Loan Facility) and (ii) up to a $50.0 million asset-based revolving credit facility pursuant to a credit agreement (the SLR Revolving Credit Agreement, together with the SLR Loan Agreement, the SLR Credit Facility Agreements) among Gemino Healthcare Finance, LLC d/b/a SLR Healthcare ABL, as lender (ABL Lender), and us (the SLR Revolver, together with the SLR Term Loan Facility, the SLR Credit Facilities).