Outset Medical, Inc.

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. We also earn recurring revenue from sales of consumables, including Tablo cartridge, and services, which generates significant total revenue over the life of Tablo consoles. Our total revenues were $31.4 million and $27.4 million for the three months ended June 30, 2025 and 2024, respectively, and $61.2 million and $55.6 million for the six months ended June 30, 2025 and 2024, 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. We also earn recurring revenue from sales of consumables, including Tablo cartridge, and services, which generates significant total revenue over the life of Tablo consoles. Our total revenues were $29.4 million and $28.7 million for the three months ended September 30, 2025 and 2024, respectively, and $90.6 million and $84.2 million for the nine months ended September 30, 2025 and 2024, 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 59% of our total full-time employees as of June 30, 2025. 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

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 56% of our total full-time employees as of September 30, 2025. 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

We plan to further broaden our installed base by continuing to target national and regional integrated delivery networks and health systems, 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 initiatives to optimize and further evolve 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.

Current wording

We plan to further broaden our installed base by continuing to target national and regional integrated delivery networks and health systems, 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 we received from the FDA in July 2023 as we resume distribution of TabloCart with Prefiltration, as well as the success of our initiatives to optimize and further evolve 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

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 current 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 cartridge 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.

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 current 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. We currently do not believe we have exposure to these tariffs as Tablo, TabloCart and Tablo cartridge are covered under a special exemption. However, in September 2025, the U.S. Department of Commerce initiated an investigation under Section 232 of the Trade Expansion Act of 1962 to assess the national security implications of imports of personal protective equipment, medical consumables, and medical equipment, including medical devices. The outcome of this investigation could result in additional tariffs or other trade restrictions. While we continue to believe our products will remain exempt, the scope and outcome of the investigation are uncertain and could affect existing exemptions or expand coverage to additional product categories. 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

The following table summarizes our results of operations for the three and six months ended June 30, 2025 and 2024 (in thousands):

Current wording

The following table summarizes our results of operations for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Previous wording

Comparison of the Three and Six Months Ended June 30, 2025 and 2024

Current wording

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

Previous wording

Product revenue increased by $4.7 million, or 12%, for the six months ended June 30, 2025 as compared to the same period in the prior year. This increase was driven by a $5.0 million increase in consumable revenue attributable to growth in our console installed base, which was offset by a $0.3 million decrease in console revenue due to fewer consoles being sold in the current year period as compared to prior year period.

Current wording

Product revenue increased by $0.3 million, or 1%, for the three months ended September 30, 2025 as compared to the same period in the prior year. This increase was driven by a $0.6 million increase in console revenue, which was offset by a $0.3 million decrease in consumable revenue.

Previous wording

Product revenue increased by $3.8 million, or 20%, for the three months ended June 30, 2025 as compared to the same period in the prior year. This increase was driven by a $2.0 million increase in consumable revenue due to growth in our console installed base and a $1.8 million increase in console revenue.

Current wording

Product revenue increased by $5.0 million, or 8%, for the nine months ended September 30, 2025 as compared to the same period in the prior year. This increase was driven by a $4.7 million increase in consumable revenue and a $0.3 million increase in console revenue.

Previous wording

Service and other revenue increased for the three and six months ended June 30, 2025 as compared to the same periods in the prior year. The increase was primarily due to services associated with growth in our console installed base.

Current wording

Service and other revenue increased for the three and nine months ended September 30, 2025 as compared to the same periods in the prior year. The increase was primarily due to services associated with growth in our console installed base.

Previous wording

Gross profit increased for the three and six months ended June 30, 2025 as compared to the same periods in the prior year. Gross margin improved by 2.1 percentage points for the three months ended June 30, 2025 and 5.1 percentage points for the six months ended June 30, 2025 as compared to the same periods in the prior year. These improvements in gross profit and gross margin were primarily driven by higher average selling prices for consoles and consumables and lower unit cost per console. These improvements were slightly offset by lower gross margin on service and other revenue as a result of one-time strategic investment in service operations to enhance console reliability.

Current wording

Gross profit increased for the three and nine months ended September 30, 2025 as compared to the same periods in the prior year. Gross margin improved by 5.1 percentage points for both the three and nine months ended September 30, 2025 as compared to the same periods in the prior year. These improvements in gross profit and gross margin were primarily driven by higher average selling prices for consumables and consoles and lower unit cost per console. Higher gross margin on service and other revenue also contributed to the improvements in gross profit and gross margin.

Previous wording

Research and development expenses decreased for the three and six months ended June 30, 2025 as compared to the same periods in the prior year. The decrease was primarily due to an overall decrease in compensation-related and stock-based compensation expense, consulting expense, and infrastructure costs resulting from our cost reduction efforts implemented in the fourth quarter of 2023, in 2024 and early 2025.

Current wording

Research and development expenses decreased for the nine months ended September 30, 2025 as compared to the same period in the prior year. The decrease was primarily due to an overall decrease in compensation-related and stock-based compensation expense, consulting expense, and infrastructure costs.

Previous wording

Sales and marketing expenses decreased for the three and six months ended June 30, 2025 as compared to the same periods in the prior year. The decrease was primarily driven by an overall decrease in compensation-related and stock-based compensation expense, freight, travel and consulting expenses resulting from our cost reduction efforts implemented in the fourth quarter of 2023, in 2024 and early 2025. The decreases for the six months ended June 30, 2025 were also reduced by the reduction in infrastructure costs.

Current wording

Sales and marketing expenses decreased for the three months ended September 30, 2025 as compared to the same period in the prior year. The decrease was primarily driven by an overall decrease in compensation-related expense and infrastructure costs. This decrease was slightly offset by increases in freight and stock-based compensation expenses.

Previous wording

General and administrative expenses decreased for the three and six months ended June 30, 2025 as compared to the same period in the prior year. The decrease was primarily due to an overall decrease in compensation-related and stock-based compensation expense, and consulting expenses resulting from our cost reduction efforts implemented in the fourth quarter of 2023, in 2024 and early 2025. Our provision for credit losses also decreased as compared to the prior year periods.

Current wording

General and administrative expenses decreased for the three months ended September 30, 2025 as compared to the same period in the prior year. The decrease was primarily due to an overall decrease in compensation-related and stock-based compensation expense.

Previous wording

The decrease in interest income and other income, net for the three and six months ended June 30, 2025 as compared to the same periods in the prior year were driven by a lower average short-term investment balance in 2025.

Current wording

The decrease in interest income and other income, net for the three and nine months ended September 30, 2025 as compared to the same periods in the prior year were driven by a lower average short-term investment balance in 2025.

Previous wording

The decreases in interest expense for the three and six months ended June 30, 2025 were primarily due to a lower outstanding term loan balance in 2025.

Current wording

The decreases in interest expense for the three and nine months ended September 30, 2025 were primarily due to a lower outstanding term loan balance in 2025.

Previous wording

As of June 30, 2025, we had cash, cash equivalents, restricted cash, and short-term investments of $187.4 million. In January and March 2025, we sold 863,340 shares of Series A Convertible Preferred Stock at a price of $200.00 per share in the Private Placement for total gross proceeds of $172.7 million, before deducting placement agent fees and other offering expenses. Subsequently, 842,753 shares of Series A Convertible Preferred Stock were converted into 14,045,866 shares of our common stock.

Current wording

As of September 30, 2025, we had cash, cash equivalents, restricted cash, and short-term investments of $182.0 million. In January and March 2025, we sold 863,340 shares of Series A Convertible Preferred Stock at a price of $200.00 per share in the Private Placement for total gross proceeds of $172.7 million, before deducting placement agent fees and other offering expenses. Subsequently, 842,753 shares of Series A Convertible Preferred Stock were converted into 14,045,866 shares of our common stock in March 2025. The remaining 20,587 shares of Series A Convertible Preferred Stock were converted into 343,117 shares of our common stock in October 2025.

Previous wording

The net cash used in operating activities of $30.5 million for the six months ended June 30, 2025 was due to a net loss of $44.3 million, a net cash outflow from the change in our operating assets and liabilities of $5.3 million, and the amortization of premiums on investments of $1.0 million, which were adjusted by loss on extinguishment of term loan of $7.7 million, stock-based compensation expense of $6.5 million, depreciation and amortization of $2.4 million, provision for credit losses of $1.6 million, non-cash interest expense of $1.3 million, non-cash lease expense of $0.8 million, and provision for inventories of $0.2 million. The net cash outflow from operating assets and liabilities was primarily due to a decrease in accrued compensation and related benefits resulting from the payouts of 2024 annual cash bonus, a decrease in accrued interest as a result of the termination of the SLR Term Loan, a decrease in accounts payable, an increase in accounts receivable resulting from the timing of collection and decreases in operating lease liabilities and accrued warranty liability. The net cash outflow from operating assets and liabilities was partially offset by a decrease in inventory, an increase in deferred revenue due to growth in our business, increases in accrued expenses and other current liabilities and a decrease in prepaid expenses and other assets.

Current wording

The net cash used in operating activities of $36.8 million for the nine months ended September 30, 2025 was due to a net loss of $62.2 million, the amortization of premiums on investments of $1.7 million, and provision for inventories of $0.2 million, which were adjusted by stock-based compensation expense of $11.6 million, loss on extinguishment of term loan of $7.7 million, depreciation and amortization of $3.5 million, non-cash interest expense of $2.0 million, non-cash lease expense of $1.2 million, a net cash inflow from the change in our operating assets and liabilities of $0.7 million, and provision for credit losses of $0.7 million. The net cash inflow from operating assets and liabilities was primarily due to decreases in inventory, accounts receivable and prepaid expenses and other assets, and an increase in deferred revenue due to growth in our business. This net cash inflow from operating assets and liabilities was partially offset by a decrease in accrued compensation and related benefits resulting from the payouts of 2024 annual cash bonus, a decrease in accrued interest as a result of the termination of the SLR Term Loan, and decreases in accounts payable, operating lease liabilities, accrued expenses and accrued warranty liability.

Previous wording

The net cash used in investing activities of $109.2 million for the six months ended June 30, 2025 was due to purchases of short-term investment securities of $153.7 million and purchases of property and equipment of $0.4 million, which was partially offset by the maturities of short-term investment securities of $44.8 million.

Current wording

The net cash used in investing activities of $106.3 million for the nine months ended September 30, 2025 was due to purchases of short-term investment securities of $193.7 million and purchases of property and equipment of $0.6 million, which was partially offset by the maturities of short-term investment securities of $88.0 million.

Previous wording

The net cash provided by financing activities of $55.3 million for the six months ended June 30, 2025 was due to net proceeds of $161.5 million from the issuance of Series A Convertible Preferred Stock, net proceeds of $98.3 million from borrowings under the Perceptive Term Loan Facility, and proceeds from ESPP purchases, partially offset by cash outflow of $205.0 million in repayment of the SLR Term Loan which included final payment and termination fees.

Current wording

The net cash provided by financing activities of $55.5 million for the nine months ended September 30, 2025 was due to net proceeds of $161.5 million from the issuance of Series A Convertible Preferred Stock, net proceeds of $98.3 million from borrowings under the Perceptive Term Loan Facility, and proceeds from ESPP purchases, partially offset by cash outflow of $205.0 million in repayment of the SLR Term Loan which included final payment and termination fees.