Outset Medical
(Nasdaq: OM)
shares fell this morning on first-quarter misses and restructuring resulting in headcount reductions.
Chair and CEO Leslie Trigg noted cost-reduction steps taken by the company, although the company did not specify how many workers were affected.
Shares of OM fell to more than 14% to $3.53 apiece in mid-morning trading today. MassDevice’s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — rose nearly 0.7%. Despite the missed expectations, analysts remain high on Outset following some recent good news, in spite of the workforce reduction.
According to the company’s first-quarter earnings call, transcribed by SeekingAlpha, Trigg said the lion’s share of the reduced workforce came in the operations and R&D areas, with the remainder spread across the organization.
“Importantly, our cost reductions were carefully planned to protect two key goals, one, continuing to meet or exceed the expectations of patients and customers; and two, achieving our long-term revenue and gross margin expansion guidance,” Trigg said.
BTIG analysts Marie Thibault and Sam Eiber acknowledge the “disappointing” headline on Outset’s first quarter. However, they attributed struggles to customers awaiting the TabloCart with Prefiltration launch, plus the cyberattack that delayed orders.
Management said the company saw a rebound in treatment ordering in April, though. The analysts also highlighted the importance of the company’s reaffirmed 2024 guidance. The workforce reduction and cost-cutting efforts should accelerate the company toward cash flow breakeven, the analysts said. They reiterated their “Buy” rating for Outset Medical.
“To us, Q1 demonstrated OM is staying on its turnaround path, with added focus on cash burn and potential for a reacceleration in sales in 2H24,” the analysts said. “We continue to think shares deserve to trade higher over time.”
A look at the first-quarter numbers from Outset Medical
The San Jose, California-based home dialysis company reported losses of $39.9 million. That equals 78¢ per share on sales of $28.168 for the quarter ended March 31, 2024.
Outset recorded a $4 million bottom-line gain on a 15.8% sales dip.
Adjusted to exclude one-time items, losses per share came in at 57¢. That landed 2¢ behind expectations on Wall Street. Sales came in just shy of expectations of $28.17 million.
A slight drop in sales may be attributed to another pause on sales for the Tablo system following a recall. However, Outset remedied its issues this week with FDA 510(k) clearance and resumed distribution of its TabloCart with Prefiltration.
“With our recent 510(k) clearance for TabloCart with Prefiltration, 12th consecutive quarter of gross margin expansion and strong sales pipeline growth during the quarter, we are well positioned to capitalize on the $11 billion U.S. dialysis market opportunity,” said Leslie Trigg, chair and CEO. “Tablo’s uniquely compelling value proposition continues to resonate with acute- and home-care providers, with significant new customer wins in both settings during the quarter.
“We also took cost-reduction steps during the quarter to help ensure we reach our profitability goals without the need for additional capital. We believe these actions, combined with continued gross margin expansion and a strong recurring revenue foundation, now provide us a clear path to achieve cash-flow breakeven sooner than previously expected.”
Outset reaffirmed its 2024 guidance for revenues betwen $145 million and $153 million.
