Outset Medical (Nasdaq: OM) stock has lost more than half its value today — a day after a disappointing Q2 report.
OM shares were down more than 60% to $1.33 apiece by midday trading today. MassDevice’s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — was up slightly.
The San Jose, California–based home dialysis tech company reported losses of $34.45 million. That equals a loss of 66¢ per share on sales of $27.4 million for the three months ended June 30, 2024.
Outset recorded a nearly $10 million bottom-line gain with a year-over-year sales decrease of 24%.
Adjusted to exclude one-time items, earnings per share came in at 47¢. That landed 2¢ behind expectations on Wall Street. Sales also fell short as experts forecast $31.2 million in revenue for the quarter.
Chair and CEO Leslie Trigg noted in a news release that the company saw fewer console placements than expected in the quarter. It now expects fewer placements for the full year, and similarly lowered its guidance for the 12-month period as well.
Outset now expects 2024 revenue to come in at approximately $110 million. That marks a significant dip from the previous projection for between $145 million and $153 million. It also revised its non-GAAP gross margin projection for low-to-mid-30% range, having previously suggested the low-30% range.
“During the quarter, the number of treatments performed each month on Tablo continued at record levels, as utilization remained high and gross margin materially expanded as it has each quarter for more than 3 years,” said Trigg. “These results reflect the strength and differentiation of Tablo and the positive impact it is having on the lives of patients and providers.
“At the same time, new console placements were below our expectations and will be lower than we originally forecasted for the year. We are taking clear steps to improve our execution and grow the business over the long term to bring the benefits of Tablo to even more providers and dialysis patients.”
This marks the second straight down quarter for Outset, which last quarter announced cost-reduction steps, including workforce reductions, while also missing Wall Street’s projections.
The analysts’ take on Outset Medical’s results
BTIG analysts Marie Thibault and Sam Eiber said Outset blamed its misses and guidance cut on longer capital sales cycles at more mainstream enterprise customers who typically require approvals from several stakeholders.
The analysts also note that Outset has a reorganization of its commercial team and strategy underway. It wants to better target and convert those accounts, seen by the analysts as the middle part of the adoption curve. The analysts expect that reorganization to take several quarters to implement.
On the positive side, the analysts note that Outset reported the continued record level of Tablo treatments and an increase in gross margin. They say this proves that the technology is “sticky” and recurring revenue provides a strong foundation.
“We are remaining constructive because the revised guidance looks more achievable to us and treatment sales and recurring revenue have remained healthy,” the analysts wrote. “We are disappointed and wary, but do not expect Outset Medical to face a cash crunch and we see its hurdles as largely focused on commercial execution, not structural challenges.”
This story originally ran on Aug. 7, 2024. Updated Aug. 8 with next-day stock price.
