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Outset Medical (OM)
NASDAQ:OM
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Outset Medical
(NASDAQ:OM)
50Neutral
Positive Factors
Commercial Strategy
OM has been working through a commercial transformation that should begin to yield dividends, and observed positive early indications in 2H'24 that the commercial transformation was taking effect.
Regulatory Affairs
Outset Medical announced that they received notice from the FDA indicating that all issues in their Warning Letter have been resolved.
Stock Target Price
The target price for Outset Medical was updated to $15 from $6.
Negative Factors
Console Revenue
While encouraging, this also implied a lighter Q4 Console revenue metric than forecasted, $5.8M vs $7.3M estimate.
Product Revenue
Product revenue in the quarter was $21.0M, which was down 8% from 4Q'23.
Stock Split
Outset Medical's 1-for-15 reverse stock split became effective, reducing the company's share count to approximately 17M from ~265M previously.
Outset Medical (OM) vs. S&P 500 (SPY)
Market Cap
$177.88M
Dividend YieldN/A
Average Volume (3M)87.95K
Price to Earnings (P/E)―
Beta (1Y)2.01
Revenue Growth-12.80%
EPS Growth28.80%
CountryUS
Employees480
SectorHealthcare
Sector Strength74
IndustryMedical - Devices
Share Statistics
EPS (TTM)-37.32
Shares Outstanding17,699,594
10 Day Avg. Volume118,057
30 Day Avg. Volume87,950
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.56
Price to Cash Flow (P/CF)-2.70
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$16.50Price Target Upside64.18% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering4
Outset Medical Business Overview & Revenue Model
Company DescriptionOutset Medical, Inc. is a medical technology company that specializes in the development and commercialization of innovative dialysis products. The company's flagship product, the Tablo Hemodialysis System, is designed to simplify dialysis treatments for patients with kidney failure, both in clinical settings and at home. Outset Medical operates in the healthcare and medical device sectors, focusing on improving the dialysis experience through technology and patient-centric solutions.
How the Company Makes MoneyOutset Medical generates revenue primarily through the sale and lease of its Tablo Hemodialysis System, which is marketed to hospitals, dialysis clinics, and home users. The company also earns income from the sale of consumables and accessories required for the operation of the Tablo system. Additionally, Outset Medical may engage in service agreements for maintenance and support, contributing to its revenue streams. Strategic partnerships with healthcare providers and institutions further enhance its market reach and business growth.
Outset Medical Financial Statement Overview
Summary
Outset Medical is experiencing revenue growth but faces profitability challenges with negative net income and EBIT margins. While there is improved cost management and liquidity from high cash reserves, the company struggles with high leverage and a declining equity position, indicating financial strain.Income Statement
Outset Medical's revenue has shown growth from 2019 to 2023, with a 17.4% increase from 2022 to 2023. However, the company is currently operating at a loss with negative net profit and EBIT margins. The gross profit margin improved from 15.4% in 2022 to 22.2% in 2023, indicating better cost management. Despite these improvements, the persistent negative EBITDA and net income highlight ongoing profitability challenges.40
Negative
Balance Sheet
Outset Medical's balance sheet shows a significant decrease in stockholders' equity from $122.9M in 2023 to $26.8M in 2024, indicating financial strain. The debt-to-equity ratio has risen sharply, suggesting increased leverage, which poses a risk. However, the company maintains a high level of cash and cash equivalents, which provides liquidity and could support future operations.50
Neutral
Cash Flow
The company's operating cash flow remains negative, although there is a slight improvement in free cash flow from 2022 to 2023. The operating cash flow to net income ratio is approximately 0.85, indicating that cash flow issues are closely tied to net income losses. Despite these challenges, substantial cash reserves are helping to offset operational cash deficits.45
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 113.69M | 130.38M | 115.38M | 102.60M | 49.94M | Gross Profit |
| 38.56M | 29.00M | 17.83M | 7.61M | -13.04M | EBIT |
| -113.38M | -169.77M | -161.02M | -130.52M | -117.47M | EBITDA |
| -97.89M | -153.79M | -152.81M | -124.86M | -114.85M | Net Income Common Stockholders |
| -127.98M | -172.80M | -162.96M | -131.94M | -120.70M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 158.69M | 203.32M | 287.50M | 339.49M | 314.87M | Total Assets |
| 275.80M | 313.80M | 400.12M | 463.46M | 403.83M | Total Debt |
| 4.48M | 136.19M | 103.23M | 37.81M | 38.60M | Net Debt |
| -119.53M | 67.68M | 30.01M | -144.54M | -256.37M | Total Liabilities |
| 248.98M | 190.91M | 154.13M | 89.38M | 75.22M | Stockholders Equity |
| 26.82M | 122.89M | 245.99M | 374.08M | 328.61M |
| Cash Flow | Free Cash Flow | |||
| -117.22M | -134.81M | -154.05M | -133.37M | -108.12M | Operating Cash Flow |
| -116.30M | -131.37M | -145.73M | -130.26M | -99.02M | Investing Cash Flow |
| 103.94M | 83.03M | -66.30M | -142.51M | 3.95M | Financing Cash Flow |
| 67.87M | 43.65M | 72.90M | 160.15M | 385.68M |
Outset Medical Technical Analysis
Neutral
10.05
Price Trends
11.36
Negative
12.86
Negative
22.02
Negative
Market Momentum
-0.64
Negative
50.94
Neutral
82.51
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For OM, the sentiment is Neutral. The current price of 10.05 is above the 20-day moving average (MA) of 9.69, below the 50-day MA of 11.36, and below the 200-day MA of 22.02, indicating a neutral trend. The MACD of -0.64 indicates Negative momentum. The RSI at 50.94 is Neutral, neither overbought nor oversold. The STOCH value of 82.51 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for OM.
Outset Medical Risk Analysis
Outset Medical disclosed 83 risk factors in its most recent earnings report. Outset Medical reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Outset Medical Peers Comparison
Overall Rating
UnderperformOutperform
Sector (49)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $14.29B | 24.47 | 3.87% | 1.83% | -0.57% | 8.25% | |
62 Neutral | $12.03B | 14.00 | 159.08% | ― | 5.56% | 45.02% | |
54 Neutral | $16.98B | 136.07 | -9.24% | 2.77% | -14.00% | -184.82% | |
50 Neutral | $177.88M | ― | -170.97% | ― | -12.80% | 28.80% | |
49 Neutral | $6.94B | 0.66 | -52.58% | 2.47% | 22.65% | 0.94% | |
48 Neutral | $695.23M | ― | -48.70% | ― | 3.55% | -757.75% | |
46 Neutral | $2.42B | ― | -50.74% | ― | -7.03% | -20233.78% |
* Healthcare Sector Average
Performance Comparison
OM
Outset Medical
10.49
-20.33
-65.96%
BAX
Baxter International
33.60
-7.10
-17.44%
DVA
DaVita
150.41
15.64
11.60%
FMS
Fresenius Medical Care
24.31
5.76
31.05%
OMI
Owens & Minor
9.27
-16.21
-63.62%
QDEL
QuidelOrtho
36.51
-10.96
-23.09%
Outset Medical Earnings Call Summary
Earnings Call Date: Feb 19, 2025 | % Change Since: -28.72% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong recurring revenue growth and significant operational improvements, including gross margin expansion and successful recapitalization. However, challenges remain in console sales and meeting original revenue expectations.Highlights
Strong Recurring Revenue Growth
Recurring revenue grew 13% sequentially and 17% year-over-year, driven by strong utilization across the installed base of nearly 6,000 Tablo consoles.
Gross Margin Expansion
Non-GAAP gross margin expanded by nearly 12 percentage points in 2024, with a continued focus on reaching above 40% in 2025.
Successful Recapitalization
Outset Medical secured $172.7 million in equity financing and reduced their outstanding debt from $200 million to $100 million, extending the maturity to 2030.
Regulatory Achievement
The FDA warning letter from July 2023 was officially closed following a comprehensive inspection with no 483 observations.
Operational Cost Reductions
Operating expenses decreased by 27%, and the company plans to reduce cash use in 2025 by more than 50% compared to 2024.
Lowlights
Revenue Decline in Console Sales
Product revenue declined by 8% year-over-year due to lower console sales, despite strong recurring revenue.
Below Original Revenue Plan
Although the company finished ahead of updated guidance, the total revenue of $113.7 million for 2024 was below the original plan for the year.
Company Guidance
During the Outset Medical Fourth Quarter 2024 Earnings Conference Call, several key metrics and forward-looking guidance were highlighted. The company reported a quarterly revenue of $29.5 million, beating earlier expectations, and closing the fiscal year with $113.7 million in revenue. Recurring revenue saw a 13% sequential increase, reaching $23.7 million for the quarter, and a 21% growth for the full year, totaling $83.9 million. The installed base of Tablo consoles grew by 10% year-over-year, with nearly 6,000 units deployed, leading to an anticipated recurring revenue run rate of over $100 million by the end of 2025. Gross margin expanded to 37.6% in Q4, with expectations to reach above 40% by the end of 2025, despite the impact of under-absorption of manufacturing overhead. Operating expenses decreased by 27% year-over-year to $26.6 million in Q4. Looking ahead, Outset Medical anticipates 2025 revenue between $115 million and $125 million, with a continued focus on growing the console installed base, expanding gross margins, and achieving profitability.Outset Medical Corporate Events
Private Placements and FinancingBusiness Operations and Strategy
Outset Medical Strengthens Financial Position with Key Moves
Positive
Jan 8, 2025
Outset Medical, Inc. has successfully closed a private placement, issuing 863,340 shares of Series A Non-Voting Convertible Preferred Stock and entered into a $100 million credit agreement with Perceptive Credit Holdings IV, LP. This strategic financial maneuver, which includes terminating existing credit facilities and issuing potential warrants, is designed to bolster the company’s liquidity and support its ongoing operations and growth ambitions. These moves could potentially impact Outset Medical’s market positioning by enhancing its financial flexibility and operational stability, though the conversion of preferred stock is contingent upon stockholder approval, which could influence future capital structure decisions.
Private Placements and FinancingBusiness Operations and Strategy
Outset Medical Secures New Financing and Debt Facility
Positive
Jan 6, 2025
Outset Medical has announced a $169 million private placement financing and a new debt facility of up to $125 million, aiming to retire prior debt and bolster its financial position. This strategic move is expected to support Outset in reaching cashflow breakeven, enabling the company to focus on advancing its mission to transform dialysis delivery, with projected financial improvements and operational growth.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.