Q3 2023 Outset Medical Inc Earnings Call

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Speaker 1: You

Okay.

Good day, and thank you for standing by.

Speaker 2: Good day, and thank you for standing by. Welcome to the Outset Medical Q3 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone, and you will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Come to the outset medical Q3, 2023 earnings conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone and you will then hear an automated message advising your hand is right to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.

Speaker 2: Please be advised at today's conference as being recorded. I would now like to hand the conference over to your first speaker today, Jim Mizzola, head of investor relations. Thank you.

I would now like to hand, the conference over to your first speaker today, Jim as a whole our head of Investor Relations. Please go ahead.

Speaker 3: Okay, thank you. Good afternoon, everyone, and welcome to a third quarter of 2023 earnings call. Here with me today are Leslie Trigg, Chair and Chief Executive Officer, and the BLMED Chief Financial Officer. We issued a news release after the close of market today and updated our investor presentation, both of which can be found on the investor relations pages aboutsetmedical.com. This call is being recorded and will be archived on the investor section of our website.

Okay. Thank you good afternoon, everyone and welcome to our third quarter 2023 earnings call.

Today, our lovely trip chair and Chief Executive Officer, and tubular Mad Chief Executive Chief Financial Officer, We issued a news release after the close of market today and updated our investor presentation, both of which can be found on the Investor Relations page is about that medical dot com.

Is being recorded and will be archived on the investors section of our website.

Speaker 3: Is there intent that all forward-losing statements made during today's call be protected under the Private Security's litigation format of 1995? These statements relate to expectations or predictions that future events are based on our current estimates and various assumptions and involve material risks and uncertainties that could cause actual results or events to materialy differ from those anticipated or implied. How citizens no obligations update these statements?

It is their intent that all forward looking statements made during today's call be protected under the private Securities Litigation Reform Act of 1095. These statements relate to expectations or predictions of future events are based on our current estimates and various assumptions and involve material risks and uncertainties that could cause actual results or events to macao.

Serially differ from those anticipated or implied outlook.

<unk> assumes no obligation to update these statements for a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section about the public filings with the Securities and Exchange Commission, including our latest annual and quarterly reports.

Speaker 3: For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section about the public filing with the Secure Reason Exchange Commission, including our latest annual and quarterly reports. With that, I will now turn the call over to Leslie. Thank you.

I will now turn the call over to Leslie.

Thanks, Jim Good afternoon, everyone and thank you for joining us.

Speaker 2: A few weeks ago we provided our preliminary third quarter results and shared details on the headwinds that will continue to affect our business through this year and into that.

A few weeks ago, when we provided our preliminary third quarter results and share details on the headwinds that will continue to affect our business through this year and into that.

Speaker 2: Today, we will review our results for the full quarter, share an update on the actions we have taken to adapt and respond to the current environment, and provide our outlook for 2024 and the longer term.

We will resolve review our results for the full quarter share an update on the actions we have taken to adapt and respond to the current environment and provide our outlook for 2024 and the longer term. We will also discuss when has not changed despite some recent step back all of the structural tailwind remain in place.

Speaker 2: Despite some recent setbacks, all the structural tailwinds remain in place.

Speaker 2: We are on the front end of growth into two very large end markets anchored by 36 million patients living with chronic kidney

We're on the front end of growth into two very large end markets anchored by 36 million patients living with chronic kidney disease.

Speaker 2: our pipeline continues to expand, and our value proposition remains compelling. Tableau's ability to disrupt an $11 billion U.S. market with a better solution in the acute and home environment is firmly intact.

Our pipeline continues to expand and our value proposition remains compelling <unk>.

<unk> ability to disrupt and $11 billion U S market with a better solution and the acute and home environment is firmly intact.

Speaker 2: To begin, revenues to the third quarter were balanced between our cute and home and markets, with a roughly equal number of households shipped to a cute and home providers. In the acute and market, our land and expand strategy continues to support a strong pipeline and growing installments.

To begin revenues in the third quarter were balanced between our acute and home and markets with a roughly equal number of capital shift to acute and home providers and the acute end market, our land and expand strategy continues to support a product a strong pipeline and growing installed base.

Speaker 2: 30% of consequences during the first three quarters in 2023 came from a Council, one during 2022. The other 70% are from extension.

30% of console placements during the first three quarters in 2023 came from accounts. We won during 2022. The other 70% are from expansion sites.

Speaker 2: KABLO is now used in more than 650 acute and post-acute facilities, including contracts with top national health system, where we have about 20% penetration, and also within the top 50 regional IDN, where we are less than 10% penetrated.

Tableau is now used in more than 650 acute and post acute facilities, including contract with top National Health system, where we have about 20% penetration and also within the top 50 regional IBM, where we are less than 10% penetrated today.

Speaker 2: Further, we continue to see success with initiatives such as expanded division education and published cost reduction data, which are all having a positive impact in the acute setting. During 2023, we have reached more than 400 nephrologists and dialysis professionals with our peer-to-peer educational program.

Further we continue to see success with initiatives such as expanded physician education and public published cost reduction data, which are all having a positive impact in the acute setting. During 2023, we have reached more than 400, nephrologist and dialysis professionals with our peer to peer educational program.

This is in addition to the more than 10000 nurses already trained on tableau.

Speaker 2: This is in addition to the more than 10,000 nurses already trained on Tableau.

Speaker 2: Physician and nurse awareness and belief in Tableau continues to be bolstered by published clinical, operational, and economic data. To date, over 70 abstracts and 15 manuscripts on Tableau have been generated.

This is a nurse awareness and belief in tableau continues to be bolstered by published clinical operational and economic data to date over 70 abstracts and 15 any script on tableau have been generated.

Speaker 2: Building on this strong foundation, last week's American Society of Nephrology Annual Meeting

Building on this strong foundation last week's American Society of Nephrology annual meeting.

Speaker 2: produce numerous abstracts on Tableau. In the acute setting, these abstracts continue to demonstrate Tableau's differentiated potential to reduce costs and enhance care in both the ICU and at the bed.

<unk> numerous abstract on tableau.

The acute setting these abstract continue to demonstrate tableau differentiated potential to reduce costs enhance cure in both the ICU at the bedside.

Speaker 2: One large health system reported achieving more than a 50% reduction in their treatment costs per hour while also reducing length of day to the ICU. A hospital in Alaska presented data showing that tabloid dramatically reduced the number of patients they had to transfer out of their hospital for care. After adopting tabloid, the hospital only had to transfer one patient out in 12 months compared to 70 patients transferred out the prior year before using tabloid.

One large health system reported achieving more than a 50% reduction in their treatment cost per hour, while also reducing length of stay in the ICU.

Hospital in Alaska presented data showing that tableau dramatically reduce the number of patients they had to transfer out of their hospital for care.

After adopting tableau the hospital only had to transfer one patient out in 12 months compared to 70 patients transferred out the prior year before using tableau.

Speaker 2: Several abstracts related to the use of Tableau in the home, including data from the first 500 patients home on Tableau, which demonstrated a very broad demographic spectrum of adopters, and in a separate abstract showed improvements in physical and mental health scores over 12 months of using Tableau at home, including improvement in sleep, which is among the most frequently cited issues among patients on site.

Shuffle abstracts related to the use of tableau in the home, including data from the first 500 patients home on tableau, which demonstrated a very broad demographic spectrum of adopters and then a separate abstract showed improvement in physical and mental health scores over 12 months of using tableau at home, including improved.

And sleep, which is amongst the most frequently cited issues among patients on dialysis.

In terms of our home sales in the quarter orders and shipments were weighted toward mid sized dialysis organizations and new home market entrants, where we continue to see a strong response to tableau has economic value proposition positive patient feedback faster training time and higher retention rates.

Speaker 2: In terms of our home sales in the quarter, orders and shipments were weighted toward midsize dialysis organizations and new home market entrants, where we continue to see a strong response to Tableau's economic value proposition, positive patient feedback, faster training time, and higher retention rates.

Speaker 2: We have made progress this year, landing or expanding within several new innovative alternative providers, evidence their strategy to broaden the access to home hemodialysis while in the early stages is working.

We have made progress this year landing or expanding within several new innovative alternative providers evidence that our strategy to broaden the access to home hemodialysis, while in the early stages is working.

Speaker 2: Overall, for 2023, we expect to place approximately 1,400 new Tableau consoles, split two-thirds in the acute setting and one-third in the home setting. With these new placements, we would exit 2023 with approximately 5,400 units in the install base, which we project will reach $100 million in recurring annual revenue over the next year.

Overall for 2023, we expect to place approximately 1400, new Tableau Council.

Two thirds in the acute setting and one third in the home setting with these new placements, we would exit 2023 with approximately 5400 units in the installed base, which we project will reach $100 million in recurring annual revenue overtime.

We felt it was important to provide investors with an annual update on console placements earlier than normal as it is relevant to the financial guidance. We will also provide today.

Speaker 2: We felt it was important to provide investors with this annual update on consult placements earlier than normal, as it is relevant to the financial guidance we will also provide today.

Speaker 2: In terms of the broader competitive market, our sales team has been working diligently over the past several weeks to address misconceptions created by competitors as a result of the FDA warning letter issued in July .

In terms of the broader competitive market. Our sales team has been working diligently over the past several weeks to address misconception created by competitors as a result of the FDA warning letter issued in July.

Speaker 2: While we expect this competitive response to continue through Q4, our team is better prepared to respond and is doing so accordingly. As noted previously, we believe we have addressed concerns regarding promotion and the Tableau cart with prefiltration 510K has been submitted with interactive 510, excuse me, with interactive FDA review underway. We have not factored in its clearance into our 2023 outline.

While we expect this competitive response to continue through Q4, our team is better prepared to respond and is doing so accordingly.

As noted previously we believe we have addressed concerns regarding promotion and the tableau cart with pre filtration by 10-K has been submitted with interactive <unk> excuse me with interactive FDA review underway.

We have not factored in at clearance into our 2023 outlook.

Speaker 2: As we look beyond 2023, we would like to take this opportunity to share our perspectives on how this business scaled into the longer.

As we look beyond 2023, we would like to take this opportunity to share our perspectives on how this business scales over the longer term.

Speaker 2: Three years post-IPO, we recognized the need to update investors on what we believe the next several years will look like relative to revenue growth, growth margin expansion, and cash flow breakeven.

Three years post IPO, we recognize the need to update investors on what we believe the next several years will look like relative to revenue growth gross margin expansion and cash flow breakeven.

Speaker 2: And being in the market now at some level of scale for several years who've given us a lot more data and experience from which to project forward with confidence and clarity.

And being in the market now at some level of scale for several years has given us a lot more data and experience from which to project forward with confidence and clarity.

Speaker 2: While the progress path won't always be linear across all our key goals, we've also heard investors loud and clear on their desire for more metrics, particularly around the install dates and use settings. And so we intend to do that going forward, starting with today's call. And finally, we are acutely aware of shareholders' desire for outset to reach profitability, and we remain committed and urgent around getting there.

While the progress past won't always be linear across all our key goal. We've also heard investors loud and clear on their desire for more metrics, particularly around the installed base and use settings and so we intend to do that going forward starting with today's call.

And finally, we are acutely aware of shareholders desire for outset to reach profitability and we remain committed and urgency around getting there.

Speaker 2: Cash consumption is obviously a big part of that equation and to that end we have already taken improved steps to reduce spending while continuing investments that drive revenue growth, growth margin expansion and operating average. The deal will lay out the specifics in greater detail and so with that I will now turn the call over to

Cash consumption is obviously, a big part of that equation and to that end, we have already taken prudent steps to reduce spending.

While continuing investments that drive revenue growth gross margin expansion and operating leverage the deal will lay out the specifics in greater detail and so with that I will now turn the call over to him.

Speaker 4: Thanks Leslie, hello everyone. I'd like to talk today about three things. First, 2023, including our two three performance, guidance for the remainder of the year, and actions we've taken here early in the fourth quarter to reduce our rate of cash to some.

Thanks, Leslie Hello, everyone I'd like to talk today about three things first 2023, including our Q3 performance guidance for the remainder of the year and actions. We've taken here early in the fourth quarter to reduce our rate of cash consumption.

Speaker 4: Second, our 2024 guidance, our longer term view and our path to cash flow break even.

Our 2020 forward guidance, our longer term view and our path to cash flow breakeven.

Speaker 4: And third, our balance sheet and our cash position.

And third our balance sheet and our cash position.

Speaker 4: With respect now to Q3 and 2023, our third quarter revenue of $30.4 million is a 9% increase over the third quarter of 2022 and a sequential decline compared to Q2 2023. The sequential decline in revenue is driven by fewer council placements for the factors that we outlined in October .

With respect now to Q3 and 2023.

Third quarter revenue of $34 million is a 9% increase over the third quarter of 2022, and the sequential decline compared to Q2 2023, the sequential decline in revenue was driven by fewer console placements.

The factors that we outlined in October.

Speaker 4: Consumable revenue was $11 million, up 14% from the prior quarter, and 62% versus the prior year. Cartridge utilization continued to perform well and in line with our expectations, highlighting the strength of our recurring revenue model.

Super Bowl revenue was $11 million up 14% from the prior quarter and 62% versus the prior year.

Cartridge utilization continued to perform well and in line with our expectations highlighting the strength of our recurring revenue model.

Speaker 4: Based on our cloud data, we see console utilization in the hospital setting of around five treatments per week and home consoles at just about three.

Based on our cloud data, we see console utilization in the hospital setting of around five treatments per week and home consoles at just above three two week.

Service and other revenue of $6 $8 million was up one 8% from the prior quarter and higher by 13, 4% compared to the prior year.

Speaker 4: Service and other revenue of $6.8 million was up 1.8% from the prior quarter and higher by 13.4% compared to the prior year. Excluding service revenue from our HHS agreement that was included in Q3-22 and did not repeat this Q3, service and other revenue increased by 42.6%, demonstrating the high renewal rate in our recurring service contract.

Excluding service revenue from our HHS agreement that was included in Q3 dollars 22 and did not repeat this Q3.

And other revenue increased by 42, 6% demonstrating the high renewal rates and a recurring service contracts.

Speaker 4: Moving to gross margin and operating expenses, I will highlight our non-GAAP results. I encourage you to review the reconciliation of GAAP to non-GAAP measures, which can be found in today's earnings report.

Moving to gross margin and operating expenses I will highlight our non-GAAP results I encourage you to review the reconciliation of GAAP to non-GAAP measures, which can be found in today's earnings release.

Speaker 4: Our third quarter growth margin was 25.6%, a sequential improvement of 312 basis points and an improvement of just above 9 percentage points versus the prior year period.

Our third quarter gross margin was 25, 6% a sequential improvement of 312 basis points and an improvement of just above nine percentage points versus the prior year period.

Speaker 4: Gross margin expanded for the 10th consecutive quarter with a mix of higher margin recurring consumable revenue and service another revenue representing roughly 60% of total revenue as compared to 45% in QQ official.

Gross margin expanded for the 10th consecutive quarter with a mix of higher margin recurring consumable revenue and service and other revenue representing roughly 60% of total revenue.

Compared to 45% in Q2 of this year.

Speaker 4: As expected, service and other gross margin increased sequentially to 15.4%, and our expectation remains that it will continue to improve again in the fourth quarter.

As expected service and other gross margin increased sequentially to 15, 4% and our expectation remains that it will continue to improve again in the fourth quarter.

Operating expenses of $42 $3 million into third quarter were roughly flat sequentially and up 11% versus the prior year period.

Speaker 4: Operating expenses of $42.3 million in the third quarter were roughly flat sequentially and that 11% were just a prior year period.

Speaker 4: We reported third quarter gap net loss of $46.2 million resulting in a net loss of 93 cents per share compared to a net loss of $40.8 million or 85 cents per share for the prior year period. Non-gap net loss of $35.2 million or 71 cents per share compared to a non-gap net loss of $33.4 million or 70 cents per share for the same period in 2022.

We reported third quarter GAAP net loss of $46 2 million, resulting in a net loss of 93 per share compared to a net loss of $48 million or 85 per share for the prior year period.

non-GAAP net loss was $35 3 million or 71 per share compared to a non-GAAP net loss of $33 4 million.

Or <unk> 70 per share for the same period in 2022.

Speaker 4: We ended the quarter with approximately $197.3 million in cash, cash equivalents, short-term investment, and restricted cash.

We ended the quarter with approximately 197 $3 million in cash cash equivalents short term investments and restricted cash.

Speaker 4: Moving now to our full year 2023 outlook, we are reiterating our expectation for revenue to be approximately $130 million, which represents 13% growth over fiscal year 2022 revenue. We continue to expect gross margin to be in the low 20% range and to exit the fourth quarter in the mid 20% range.

Moving now to our full year 2023 outlook, we are reiterating our expectation for revenue to be approximately $130 million, which represents 13% growth over fiscal year 2022 revenues.

We continue to expect gross margin to be in the low 20% range and to exit the fourth quarter in the mid 20% range.

Speaker 4: Further, we continue to expect to consume less cash in 2023 than we did in 2022. And to exit 2023 with approximately $160 million of cash, cash equivalent, short-term investment, and restricted cash on our balance sheet.

Further we continue to expect to consume less cash in 2023, then we get into 2022 and to exit 2023 with approximately $160 million of cash cash equivalents short term investments and restricted cash on our balance sheet.

Speaker 4: I want to take a moment now to talk about the cost reduction we implemented in the fourth quarter, to better align our operating expenses with our expected rate of revenue growth, and with our commitment towards driving towards profitability.

I wanted to take a moment now to talk about the cost reduction we implemented in the fourth quarter to better align our operating expenses with our expected rates of revenue growth and with our commitment towards driving towards profitability.

Speaker 4: We will record a charge of approximate between a half million dollars in our statement of operations in the full quarter, composed largely of severance and related benefits.

We will record a charge of approximately $2 $5 million in our statement of operations in the fourth quarter composed largely of severance and related benefits. These actions.

Speaker 4: These actions combined with other cost savings initiatives in a foot in place mean that our expected all acts in 2024 will be 20 to $25 million dollars less than we expected to be in 2023. Now, certainly.

Bind with other cost savings initiatives, we have put in place means that our expected opex in 2024 will be $20 million to $25 million less than we expected to be in 2023.

Now turning to 2024.

Speaker 4: For the full year 2024, we expect revenue growth in the mid-peen as compared to fiscal year 2023 revenue.

For the full year 2024, we expect revenue growth in the mid teens as compared to fiscal year 2023 revenue.

Speaker 4: This is a conservative expectation based on the following assumptions.

This is a conservative expectation based on the floating assumptions one.

Speaker 4: replace a similar number of consoles in 2024 as we have in 2023. Two, recurring revenues again contribute to our growth in the same manner as they have in 2023. And three, that Tableau cart with pre-filtration is approved in the second half of the year.

Place a similar number of consoles in 2024 as we have in 2023 to <unk>.

Recurring revenues again contribute to our growth in the same manner as they have in 2023 and three that tableau cart with pre filtration is approved in the second half of the year.

Speaker 4: As always, over performance in any year could be driven by a variety of effects.

As always over performance in the year it could be driven by a variety of factors, including greater console placements in our large acute and home end markets.

Speaker 4: including greater control placements in our large acute and home end markets.

Speaker 4: higher ASP of our consoles, driven by increased uptake of Tableau ProPlus software and Tableau cards, as well as higher volume consumable sales.

Higher ASP of our consoles.

Given by increased uptake of tableau, plus software and tableau cards.

As well as higher volume consumable sales.

We expect gross margin for the full year 2024 to be in the low 30% range.

Speaker 4: We expect gross margin for the four years 2024 to be in the low 30% range and to exit the fourth quarter of 2024 in the mid 30% range.

The fourth quarter of 2024 in the mid 30% range.

The drivers of gross margin improvements are the same as we have discussed for the past three years.

Speaker 4: The drivers of those margin improvements are the same as we have discussed for the past three years. Console Cost-Term Program, the full true of higher margin products and consumables as console to play and service level.

So of course turn programs the pull through of higher margin products and consumables as controls in place.

And service leverage.

Speaker 4: With the cost reductions we are undertaking in 2023 and the further actions we're taking to manage our OPEX, we anticipate OPEX in 2024 of $140 to $145 million, or $20 to $25 million below where we expect to exit 2023.

With the cost reductions we are undertaking in 2023 and the further actions we are taking to manage our opex, we anticipate opex in 2024 of $140 million to $145 million.

For $20 million to $25 million below where we expect to exit 2023.

This combination of revenue growth gross margin expansion and reduced Opex is expected to drive significant operating leverage and a further reduction in our cash consumption.

Speaker 4: This combination of revenue growth was margin extension and reduced all packs was expected to drive to the significant operating leverage and a further reduction in our cash consumption. We expect to use approximately 25% less cash in 2024 than we anticipate using in 2020.

We expect to use approximately 25% less cash in 2024, and we anticipate using in 2023.

Now looking out beyond 2024.

Speaker 4: Now, looking out beyond 2024, the project that our business will grow at a high-teams rate annually after 2024 as we gain scale adjusted the capital spending environment and achieve Tableau of Cart with pre-culturation clearance.

We project that our business will grow at a high teens rate annually. After 2024, as we gain scale adjusted the capital spending environment and achieved tableau cart with pre filtration clearance for modeling purposes. We expect this ramp to show home revenues, increasing from approximately 20% of revenue in 2023.

Speaker 4: for modeling purposes, and we expect this ramp to show home revenues increasing from approximately 20% of revenue in 2023 to approximately 25% of revenue in 2023.

So approximately 25% of revenue in 2027.

Speaker 4: Beginning in 2024, we will share our installed base twice a year to provide additional visibility to this rapid.

Beginning in 2024, we will share our installed base twice a year to provide additional visibility to this ramp.

Our track record for gross margin expansion gives us ongoing confidence in our ability to get to a 50% gross margin milestone.

Speaker 4: Our track record for gross margin expansion gives us ongoing confidence in our ability to get to our 50% gross margin milestone. At our projected revenue growth rates, we now anticipate reaching our 50% gross margin milestone exiting 2027 as full year revenues reach $250 million.

Our projected revenue growth rates, we now anticipate reaching our 50% gross margin milestone exiting 2027 as full year revenues reached $250 million.

Speaker 4: Our conviction in this gross margin ramp is driven by the same factors that appealed 10 consecutive quarters of gross margin expenses.

Our conviction in this gross margin ramp is driven by the same factors that a few 10 consecutive quarters of gross margin expansion.

Speaker 4: Moving to OPEX. As we have previously shared, we believe that we've already made our key structural investments in talent and infrastructure, and we plan to expand OPEX by a maybe single digit percent annually beyond 2024.

Moving to Opex as we have previously shared we believe that we've already made our key structural investments in talent and infrastructure and we plan to expand opex by a mid single digit percent annually beyond 2024.

Speaker 4: This combination of revenue growth, gross margin expansion, and operating leverage is expected to support achievement of cash flow rate even exiting 2027 as we get gross margin to 50%.

This combination of revenue growth gross margin expansion and operating leverage is expected to support achievement of cash flow breakeven exiting 2027, as we get gross margins to 50%.

Speaker 4: Now, turning to our balance sheet in our cash runway. While there are over-performance scenarios that get us the cash flow rate even without the new floor additional capital, it is reasonable to expect that you may need to top off the balance sheet before 2027.

Now turning to our balance sheet and our cash runway Wilder our over performance scenarios that get us to cash flow breakeven without the need for additional capital. It is reasonable to expect that we may need to top off the balance sheet before 2027.

Speaker 4: With approximately $160 million of cash exiting 2023 and access to the next 100 million of debt under our SLR agreement, our cash position provides us with time and levers to operate and grow the business effectively for the next several years. So with that, let me turn the call back to us.

With approximately $160 million of cash exiting 2023 and access to the next $100 million of debt under our <unk> agreement, our cash position provides us with time and leavers to operate and grow the business effectively for the next several years.

With that let me turn the call back to Leslie for closing comments.

Speaker 2: Thanks, Nabil. I'd like to close by going back to the fundamentals of this market, the business model, and our product.

Thanks to Bill I'd like to close by going back to the fundamentals of this market the business model and our product.

We are penetrating one of the largest health care markets in the world with over 85 million dialysis treatments performed each year in the United States alone and we have two growth platforms within our acute dialysis and home dialysis or acute can in the U S is $2 $5 billion, that's nearly 40000 comp.

Speaker 2: We are penetrating one of the largest healthcare markets in the world with over 85 million dialysis treatments performed each year in the United States alone. And we have two growth platforms within it, acute dialysis and home dialysis. Our acute tan in the US is $2.5 billion. That's nearly 40,000 consoles. By year end, we expect to have still just over 4,000 acute consoles. So a very, very long growth runway still lies ahead of us.

By year end, we expect to have sold just over 4000 acute console. So a very very long growth runway still lies ahead of us.

Speaker 2: The home TAM in the U.S. is nearly $9 billion, and that's assuming only 30% of dialysis patients can or ever want to go home. And from what we've seen across the country with Tableau, this is an incredibly conservative estimate. We have barely scratched the surface.

The hometown in the U S is nearly $9 billion and Thats, assuming only 30% of dialysis patients can are ever want to go home and from what we've seen across the country with tableau. This is an incredibly conservative estimate we have barely scratched the surface.

Speaker 2: With so many tailwinds pointing toward more care in the home and more dialysis care in the home specifically, we are on the right side of healthcare with the right technology at the right time.

With so many tailwind pointing toward more care in the home and more dialysis care in the home specifically we are on the right side of health care with the right technology at the right time.

In this model.

Speaker 2: Just four years into commercialization, roughly half of our revenues already come from recurring revenue. When Tableau consoles are sold and installed, they're used. Each console sold over time generates between $15,000 and $20,000 depending on its use setting per year, every year. This is a business that

Just four years into commercialization roughly half of our revenues already come from recurring revenue when tableau Council are sold and installed they are ya.

Each comparable over time generates between 15000 and $20000 depending on a few setting per year every year.

This is a business that produces operating leverage for example, we have grown revenue more than 70% on a compounded annual basis over the last four years with the same size capital L. P.

Speaker 2: For example, we have grown revenue more than 70% on a compounded annual basis of the last four years with the same size capital.

Speaker 2: This is a business that will generate growth margin of 50% and beyond. We have 10 consecutive quarters of growth margin expansion behind us and a clear itemized execution plan that gets us there.

This is a business that will generate gross margin of 50% and beyond.

Have 10 consecutive quarters of gross margin expansion behind us and a clear itemized execution plan that gets us there.

Speaker 2: This is a business that can be profitable and will be profitable due to inherent operating leverage, growth margin profile and an effort-stickening foundation of predictable, sticky, recurring revenue.

This is a business that can be profitable and will be profitable due to inherent operating leverage gross margin profile and an effort thickening foundation of predictable sticky recurring revenue.

And the product.

Speaker 2: What we do well goes beyond the technology. Our product is not just the device, but change management and customer success expertise that is proprietary and very hard to replicate.

What we do well goes beyond the technology, our product is not just the device that change management and customer success expertise that is proprietary and very hard to replicate.

Speaker 2: There are high barriers to success and we are actively elevating those barriers by expanding both our technology mode and our regulatory mode. Our economic, clinical and operational value proposition is ever going.

There are high barriers to success and we are actively elevating those barriers by expanding both our technology moat and our regulatory mode, our economic clinical and operational value proposition is evergreen.

Speaker 2: save healthcare providers money, simplify their operations, and improve the quality of living for patients.

Save health care providers money simplify their operation and improve the quality of living for patients.

Speaker 2: These fundamental benefits are unlikely to go out of style and Tableau brings a highly differentiated, difficult to copy product market fit.

These fundamental benefits are unlikely to go out of style and tableau brings a highly differentiated difficult to copy product market fit to them for.

Speaker 2: For all these reasons, this is a market, a business model, and a product that supports double digit growth rates for many years.

For all these reasons. This is a market a business model and our products that support double digit growth rates for many years to come.

Speaker 2: With that, I think we are ready for Q&A. Operator, please.

With that I think we are ready for Q&A operator, please open the line.

Speaker 2: Thank you at this time. We will conduct a question and answer session. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. So with draw your questions, please press star 11 again. Please stand by while we compile the Q&A rough.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

These standby, while we compile the Q&A roster.

Speaker 2: Our first question comes from the line of Rick Wyze of Cysil. Your line is now open.

Our first question comes from the line of Rick Wise of Stifel. Your line is now open.

Speaker 5: Good afternoon, Leslie. Hi, everybody. Thank you for that very clear

Good afternoon Leslie.

Hi, everybody.

Thank you for that very clear almost clear perspective numbers the incremental guidance.

Speaker 5: all those clear perspectives and numbers, the incremental guidance.

Speaker 5: You know, there's a lot to focus on. But maybe for starters, Leslie, we attended you. Out that was there, the ASM meetings and Philadelphia this past week. I just be curious, you're

Yes.

Lots of focus on.

Sure.

Maybe for starters.

Absolutely.

We attended.

Yes.

That was there.

<unk>.

Meetings in Philadelphia this past week.

I'd just be curious from your perspective.

Speaker 5: that your high level takeaways.

Your your high level takeaways any updates on.

Speaker 5: any updates on reactions to or the opportunities that that emerged at ASN and maybe just as part of that.

Reaction is to or.

The opportunities that emerged thats ASM and maybe.

Just as part of that.

Speaker 5: We heard from one of your larger acute customers about the cost savings they're seeing.

We were we heard from one of your larger.

Customers about that.

Cost savings were seeing.

Speaker 5: How are you driving that awareness? Clearly there's a major customer, the high volume, that's seeing significant economic

How are you driving that awareness clearly, there's a major customer that high volume that seeing.

Significant economic benefits.

Speaker 5: How are you sort of powering that method forward as well? Thank you.

How are you.

Sort of powering that message forward as well thank you.

Speaker 2: Yeah, sure, thanks for the question, Rick. We're creating awareness of the, I would call it now the proven and reproducible cost reduction benefits in a couple of ways. I mentioned on the descriptive remarks that we have actually reached a lot of people through these peer-to-peer educational sessions. We're doing them now amongst nephrologists, amongst nurses, and amongst healthists and executives.

Yeah sure. Thanks for the question Rick.

We're we're creating awareness of the I would call. It now the proven and reproducible cost reduction benefit in a couple of ways.

I mentioned on the scripted remarks that we have actually reached a lot of people through these peer to peer educational sessions.

We're doing it now amongst nephrologists amongst nurses and amongst helped us an executive.

Speaker 2: Having reached over 400 professionals just in the last call it nine or 10 months. That's been a big new focus for us this year. And I think that's really paying off. So that's one venue. The second venue is by continuing to add to the to the published evidence base. I mentioned you over 70 abstract 15 manuscripts.

<unk> reached over 400 professional jets.

Just in the last call it nine or 10 months, that's been a big new focus for US this year and I think thats really paying off so that's one venue.

Second venue.

Is by continuing to add to that Judy the published evidence base I mentioned over 70 abstract 15 manuscripts.

Speaker 2: Any number of those actually reference and document the cost reduction benefits and the operational and clinical benefits is valid and I think that

Any number of those actually referenced and document the.

The cost reduction benefits and the operational and clinical benefits as well and I think that's really paying off.

Speaker 2: really paying off. And then lastly, in...

And then lastly.

Speaker 2: large national and regional medical meetings like the one that you just alluded to, BASN, where we have the opportunity to not only speak directly to customers, but also connect customers with their peer group. So I will say that I think we are starting to see a bit of a network effect here. That network effect is certainly turning the flywheel on the acute and continues to create momentum for us in that segment.

Large national and regional medical meetings like the one that you just alluded to behave band, where we have the opportunity to not only speak directly to customers, but also connect customers with their peer group. So I will say that I think we are starting to see a bit of a network effect here.

Network effect is certainly turning the flywheel on the acute and continues to create momentum for us in that segment.

Speaker 5: Great. That's excellent. And just specifically, you highlighted innovation. I was just curious, you know, are there other products we should be aware of or you'd want to talk about? But specifically, can you update us at all or add any additional color? I know it's difficult on your interactions with FDA or just where do things stand with Tableau Card?

Great that's excellent.

Just specifically you highlighted innovation I'm just curious.

Are there other products, we should be aware of where you'd want to talk about.

But specifically.

Can you update us at or adding additional quarter.

I know it's difficult.

On your interactions with FDA, or just where things stand with capital cards.

With that little cart sure well are no no updates on the regulatory path.

Speaker 2: Well, no updates on the regulatory path. It is under review and

Is under review and we.

Speaker 2: We feel that it was a very, very, very strong submission one that we're really proud of. We are factoring in its clearance into

We feel that it was a very very very strong submission one that we're really proud of.

We aren't factoring in its clearance into 2023 and for the purposes of modeling assume that tableau car is cleared in the second half of 2024, but that's not driven by anything specific or new with regard to our interactions with the FDA. We just think it's a prudent assumption to make.

Speaker 2: 2023 and and and for the purposes of modeling, assume that Tableau Cart is cleared in the second half of 2024, but that's not driven by anything specific or new with regard to our interactions with the FDA. We just think it's a prudent assumption to make.

Speaker 2: And then I think, yes, we're still facing and would expect a face in queue for some of the competitive activity around Tableau Part, not being available by our choice.

And then I think yes, we're still facing and would expect to face in Q4 some of the competitive activity.

<unk> tableau card not being available by our choice.

Speaker 2: And some competitive noise making round, the other aspect of the warning letter around some case studies that were on our website. We feel that we have fully satisfied the FDA concerns around

And.

And some competitive noise, making round the other aspect of the warning letter.

Around some case studies that we are on our website, we feel that we have fully satisfied of the FDA concerns around.

Speaker 2: the website and of course we filed on 510k on Tableau cart. Our team is absolutely better prepared this quarter but there are a lot of customer conversations to have. You know I mentioned again the prepared remarks that Tableau is being used in over 650 facilities. That's thousands of users, nurses.

The web site and of course, we filed on Form 10-K.

On tableau cart our team is absolutely better prepared this quarter, but there are a lot of customer conversations to have I mentioned again in the prepared remarks that tableau is being used in over 650 facilities.

<unk> users nurses and health system administrators, and Nephrologists that our team.

Speaker 2: and health system administrators and nephrologists that our team has to and wants to have conversations with just to ensure that there are no, you know, misconceptions or misinformation out there. So I would expect that that communication process those conversations will certainly take us through Q4, which again was factored into the guidance that we've provided around year end 2020.

Have you and wants to have conversations with just to ensure that there are no misconceptions or misinformation out there. So I would expect that that communication process. Those conversations will certainly take us through Q4, which again was factored into the guidance that we've provided.

Round year end 2023.

Speaker 5: Great. And just one last thing from me, just maybe an update on your home efforts, some of the key milestones from your perspective this quarter, and the setup for the home outlook for 24 a little bit. Thank you so much. Oh, sure.

Great and just one last one from me.

Maybe.

Update on your home efforts.

Some of the key milestones from your perspective this quarter.

<unk>.

Yes.

The setup for the home.

Outlook for 'twenty.

Thank you so much.

Sure I appreciate the question Yeah home continues to grow we still expect it to be a very significant contributor to revenue over the long term as we alluded to.

Speaker 2: Yeah, I get a home continues to grow. We still expect it to be a very significant contributor to revenue over the long term as we alluded to.

Speaker 2: What we're really focused on strategically is, number one, I say, top of the funnel, expanding the provider universe, whether those are new market entrants, and we've seen actually the emergence of several new market entrants. These are sort of adjacent health care providers that had not previously been in the home Dallas.

What we're really focused on strategically is number one I would say top of the funnel expanding the provider universe, whether those are new market entrants and we've seen actually the emergence of several new market entrants either.

Sort of adjacent health care providers that had not previously been into home dialysis market before and have entered seeing the opportunity there.

Speaker 2: market before and have entered, seeing the opportunity there.

Speaker 2: and are using Tableau exclusively to drive more patient adoption in the home. So that's part one, Extended Provider Universe, and I think we have a lot of nice proof points out of 2023.

Using tableau exclusively to drive more patient adoption in the home. So thats part one extending to provider universe and I think we have a lot of nice proof points out of 2023.

Speaker 2: On that one and headed into 24. The second one is to drive the depth of the home programs that we have, you know, historically, these home programs with the incumbent device.

That one in heading into 'twenty for the second one is to drive the depth of the home programs that we have historically detailed programs with the incumbent device typically tended to Peter out at maybe low single digit numbers of patients in the home that has not been our experience with.

Speaker 2: Typically tended to peter out that maybe low single digit numbers of patients in the home that has not been our experience.

Speaker 2: with the home programs that are offering Tableau. These are well, well, well into the double digits. And I would say actually I don't know yet where the ceiling is for how big a home program can be. Tableau was designed to really tolerate training, to really simplify operations.

With the home programs that are often tableau these are well well well into the double digits and I would say actually I don't know yet where the ceiling is for how big a home program can be tableau was designed to really accelerate training to really simplify operation.

Speaker 2: and therefore expand the number of patients who feel that home is accessible to them.

And therefore.

And the number of patients who feel that home is acceptable to them.

Speaker 2: and feel that they can be successful at home and we see it doing that and actually a couple of our abstracts really demonstrate that as well.

And feel that they can be successful at home and we see it doing that and actually a couple of our abstracts really demonstrate that as well at that point to driving depth in each home program and then three is always the retention rate because the longer that tableau patient stay at home on tableau. The thicker that foundation for future growth is we are.

Speaker 2: That's point to driving death in each home program. And then point three is always the retention rate because the longer that, you know, tablet patients stay at home on Tableau, the thicker that foundation for future growth is.

Speaker 2: We have continued through Q3 and as we said her today, even in Q4 seeing a very steady and stable retention rate that is markedly higher than the retention rate seen with other home devices of the past.

Continued through Q3 and as we sit here today, even in Q4 being a very steady and stable retention rate that is markedly higher than than the retention rate seen with other home devices in the past.

One I appreciate that thanks.

One of them for our next question.

Our next question comes from the line of <unk> Singh of RBC capital markets. Your line is now open.

Speaker 2: Our next question comes from the line of Sagan Singh of RBC Capital Markets. Your line is now open.

Hey, this is <unk>. Thanks for taking my question.

Speaker 5: Hey, this is Avion for Segurin. Thanks for taking the question. And thank you again for the detailed longer-term outlook. It's very helpful. I had a couple. First is, how should we think about the cadence of revenue growth and margin extension from 2024 to 2027? Do you expect it to be linear or more back and loaded, especially as we get closer to the EPC deadline in 2027?

Thank you again for the detailed longer term outlook. It's very helpful. I had a couple the first is how should we think about the cadence of revenue growth and margin expansion from 2024 to 2027 do you expect it to be linear or more back end loaded, especially as we get closer to the EPC deadline in 2027.

Speaker 4: Yeah, hey, this is Neville. So with respect, let me sort of first start with the annual and then I can dial into the quarters here. So with respect to the annual, our expectation is roughly meet teams for 2024 and then getting into the high teams for 2025 and beyond.

Yes, Hey, this isn't the bill so with respect to let me sort of first start with the annual and then I can.

Go into the quarters here, so with respect to the annual our expectation is roughly mid teens for 2024, and then getting into the high teens through 2025 and beyond now with respect to the quarters within that based on revenue.

Speaker 4: Now, with respect to the quarters within that, that's on revenue, from a gross margin perspective, again, in the annuals, it'll, it'll be linear. Our margin expansion has been linear annually. And sort of, if you think about the quarters now going back for a while.

From a gross margin perspective again in the annual it'll it'll be linear our margin expansion has been linear annually and sort of if you think about the quarters now going back for a while.

Speaker 4: Now, with respect to the quarters, from a top line, from a revenue perspective,

Now with respect to the quarters from a topline from a revenue perspective.

Speaker 4: We have historically observed this capital purchasing cyclicality where Q1 tends to be the slowest grower and we see accelerating growth as we move through the year. That sort of applied this year that'll apply in any year in 2024, given that we expect a low-carthid pre-saltration to get cleared in the second half.

We have historically observed this capital.

You're seeing cyclicality, where Q1 tends to be the slowest grower and we see accelerating growth as we move through the year that that sort of applied this year that will apply in any year in 'twenty 'twenty four given that we expect tableau cart with pre filtration to get cleared in the second half this.

Speaker 4: This first half, second half, it's actually a little bit more pronounced and you'll see more growth in the back half of the year. But again, when you go to 25 and beyond, it'll be just the capital purchasing cyclicality impacting sort of a slower Q1 and exhality.

First half second half the effect will be a little bit more pronounced and you'll see more growth in the back half of the year, but again when you go to 25 and beyond it'll be just to capital our.

Capital purchasing cyclicality.

Impacting sort of a slower Q1 and accelerated two there, let's see let me add on to that because I heard also something in there a little bit about home and ETP model. So let me address that.

Speaker 2: Let me add onto that because I heard also something in there a little bit about home and the ETC model. So let me address that.

Speaker 2: I think, as I think about home, I would expect that the home growth, again, to remain relatively linear. I mean, we'll have, you know, quarter to quarter variability, that's to be expected. But over a period of 24 to 27, let's say, I would expect it, the growth rate could be relatively linear. And I also just want to make a comment of the DPC model. Those...

I think as I think about home.

I would expect this home growth again to remain relatively linear I mean, we'll have quarter to quarter variability that's to be expected, but over a period of 24% 27, let's say I would expect that the growth rate to be relatively linear and I also just wanted to make a comment of the DTC model those.

Speaker 2: incentives and incentives are getting richer. As we get closer to 2020-27, I think by 26-27 it gets up to either plus 8 percent over the Medicare base rate or minus 10 percent.

Incentives and disincentives are getting richer as we get closer to 2027, I think by 'twenty six 'twenty seven it gets up to either plus 8% over the Medicare base rate or minus 10%.

Speaker 2: under the base rate if providers are not growing their home and transplant programs to the threshold that CMS is established. So that is certainly going to remain a powerful tailwind is not the only tailwind so.

Under the base rate if providers are not growing their home and transplant programs to the threshold that CMS has established so that is certainly going to remain a powerful tailwind is not the only tailwind so.

Speaker 2: recently have have actually seen clinic closures become a tailwind. So also the

We recently have actually seen clinic closures become.

Tailwind both of the the biggest service providers in the nation have announced clinic consolidation in clinic closures due largely to their own staffing challenges.

Speaker 2: The biggest service providers in the nation have announced clinic consolidation and clinic closures due largely to their own staffing challenges.

Speaker 2: And that is, in our experience, really encouraging nephrologists and health systems and other providers to really expand their home and looking at home as a near-term and long-term solution for that problem.

And that is in our experience.

Really encouraging of Nephrologists and health systems, and other providers to really expand their home and looking at home as a near term and long term solution for that problem. So that's another tailwind and then generally Medicare advantage I think again over the long term. This will go far beyond 'twenty seven.

Speaker 2: That's another tailwind and then generally Medicare advantage. I think again over the long term that this was a far beyond 27. As Medicare advantage is now available to all dialysis patients and has been reported to be up to 40% now plus of the dialysis population. These payers again in our experience have never been more motivated to send higher and higher numbers of patients home on dialysis and ensuring that

As Medicare advantage is now.

<unk> available to all dialysis patients and has been reported to be up to 40% now plus of the dialysis population.

The payers again in our experience have never been more motivated to sell higher and higher numbers of patients home on dialysis and in ensuring that.

Speaker 6: they can reap the benefits both clinical, economic, and operational in those MA plans. So those are my additional remarks on home. I hope that's helpful. That's great. Thank you.

They can reap the benefits, both clinical economic and operational and M&A plan. So those are my additional remark on how am I hope that's helpful.

That's great. Thank you.

Okay.

Great. Thanks, Operator next question.

And by far our next question.

Yeah.

Our next question comes from the line of Joshua Jennings, a PD Cowen Your line is now open.

Speaker 2: Our next question comes from the line of Joshua Jennings of TD Kellan. Your line is now open.

Hi, good afternoon, thanks for taking my questions.

Speaker 5: Hi, good afternoon. Thanks for taking the questions. I wanted to just ask about the strategy to.

Just to ask about.

The strategy.

<unk> launch to international markets just with.

The updated outlook.

Speaker 7: The updated outlook does that seem like it includes. Any international expansion plans and so would that be additional and any updates just on on that international strategy, which would be helpful to think.

Does that.

It seemed like it includes any international expansion plans and so would that be additional any updates just on the international strategy.

Helpful to think through.

Speaker 2: Yeah, thanks for the question, Josh. The forward-looking guidance that we provided today is US only.

Yeah.

Thanks for the question Josh.

The forward looking guidance that we provided today is U S only.

Speaker 2: and over the near term and the long term out through 2020-27. We have...

And over the over the near term and the long term outbreak through 2027.

We have filed for regulatory clearance in.

Speaker 2: for regulatory clearance in a small number of by and large English speaking countries outside the United States. And we have had an effort underway to evaluate those markets. This is, it's certainly a growth sector, a potential growth sector in the future, but I would call it a longer term growth sector. Our team and our management team here remains very, very focused today on the largest dialysis market in the world, which is here in the United.

A small number of them by and large English speaking countries outside the United States and we have had an effort underway to evaluate those market.

This is certainly a growth sector potential growth factor in the future, but I would call it a longer term growth vector.

Our team and our management team here remains very very focused today on the largest dialysis market in the world, which is here in the United States.

Understood Thanks for that.

Speaker 7: Thanks for that and wanted to ask a follow up on the event at ASN.

I wanted to ask a follow up on any of them.

Okay.

Speaker 7: the nursing executive from HCA commented at about 145 HCH for the adopted tab. Well, I was wondering if that IDN has kind of incorporated tab well as the best practices technology for the patient dialysis.

Our nursing factor there.

From HCA commented that about 145.

Quicker adopted blow, but I was wondering too.

Alright.

Corporate its a broker with best practices technology personal dialysis.

Sure.

Uh huh.

Speaker 7: Here we are on the opportunity at HCA to more deeply penetrate their hospital network and acute setting, but also catalyzed at the Health and Health HCA home FOMHEMO programs.

The only opportunity that HCA to more deeply penetrate.

There are people that work in acute setting, but also a catalyst.

Home home Hemo a program.

Thanks for taking my questions.

Speaker 2: Sure, yeah, I appreciate it. Well, let me kind of zoom back up. I mean, we talked about roughly the 650.

Sure Yeah I appreciate it.

Let me kind of zoom back up I mean, we talked about roughly.

The 650 different facilities and the acute and also fabricated I talked I think I talked about that more in October as really being a big grower for us this post acute or sub acute space as well.

Speaker 2: in the acute and also subacute. I think I talked about that more in October as really being a big grower for us this post-acute or subacute space as well.

Speaker 2: inclusive of very large national hospital and health systems like HVA and others.

Inclusive of.

Very large national hospital, and health systems, like HD, and others and and these regional kind of top 50 top 100 largest regional IDM.

Speaker 2: and these regional top kind of top 50s to 100 largest regional IDN. HCA has been a phenomenal partner.

<unk> has been a phenomenal partner to us.

Speaker 2: They were remain an innovator and very full of thinking.

They were and remain an innovator and very forward thinking both on the acute side and also I think on the home side in terms of how they're thinking about the future of dialysis care.

Speaker 2: both on the acute side and also I think on the home side in terms of how they're thinking about the future of dialysis care.

Speaker 2: As we look at the, let's just say the national health systems themselves, we are just 20% penetrated there. We're proud of getting to 20%, but that leaves 80 plus percent that that we still have ahead of us. So we're excited about

As we look at the let's just say the National Health systems themselves. We are just 20% penetrated there were proud of getting to 20%, but that leaves 80 plus percent that we still have ahead of us and so we're excited about replicating the success that we've had with many of our customers again acute and <unk>.

Speaker 2: replicating the success that we've had with many of our customers again, acute and sub-acute.

Acute.

Speaker 2: throughout the rest of the national and these large regional providers.

Throughout the rest of the national in these large regional providers as well.

Speaker 3: Great. Thanks for the question, Josh. Operator, I think we're in for the next question. One.

Great. Thanks for the question, Josh Upper to the group and the next question.

One moment for our next question.

Speaker 8: Our next question comes from the line of Travis Deed of B of A Securities. Your line is now open.

Our next question comes from the line of Travis Steed of Bofa Securities. Your line is now open.

Speaker 9: Hi, this is Stephanie Piazzolla on the line for Travis. Thanks for taking the question and providing the longer term guidance.

Hi. This is Stephanie appears all are on the line for Travis Thanks for taking the question and providing the longer term guidance I think that's really helpful.

Speaker 9: I think that's really helpful. Um, just wanted to ask about 1st on the Pre announcement call. Uh, you talked about a few headwinds that are leading to a longer sales cycle. I know that was only a few weeks ago, but if there's any updates on those from a competitive noise or capital spending. Standpoint and what is factored into the 2024 guidance for those. And.

Just wanted to ask about first on the pre announcement call.

You talked about a few headwinds that are leading to a longer sales cycle. I know that was only a few weeks ago, but if there's any update on those from a competitive noise or capital spending standpoint, and what is factored into the 2024 guidance for those and.

Speaker 9: I think you mentioned that the guidance you put out is maybe a conservative starting point. So maybe more detail on why you think this is the right spot to be for now and any drivers that could get you above this expectation.

I think you mentioned that the.

The guidance you've put out is maybe a conservative.

Starting point, so maybe more detail on why you think this is the right spot to be for now.

And any drivers that could get you above this expectation.

Yeah sure. Thanks, Stephanie.

Speaker 2: Well, as I said, kind of in a prepared remark, I mean, there is a lot of momentum.

Well as I said kind of in the prepared remarks, I mean, there is a lot of momentum.

Speaker 2: and both acute and home and I think that's due to the large evidence safe now around Tableau, kind of the scrolling network effect. We just talked about in a previous question and I think kind of the proven reproducibility of the cost reduction benefits. So those are all things that give me and us a lot of confidence in the full projections that we provided here near-term and longer term.

In both acute and home and I think that's due to the large evidence base now around tableau kind of this growing network effect, we just talked about in a previous question and I think kind of the proven reproducibility of the cost reduction benefit. So those are all things that give me and us a lot of confidence and forward projections that we provided here.

Our near term and longer term.

Speaker 2: Having said that, I mean, at the same time, we are obviously going to want to be mindful of some of the changes we're noting in the capital purchasing environment. I'll get to that part of your question in one sec.

Having said that and at the same time, we are obviously going to want to be mindful of some of the changes were noting in the capital purchasing environment I'll get to that part of your question <unk>.

And also maybe navy customers continuing to wait for the availability of tableau car potentially well into next year, depending on when clearance comes and how thats affecting the duration of our sales cycle and so as we look forward.

Speaker 2: And also maybe customers continuing to wait for the availability of capital car potentially, well into next year depending on when clearance comes.

Speaker 2: and how that's affecting the duration of our sales cycle. And so as we look forward, we try to be considerate of both the very real upside drivers.

We tried to be considerate of both the very real upside drivers.

Speaker 2: And then some of the potential lingering headwinds in a way that allows us to have confidence and clarity in our projection. So that's maybe part one, specifically about

And then some of the potential lingering headwinds in a way that allows us to have confidence and clarity in our projections. So that's a big part one specifically about.

Speaker 2: Capital spending is they talked about our call that a month ago. We're just seeing more stakeholders involved in decision making kind of at all levels. That's not necessarily not bad. It's very understandable and it's prudent on their part. We're seeing kind of more steps in their financial analyses and their processes and just all around more kind of eye dotting and key crossing.

Capital spending as I talked about on our call that a month ago. We're just seeing more stakeholders involved in decision, making kind of at all level, that's not necessarily its not bad its very understandable and if it's prudent on their part.

We're seeing kind of more steps in their financial analyses in their processes and just all around more kind of I dotting in T crossing.

Speaker 8: Now, the good news is we're not seeing customers or potential customers kind of turn away from extension or turn away from in sourcing or backing out of deals. We're not seeing people say that they don't want to move forward.

Now the good news is we're not seeing customers or potential customers can I turn away from expansion return away from in sourcing our backing out of deals we're not seeing people say that they don't want to move forward with tableau.

Speaker 2: with Tableau in either the acute or the home and market. It's just rather kind of the the extra process that people deliberation that, you know, elongating our sales cycle kind of maybe toward the outer edge of what we've communicated the past, which has been about nine to 12 months, I would say we're probably closer to, you know, sort of 12 plus months.

<unk> or the home end market, its just rather kind of be the.

The extra process steps people deliberation that.

Getting our sales cycle kind of talk maybe towards the outer edge of what we've communicated the past which has been about nine to 12 months I would say, we're probably closer to 12 plus months.

Speaker 2: And then how did it inform our views on 24? Well, I think it is very reasonable and yes, conservative to assume that some of these factors kind of carry forward for us.

And then how does that inform our views on 24, well I think it is very reasonable and yet conservative to assume that some of these factors kind of carry forward for us.

Speaker 2: Both on on some of the competitive noise making and also capital with elongated capital spending decision processes into and through 2024, but that's kind of how we thought about it clear upside drivers and some.

Both on on some of the competitive noise.

Noisemaking and also capital with elongated capital spending decision processes into and through 2024, but that's kind of how we thought about it clear upside drivers in some.

Speaker 2: you know, and some considerations on the headwind side as well.

And some considerations on the headwind side as well.

Thank you that's helpful. And then just one more on the long range plan on the long range plan, maybe if you could just provide a little bit more detail on the overall thought process of how you put this together.

Speaker 9: Thank you, that's helpful. And then just one more on the long range plan, on the long range plan, maybe if you could just provide a little bit more detail on the overall thought process of how you put this together, just generally what's assumed in the high-teens annual growth rate from a macro or micro perspective. Now you talked about some of the reimbursement factors, so anything else there, maybe some other drivers that can acute and home.

Just generally what's assumed in the high teens annual growth rate.

From a macro or micro perspective no.

I know you talked about some of the reimbursement factors or anything else there maybe.

Maybe some other drivers within acute and home.

Speaker 2: Sure. Well, I know I'll ask to be able to weigh in here too. I, I would say.

Sure.

I happen to be able to weigh in here too.

I would say.

Speaker 2: I mean, the last four years here in the marketplace have given us a lot more data and experience than we had at the time of the ICO, you know, our first full launch year was 2019.

I mean, the last four years here in the marketplace have given us a lot more data and experience that we had at the time of the IPO.

Our first full launch here was 2019.

Speaker 2: So we've learned a lot that in a briefer fashion. We also, though, today have a lot more scale from which to build on and and this, again, this very predictable, very sticky recurring revenue that provides even greater visibility and predictability than we've ever had before. Our evidence states the thousands of nurses and physicians, you know, the hundreds of facilities, this network effect all helps a lot as we look forward. And we also have, I'll say,

So we've learned a lot in our <unk>.

For fashion.

We also though today are a lot more scale from which to build on and Thats again, thats very predictable very sticky recurring revenue that provide even greater visibility and predictability than we've ever had before.

Our evidence based the thousands of nurses and physicians the hundreds of facilities that network effect.

All helps a lot as we look forward and we also have I'll say at the same token. We also have better knowledge of the challenges and kind of the timeline associated with true disruption and what we are doing is truly disruptive not only the home side, but also in the acute side. So.

Speaker 2: the same token, we also have better knowledge of the challenges and kind of the timeline associated with true disruption and what we are doing is truly disruptive.

Speaker 8: not only in the home side, but also in the acute side.

Speaker 8: I guess I'll use analogy and say we've seen the full movie play out, if you will, which has given us a lot more visibility both on, on upside and potential headwind. So all of that informs our confidence in describing how we think this business will scale over the next.

I guess I'll use an analogy and say we haven't seen the full movie play out if you will which has given us a lot more visibility both on an upside and potential headwinds. So all of that informs our confidence in and describing how we think this business will scale over the next few years and our expectations not only on revenue.

Speaker 4: few years and our expectations, not only on revenue, but how quickly we will achieve growth margins at 50% and cash flow break even getting to this third very vital goal for us, which is reaching profitability. But anyway, Nabil, I'll pass you for any other comments. Yes, Stephanie, I would just add a little bit more color here. If you think about sort of.

But.

How quickly we will achieve gross margins at 50% and cash flow breakeven getting to this third very vital for us, which is reaching profitability, but anyway, maybe I'll talk to you for any of those problems, yes, I would just add a little bit more color here. So if you think about sort of.

Speaker 4: placing roughly 1,400 consoles, which is what we placed in 22, will be expected to place in 23. If you think about that same 1,400 console sort of over time, and you think about the recurring revenues that we get from this growing installed base.

What are you seeing roughly 4500 consoles, which is what we placed in the queue with each lease we expect to place in 'twenty. Three if you think about that same four.

200 consoles sort of overtime and you think about the recurring revenues that we get from this growing installed base that alone will get us to a roughly mid teens CAGR between now and 2027, right and then sort of to get to the high teens in any year Youre looking for.

Speaker 4: that alone will get you to a roughly mid-team CAGR between now and 2027, right? And then sort of to get to the high teams in any year, you're looking for console growth. And again, for all the reasons that Leslie talked about, we do believe we can drive higher consoles. By the way,

So growth and again for all the reasons that <unk> talked about we do believe we can drive higher consoles by the way. We will have placed 1400 consoles last year unexpectedly this year in years. When we have had two exogenously events kind of.

Speaker 10: We will have placed 1,400 consoles last year and expected play this year in years when we have had two exogenous events, kind of hit us.

And so we believe that is a relatively conservative assumption as we move forward. So I feel that to say getting to roughly mid teens CAGR over the longer term here as possible with the black consoles and for all the reasons as we talked about we believe we can get to high teens.

Speaker 6: And so, we believe that is a relatively conservative assumption as we move forward. So, I say all that to say getting to roughly mid-team CAGR over the longer term here is possible with flat consoles, and for all the reasons Leslie talked about, we believe we can get to high-team. Okay. Great. Thanks, Stephanie.

Okay, great. Thanks, Stephanie I think we are ready for our next question operator.

One moment our next question.

Speaker 11: Our next question comes from the line of Kristen Stewart of CL King. Your line is now open.

Our next question comes from the line of Kristen Stewart of C. L. King Your line is now open.

Speaker 12: Hi, thanks for taking my question. I'm sorry if you could expand a little bit more color on the competitive landscape and maybe comment on the launch of Quanta's product at ASN as well. And just you're thinking on the competitive landscape going forward in your thought process for not only 2024, but the longer term as well.

Hi, Thanks for taking my question I was wondering if you could expand a little bit more color on the competitive landscape and maybe comment on.

Launch of Qantas product.

N as well and just your thinking on the competitive landscape going forward in your thought process for not only 2024, but the longer term as well.

Sure happy to.

Speaker 8: We believe we have a better product with pretty deep expertise supporting customers. As I said in the prepared remarks, what I've really learned more than anything.

We believe we have a better product.

You know, it's pretty deep expertise supporting customers as I said in the prepared remarks, what I've really learned more than anything over the last four years.

Speaker 8: over the last four years is the importance of product and programs around the product. You know, what we do when we walk into an acute site, we're not selling a dial.

Is the importance of our products and programs around the product what we do when we walk into an acute site, we're not selling a dialysis machine, we're not trying to convince somebody that our dialysis machine is better than somebody else's Helseth machine first and foremost, we're creating opportunities strategic cost reduction.

Speaker 2: We're not trying to convince somebody that our dialysis machine is better than somebody else that helps with machine. You know, first and foremost, we're creating opportunities, strategic cost reduction opportunities for that hospital. We show them the financial analyses, showing the cost benefit in labor and in supply reduction. And then step two is the how to.

Opportunities for that hospital, we show them, the financial analyses, showing the cost benefit and labor and supplies reduction and then step two is to how to hospitals and health systems have never done this before and therefore, they by and large they don't already have that roadmap for change management. They don't.

Speaker 2: Hospitals and health systems have never done this before and therefore they, by and large, they don't already have that roadmap.

Speaker 2: for change management, they don't already have the recipe book for how do you insource

I already have the recipe for how do you in source inpatient dialysis, we have developed that I'm getting quite a proprietary way over the last several years and so it's really kind of the the one two punch of a superior product superior team and our proprietary Playbooks I think.

Speaker 8: inpatient dialysis. We have developed that in quite a proprietary way over the last several years.

Speaker 8: And so it's really kind of the one two punch of a superior product, a superior team and a proprietary playbook that I think makes our offering so compelling and so protectable.

Our offerings so compelling.

And so protect <unk>.

Speaker 8: I think the other advantage here is that our footprint now is large. The Tableau evidence base is large. We do have thousands of nurses in position to have been trained and educated. I'll give you a quick example of anecdotes from ASN.

I think the other advantage here is that our footprint now is March.

Tableau evidenced based is is large we do have thousands of nurses and physicians who have been trained and educated I'll give you. A quick example, anecdote from ASN.

Speaker 8: I was talking to our team there at the booth and I said, hey, how many

I was talking to our team there at the Booth and I said, Hey, how many physicians who came up to the booth. This year had heard of tableau or heard about that and the answer was all now that's not probably precisely accurate, but I would say even two years ago that answer was probably more like 40 or 50%. So yeah. We've made a lot of strides in.

Speaker 8: Physicians who came up to the booth this year had heard of Cablo or heard about that and the answer was

Speaker 8: all. Now, that's not probably precisely accurate, but I would say even two years ago, that answer was probably more like 40 or 50 percent. So, yeah, we made a lot of strides in just pure awareness, and so I think we have succeeded.

And if it were just pure awareness and so I think we have succeeded in erecting a pretty substantial commercial note around tableau and as well as the technology moat.

Speaker 2: in erecting a pretty substantial commercial moat around Tableau and as well as a technology moat.

Speaker 8: For example, weak Tableau is fully integrated with both Epic and Cerner. That interoperability is a big deal and that is no trivial task.

For example, wheat tableau is fully integrated with both epic and Cerner that interoperability is a big deal and that is no trivial task to fully integrate with epic and Cerner are we just sort of done that quietly in the background.

Speaker 8: to fully integrate with Epic Concernor, we've just sort of done that quietly in the background. And of course, a regulatory mode. We've continued to be new and higher bars. And so I think all of those things.

And of course, our regulatory but we've continued to meet new and higher bars, and so I think all of those things help us to further elevate the barriers to success. In addition to the barriers that we've already overcome to become the recognized later here in the states.

Speaker 13: Help us to further elevate the barriers to success in addition to the barriers that we've already overcome to become, you know, the recognized leader here in the state. Thanks very much.

Perfect. Thanks very much.

Okay, great. Thanks for the question Kristen next question operator.

One moment for our next question.

Speaker 11: My next question comes from the line of Suraj Kaliya of Oppahimer Company. Your line is now open.

Our next question comes from the line of Suraj Kalia of Oppenheimer <unk> Company. Your line is now open.

Speaker 14: Good afternoon, everyone. Lovely quick question, and I'll

Good afternoon, everyone.

Leslie a quick question and I'll, just so I have one question.

Appreciate you guys laying out the roadmap from FY 'twenty four through 27 in supposedly just trying to understand the rationale for this roadmap.

Speaker 14: I appreciate you guys laying out the roadmap from FYI.

Speaker 14: trying to understand the rationale for this roadmap.

This point in time.

Speaker 14: You'll do talk about structural tailwinds for Tableau. I'm hoping you could thread the needle for us. You know, we know GLP ones are at the doorstep. There's a new computer.

Youll do talk about structural tailwind for tableau.

I'm, hoping you could thread the needle for us.

Renewed GOP ones are at the at the doorstep, there's a new competitor coming online next year, just kind of walk us through.

Putting yourself in some.

Within certain benchmarks already long term.

Speaker 14: with certain benchmarks already long-term. If...

Kindly help us understand the rational at this point in time. Thank you.

Yeah.

Yeah sure happy to thanks for the question Suraj.

Speaker 2: Yeah, sure. Happy to. Thanks for the questions, George. So which I, which I'll kind of interpret as sort of the why now, just because I see a couple of reasons. I mean, first of all,

So, which I, which all kind of interpret is sort of the why now.

But I think a couple of reasons I mean first of all we.

Speaker 8: We have heard investors loud and clear about what they most care about, what matters most of them about outset today and where outset is going tomorrow. We're listening.

We have heard investors, allowing clearer about what they most care about what what matters most to them about outset today and where else that is going tomorrow.

We're listening.

Speaker 8: And what we've heard from investors is a very strong desire to understand.

And what we've heard from investors is a very strong desire to understand.

Speaker 8: how and when, how and when, how and when, and how that reaches a growth margin of 50% and then when we start the next leg in the journey, which is going beyond 50%. And so we felt having listened to all of our important shareholders that we wanted to provide the information, the transparency and the clarity that our shareholders are seeking. So that's that's point one point two is that I mentioned drive. I think.

How and when our debt get to profitability, how and when.

Blow and out that reaches a gross margin of 50% and then when we start the next leg of the journey, which is going beyond that 50%.

And so we felt having listened to all of our important shareholders that.

We wanted to provide the information the transparency and the clarity that that our shareholders are speaking. So that's 0.1 0.2 is that as I mentioned driving I think.

Three years post IPO and now four years here in the marketplace.

Speaker 8: Three years post IPO and now four years here in the market plate.

Speaker 8: I think we do have the data and the experience, which we didn't have at the time of the IPO, at that point just having been in the marketplace there for maybe just a year or two, we just have a lot more.

I think we do have the data and experience, which we didn't have at the time of the IPO at that point, just having been in the marketplace. There for maybe just a year or two.

We just have a lot more insight.

Speaker 8: And a lot more scale from which to build on, as I mentioned, you know, a few minutes ago, I think we've got a lot more clarity and confidence around what the upside drivers are and and and also what some of the challenges are and what that timeline is likely to look at look like.

And a lot more scale from which to build on as I mentioned, a few minutes ago. I think we've got a lot more clarity and confidence around what the upside drivers are.

And also what some of the challenges are and what that timeline is likely to look at look like as.

Speaker 8: as we disrupt this market both on acute and home. So I think we're in a good position based on our experience over the last four years and also out of our genuine desire to ensure that Cheryl Durkab, the information that they want need and dessert about the business and how it's going to scale up in the next few years.

As we disrupt this market both an acute and home. So I think we're in a good position based on our experience over the last four years.

And also out of our genuine desire to ensure that shareholders have the information that they they want need and deserve about the business and how it's going to scale over the next few years.

Speaker 11: This concludes the question and answer session. I would now like to turn it back to Leslie Trick for closing remarks.

This concludes the question and answer session I would now like to turn it back to Leslie trick for closing remarks.

Great. Thank you well thanks to all of you for joining today and we look forward to our next update on our fourth quarter call and have a great evening.

Speaker 8: Great, thank you. Well, thanks to all of you for joining today. We look forward to our next update on our fourth quarter call and have a great evening.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Speaker 11: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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