Q2 2024 Outset Medical Inc Earnings Call

August 7, 2024

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Operator: Please stand by. Your call will begin momentarily. Again, please stand by. Your call will begin momentarily. [music] Ladies and gentlemen, thank you for standing by. Welcome to Outset Medical's second quarter 2024 earnings conference call.

Speaker Change: Please stand by. Your call will begin momentarily. Again, please stand by. Your call will begin momentarily.

Operator: Please stand by; your call will begin momentarily. Again, please stand by; your call will begin momentarily. [music] Ladies and gentlemen, thank you for standing by. Welcome to Outset Medical's second quarter 2024 earnings conference call.

Operator: 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. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Jim Mazzola, Head of Investor Relations. Please go ahead.

Operator: 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. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Jim Mazzola, Head of Investor Relations. Please go ahead.

Speaker Change: all

Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to Outset Medical's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker Change: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Jim Mazzola, Head of Investor Relations. Please go ahead.

Jim Mazzola: Okay, thank you very much. Good afternoon, everyone. And sorry for starting a few minutes late here. Welcome to our second quarter 2024 earnings call. Here with me as always are Leslie Trigg, Chair and Chief Executive Officer, and Nabeel Ahmed, Chief Financial Officer. We issued a news release after the close of market today, which can be found on the investor pages of OutsetMedical.com. This call is being recorded and will be archived on the investor section of our website.

Jim Mazzola: Okay, thank you very much. Good afternoon, everyone. And sorry for starting a few minutes late here. Welcome to our second quarter 2024 earnings call. Here with me as always are Leslie Trigg, Chair and Chief Executive Officer, and Nabeel Ahmed, Chief Financial Officer. We issued a news release after the close of market today, which can be found on the investor pages of outsetmedical.com. This call is being recorded and will be archived in the investor section of our website.

Jim Mazzola: Okay, thank you very much. Good afternoon, everyone, and sorry for starting a few minutes late here. Welcome to our second quarter 2024 earnings call.

Jim Mazzola: Here with me as always are Leslie Trigg, Chair and Chief Executive Officer, and Nabeel Ahmed, Chief Financial Officer. We issued a news release after the close of market today, which can be found on the investor pages of OutsetMedical.com. This call is being recorded and will be archived on the investor section of our website.

Jim Mazzola: It's our intent that all forward-looking statements made during today's call be protected under the Private Securities Litigation Reform Act of 1995. 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 materially differ from those anticipated or implied. Outset assumes no obligation to update these statements. And for a list and description of risks and uncertainties associated with our business, please refer to the risk factors section of Outset public filings with the SEC, including our latest annual and quarterly report. Lovely.

Jim Mazzola: It is our intent that all forward-looking statements made during today's call be protected under the Private Securities Litigation Reform Act of 1995. Such 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 materially differ from those anticipated or implied. Outset assumes no obligation to update these statements. And for a list and description of risks and uncertainties associated with our business, please refer to the risk factors section of our public filings with the SEC, including our latest annual and quarterly reports.

Jim Mazzola: It is our intent that all forward-looking statements made during today's call be protected under the Private Securities Litigation Reform Act of 1995. Such 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 materially differ from those anticipated or implied. Outset assumes no obligation to update these statements. And for a list and description of risks and uncertainties associated with our business, please refer to the risk factors section of Outset's public filings with the SEC, including our latest annual and quarterly reports, life with.

Jim Mazzola: It's our intent that all forward-looking statements made during today's call be protected under the Private Securities Litigation Reform Act of 1995.

Jim Mazzola: 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 materially differ from those anticipated or implied.

Jim Mazzola: outset assumes no obligation to update these statements and for list and description of risk and uncertainties associated with our businessplease rerep the risk factors section of out set public filings with the sec including our latest annual and quarterly reports

Operator: Locally,

Leslie Trigg: Thanks, Jim. Good afternoon, everyone, and thank you for joining us. I'll begin with our results in the second quarter, which on the top line were below our expectations as we worked through the re-ramp of Tableau CART and saw new evidence of our sales cycle elongating. Areas of strength in the quarter included treatment sales, which grew 25% year-over-year, console ASP, which increased more than 8% year-over-year, the console install base, which grew 18% year-over-year, and the number of acute facilities using Tableau, which grew 16% year-over-year.

Leslie Trigg: Thanks, Jim. Good afternoon, everyone, and thank you for joining us. I'll begin with our results in the second quarter, which were below our expectations as we worked through the re-ramp of Tableau CART and saw new evidence of our sales cycle elongating. Areas of strength in the quarter included treatment sales, which grew 25% year-over-year, console ASP, which increased more than 8% year-over-year, the console install base, which grew 18% year-over-year, and the number of acute facilities using Tableau, which grew 16% year-over-year.

Leslie: and Leslie.

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

Leslie: i'll begin with our results in the second quarter which on the top line where below our expectations as we work through the reamp of cappeital cart and sosaw on new evidence of our sales cycle elong ting

Speaker Change: areas of strength in the quarter included treatment sales which grew twenty-five percent yearover-year council asp which increased more than eight percent year-over-year the consuil installed base which grew eighteen percent year-over-year and the number of acute facilities using tableau which grew sixteen percent year-year

Speaker Change: non-GAAP growth margin came in substantially above our expectations at 37.3% for the quarter, with product margin coming in at 44.8%.

Speaker Change: Despite the progress, second quarter revenue of $27.4 million was lighter than expected and driven entirely by console sales below our forecast.

Leslie Trigg: While the return of Tableau CART was helpful in advancing some of the acute deals in our pipeline, the shipwreck masks what we now recognize, which is the need for commercial execution changes to better position ourselves to capitalize on enterprise opportunities that typically come with a longer sales cycle. Before I get to those changes, I think it may be helpful to reflect on the growth we've experienced since our launch in 2019, which was driven by early market adopters.

Leslie Trigg: While the return of Tableau CART was helpful in advancing some of the acute deals in our pipeline, the shiphold masks what we now recognize, which is the need for commercial execution changes to better position ourselves to capitalize on enterprise opportunities that typically come with a longer sales cycle. Before I get to those changes, I think it may be helpful to reflect on the growth we've experienced since our launch in 2019, which was driven by early market adopters.

Speaker Change: While the return of Tableau CART was helpful in advancing some of the acute deals in our pipeline, the shiphold masked what we now recognize, which is the need for commercial execution changes to better position ourselves to capitalize on enterprise opportunities that typically come with a longer sales cycle.

Leslie Trigg: These innovators and visionaries, largely in the acute setting where we have scale and now a low double-digit market share, were the first to leave their long-standing outsourced relationships motivated by gaining control over their financial, operational, and clinical destiny. The support from early adopters of Tableau and the insourcing model has been essential to demonstrating the benefits Tableau provides that will fuel our next stage of growth.

Leslie Trigg: These innovators and visionaries largely in the acute setting where we have scale and now low double digit market share, were the first to leave their long-standing outsourced relationships motivated by gaining control over their financial, operational, and clinical destiny. The support from early adopters of Tableau and the insourcing model has been essential to demonstrating the benefits Tableau provides that will fuel our next stage of growth.

Speaker Change: before i get to those changes i think it maybe helpful to reflect on the growth we've experiencedsince our launch in two thousand and nineteen which was driven by early market adopters see innovators and visionaries largely in the acute setting where we have scale and now low double-digit market share

Speaker Change: were the first to leave their long-standing outsourced relationships.

Speaker Change: motivated by gaining control over their financial...

Speaker Change: Operational and Clinical Destiny.

Speaker Change: The support from early adopters of Tableau and the insourcing model has been essential to demonstrating the benefits Tableau provides that will fuel our next stage of growth.

Leslie Trigg: This next stage of growth comes as we extend past the early enterprise adopters and use our foothold to expand into the mainstream enterprise adopters. These customers are deliberate, consensus driven, and process oriented. Purchase decisions are contemplated with enterprise conversion in mind. And accordingly, the sales cycle often takes longer as it requires a larger group of stakeholders.

Leslie Trigg: This next stage of growth comes as we extend past the early enterprise adopters and use our foothold to expand into the mainstream enterprise adopters. These customers are deliberate, consensus driven and process oriented. Purchase decisions are contemplated with enterprise conversion in mind. And accordingly, the sales cycle often takes longer as it requires a larger group of stakeholders buying.

Speaker Change: This next stage of growth comes as we extend past the early enterprise adopters and use our foothold to expand into the mainstream enterprise adopters. These customers are deliberate,

Speaker Change: Consensus driven and process oriented. Purchase decisions are contemplated with enterprise conversion in mind and accordingly the sales cycle often takes longer as it requires a larger group of stakeholders buying in.

Leslie Trigg: We've learned that success with mainstream enterprise adopters requires a change in how we sell, who we sell to, and the process we use to get there. For example, we identified the need to sell more broadly within the C-suite and establish commitment across a larger base of stakeholders deeper within the system to gain buy-in. We've also recognized that our team needed to demonstrate exceptional consultative and change management skills as they work with large health systems on potential enterprise conversions.

Leslie Trigg: We've learned that success with mainstream enterprise adopters requires a change in how we sell, who we sell, and the process we use to get there. For example, we've identified the need to sell more broadly within the C-suite and established commitment across a larger base of stakeholders deeper within the system to gain buy-in. We've also recognized that our team needed to demonstrate exceptional consultative and change management skills as they work with large health systems on potential enterprise conversions. As we advance the insourcing movement from the early enterprise adopters into mainstream enterprise adoption, it requires changes in how we go to market.

Speaker Change: We've learned that success with mainstream enterprise adopters requires a change in how we sell, who we sell, and the process we use to get there.

Speaker Change: For example, we've identified the need to sell more broadly within the C-suite and established commitment across a larger base of stakeholders deeper within the system to gain buy-in.

Speaker Change: We've also recognized that our team needed to demonstrate exceptional consultative and change management skills as they work with large health systems on potential enterprise conversions.

Speaker Change: As we advance the insourcing movement from the early enterprise adopters into mainstream enterprise adoption, it requires changes in how we go to market.

Leslie Trigg: This involves three big shifts in our commercial approach. First, retooling our commercial team by infusing our capital sales team with individuals who have a different profile and skill set, and ensuring we have the right talent in each role. Second, introducing a new capital sales process with greater specificity, accountability, and discipline. And third, injecting rigorous sales management inspection at every step along the way to improve capital sales forecasting and timing. This work is already underway.

Speaker Change: which involves three big shifts in our commercial approach. First, retooling our commercial team by infusing our capital sales team with individuals who have a different profile and skillset and ensuring we have the right talent in each role.

Speaker Change: Second, introducing a new capital sales process with greater specificity, accountability, and discipline. And third, injecting rigorous sales management inspection at every step along the way to improve capital sales forecasting and the timing of close.

Leslie Trigg: For example, we now have in place a sales leadership team with deep capital equipment experience centered around enterprise talent. We have also restructured our sales organization and trained them on our new enterprise sales approach. What we're experiencing is a temporary dislocation of converting the pipeline to revenue on our time. With our installed base now at roughly 5,700 consoles, the number of treatments performed each month on Tableau continues at record levels. Treatment orders remain strong, and our recurring revenue business model continues to distinguish itself. During the second quarter, recurring revenue grew 24 percent from the second quarter of 2023, with gross margin materially expanding as it has each quarter for more than three years.

Leslie Trigg: For example, we now have in place a sales leadership team with deep capital equipment experience centered around enterprise talent. We have also restructured our sales organization and trained them on our new enterprise sales approach. As we effectuate these changes, the result will be a resized and more nimble sales team and a methodical enterprise sales process commensurate with our expected future growth trajectory. Given the depth and breadth of the sales team and process restructuring, we expect it to take several quarters to fully implement and realize the many benefits that will come from it. As we look ahead to the second half of the year, we now know it will not be possible to execute this transformation, given the expected accompanying disruption, while simultaneously delivering on the ramp we previously forecast.

Speaker Change: This work is already underway. For example, we now have in place a sales leadership team with deep capital equipment experience centered around enterprise selling. We have also restructured our sales organization and trained them on our new enterprise sales approach.

Speaker Change: As we effectuate these changes, the result will be a resized and more nimble sales team and a methodical enterprise sales process commensurate with our expected future growth trajectory.

Speaker Change: Given the depth and breadth of the sales team and process restructuring, we expect it to take several quarters to fully implement, and realize the many benefits that will come from it.

Speaker Change: as we look ahead to the second half of the year we now know it will not be possible to execute this transformation given the expected accompany disruption while simultaneously delivering on the ramp we previously forecasted

Nabeel Ahmed: As a result, we expect the second half of 2024 will look similar to the first half, with expected revenue for the year of approximately $110 million. We will continue to ensure spending is aligned to this new revenue outlook as we drive toward profitability. We expect this restructuring and optimization to deliver additional annualized savings into 2022. Additionally, while the transition to enterprise sales is challenging for any company, we believe the benefits are substantial in terms of deal size and revenue growth.

Speaker Change: As a result, we expect the second half of 2024 will look similar to the first half with expected revenue for the year of approximately $110 million.

Speaker Change: We will continue to ensure spending is aligned to this new revenue outlook as we drive toward profitability. We expect this restructuring and optimization to deliver additional annualized savings into 2025.

Speaker Change: While the transition to enterprise sales is challenging for any company, we believe the benefits are substantial in terms of deal size and revenue growth. While this transition is having a near-term negative impact on our business, we have strong conviction that it's the right thing for our business over the long term.

Nabeel Ahmed: While this transition is having a near-term negative impact on our business, we have strong conviction that it's the right thing for our business over the long term. What we're observing is not a lack of demand or losing opportunities to a competitor. Tableau remains highly differentiated in delivering the clinical, financial, and operational improvements health care providers need in both the acute and home settings. The quality and depth of demand in our pipeline is stronger than we have ever seen to date, with a high percentage of large deal sizes over a million dollars. What we're experiencing is a temporary dislocation of converting the pipeline to revenue on our time due to the changes in customer profile and process and the improvements needed in our own sales.

Speaker Change: What we're observing is not a lack of demand or losing opportunities to a competitor. Tableau remains highly differentiated in delivering the clinical, financial, and operational improvements healthcare providers need in both the acute and home settings.

Speaker Change: The quality and depth of demand in our pipeline is stronger than we have ever seen to date, with a high percentage of large deal sizes over $1 million each.

Speaker Change: What we're experiencing is a temporary dislocation of converting the pipeline to revenue on our timeline due to the changes in customer profile and process and the improvements needed in our own sales execution.

Nabeel Ahmed: With our installed base now at roughly 5,700 consoles, the number of treatments performed each month on Tableau continues at record levels. Treatment orders remain strong, and our recurring revenue business model continues to differentiate itself. During the second quarter, recurring revenue grew 24 percent from the second quarter of 2023, with gross margin materially expanding, as it has each quarter for more than three years. Non-GAAP gross margin in the second quarter reached a record 37.3 percent, with product margin at 44.8 percent and service and other margin at 19.8.

Speaker Change: With our installed base now at roughly 5,700 consoles, the number of treatments performed each month on Tableau continues at record levels, treatment orders remain strong, and our recurring revenue business model continues to distinguish itself.

Speaker Change: During the second quarter, recurring revenue grew 24% from the second quarter of 2023, with gross margin materially expanding as it has each quarter for more than three years.

Speaker Change: non-GAAP gross margin in the second quarter reached a record 37.3% with product margin at 44.8% and service and other margin at 19.8%.

Nabeel Ahmed: Before turning the call over to Nabeel, I'd like to add a few highlights from our end markets. For example, in the acute and subacute settings, we added nearly 30 new accounts during the quarter and continued strategic insourcing rollout at two of the largest health systems in the world. Data from one of our ICU customers was also published in a medical journal and showed a 40 percent reduction in mean length of stay, which resulted in savings during the measurement period of more than a million dollars.

Nabeel: Before turning the call over to Nabeel, I'd like to add a few highlights from our end markets. For example, in the acute and subacute settings, we added nearly 30 new accounts during the quarter and continued strategic insourcing rollout at two of the largest health systems in the country.

Speaker Change: Data from one of our ICU customers was also published in a medical journal and showed a 40% reduction in mean length of stay which resulted in savings during the measurement period of more than a million dollars.

Nabeel Ahmed: In the home, we continue to see industry-leading retention rates and look forward to publishing more data from our home registry later this year. At the end of the second quarter, our 90-day retention rate remained at 90 percent versus the 65 percent average reported with the incumbent home hemodialysis device, and our cumulative opt-off rate remains at just approximately 10 percent. Our home census continues to grow with multiple midsize dialysis organizations and skilled nursing facilities expanding with. With that, I'll now turn it over to Nabeel.

Speaker Change: In the home, we continue to see industry-leading retention rates and look forward to publishing more data from our home registry later this year.

Speaker Change: At the end of the second quarter, our 90-day retention rate remained at 90% versus the 65% average reported with the incumbent home hemodialysis device. And our cumulative opt-off rate remains at just approximately 10%.

Nabeel: Our home census continued to grow with multiple midsize dialysis organizations and skilled nursing facilities expanding with Tableau. With that I'll now turn it over to Nabeel.

Nabeel Ahmed: Thanks, Leslie. Hello, everyone.

Nabeel: Thanks, Leslie. Hello, everyone. Revenue for the second quarter was $27.4 million, a 3% decline from the first quarter and driven solely by softness and console revenue for the reasons Leslie described.

Nabeel Ahmed: Revenue for the second quarter was $27.4 million, a 3 percent decline from the first quarter and driven solely by softness and console revenue for the reasons Leslie described. Product revenue of $19.2 million included console revenue of $7.2 million, which declined 22% from the first quarter. The other component of product revenue is consumable sales, which performed very well as utilization continued to be strong. Consumable revenue rose nearly 8% sequentially and more than 25% from the second quarter of last year to nearly $12.1 million.

Nabeel Ahmed: Revenue for the second quarter was $27.4 million, a 3 percent decline from the first quarter and driven solely by softness and console revenue for the reasons Leslie described. Product revenue of $19.2 million included console revenue of $7.2 million, which declined 22% from the first quarter. The other component of product revenue is consumable sales, which performed very well as utilization continued to be strong. Now, moving to our second quarter gross margin and operating expenses, which, as a reminder, reflect our non-GAAP results.

Nabeel: Product revenue of $19.2 million included console revenue of $7.2 million, which declined 22% from the first quarter. The other component of product revenue is consumable sales, which performed very well as utilization continued to be strong.

Speaker Change: Consumable revenue rose nearly 8% sequentially and more than 25% from the second quarter of last year to nearly 12.1 million dollars.

Nabeel Ahmed: Service and other revenue also performed well, increasing to $8.2 million, up 5% sequentially and 22% year over year. We were encouraged to see that Consul ASP remains strong across all end markets as a result of our disciplined pricing and strong uptake of our Tableau Pro Plus offering with acute touch.

Speaker Change: Service and other revenue also performed well, increasing to $8.2 million, up 5% sequentially and 22% year-over-year.

Speaker Change: we were encouraged to see that fl assp remains strong across all end markets as a result of our discipline pricing and strong uptake of our tableau pro-plus offering with acqute customers

Nabeel Ahmed: Now, moving to our second quarter gross margin and operating expenses, which, as a reminder, reflects our non-GAAP results. Please refer to the reconciliation of gap to non-gap measures found in today's earnings. Gross margin of 37.3% increased more than 6 percentage points from the first quarter and more than 14 percentage points from the second quarter of last year. As Leslie mentioned, we saw strong underlying dynamics within both product gross margin, which was a record 44.8%, and service and other gross margin, at 19.8%. Expanding gross margin remains a hallmark of our story and continues to be driven by our product maker. Consult Cost on Programs, Strong Utilization, and Service Renewal

Speaker Change: Now, moving to our second quarter gross margin and operating expenses which, as a reminder, reflect our non-GAAP results. Please refer to the reconciliation of GAAP to non-GAAP measures found in today's earnings release.

Nabeel Ahmed: Please refer to the reconciliation of GAP to non-GAAP measures found in today's earnings. Gross margin of 37.3% increased more than six percentage points from the first quarter and more than 14 percentage points from the second quarter of last year. As Leslie mentioned, we saw strong underlying dynamics within both product gross margin, which was a record 44.8%, and service and other gross margin, at 19.8%. Expanding gross margin remains a hallmark of our story and continues to be driven by our product maker. Non-GAAP net loss was $24.7 million, or 47 cents per share, materially lower on a sequential and year-over-year basis.

Speaker Change: Gross margin of 37.3% increased more than six percentage points from the first quarter and more than 14 percentage points from the second quarter of last year.

Speaker Change: As Leslie mentioned, we saw strong underlying dynamics within both product gross margin, which was a record 44.8%, and service and other gross margin at 19.8%.

Leslie: Expanding gross margin remains a hallmark of our story and continues to be driven by our product mix, console cost and programs, strong utilization, and service renewals.

Nabeel Ahmed: Because gross margin is sensitive to mix, it may fluctuate a bit on a quarter to quarter basis, but we remain confident in our ability to reach our next milestone at 50%. Operating expenses of $31.2 million declined 11 percent as compared to the first quarter and 25 percent from the prior year period, driven by our ongoing focus on expense management and the restructuring actions we've taken since the fourth quarter of 2023, non-GAAP net loss was $24.7 million or 47 cents per share, materially lower on a sequential and year-over-year basis, net loss for the second quarter was 16% lower than the first quarter and 27% lower than the second quarter of 2020, reflecting the positive results of our drive to profitability.

Speaker Change: bebecause gross margin sensitive to mix it may fluctuate a bit on a quarter-to-quarter basis but we remain confident in our ability to reach our next milestone at fifty percent

Speaker Change: Operating expenses of $31.2 million declined 11% as compared to the first quarter and 25% from the prior year period driven by our ongoing focus on expense management and the restructuring actions we've taken since the fourth quarter of 2023.

Speaker Change: non-GAAP net loss was $24.7 million or 47 cents per share, materially lower on a sequential and year-over-year basis.

Leslie: Net loss for the second quarter was 16% lower than the first quarter, and 27% lower than the second quarter of 2023, reflecting the positive results of our drive to profitability.

Nabeel Ahmed: These results also reflect our ongoing focus on gross margin expansion, which we've achieved consistently for three years now, and on our commitment to aligning OPEX with our level of revenue growth. I want to step back for a moment here and focus on our ongoing commitment to reaching profitability. We have, in previous quarters, underlined our alignment with shareholders on this goal, and I wanted to update you on our related activities. These revenues have historically proven to be very predictable and come at high gross margins with high marginal operating levels. Once we get our console placement engine ramped up,

Leslie: These results also reflect our ongoing focus on gross margin expansion, which we've achieved consistently for three years now, and on our commitment to aligning OPEX with our level of revenue growth.

Leslie: I want to step back for a moment here and focus on our ongoing commitment towards reaching profitability. We have, in previous quarters, underscored our alignment with shareholders on this goal and I wanted to update you on our related actions.

Nabeel Ahmed: First, from a revenue perspective, our business is structurally designed for both revenue growth over the long term and for gross margin expansion. For example, every console we sell today is expected to generate between $15,000 to $20,000 of annual recurring revenue. These revenues have historically proven to be very predictable and come at high gross margins with high marginal operating levels. Indeed, our recurring revenues grew by 24% in Q2-24 compared to Q2 of 2023 and by 27% if you compare the first half of 2024 to the first half of 2020. Once we get our console placement engine ramped up,

Leslie: First, from a revenue perspective.

Leslie: Our business is structurally designed for both revenue growth over the long term and for gross margin expansion. Every console we sell today is expected to generate between $15,000 to $20,000 of annual recurring revenues.

Leslie: These revenues have historically proven to be very predictable and come at high gross margins with high marginal operating leverage.

Leslie: Indeed, our recurring revenues grew by 24% in Q2-24 compared to Q2 of 2023, and by 27% if you compare the first half of 2024 to the first half of 2023.

Nabeel Ahmed: We should expect that these recurring revenues will continue their contribution to growth and gross margin expansion. We believe that recurring revenues, on an annual basis, should continue to be over half of our total revenues as we move forward. Second, we continue to deliver on our gross margin expansion initiatives and have improved gross margin by more than 70 percentage points since Q3 of 2020, our first publicly reported quarter. In addition to the gross margin expansion that is structurally driven by our business, we expect to continue our work to improve gross margin over time as we continue our cost reduction initiatives across products and services.

Leslie: Once we get our console placement engine ramped,

Leslie: We should expect that these recurring revenues will continue their contribution to growth and gross margin expansion.

Nabeel Ahmed: We believe that recurring revenues on an annual basis should continue to be over half of our total revenues as we move forward. Since the fourth quarter of 2023, and inclusive of the actions we discussed today, we have reduced our annualized spending by roughly $70 million, putting our run rate non-GAAP operating expenses at just over $100 million. Our non-GAAP operating loss for the second quarter was $21 million, the lowest quarterly level it's been at since we achieved commercial scale in 2021, reflecting the work we've done around driving recurring revenue growth, expanding gross margin, and managing operations.

Leslie: We believe that recurring revenues, on an annual basis, should continue to be over half of our total revenues as we move forward.

Leslie: Second, we continue to deliver on our gross margin expansion initiatives and have improved gross margin by more than 70 percentage points since Q3 of 2020, our first publicly reported quarter.

Leslie: In addition to the gross margin expansion that is structurally driven by our business, we expect to continue our work to improve gross margin over time as we continue our cost reduction initiatives across product and service.

Nabeel Ahmed: Third, we are focused on ensuring that OPEC scales at a rate that is aligned with our expected rate of revenue growth and with an eye towards profitability. Since the fourth quarter of 2023, and inclusive of the actions we discussed today, we have reduced our annualized spending by roughly $70 million, putting our run rate non-GAAP operating expenses at just over $100 million. Our non-GAAP operating loss for the second quarter was $21 million, the lowest quarterly level it's been at since we achieved commercial scale in 2021, reflecting the work we've done around driving recurring revenue growth, expanding gross margin, and managing operations.

Speaker Change: third we are focused on ensuring that our opex scales that are rate that is aligned with our expected rate of revenue growth and within iceswards profitability

Leslie: Since the fourth quarter of 2023, and inclusive of the actions we discussed today, we have reduced our annualized spending by roughly $70 million, putting our run rate non-GAAP operating expenses at just over $100 million.

Leslie: Our non-GAAP operating loss for the second quarter was $21 million.

Leslie: The lowest quarterly level it's been at since we achieved commercial scale in 2021, reflecting the work we've done around driving recurring revenue growth, expanding gross margin, and managing OPEX.

Nabeel Ahmed: And finally, moving to our balance sheet, we are focused on additional opportunities to reduce the working capital impact on cash through supply chain and manufacturing strategies to optimize inventory levels. We expect that inventory will step up over the second half of this year before burning down beyond that. We remain well-financed, ending the second quarter with $198.2 million in cash, cash equivalents, short-term investments, and restricted cash.

Leslie: And finally, moving to our balance sheet, we are focused on additional opportunities to reduce the working capital impact on cash through supply chain and manufacturing strategies to optimize inventory levels.

Leslie: We expect that inventory will step up over the second half of this year before burning down beyond that period.

Leslie: We remain well-financed, ending the second quarter with $198.2 million in cash, cash equivalents, short-term investment, and restricted cash.

Operator: Please stand by. Your call will begin momentarily. Again, please stand by. Your call will begin momentarily.

Nabeel Ahmed: Turning to our outlook for full year 2024, we now expect revenue of approximately $110 million. Our base assumption is that console revenue in the second half will be similar to what we reported for the first half. With strong utilization, we would expect recurring revenue to continue to perform well as it has consistently done. Turning to gross margin, with our continued outperformance, we have increased conviction in our guidance for 2024 non-GAAP gross margin.

Nabeel Ahmed: Turning to our outlook for full year 2024, we now expect revenue of approximately $110 million. Our base assumption is that console revenue in the second half will be similar to what we reported for the first half. With strong utilization, we would expect recurring revenue to continue to perform well as it has consistently done. As I said earlier, since the fourth quarter of 2023, we have reduced our annualized spending by roughly $70 million, putting our run rate non-GAAP operating expenses at just over $100 million.

Leslie: Turning to our outlook for full year 2024, we now expect revenue of approximately $110 million. Our base assumption is that console revenue in the second half is similar to what we reported for the first half.

Leslie: With strong utilization, we would expect recurring revenue to continue to perform well as it has consistently done.

Leslie: Turning to gross margin. With our continued outperformance, we have increased conviction in our guidance for 2024 non-GAAP gross margin.

Nabeel Ahmed: For the full year, we are updating this guidance to now be in the low to mid 30% range. Again, gross margin expansion is driven by recurring revenue from a larger installed base, service leverage, and the console cost-down program. Turning now to OPEX for 2024, we expect to realize additional benefit from the work we have done. We now anticipate that OPEX for 2024 will be roughly $120 million, down from our prior guidance of 125 to 130 million.

Leslie: For the full year, we are updating this guidance to now be in the low to mid 30% range. Again, gross margin expansion is driven by recurring revenues from a larger install base, service leverage, and console cost down programs.

Leslie: Turning now to OPEX for 2024. We expect to realize additional benefit from, we expect to realize additional benefit this year from the work we have done. We now anticipate that OPEX for 2024 will be roughly 120 million dollars down from our prior guidance of 125 to 130 million dollars.

Nabeel Ahmed: As I said earlier, since the fourth quarter of 2023, we have reduced our annualized spending by roughly $70 million, putting our run rate non-GAAP operating expenses at just over $100 million. And finally, with our strong value proposition across two large end markets, wide competitive modes, and broad, integrated offering of products and services, we remain bullish on long-term revenue growth. We will revisit our long-term outlook once the enterprise sales transition is complete, and we believe that following this transition, we will return to strong, consistent top-line growth. With that, I'll turn the call back over to Leslie.

Leslie: As I said earlier, since the fourth quarter of 2023, we have reduced our annualized spending by roughly $70 million, putting our run rate non-GAAP operating expenses at just over $100 million.

Nabeel Ahmed: And finally, with our strong value proposition across two large end markets, wide competitive modes, and broad integrated offering of products and services, we remain bullish on long-term revenue growth. We will revisit our long-term outlook once the enterprise sales transition is complete, and believe that following this transition, we will return to strong, consistent top-line growth. With that, I'll turn the call back over to Leslie.

Leslie: And finally, with our strong value proposition across two large end markets, wide competitive modes, and broad, integrated offering of products and service, we remain bullish on the long-term revenue growth profile.

Operator: Ladies and gentlemen, thank you for standing by.

Operator: Welcome to Outset Medical, 2nd quarter, 2020-24 earnings conference call. At this time, all participants are in a listen only mode. After the speakers presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 1-1 on your telephone. You would then hear an automated message advising your hand is raised. 2. Would draw your question, please press star 1-1 again. Please be advised that today's conference is being recorded.

Leslie: We will revisit our long-term outlook once the enterprise sales transition is complete and believe that following this transition, we will return to strong, consistent top-line growth. With that, I'll turn the call back over to Leslie.

Leslie Trigg: Thanks, Nabeel. We are clearly dissatisfied with our performance, and we are making significant and difficult changes to our people, our processes, and our commercial approach as a result. While this has caused disruption, and it will continue to disrupt our near-term consular growth trajectory, we are firmly convinced that these are the right steps to return the company to meaningful, sustainable, top-line growth. Further, the fundamentals of this market, the business model, and our product remain firmly intact. We are entering one of the largest healthcare markets in the world, with over 85 million dialysis treatments performed each year in the United States alone.

Leslie: Thanks Nabeel. We are clearly dissatisfied with our performance and we are making significant and difficult changes in our people, our processes, and our commercial approach as a result.

Jim Azula: I would like now to turn the conference over to Jim Azula, Head of Invest Relations. Please go ahead. Okay, thank you very much. Good afternoon, everyone, and sorry for starting a few minutes late here.

Leslie: While it has caused disruption, and it will continue to disrupt our near-term consult growth trajectory, we are firmly convinced that these are the right steps to return the company to meaningful, sustainable, top-line growth.

Jim Azula: Welcome to our 2nd quarter, 2024 earnings call. Here with me, as always, our Leslie Trigg, Chair and Chief Executive Officer, Nabeel Ahmed, Chief Financial Officer. We should a news release after the close of market today, which can be found on the investor pages about setmedical.com. This call is being recorded and will be archived on the investor's section of our website. It's our intent that all forward-looking statements made during today's call will be protected under the private security's litigation reform act of 1995.

Leslie: Further, the fundamentals of this market, the business model, and our product remain firmly intact.

Leslie: 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.

Leslie Trigg: We have a proven business model. During just the past three years, we have increased recurring revenue from about 30% to well above 50% of total revenue. When Tableau consoles are sold and installed, they're used.

Speaker Change: We have a proven business model. During just the past three years, we've increased recurring revenue from about 30% to well above 50% of total revenue. When Tableau consoles are sold and installed, they're used.

Leslie Trigg: And we have executed very well to expand growth margin consistently since our IPO, again, demonstrating the strength of this business model. We remain as committed as ever to reaching profitability. This is a business that can be profitable and we believe it will be profitable due to a proven foundation of predictable recurring revenue, our gross margin profile, and inherent operating. What we do well goes far 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.

Jim Azula: 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 materially differ from those anticipated or implied. Outset assumes no obligation to update these statements and for a list and description of risk and uncertainties associated with our business. Please refer to the risk factor section of outset public filings with the SEC, including our latest annual and quarterly reports.

Leslie: And we have executed very well to expand growth margin consistently since our IPO, again, demonstrating the strength of this business model over time.

Leslie: We remain as committed as ever to reaching profitability. This is a business that can be profitable and we believe will be profitable due to a proven foundation of predictable recurring revenue, our gross margin profile, and inherent operating leverage.

Leslie: What we do well goes far 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.

Leslie Trigg: We now have data from hundreds of customers that support the business case and the value proposition of insourcing with Tableau. We help save healthcare providers money, simplify their operations, and improve the quality of life for their patients. These fundamental benefits are more important than ever, and Tableau brings a highly differentiated, difficult-to-copy product to the market.

Leslie Trigg: Thank you, Jim. Good afternoon, everyone, and thank you for joining us. I'll begin with our results in the second quarter, which on the top line, we're below our expectations as we work through the re-ramp of Tableau Cart and saw new evidence of our sales cycle, elongating areas of strength in the quarter, included treatment sales, which grew 25% year over year, console ASP, which increased more than 8% year over year, the console installed base, which grew 18% year over year, and the number of acute facilities using Tableau, which grew 16% year over year.

Speaker Change: We now have data from hundreds of customers that support the business case and the value proposition of insourcing with Tableau. We help save health care providers money, simplify their operations, and improve the quality of living for their patients.

Speaker Change: These fundamental benefits are more important than ever and Tableau brings a highly differentiated, difficult-to-copy product market fit to them.

Operator: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. And our first question will come from Marie Thibault on BTIG. Your line is open.

Speaker Change: With that, I think we are ready for Q&A. Operator, please open the line.

Speaker Change: Thank you. As a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again.

Leslie Trigg: Non-gap growth margin came in substantially above our expectations at 37.3% for the quarter, with product margin coming in at 44.8%. Despite the progress, second quarter revenue of 27.4 million dollars was lighter than expected, and driven entirely by console sales below our forecast. While the return of Tableau Cart was helpful in advancing some of the acute deals in our pipeline, the shiphold matched what we now recognize, which is a need for commercial execution changes to better position ourselves to capitalize on enterprise opportunities that typically come with a longer sales cycle.

Speaker Change: And our first question will come from Marie Thibault with BTIG. Your line is open.

Marie Thibault: Hi, good evening. Thanks for taking the questions. I want to start here by just trying to understand a little bit more of the challenges you're facing. I hate to be dense here, but enterprise sales sounds a little jargony to me. I want to understand who the enterprise customers are, how different that is from the MDOs that you had been targeting, and then are there structural challenges to the market? Is it competition? What else is making it hard for Tableau to compete for console sales?

Marie Thibault: Hi, good evening. Thanks for taking the questions. I want to start here with just trying to understand a little bit more of the challenges you're facing. I hate to be dense here, but enterprise sales sounds a little jargony to me. I want to understand who the enterprise customers are, how different that is from the MDOs that you had been targeting. And then are there structural challenges to the market? Is it competition? What else is making it hard for you?

Leslie Trigg: Before I get to those changes, I think it may be helpful to reflect on the growth we've experienced since our launch in 2019, which was driven by early market adopters. These innovators and visionaries largely in the acute setting where we have scale and now low double digit market share were the first to leave their longstanding outsourced relationships motivated by gaining control over their financial operational and clinical destiny. The support from early adopters of Tableau and the enforcing model has been essential to demonstrating the benefits Tableau provides that will fuel our next stage of growth.

Leslie Trigg: Yeah, thanks, Marie, for the question. Yeah, a couple things.

Speaker Change: Tableau to compete for console sales here.

Marie Thibault: yes thanks marie for the for the question

Leslie Trigg: So first of all, maybe I'll work backwards here. Short answer: no, no structural changes or challenges that we're facing here. You know, in a good way, in a bad way, we own this. The changes we need to make are entirely within our control.

Speaker Change: Thank you very much.

Speaker Change: Yeah, a couple things. So first of all, maybe I'll work backwards here. Short answer, no, no structural changes or challenges that we're facing here. You know, in a good way, in a bad way, we own this. The changes we need to make are entirely in our control.

Leslie Trigg: And require shifts and adjustments in our sales team, in our sales processes, in our pipeline management, and in our deal control. We do know how to do this; we have successfully closed large enterprise-level deals before; we now need to do so more consistently across the country. So that's, that's maybe point one.

Marie Thibault: um

Marie Thibault: and require shifts and adjustments in our sales team, on our sales processes, in our pipeline management, and in our deal control.

Leslie Trigg: This next stage of growth comes as we extend past the early enterprise adopters and use our football to expand into the mainstream enterprise adopters. These customers are deliberate consensus driven and process oriented purchase decisions are contemplated with enterprise conversion in mind and accordingly the sales cycle often takes longer as it requires a larger group of stakeholders buying in. We've learned that success with mainstream enterprise adopters requires a change in how we sell who we sell and the process we use to get there.

Marie Thibault: We do know how to do this. We have successfully closed large enterprise-level deals before. We now need to do so more consistently across the country. So that's maybe point one.

Leslie Trigg: In terms of the first part of your question, what are the real differences between the customer segments? I think what we've recognized, in hindsight, is that the first phase of our growth was fueled by early adopters. And those decision-making processes are different. Early adopters tend to move more quickly, tend to move with less consensus, fewer steps in the process, and are really willing to move quickly, and sometimes without all the evidence in hand.

Speaker Change: In terms of the first part of your question, what are the real differences between the customer segments, I think what we've recognized in hindsight is that the first phase of our growth was fueled by early adopters, and those decision-making processes are different.

Leslie Trigg: For example, we've identified the need to sell more broadly within the C-suite and establish commitment across a larger basis stakeholders deeper within the system to gain buy-ins. We've also recognized that our team needs to demonstrate exceptional consultative and change management skills as they work with large health systems on potential enterprise conversions.

Marie Thibault: Early adopters tend to move more quickly, tend to move with less consensus, fewer steps in the process.

Leslie Trigg: We have moved through that segment, you know; we're now in the low double-digit market penetration zone, which kind of aligns actually to that classic adoption curve in the early adopters, the visionaries and innovators that tend to go first within it. Now we have earned the right to penetrate mainstream enterprise adopters, and their decision-making processes are different. It is more consensus-driven; there are more stakeholders, both vertically up and down within these health systems and across from finance to operations to clinical influencers, and we need to do a better job of building that support, top to bottom, left to right.

Marie Thibault: and are really willing to kind of move quickly and sometimes about

Marie Thibault: All the evidence in hand.

Marie Thibault: We have moved through that segment, you know, we're now in the low double-digit market penetration zone which kind of aligns actually to that classic adoption curve and the early adopters, the visionaries, and the innovators that tend to go first within it.

Leslie Trigg: As we advance the in sourcing movement from the early enterprise adopters into mainstream enterprise adoption, it requires changes in how we go to market, which involves three big shifts in our commercial approach. First retooling our commercial team by infusing our capital sales team with individuals who have a different profile and skill set and ensuring we have the right talent in each role. Second, introducing a new capital sales process with greater specificity, accountability and discipline.

Marie Thibault: Now we have earned the right.

Marie Thibault: to penetrate into mainstream enterprise adopters, and their decision-making processes are different. It is more consensus-driven. There are more stakeholders.

Marie Thibault: both vertically up and down within these health systems and across from finance to operations to clinical influencers and we need to do a better job of building that support top to bottom left to right.

Leslie Trigg: So those are some of the differences in the types of deals and the stage that we're seeing shifting from again early adopters, often smaller deals, to now a pipeline that has evolved, as we see it, to a larger percentage of significant deals. These are deals that are 50 plus consoles, 100 plus consoles. These are customers that are considering enterprise-wide conversions, and while that's actually good news in the sense that the commitment levels and the interest levels are higher and much deeper, the flip side of that is that it does involve a longer sales cycle, and we need to make the adjustments in our team and our processes to better handle that.

Leslie Trigg: And third, injecting rigorous sales management inspection at every step along the way to improve capital sales forecasting and the time, of Clothes. This work is already underway. For example, we now have in place a sales leadership team with deep capital equipment experience centered around enterprise selling. We have also restructured our sales organization and trained them on our new enterprise sales approach. As we effectuate these changes, the result will be a resize and more nimble sales team and a methodical enterprise sales process commensurate with our expected future growth trajectory. Given the depth and breadth of the sales team and process restructuring, we expected to take several quarters to fully implement and realize the many benefits that will come from it.

Marie Thibault: So, those are some of the differences in the types of deals and the stage that we're seeing shifting from, again, early adopters, often smaller deals.

Leslie Trigg: I understand. That's very helpful, Leslie.

Marie Thibault: to now a pipeline that has evolved, as we see it, to a larger percentage of significant deals. These are deals that are 50-plus consults, 100-plus consults.

Marie Thibault: These are customers that are considering enterprise-wide conversions, and while that's actually good news in the sense that the commitment levels and the interest levels are higher and much deeper, the flip side of that is that it does involve a longer sales cycle, and we need to make the adjustments in our team and our processes to better prosecute that.

Leslie Trigg: I guess my follow-up here would have to do with the workforce changes you've been making. On the last call, you discussed, you know, reductions in headcount and, you know, a commitment not to impact commercial efforts. Now there's a discussion of, you know, finding the right people for the seats and sort of resizing the team. Is it a smaller sales force that you're looking at? It does sound like a very different type of person that you're targeting.

Lesly: understood that's very helpful lesly

Leslie Trigg: As we look ahead to the second half of the year, we now know it will not be possible to execute this transformation given the expected accompanying disruption while simultaneously delivering on the ramp we previously forecasted. As a result, we expect the second half of 2024 will look similar to the first half with expected revenue for the year of approximately $110 million. We will continue to ensure spending is aligned to this new revenue outlook as we drive toward profitability.

Speaker Change: I guess my follow-up here would have to do with the workforce changes you've been making. On the last call, you discussed, you know, reductions in headcount and, you know, a commitment to not impact commercial efforts. Now there's a discussion of, you know, finding the right people for the seat and sort of resizing the team. Is it a smaller sales force that you're looking at? It does sound like a very different...

Leslie Trigg: Is that targeting done? Is the hiring done, and are the right people in place, and now we're selling? Or is there still more evolution to come in the workforce? Thanks for taking the question.

Marie Thibault: type of person that you're targeting. Is that targeting done? Is the hiring done? And are the right people in place? And now we're selling or is there still more evolution to come on the workforce? Thanks for taking the question.

Leslie Trigg: We expect this restructuring and optimization to deliver additional annualized savings into 2025. While the transition to enterprise sales is challenging for any company, we believe the benefits are substantial in terms of deal size and revenue growth. While this transition is having a near-term negative impact on our business, we have strong conviction that it's the right thing for our business over the long term. What we're observing is not a lack of demand or losing opportunities to a competitor.

Leslie Trigg: Sure, of course, understood. Again, I'll probably start with the last part of your question. So yes, these individuals, and I'll start at the leadership level, that have a very different profile, and more importantly, a track record of kind of being in the end zone and shepherding multi-million dollar deals all the way to the end zone successfully, they are already inside of our organization, not only at the leadership level, but also within our capital sales team.

Speaker Change: Sure, of course. I understood. Again, I'll start probably with the last part of your question.

Marie Thibault: So, yes, these individuals, and I'll start at the leadership level, that have a very different profile and, more importantly, a track record of being in the end zone and shepherding multi-million dollar deals all the way to the end zone successfully, they are already inside of our organization at the, not only at the leadership level, but also within our capital sales team.

Leslie Trigg: Tableau remains highly differentiated in delivering the clinical, financial, and operational improvement healthcare providers need in both the acute and home settings. The quality and depth of demand in our pipeline is stronger than we have ever seen to date with a high percentage of large deal sizes over a million dollars each. What we're experiencing is a temporary dislocation of converting the pipeline to revenue on our timeline due to the changes in customer profile and process and the improvements needed in our own sales execution.

Leslie Trigg: We've seen them demonstrate success here already at Outset. Now we need to see it happening more broadly and more consistently across the rest of the organization. In terms of the size of the Salesforce, you know, I would think about it as probably more kind of spans and layers, getting closer to the customer. By and large, the size of the team focused on selling capital is the same. Again, just a very different talent, background, level, profile, and skill set.

Speaker Change: We've seen them demonstrate success here already at Outset, now we need to see it happening more broadly and more consistently across the rest of the organization.

Speaker Change: In terms of the size of the Salesforce, you know, I would think about it as probably more kind of spans and layers.

Speaker Change: getting closer the customer by and large the size of the team focused on selling capital is is the same

Speaker Change: Again, just a very different talent, background, level, profile, skill set.

Leslie Trigg: The other key, key, key area of the commercial team that's probably, you know, underappreciated, and I really want to emphasize is our field service and support team. The size of that team isn't changing at all. The composition isn't changing. They really are the face of Outset. They inform the user experience more than probably anybody else on our team, and they're vital to this growth that we continue to see in the recurring revenue base. That part of our organization is an

Leslie Trigg: With our installed base now at roughly 5,700 consoles, the number of treatments performed each month on Tableau continues at record levels. Treatment orders remain strong and our recurring revenue business model continues to distinguish itself. During the second quarter, recurring revenue grew 24% from the second quarter of 2023, with gross margin materially expanding as it has each quarter for more than three years. Non-gap gross margin in the second quarter reached a record 37.3% with product margin at 44.8% and service and other margin at 19.8%.

Speaker Change: The other key, key, key area of the commercial team that's probably, you know, underappreciated, and I really want to underscore, is our field service and support team. The size of that team isn't changing at all. The composition isn't changing. They really are the face of Outset. They inform the user experience more than probably anybody else on our team, and they're vital to this growth that we continue to see in the recurring revenue base, and that part of our organization isn't changing.

Rick Wise: And the next question comes from Rick Wise with Stiefel. Your line is now open.

Operator: And the next question comes from Rick Wise with Stiefel. Your line is now open.

Speaker Change: Thank you.

Marie Thibault: And the next question comes from Rick Wise with CFL. Your line is now open.

Leslie Trigg: Before turning the call over to Nabil, I'd like to add a few highlights from our end market. For example, in the acute and subacute settings, we added nearly 30 new accounts during the quarter and continued strategic enforcing rollout as she was the largest health system in the country. Data from one of our ICU customers was also published in a medical journal and showed a 40% reduction in mean length of day, which resulted in savings during the measurement period of more than a million dollars.

Frederick Wise: Good afternoon, Leslie. Like Marie, I'd like to make sure I understand how this all happened. It makes total sense that bigger contracts, better bigger orders enterprise-wide, selling and execution maybe require evolution. But I guess a two-part question related to that, you know, looking back at your comments last quarter, it felt like, with Tableau cart in hand, orders had been delayed, and could now be sold. And then there was a cyber attack that disrupted things, and we would see an acceleration.

Rick Wise: Good afternoon, Leslie.

Rick Wise: Like Marie, I'd like to make sure I'm understanding how this all evolved. It makes total sense that bigger contracts, bigger orders, enterprise-wide.

Rick Wise: selling and execution maybe requires evolution.

Rick Wise: But I guess a two-part question related to that.

Leslie Trigg: In the home, we continued to see industry leading retention rates and looked forward to publishing more data from our home registry later this year. At the end of the second quarter, our 90-day retention rate remained at 90% versus the 65% average reported with the incumbent home hemodialysis device. And our cumulative opt-off rate remained at just approximately 10%. Our home census continue to grow with multiple mid-sized dialysis organizations and skilled nursing facilities expanding with tabloids.

Speaker Change: You know, looking back at your comments last quarter, it felt like with Tableau cart in hand, orders had been delayed, could now be sold.

Frederick Wise: Help us transition from what you were thinking and understanding about where you were in early to mid-May and where we are now. Sort of like what happened. What didn't materialize that you thought was materializing? Is it that you were counting on multiple large orders that didn't happen?

Speaker Change: There was a cyber attack that disrupted things, and we would see an acceleration.

Speaker Change: Help us transition from what you were thinking.

Speaker Change: and understanding about where you were in early to mid-May.

Nabeel Ahmed: With that, I'll now turn it over to Nabeel. Thanks, Leslie. Hello, everyone. Revenue for the second quarter was $27.4 million. That's 3% decline from the first quarter and driven solely by softness and console revenue for the reasons Leslie describes. Product revenue of $19.2 million included console revenue of $7.2 million which declined 22% from the first quarter. The other component of product revenue is consumable sales which perform very well as utilization continued to be strong.

Speaker Change: and where we are now, sort of like what...

Speaker Change: What happened? What didn't materialize that you thought was materializing?

Speaker Change: Is it that you were counting on multiple large orders that didn't happen? Just trying to understand how we got here. I understand what you're saying about where you need to go as an organization next.

Leslie Trigg: Just trying to understand how we got here. I understand what you're saying about where you need to go as an organization next. Thank you.

Leslie Trigg: Yeah, a very, very fair set of questions there. Well, first and foremost, I think, certainly, in hindsight, with the benefit of hindsight, I think TableauCart masked some additional factors that were also helping to elongate our sales cycle. We, I think we were pretty clearly slow to recognize it, as we focused principally on getting Cavalo Cart back on track and back on the market. I think the first thing that we missed, which is now very evident as we sit here today, is this shift in the composition of our pipeline and in our customer base.

Speaker Change: Thank you. Yeah, yeah, yeah. A very, very fair set of questions there.

Speaker Change: Well, first and foremost, I think certainly in hindsight, with the benefit of hindsight, I think TableauCart masked some additional factors that were also helping to elongate our sales cycle. I think we were pretty clearly slow to recognize it as we focused

Nabeel Ahmed: Consumable revenue rolls nearly 8% sequentially and more than 25% from the second quarter of last year can nearly $12.1 million. Service another revenue also performed well increasing to 8.2 million dollars up 5% sequentially and 22% year over year. We were encouraged to see that console ASP remains strong across all end markets as a result of our discipline pricing and strong uptake of our tabloid pro-plus offering with acute customers.

Speaker Change: principally on getting Cablo Cart you know back on track and back on market. I think the first thing that we miss which is now very discernible as we see it here today is this shift

Leslie Trigg: Again, away from the earlier adopters and toward a very large percentage of deals that are at the enterprise level with mainstream adopters. Now, what that requires is a much different sales process and sales team than we've had in the past. As I've mentioned to you, the process with these customers is more consensus-driven, with more stakeholders and more deliberation, which is quite understandable given the level of commitment that they're contemplating and the additional steps.

Speaker Change: in the composition of our pipeline.

Speaker Change: and in our customer base, you know, again, away from the earlier adopters and toward a very large percentage of deals.

Nabeel Ahmed: Now moving to our second quarter gross margin and operating expenses which as a reminder reflects our non gap results. Please refer to the reconciliation of gap to non gap measures found in today's earnings. Gross margin of 37.3% increased more than 6% points from the first quarter and more than 14% points from the second quarter of last year. As Leslie mentioned you saw strong underlying dynamics within both product gross margin which was a record 44.8% and service another gross margin at 19.8%.

Speaker Change: that are enterprise-level with mainstream adopters. Now...

Speaker Change: What that requires to convert is a much different sales process and sales team than we've had in the past. As I mentioned, the process with these customers is more consensus-driven with more stakeholders and more deliberation, which is quite understandable, given the level of commitment that they're contemplating and more steps.

Leslie Trigg: I think this shift reflects high demand and a high level of commitment. But, on the flip side, we need to change, and we need to make adjustments in our commercial execution just to be able to capitalize on that. I think what most surfaced for us, Rick, thinking back to the second quarter, is while Tableau Cart itself certainly did elongate some of these larger deals, it didn't alone elongate all of them.

Speaker Change: Good news, this shift reflects high demand and a high level of commitment. Again, on the flip side, we need to change and we need to make adjustments in our commercial execution just to be able to capitalize on that.

Speaker Change: What I think what what most surfaced it for us, Rick, thinking back to the second quarter,

Nabeel Ahmed: Expanding gross margin remains a hallmark of our story and continues to be driven by our product mix console cost down programs strong utilization and service renewals. Because gross margin is sensitive to mix it may fluctuate a bit on a quarter to quarter basis but we remain confident in our ability to reach our next milestone at 50%. Operating expenses of $31.2 million declined 11% as compared to the first quarter and 25% from the prior year period driven by our ongoing focus on expense management and the restructuring actions we've taken since the fourth quarter of 2023.

Speaker Change: is while Tableau Cart itself certainly did elongate some of these larger deals.

Leslie Trigg: And yes, we did expect more of the sort of Tableau Cart occluded deals, for lack of a better term, to advance and to close in the second quarter. And when they didn't, it really became pretty apparent that there probably was something more going on here, something that we needed to examine on a much deeper level, which really led to our realization that, hey, we're past the early adopters. We've earned the right, with our results, with our footprint, with our experience, to go after these larger enterprise deals with mainstream customers and go after enterprise-wide conversion. But we're going to need to change in order to take full advantage of it. I hope that that helped.

Speaker Change: It didn't alone elongate all of them and yet we did expect more of the

Speaker Change: sort of the tableau cart occluded deals, for lack of a better term, to to advance and to close in the second quarter and when they didn't

Speaker Change: It really became pretty apparent that there probably was something more going on here, something that we needed to examine on a much deeper level, which really led to our realization that, hey, we're past the early adopters.

Speaker Change: We've earned the right with our results.

Speaker Change: with our footprint, with our experience to go after these larger enterprise deals with mainstream customers and go after enterprise-wide conversion, but we're going to need to change in order to take full advantage of it.

Nabeel Ahmed: Non gap net loss was 24.7 million dollars or 47 cents per share materially lower on a sequential and year over your basis net loss for the second quarter was 16% lower than the first quarter and 27% lower than the second quarter of 2023 reflecting the positive results of our drive to profitability. These results also reflect our ongoing focus on gross margin expansion which we've achieved consistently for three years now and on our commitment to aligning up acts with our level of revenue growth.

Frederick Wise: Yeah, no, thank you. And a couple of other questions about, you know, as we go through this transition, as you go through this transition, I guess, I guess there are so many questions here. How does the lower than anticipated revenue impact cash flow breakeven timing, and the 50% gross margins?

Speaker Change: I hope that helps. Yeah. No, thank you. And a couple of other questions about, you know, as we go through this transition, as you go through this transition.

Speaker Change: I guess there's so many questions here.

Speaker Change: How does the lower than anticipated revenue impact cash flow breakeven timing, the 50% gross margins? I mean, you reiterated all these things, basically, but does the timing change?

Nabeel Ahmed: I want to step back for a moment here and focus on our ongoing commitment towards reaching profitability. We have in previous quarters underscored our alignment with shareholders on this goal and I wanted to update you on our related access. Actions. First, from a revenue perspective, our business is structurally designed for both revenue growth over the long term and for gross margin expansion. Every console we sell today is expected to generate between 15 to $20,000 of annual recurring revenues.

Nabeel Ahmed: I mean, you reiterated all these things, basically, but does the timing change? And, and, you know. Well, I'll stop there. Go ahead. Thank you.

Speaker Change: I'll stop there. Go ahead. Thank you.

Nabeel Ahmed: Hey Rick, it's Thibault. So with respect to cash flow breakeven timing, so our run rate OPEX for 2025 and kind of after the actions we've taken is now about $100 million. And so that means that at a 50% gross margin, which we continue to have conviction in getting to, we can now get there at a revenue run rate of $200 million, which is actually lower than our previous guidance when it came to breaking even.

Nabeel: Hey Rich, it's Nabeel.

Nabeel: So with respect to cash flow breakeven timing

Rich: So, our run rate to OPEX for 2025 and kind of after the actions we've taken is now about $100 million.

Nabeel Ahmed: These revenues have historically proven to be very predictable and come at high gross margins with high marginal operating leverage. Indeed, our recurring revenues grew by 24% in Q2-24 compared to Q2 of 2023, and by 27% if you compare the first half of 2024 to the first half of 2023. Once we get our console placement engine ramped, we should expect that these recurring revenues will continue their contribution to growth and gross margin expansion.

Speaker Change: And so that means that at a 50% gross margin, which we continue to have conviction in getting to, we can now get there at a revenue run rate of $200 million, which is actually lower than our previous guidance when it came to breaking even.

Nabeel Ahmed: And then, Rick, you know, as we move a little bit above 50% gross margin, that revenue run rate is below $200 million. Now, talking about gross margin for a minute here, you know, our growth is really underpinned by the recurring revenues that Leslie and I talked about. And these recurring revenues, particularly consumables, come with higher gross margins than consoles. That's been the case, and will continue to be the case. And so the mixed shift associated with more recurring revs actually conceivably accelerates our path to 50%, all else being equal.

Nabeel: And then, Rick, you know, as we move a little bit above 50% gross margin, that revenue run rate is below $200 million.

Rick Wise: Now, talking about the gross margin for a minute here.

Speaker Change: You know, our growth is really underpinned by the recurring revenues that Leslie and I talked about. And these recurring revenues, particularly consumables,

Nabeel Ahmed: We believe that recurring revenues on an annual basis should continue to be over half of our total revenues as we move forward. Second, we continue to deliver on our gross margin expansion initiatives and improve gross margin by more than 70 percentage points since Q3 of 2020, our first publicly reported quarter. In addition to the gross margin expansion that is structurally driven by our business, we expect to continue our work to improve gross margin over time as we continue our cost reduction initiatives across products and service.

Speaker Change: come with higher gross margin than consoles. That's been the case and will continue to be the case. And so the mixed shift associated with more recurring revs actually conceivably accelerates our path to 50%

Nabeel Ahmed: And so hopefully, that gives you a size for a sort of look; we actually break even at a lower run rate and continue to have conviction in that 50% gross margin milestone. Let me pause to see if I answered correctly.

Speaker Change: all else being equal. And so hopefully that gives you a size for a sort of look. We actually break even at a lower run rate and continue to have conviction in that 50%, a gross margin milestone. Let me pause to see if I answered your question.

Frederick Wise: Yeah, that's very helpful, Nabeel. And lastly, for the moment, you've guided us to a second half, as you've said very clearly, roughly equal to the first half as you go through this sales or execution transition. And again, impossible to answer, I'm sure. But how do we, we have to plug something into our models for 25 and beyond.

Nabeel Ahmed: Third, we are focused on ensuring that our off-ex scales that are rate that is aligned with our expected rate of revenue growth and with an eye towards profitability. Since the fourth quarter of 2023 and inclusive of the actions we discussed today, we have reduced our annualized spending by roughly $17 million, putting our run rates non-gap operating expenses at just over $100 million. Our non-gap operating loss for the second quarter was $21 million.

Rick Wise: Yeah, that's very helpful, Nabeel. And I guess last to me for the moment, you've guided us to a second half, as you've said very clearly, roughly equal to the first half as you go through this

Rick Wise: and again impossible to answer I'm sure but how do we we have to plug something into our models for 25 and beyond

Leslie Trigg: Do we, should we imagine, Leslie, do you imagine, do you hope that this is a six-month transition process? I mean, what are you hoping and dreaming at this point? And that starting, you know, from the get-go in 25, in 25, we're gonna, we should, you hope, be able to see the demand translate into better execution and some of these million-dollar contracts translate into better sales. What do we think about 25 and beyond, frankly?

Nabeel Ahmed: The lowest quarterly level it's been at since we achieved commercial scale in 2021. Reflecting the work we've done around driving recurring revenue growth, expanding gross margin and managing off-ex. And finally, moving to our balance sheet, we are focused on additional opportunities to reduce the working capital impacts on cash through supply chain and manufacturing strategies to optimize inventory levels. We expect that inventory will step up over the second half of this year before burning down beyond that period. We remain well financed ending the second quarter with $198.2 million in cash, cash equivalence, sur term investment and restricted cash.

Speaker Change: Do we, should we imagine, Leslie, do you imagine, do you hope that this is a six-month

Rick Wise: Transition process. I mean, what are you hoping and dreaming at this point? And that starting, you know, from the get-go in 25, we should, you hope,

Rick Wise: that we'll be able to see the demand translate into and better execution and some of these million-dollar contracts translate into better sales. How do we think about 25 and beyond, frankly?

Leslie Trigg: Sure, yeah, I'm happy to comment on that, and Nabeel can jump in at any time. Suffice it to say, in the very immediate short term, we're obviously focused on executing this transformation. And I do expect it to take several quarters to fully implement. Again, it's underway, it's taking root, but that never happens overnight. And along the way, we'll get better and better visibility about the timing, the effects, the results, which obviously will put us in a good position to provide guidance for 25 as we get here closer to the turn of the year. And over the longer term, 25 and beyond. I think about it in a couple of ways.

Speaker Change: Sure, yeah, I'm happy to comment on that and Nabeel can jump in at any time.

Nabeel Ahmed: Turning to our outlook for full year 2024, we now expect revenue of approximately $110 million. Our base assumption is that console revenue in the second half is similar to what we reported for the first half. With strong utilization, we would expect recurring revenue to continue to perform well as it has consistently done. Turning to gross margin. With our continued outperformance, we have increased conviction in our guidance for 2024 non-gap gross margin.

Speaker Change: Suffice it to say in the the very immediate short term here we're obviously focused on on executing this this transformation and

Speaker Change: And I do expect it to take several quarters to fully implement. Again, it's underway, it's taking root, but that never happens overnight. And along the way, we'll get better and better visibility about the timing, the effects, the results, which obviously will put us in a good position to...

Speaker Change: Provide guidance for 25 as we get here closer to the turn of the year over the longer term, you know 25 and beyond

Nabeel Ahmed: For the full year, we are updating this guidance to now be in the low to mid 30% range. Again, gross margin expansion is driven by recurring revenue from the larger install base, service leverage and console cost downprivileged.

Leslie Trigg: First and foremost, nothing about the fundamentals, the structure of this opportunity has changed. As they said, we own this. We have demonstrated the ability to close large enterprise deals in the past. We just need to do it more consistently across the country in a more standardized fashion, and all the steps needed to get there are in place. The strength of our recurring revenue foundation really is a powerful growth engine. We've seen that time and again.

Speaker Change: I think about it in a couple of ways. First and foremost, nothing about the fundamentals, the structure of this opportunity has changed. As they said, we own this.

Nabeel Ahmed: Williams. Turning now to OpEx for 2024. We expect to realize additional benefit from the work we have done. We now anticipate that OpEx for 2024 will be roughly $120 million down from our prior guidance of $125 to $130 million. As I said earlier, since the fourth quarter of 2023, we have reduced our annualized spending by roughly $70 million, putting our run rate, non-gap operating expenses at just over $100 million. And finally, with our strong value proposition across two large end markets, wide competitive mode, and broad integrated offering of products and service, we remain bullish on the long-term revenue growth profile.

Speaker Change: We have demonstrated the ability to close large enterprise deals in the past. We just need to do it more consistently across the country in a more standardized fashion, and all the steps needed to get there are in flight.

Speaker Change: the strength of our recurring revenue foundation really is a powerful growth engine we've seen that time again

Leslie Trigg: And in fact, actually, interestingly, our cohort analysis shows that console utilization in the acute and subacute phase actually goes up over time as new accounts become more mature accounts. So that's obviously very encouraging to see. Second, the growth in our pipeline that I alluded to earlier indicates very strong forward demand. The overall pipeline actually has never been larger than it is today. And the number of deals with 50 consoles, a hundred consoles, several hundred consoles has never been higher.

Speaker Change: And, in fact, actually, interestingly, our cohort analysis shows that consular utilization in the acute and subacute phase actually goes up over time as new accounts become more mature accounts. So that's obviously very encouraging to see.

Speaker Change: Second, the growth in our pipeline that I alluded to earlier, it indicates very strong forward demand.

Speaker Change: The overall pipeline actually has never been larger than it is today, and the number of deals with 50 consoles, 100 consoles, several hundred consoles, has never been higher. So this is not a demand problem. Where we need to get stronger is converting the pipeline.

Nabeel Ahmed: We will revisit our long-term outlook once the enterprise sales transition is complete, and believe that following this transition, we will return to strong, consistent, top-line growth.

Leslie Trigg: So this is not a demand problem. Where we need to get stronger is in converting the pipeline. The changes we need to make in order to do that, which pertain to sales execution, they are in our control, and we do know how to do this. We just need to do it consistently.

Speaker Change: The changes we need to make in order to do that pertain to sales execution. They are in our control and we do know how to do this. We just need to do it consistently. My final remark with regard to longer term growth is

Leslie Trigg: With that, I'll turn the call back over to Leslie. Thanks, Nabeel.

Leslie Trigg: My final remark with regard to longer-term growth is that it's kind of a double-edged sword, actually. With the deals in our pipeline getting larger, it actually doesn't take that many deals to close incrementally to drive growth. Now, obviously, near-term here, we've seen that work the other way. If several deals that are, call it, 50-plus consoles don't close on the timeline that you expect them to, it has a sizable impact on revenue, which is what we saw happening in Q1 and Q2 and what informed our guidance for the back half of the year. Looking forward, getting back to growth can be achieved with better, more predictable execution on a relatively small number of larger deals. That's it!

Leslie Trigg: We are clearly dissatisfied with our performance, and we are making significant and difficult changes in our people, our processes, and our commercial approaches and results. While it has caused disruption and it will continue to disrupt our near-term consular growth trajectory, we are firmly convinced that these are the right steps to return the company to meaningful, sustainable, top-line growth. Further, the fundamentals of this market, the business model, and our product remain firmly intact.

Speaker Change: It's kind of a double-edged sword, actually. With the deals in our pipeline getting larger, it actually doesn't take that many deals to close incrementally to drive growth.

Speaker Change: Now, obviously, near-term here, we've seen that work the other way. If several deals that are, call it, 50-plus consoles don't close on the timeline that you expect them to, it has a sizable impact on revenue.

Leslie Trigg: 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. We have a proven business model. During just the past three years, we have increased recurring revenue from about 30% to well, about 50% of total revenue. When Tableau consoles are sold and installed, they are used. And we have executed very well to expand growth margin consistently since our IPO, again, demonstrating the strengths of this business model over time.

Speaker Change: which is what we've seen happening in Q1 and Q2 and what informed our guidance for the back half of the year but looking forward getting back to growth can be achieved with better more predictable execution on a actually in a relatively small number of larger deals.

Nabeel Ahmed: Rick, if I may, I'd just love to help provide sort of how we think about our model. You know, we're not providing any guidance for any period beyond 2024 right now, but hopefully, this will give you kind of color as you think about your models. So first of all, we always start with the recurring revenues. implied in our guidance is that recurring revenues will be roughly $80 million or a little bit more for 2024.

Rick Wise: Rick, if I may, I'd just love to help provide sort of how we think about our model, you know, we're not providing any guidance for any period beyond 2024 right now, but hopefully this will give you kind of the colors you think about your models.

Leslie Trigg: We remain as committed as ever to reaching profitability. This is a business that can be profitable, and we believe will be profitable due to a proven foundation of predictable recurring revenue, our growth margin profile, and inherent operating leverage. What we do well goes far 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. We now have data from hundreds of customers that support the business case and the value proposition of insourcing with Tableau.

Speaker Change: First of all, we always start with the recurring revenues. Implied in our guidance is that recurring revenues will be roughly $80 million or a little bit more for 2024.

Nabeel Ahmed: That's going to grow in 2025 as the installed base grows and matures as it sort of always has done. Now, as we've previously shared, this recurring revenue growth means that we can grow total revenue even if console placements or console revenues remain flat. And then Rick, any console growth year on year easily gets you into the low double digit growth range for total revenue or beyond. So again, we're not giving guidance, but hopefully that helps you sort of understand how we think about the model.

Speaker Change: That's going to grow in 2025 as the installed base grows and matures as it sort of always has done.

Speaker Change: Now, as we've previously shared, this recurring revenue growth means that we can grow total revenue even if console placements or console revenues remain flat.

Leslie Trigg: We help save healthcare providers money, simplify their operations, and improve the quality of living for their patients. These fundamental benefits are more important than ever, and Tableau brings a highly differentiated difficult to copy product market fit to them.

Rick Wise: And then Rick, any console growth year-on-year easily gets you into the low double-digit growth range for total revenue or beyond. So again, we're not giving guidance but hopefully that helps you sort of with how we think about the model.

Operator: With that, I think we are ready for Q&A operator, please open the line. Thank you, as a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

Operator: Okay, thanks, Rick. Next question, operator? Yes.

Operator: Yes, our next question comes from Shagun Singh with RBC Capital Markets. Your line is open.

Speaker Change: Okay thanks Rick. Next question operator? Yes our next question comes from Shagun Singh with RBC Capital Markets. Your line is open.

Leslie Trigg: Great, thank you so much. Yeah, Leslie, it does seem like there's an execution issue at Outset on multiple fronts. And I'm just wondering, you know, you're calling it commercial, but you know, is it commercial? Is it strategy?

Shagun Chadha: Great, thank you so much. Yeah, Leslie, it does seem like there's an execution issue at Outset on multiple fronts. And I'm just wondering, you're calling it commercial, but is it commercial? Is it strategy?

Marie Thibault: And our first question will come from Marie Tibo with BTIG. Your line is open. Hi, good evening. Thanks for taking the questions. I want to start here with just trying to understand a little bit more of the challenges you're facing.

Leslie Trigg: Leslie, it does seem like there's an execution issue at Outset on multiple fronts, and I'm just wondering, you're calling out commercial, but is it commercial, is it strategy, is it something broader than that?

Leslie Trigg: Is it something broader than that? You know, I'm sure you guys have looked into it in more detail. So can you share what your findings are? And then, you know, I'm just curious. How do you know that this is a sales elongation issue? Because, you know, to Rick's question, you know, earlier, we were thinking it's a tableau card issue and it's not in the market. And perhaps, like, you can give us some insight into the pipeline, where does it stand versus last year?

Leslie Trigg: Is it something broader than that? I'm sure you guys have looked into it in more detail. So can you share what your findings are? And then, I'm just curious, how do you know that this is a sales elongation issue? Because to Rick's question, earlier we were thinking it's a tableau cart issue and it's not in the market. And perhaps you can give us some insight into the pipeline, where does it stand versus last year?

Leslie Trigg: I hate to be dense here, but enterprise sales, from the little jargony to me, I want to understand who the enterprise customers are, how different that is from the MDOs that you had been targeting. And then are there structural challenges to the market? Is it competition? What else is making it hard for Tableau to compete for Conco Sales? here. Yeah, thanks, Marie, for the question. Yeah, a couple things. So first of all, Nabeel worked backwards here.

Leslie Trigg: I'm sure you guys have looked into it in more detail, so can you share what your findings are? And then, I'm just curious, how do you know that this is a sales elongation issue? Because to Rick's question, earlier we were thinking it's a tableau cart issue and it not being in the market.

Leslie Trigg: And perhaps like you can give us some, you know, look into the pipeline, where does it stand versus last year? You know, have you thought of any metrics you're going to share with us going forward that gives us confidence that you have visibility into this?

Leslie Trigg: You know, have you thought of any metrics you're going to share with us going forward that give us confidence that you have visibility into this? I know there are a lot of questions, but just, you know, how can you make us more comfortable with the story that's here? Thank you.

Leslie Trigg: Have you thought of any metrics you're going to share with us going forward that give us confidence that you have visibility into this? I know there are a lot of questions, but just how can you make us more comfortable with the story that's here? Thank you.

Leslie Trigg: Short answer no. No structural changes or challenges that we're facing here. You know, in a good way and a bad way, we own this. The changes we need to make are entirely in our control and require shifts and adjustments in our sales team, in our sales processes, in our pipeline management and our deal control. We do know how to do this. We have successfully closed large enterprise level deals before. We now need to do so more consistently across the country. So that's maybe point one.

Leslie Trigg: I know there are a lot of questions, but just, you know, how can you make us more comfortable with the story that's here going forward? Thank you.

Leslie Trigg: Sure, yeah, I'm happy to address those questions on the pipeline front. Compared to last year, the pipeline in totality is significantly larger across the board. And that's actually across all of our end markets, acute, subacute, and home than it was a year ago today, kind of point one. Another way that we look at our pipeline is by stage, you know, stage of this new sales process that we have introduced and trained everybody on. We have a greater percentage of deals in the late stages of the sales process than we ever have before. So, i.e.

Leslie Trigg: Sure, yeah, I'm happy to.

Leslie Trigg: address those questions on on the pipeline front compared to last year the pipeline in totality

Leslie Trigg: is significantly larger across the board, and that's actually across all of our end markets acute.

Leslie Trigg: Subacute and home than it was a year ago today, kind of point one.

Leslie Trigg: Another way that we look at our pipeline is by stage, you know, stage of this new sales process that we have introduced and trained everybody to.

Leslie Trigg: In terms of the first part of your question, what are the recognized in hindsight is that the first phase of our growth was fueled by early adopters and those decision-making processes are different. Early adopters tend to move more quickly, tend to move with less consensus, fewer steps in the process and are really willing to kind of move quickly and sometimes about all the evidence in hand. We have moved through that segment.

Leslie Trigg: We have a greater percentage of deals in the late stages of the sales process than we ever have before. So, i.e., greater progress through the sales process compared to a year ago this time.

Leslie Trigg: So, i.e., greater progress through the sales process compared to a year ago this time. And the third thing we look at is deal size. We have a large percentage, approximately 60%, a bit above, of deals that equate to roughly a million dollars or substantially more in deal size sitting in the pipeline. So those are the ways that we look at the pipeline. All of those trend lines are up as you compare them to last year. Regarding your question about hey, is it execution or is it strategy or other? We feel strongly that it is execution, and I'll tell you the reasons for that.

Leslie Trigg: Greater progress through the sales process compared to a year ago this time. And the third thing we look at is deal size. We have a large percentage, approximately 60%, a bit above of deals that equate to roughly a million dollars or substantially more in deal size sitting in the pipeline. So those are the ways that we look at the pipeline. All of those trend lines are up as you compare them to last year.

Leslie Trigg: and the third thing we look at is is deal size.

Leslie Trigg: We have a large percentage, approximately 60% a bit above.

Leslie Trigg: You know, we're now in the low double digit market penetration zone, which kind of aligns actually to that classic adoption curve in the early adopters, the visionaries and the innovators that tend to go first within it. Now we have earned the right to penetrate into mainstream enterprise adopters and their decision-making processes are different. It is more consensus-driven. There are more stakeholders both vertically up and down within these health systems and across from finance to operations to clinical influencers and we need to do a better job of building that support top to bottom left to right.

Leslie Trigg: of deals that equate to roughly a million dollars or substantially more in deal size sitting in the pipeline. So those are the ways that we look at the pipeline. All of those trend lines are up as you compare them to last year.

Speaker Change: Regarding your question about, hey, is it execution or is it strategy or other?

Leslie Trigg: First and foremost, we now have the largest evidence base we've ever had around the financial cost savings that Tableau has driven for customers, the clinical outcomes that it has provided, and the operational efficiencies. We have 75 abstracts and 15 papers and innumerable case studies and white papers that all show tangibly the benefits of insourcing with Tableau. I have spent a lot of time in the field, qualitatively, and with our sales team really pressing on, "Hey, is there something that's changed in the value proposition or the implementation?" And the answer to that has been resoundingly no.

Leslie Trigg: We feel strongly that it is execution and I'll tell you the reasons for that.

Leslie Trigg: First and foremost, we now have

Speaker Change: The largest evidence base we've ever had around the financial cost savings that Tableau has driven for customers, the clinical outcomes that it has provided, and the operational efficiencies. We have 75 abstracts and 15 papers and innumerable case studies and white papers that all show tangibly the benefits of insourcing with Tableau.

Leslie Trigg: So those are some of the some of the differences in the the types of deals and the stage that we're seeing shifting from again early adopters off in smaller deals to now a pipeline that has evolved as we see it to a larger percentage of significant deals. These are deals that are 50 plus consoles, 100 plus consoles. These are customers that are considering enterprise-wide conversions and while that's actually good news in the sense that the commitment levels and the interest levels are higher and much deeper, the split side of that is that it does involve a longer sales cycle and we need to make the adjustments in our team and our processes to better prosecute that.

Marie Thibault: Understood. That's very helpful, Leslie.

Leslie Trigg: I have spent a lot of time in the field, I'll add qualitatively, and with our sales team.

Leslie Trigg: really pressing on, hey is there something that's changed in the value proposition or the implementation? And the answer to that has been resoundingly no. The feedback that we continue to get from current customers and prospective customers is their interest level has never been higher around improving their own margins.

Leslie Trigg: The feedback that we continue to get from current customers and prospective customers is that their interest level has never been higher around improving their own margins and producing tangible day one, dollar one expense reduction by insourcing with Tableau. So I think our strategy is on point. With acute care, sub-acute has been one of the fastest growing market segments for us for the last year or two here with rehabs, LTACs, and skilled nursing facilities.

Leslie Trigg: I guess my follow-up here would have to do with the workforce changes you've been making. On the last call you discussed reductions and headcount and a commitment to not impact commercial efforts. Now there's a discussion of finding the right people for the seat and sort of resizing the team. Is it a smaller sales force that you're looking at? It does sound like a very different type of person that you're is that targeting done?

Leslie Trigg: and producing tangible day one, dollar one expense reduction by insourcing with Tableau. So I think our strategy is on point with ACUTE.

Leslie Trigg: Subacute has been one of the fastest-growing market segments for us for the last year or two here with rehabs, LTACs, and skilled nursing facilities. When we look at

Leslie Trigg: When we look at our expansion with the number of customers and the number of sites using Tableau in the sub-acute segment, that also is all up and to the right. We talked about 16% growth year over year in facility expansion and 18% growth year over year in the installed base, which are data points that do point to customer validation of the model and in the technology. We have more demand than I ever could have hoped for a couple of years ago.

Leslie Trigg: our expansion with the number of customers and the number of sites.

Leslie Trigg: using Tableau in the sub-acute segment, that also is all up and to the right. We talked about 16% growth year-over-year in facility expansion and 18% growth year-over-year in the installed days.

Leslie Trigg: Is the hiring done and are the right people in place and now we're selling or is there still more evolution to come on the workforce? Thanks for taking the question. Yes. Sure. Of course. I understood. Again, I'll start with the probably with the last 30 questions. So, yes, these individuals and I'll start at the leadership level that have a very different profile and more importantly a track record of kind of being in the end zone and shepherding you know multi-million dollar deals all the way to the end zone successfully.

Leslie Trigg: which are data points that that do point to you know customer validation in the model and in the technology. We have

Leslie Trigg: What we now need to do is evolve and transition the way we get after it. I would say that, again, our sales team, and our sales processes were really oriented around the first part of the market, which for any medical device company are those early adopters. It's time for us to evolve that so we can reach the next shelf and take advantage of the mainstream enterprise adoption that's available to us now.

Speaker Change: more demand than i ever could have hoped for a couple of years ago what we now need to do is evolved in transition the way we get after it

Leslie Trigg: They are already inside of our organization at the not only at the leadership level but also within our capital sales team. We've seen them demonstrate success here already at outset. Now we need to see it happening more broadly and more consistently across the rest of the organization. In terms of the size of the sales force, you know I would think about it as probably more kind of spans and layers getting closer to the customer by and large the size of the team focused on selling capital is is the same. Again, just a very different talent background level profile skill sets.

Leslie Trigg: I would say that, again, our sales team, our sales processes were really oriented around the first part of the market, which, for any medical device company, are those early adopters. It's time for us to evolve that so we can reach up to the next shelf.

Leslie Trigg: and take advantage of the mainstream enterprise adoption that's available to us now.

Operator: Okay, I want to make sure we get to everyone's questions, so we should probably move to the next question operator.

Speaker Change: Okay, I want to make sure we get to everyone's questions, so we should probably move to the next question, Operator. Yes, our next question comes from Shuraj Kalia.

Operator: Yes, our next question comes from Siraj Kalia. Kalia with Oppenheimer. Your line is open.

Suraj Kalia: Leslie, can you hear me all right? Yes. So Leslie, just one question, but a multi-part question.

Speaker Change: cala with upenheimer your line 's open

Leslie Trigg: The the other key key key areas of commercial team that's probably you know under appreciated and I really want to underscore is our field service and support team. The size of that team isn't changing at all. The composition isn't changing. They really are the face of health set. They inform the user experience more than probably anybody else on our team and they're vital to this growth that we continue to see in the recurring revenue base and and not part of our organization, and changing. Thank you.

Leslie Trigg: Leslie, can you hear me all right?

Leslie Trigg: Yeah

Leslie Trigg: Perfect.

Leslie Trigg: And I have to confess, Leslie, I cannot connect the dots on the reasons for the shortfall, especially given the bullish commentary over the last three years, you know, the guidance cuts almost every year. What I'm trying to understand is, I understand Q1 to Q2 may be a short-term issue, but is it more of an issue of internal forecasting? versus Execution Capabilities. I guess that's one of the things that I'm trying to understand. Has price sensitivity increased? because y'all didn't implement an 8% console price increase. Is that a factor? Was there any geographic, you know, pockets of weakness?

Leslie Trigg: So, Leslie, just one question, but a multi-part question, and I have to confess, Leslie, I cannot connect the dots on the reasons for the shortfall, especially given the bullish commentary over the last three years, you know, the guidance cuts almost every year.

Leslie Trigg: on the reasons for the shortfall, especially given the bullish commentary over the last three years, you know, the guidance cuts almost every year versus execution capabilities. Is that a factor? Were there any geographic pockets of weakness?

Rick Wise: And the next question comes from Rick Wise with CIFL. Your line is now open. Good afternoon, Leslie. Like Marie, I'd like to make sure I'm understanding how this all of all that makes total sense that bigger contracts, bigger orders, enterprise-wide selling and execution maybe requires evolution. But I guess a two-part question related to that. You know, looking back at your comments last quarter, it felt like with Tableau Cart and Hand orders had been delayed, could now be sold.

Speaker Change: What I'm trying to understand is, I understand Q1 to Q2 may be something shorter.

Speaker Change: But is it more of an issue of internal forecasting versus execution capabilities?

Speaker Change: I guess that's one of the things that I'm trying to understand. Has price sensitivity increased because y'all did implement an 8% console price increase?

Speaker Change: Is that a factor? Was there any geographic, you know, pockets of weakness? And finally, I would ask is, you mentioned multiple times about 50, hundreds of console deals.

Suraj Kalia: And finally, I would ask you multiple times about 50, hundreds of console deals in the pipeline. Are these deals actually signed? Is there a PO in hand?

Leslie Trigg: And finally, I would ask you multiple times about 50, hundreds of console deals in the pipeline. Are these deals actually signed? Is there a PO in hand?

Leslie Trigg: Thank you. I know it's a multi-part question, but hopefully, you can help me reconcile it. I'm having a very hard time connecting the dots here.

Leslie Trigg: in the pipeline. Are these deals actually signed? Is there a PO in hand? Thank you. I know they're multi-part questions, but hopefully you can help me reconcile. I'm having a very hard time connecting the dots here. Thank you.

Rick Wise: And there was a cyber attack that disrupted things and we would see an acceleration. Help us transition from what you were thinking and understanding about where you were in early mid-May. And where we are now, sort of like what happened? And what didn't materialize that you thought was materializing is that you were counting on multiple large orders that didn't happen. I just trying to understand how we got here. I understand what you're saying about where you need to go as an organization next.

Leslie Trigg: Well, yeah, let me kind of take that one piece at a time. So you asked about sort of connecting the dots on the magnitude of the impact here for the second half of the year. You know, there were a couple of factors we considered in developing our guidance for the back half of the year. First, we do expect some level of disruption from this Salesforce restructuring, the process restructuring. And so that certainly was an element of our thought process in guidance development as we implemented and continue to implement all the changes.

Leslie Trigg: Sure.

Leslie Trigg: Well, yeah, let me kind of take that one piece at a time. So you asked about sort of the connecting the dots on the magnitude.

Leslie Trigg: of the impact here for the second half of the year. Yeah, there were a couple of factors we considered in developing our guidance for the back half of the year. First, we do expect some level of disruption from this Salesforce restructuring, the process restructuring.

Leslie Trigg: Second, you know, I mentioned that the complexion of our pipeline has changed in a good way. It is populated much more heavily with these larger enterprise agreements that can be 50 plus consoles. And so at that level, it really doesn't take all that many deals to arrive at a revenue impact that's pretty significant. Second, you asked about price sensitivity. No, we really have not experienced price sensitivity as a factor because, in the acute and subacute setting, and again, this has been well demonstrated, documented, and published on, the magnitude of the cost savings that Tableau drives in the acute and subacute setting is extremely significant, 50% to 70% down on the total cost of a hospital's expense line for dialysis after the implementation of insourcing with Tableau.

Rick Wise: Thank you. Yeah. Very, very fair set of questions there. Well, first and foremost, I think certainly in hindsight with the benefit of hindsight. I think Tableau Cart masked some additional factors that were also helping to elongate our cell cycle. We, I think we were pretty clearly slow to recognize it as we focused principally on getting Tableau Cart back on track and back on market. I think the first thing that we miss, which is now very discernible as we see it here today, is this shift in the composition of our pipeline.

Leslie Trigg: In a good way. It is populated much more heavily with these larger enterprise agreements that can be 50-plus consoles. And so at that level, it really doesn't take all that many deals to arrive at a revenue impact that's pretty significant.

Leslie Trigg: $40 million is roughly a dozen or so deals, and so hopefully that provides a little bit of color and a connection point for you there on the first part of your question.

Leslie Trigg: Second, you asked about price sensitivity. No, we really have not experienced price sensitivity as a factor because, in the acute and subacute setting, and again, this has been well demonstrated, documented, and published on, the magnitude of the cost savings that Tableau drives in the acute and subacute setting is extremely significant, 50% to 70% down on the total cost of a hospital's expense line for dialysis after the implementation of insourcing with Tableau.

Rick Wise: And in our customer base, you know, again, away from from the earlier adopters and toward a very large percentage of deals that are enterprise level with mainstream adopters. Now, what that requires to convert is a much different sales process and sales team than we've had in the past as I've mentioned you the process with these customers is more consensus driven with more stakeholders and more deliberation, which is quite understandable. Given the level of commitment that they're contemplating and and more steps.

Leslie Trigg: Second, you asked about price sensitivity. No, we really have not experienced price sensitivity as a factor because in the acute and subacute setting, and again, this has been well demonstrated and documented and published on, the magnitude of the cost savings that Tableau drives in the acute and subacute setting is extremely significant.

Leslie Trigg: 50 to 70% down on the total cost of a hospital's expense line for dialysis after the implementation of insourcing with Tableau. So no, price sensitivity has not really, it's not been a factor at all.

Leslie Trigg: So no, price sensitivity really has not been a factor at all. You then asked about the pipeline. Do you have issues with forecasting? And are these deals with a PO in hand? I mean, the definition of a pipeline is forward looking. These are deals that are at various stages in our sales cycle. We stage them just like any capital equipment company. And so when I talk about the strength of the pipeline, the size of the pipeline, and the stage of the pipeline, we're referring to our visibility and our future opportunities that are in front of us across the end market.

Rick Wise: I think good news, this shift reflects high demand and and a high level of commitment. Again, on the flip side, we need to change and we need to make adjustments in our commercial execution just to be able to capitalize on that. What I think what what most surface did for us Rick thinking back to the second quarter is while Tableau Cart itself certainly did elongate some of these larger deals, it didn't alone elongate all of them.

Leslie Trigg: You then asked about the pipeline. Do you have issues in forecasting?

Leslie Trigg: Are these deals with a PO in hand? I mean, the definition of a pipeline is future forward.

Leslie Trigg: These are deals that are at various stages in our sales cycle. We stage them, just like any capital equipment company. And so when I talk about the strength of the pipeline, the size of the pipeline,

Rick Wise: And yes, we did expect more of the sort of the Tableau Cart occluded deals for lack of their term to advance and to close in the second quarter. And when they didn't, it really became pretty apparent that there probably was something more going on here, something that we needed to examine on a much deeper level, which, which really led to our realizations that hey, we're past the early adopters. We've earned the right with our results, with our footprint, with our experience to go after these larger enterprise deals with mainstream customers and go after enterprise wide conversion, but we're going to need to change in order to take full advantage of it.

Leslie Trigg: And the stage of the pipeline, we're referring to our visibility and our future opportunities that are in front of us across the end market.

Leslie Trigg: Of course, going lastly to forecasting, one of the reasons why we see the need to adjust and mature our sales process and methodologies and team is that we do believe it'll reap benefits in the way that we execute against forecasting. We think it'll give us greater visibility, greater control, and greater predictability moving forward.

Leslie Trigg: Of course, going lastly to forecasting.

Leslie Trigg: One of the reasons why, you know, we see the need to adjust and mature.

Leslie Trigg: Our sales process and methodologies and team are because we do believe it'll reap benefits in the way that we execute against forecasting. We think it'll give us greater visibility, greater control, and greater predictability moving forward.

Operator: Great. Thanks, Suraj. Next question, operator. Our next question will come from Kristen Stewart with CL King. Your line is open. Hi, thanks for taking my question. I just wanted to focus on the expenses of the company. I think you have

Kristen Stewart: Great. Thanks, Suraj. Next question, operator. Our next question will come from Kristen Stewart with CL King. Your line is open. Hi, thanks for taking my question. I just wanted to focus on the expenses of the company. I think you have

Kristen Stewart: Our next question will come from Kristen Stewart with CL King. Your line is open.

Kristen Stewart: Great. Thanks, Suraj. Next question, operator. Our next question will come from Kristen Stewart with CL King. Your line is open.

Leslie Trigg: I hope that helps. Yeah, no, thank you. And a couple of other questions about, you know, as we go through this transition, as you go through this transition, I guess, I guess there's so many questions here. How does the lower than just paid revenue impact cash flow, break even timing, the 50% gross margin that you reiterated all these things basically, but does the timing change? And, you know, well, I'll stop there.

Kristen Stewart: Hi, thanks for taking my question. I just wanted to focus on the expenses of the company. I think you had mentioned that operating expenses were going to be about $120,000 this year, and if I heard you right,

Kristen Stewart: You said $100 million for the run rate for 2025. What kind of gives you the confidence that you can make these cuts? Where are they coming from? And just the confidence that this isn't going to be more disruptive from a selling organization perspective.

Nabeel Ahmed: Yeah, hey, Kristen, with respect to the first of all, you are right. We got it to about one hundred and twenty million in OPEX for twenty four, and a run rate of about one hundred million in twenty twenty five. The cuts this time were all around the areas that Leslie talked about. And it's really for us about rightsizing our OPEX structure with both our revenue revenue levels, number one, and number two, with our commitment to making sure that we remain on the path to profitability.

Nabeel Ahmed: Yeah, hey Kristen, with respect to the, so first of all, you are right, we got it to about $120 million in OPEX for 2024, and a run rate of about $100 million in 2025. The cuts this time were all around the areas that Leslie talked about, and it's really for us about right-sizing our OPEX structure with both our revenue levels, number one, and then number two, with our commitment to making sure that we remain on the path.

Leslie Trigg: Go ahead. Thank you. Hey, hey, hey, it's the bill. So with respect to cash flow, break even timing. So our run rates all pecs for 2025 and kind of after the actions we've taken is now about a hundred million dollars. And so that means that at a 50% gross margin, which we continue to have conviction in getting to, we can now get there at a revenue run rate of 200 million dollars, which is actually lower than our previous guidance when it came to breaking even.

Operator: Great, thanks, Kristen. Operator, we can move to the next question. Yes.

Nabeel Ahmed: Great. Thanks, Kristen. Operator, we can move to the next question. Yes.

Nabeel Ahmed: and Profitability.

Operator: Yes, our next question comes from Stephanie Piazzola with Bank of America Securities. Your line is open.

Stephanie Piazzola: Yes, our next question comes from Stephanie Piazzola with Bank of America Securities. Your line is open.

Stephanie Piazzola: Great, thanks Kristen. Operator, we can move to the next question. Yes, our next question comes from Stephanie Piazzola with Bank of America Securities. Your line is open.

Leslie Trigg: And then, Rick, you know, as we move a little bit above 50% gross margin, that revenue run rate is below 200 million. Now talking about the gross margin for a minute here, you know, our growth is really under pressure. It's been pinned by the recurring revenues that Leslie and I talked about and these recurring revenues, particularly consumables come with higher gross margin than consoles. That's been the case and will continue to be the case.

Stephanie Piazzola: Hi, thanks for taking the question. I just wanted to follow up on the guidance for this year moving lower by 40 million and maybe a little bit more about how you thought about this being the new guidance level. You said it would be similar second half to 1st half, but maybe if you could dive a little bit more into the underlying assumptions here and confidence in this being the right spot, just with some expected disruption from the commercial execution changes. Thank you.

Nabeel Ahmed: Hi, thanks for taking the question. I just wanted to follow up on the guidance for this year, Moving Well, we're by 40 million and maybe a little bit more about how you thought about this being the new guidance level. You said it would be similar in the second half to the first half, but maybe if you could dive a little bit more into the underlying assumptions here and confidence in this being the right spot, just with some expected disruption from the commercial execution changes. Thank you.

Nabeel Ahmed: Hi, thanks for taking the question. I just wanted to follow up about the guidance for this year moving forward by $40 million.

Nabeel Ahmed: And maybe a little bit more about how you thought about this being the new guidance level. You said it would be

Nabeel Ahmed: you know similar second half to first half but maybe if you could dive a little bit more into the underlying assumptions here and confidence in this being the right spot just with some expected disruption from the commercial execution changes. Thank you.

Leslie Trigg: And so the mix shifts associated with more recurring revs actually conceivably accelerates our path to 50% all else being equal. And so hopefully that gives you a size for a sort of look, we actually break even at a lower run rate and continue to have conviction in that 50% gross margin also. Let me pause to see if I answered your question. Yeah, that's very helpful. And I guess last to me for the moment, you've guided us to a second half, as you said, very clearly, roughly equal to the first half as you go through this sales or execution transition.

Nabeel Ahmed: Yeah, hey, Stephanie. So first of all, when we think about guidance for any period, we start with kind of the recurring revenue base, which for us is consumables, and then the service and other lines in our P&L. That for the first half is about $40 million, just under $40 million. And we would expect that to grow a little bit here in the second half or, at least, stay stable, all else being equal.

Speaker Change: Yeah, hey, Stephanie. So first of all, when we think about guidance for any period, we start with kind of the recurring revenue base, which for us is consumables and then the service and other line in our P&L.

Speaker Change: That, for the first half, is about $40 million, just under $40 million.

Speaker Change: And we would expect that to grow a little bit here in the second half, or at least, you know, stay stable, all else being equal. So you start out for the second half with $40 million of kind of recurring revenue base.

Nabeel Ahmed: So you start out for the second half with $40 million of some kind of recurring revenue base. The implied 2H total revenue is $55 million, which leaves consoles at about $15 million. And again, if you look at what we did in the first half, console revenue was about $16 million. So again, it's that same level of console placement in the second half, as we expect, as we did in the first. That's how we talk about the

Leslie Trigg: And again, impossible to answer, I'm sure. But how do we have to plug something into our models for 25 and beyond? Do we should we imagine Leslie, do you imagine? Do you hope that this is a six month transition process? I mean, what are you hoping and dreaming at this point and that starting, you know, from the get go in 25. We're just we should you hope that we'll be able to see the demand translate into and better execution and some of these million dollar contracts.

Speaker Change: The implied 2H total revenue is $55 million.

Speaker Change: which leads consoles.

Speaker Change: at about $15 million. And again, if you look at what we've done in the first half, console revenue was about $16 million. So again, it's that same level of console placement in the second half as we expect, as we did in the first half of the year.

Nabeel Ahmed: That's how we talk about them.

Operator: Okay, thanks, Stephanie. I just want to make sure we get everybody in here. So, operator, can we go to the next question, please? Yes, our next question is from Josh Jennings with TD Co., and your line is open.

Nabeel Ahmed: Okay, thanks, Stephanie. I just want to make sure we get everybody in here. So, operator, can we go to the next question, please? Yes, our next question is from Josh Jennings with TD Co., and your line is open.

Operator: here. That's how we thought about the guidance.

Operator: Josh, your line is now open. Okay, our next question will come from Drew Ranier with Morgan Stanley. Your line is now open.

Leslie Trigg: Translate into better sales. How do we think about 25 and beyond, frankly? Sure, yeah, I have a comment on that and to be able to jump in at any time. Suffice it to say, in the very immediate short term here, we're obviously focused on executing this transformation. And I do expect it to take several quarters to fully implement, again, its underway. It's taking root, but that never happens overnight. And along the way, we'll get better and better visibility about the timing, the effects, the results, which obviously will put us in a good position to provide guidance for 25 as we get here closer to the turn of the year.

Operator: Josh, your line is now open.

Operator: and Nabeel Ahmed. Thank you.

Operator: Okay, our next question.

Operator: We'll come from Drew Ranier with Morgan Stanley . Your line is now open.

Drew Ranier: Leslie, hi Nabeel, thanks for taking the questions. Maybe just one, and it's on 2025, but when I think about your installed base, where you're kind of ending the second quarter, at least kind of like what our numbers are pointing to, and it kind of gets us to recurring revenue on an annualized basis of about $110 million. So is that at least a good point to start for 2025, and then we can think about layering on maybe a similar revenue number for quarterly consoles, somewhere around that, like $7 million per quarter. It sounds like you have at least some visibility in the back half numbers, but just thinking about holding that constant for next year.

Andrew Ranieri: Leslie, hi Nabeel, thanks for taking the questions. Maybe just one, and it's on 2025, but when I think about your installed base, where you're kind of ending the second quarter, at least kind of like what our numbers are pointing to, and it kind of gets us to recurring revenue on an annualized basis of about $110 million. So is that at least a good point to start for 2025, and then we can think about layering on maybe a similar revenue number for quarterly consoles, somewhere around that, like $7 million per quarter. It sounds like you have at least some visibility in the back half numbers, but just thinking about holding that constant for next year.

Drew Ranier: and Leslie Heineveld. Thanks for taking the questions.

Speaker Change: Maybe just one, and it's on 2025, but...

Drew Ranier: When I think about your install base, where you're kind of ending the second quarter, at least kind of like what our numbers are pointing to, and it kind of gets us to recurring revenue on an analyzed basis of about $110 million.

Leslie Trigg: Over the longer term, you know, 25 and beyond, I think about it in a couple of ways. First and foremost, nothing about the fundamental, the structure of this opportunity has changed, as they said, we own this. We have demonstrated the ability to close large enterprise deals in the past. We just need to do it more consistently across the country in a more standardized fashion. And all the steps needed to get there are in flight.

Drew Ranier: So, is that at least a good point to start for 2025, and then we can think about layering on?

Drew Ranier: Maybe a similar revenue number for quarterly consults, somewhere around that, like, $7 million per quarter. It sounds like you have at least some visibility in the back half numbers, but just thinking about holding that constant for next year.

Nabeel Ahmed: Yeah, hey, Drew. So, a couple of things. So first of all, we're not guiding to 2025 or for any period beyond 2024 right now, but let me tell you maybe the way we think about the components, okay? So if you unpack recurring revenues, on the consumable side, we assume between four and five treatments per console per week in the acute setting. And again, we have this notion of some consoles needing to ramp up; some obviously do more, some do a bit less.

Nabeel Ahmed: Hey, Drew. So a couple of things. So first of all, we're not guiding to 2025 or for any period beyond 2024 right now here. But let me tell you maybe the way we think about the components, right? So if you unpack recurring revenues,

Leslie Trigg: The strength of our recurring revenue foundation really is a powerful growth engine. We've seen that time and again. And in fact, actually interestingly, our cohort analysis shows that constantly utilization in the acute and subacute space actually goes up over time, as new accounts become more mature accounts. So that's obviously very encouraging to speak. Second, the growth in our pipeline that I alluded to earlier, it indicates very strong forward demand. The overall pipeline actually has never been larger than it is today.

Nabeel Ahmed: But on average, it's between four and five treatments per console per week in the acute setting, and then at home, it's between three and four treatments per console per week in the home setting. So that's kind of how you get the consumable number. Service, it's the service contracts, and then they renew. They've typically renewed in the 90% zone. So again, that's kind of the assumption that we have used at least as we think about the second half of the year. And then you're left with the console number. So I don't want to comment on a specific number, but hopefully, that gives you a construct of how to think about 2025.

Nabeel Ahmed: But on average, it's between four and five treatments per console per week in the acute setting, and then at home, it's between three and four treatments per console per week in the home setting. So that's kind of how you get the consumable number. Service, it's at the service contract, and then they renew. They've typically renewed in the 90% zone. So again, that's kind of the assumption that we have used, at least as we think about the second half of the year, and then you're left with the console number. So I don't want to comment on a specific number. But hopefully, that helps you with the construct of how to think.

Nabeel Ahmed: On the consumable side, we assume between four and five treatments per console per week in the acute setting, and again, we have this notion of some consoles need to ramp up, some obviously do more, some do a bit less.

Leslie Trigg: And the number of deals with 50 consoles, 100 consoles, several hundred consoles has never been higher. So this is not a demand problem where we need to get stronger is converting the pipeline. The changes we need to make in order to do that, pertained to sales execution that they are in our control. And we do know how to do this. We just need to do it consistently. My final remark with regard to longer term growth is it's kind of a double-edged sword actually with the deals in our pipeline getting larger.

Nabeel Ahmed: But on average, it's between 4 and 5 treatments per consult per week in the acute. And then at home, it's between 3 and 4 treatments per consult per week in the home setting. So that's kind of how you get the consumable number.

Nabeel Ahmed: it's the service contracts, and then they renew, they've typically renewed in the 90% zone. So again, that's kind of the assumption that we have used at least as we think about the second half of the year, and then you're left with the console number. So I don't want to comment on a specific number, but hopefully that helps you with the construct of how to think about 25.

Leslie Trigg: It actually doesn't take that many deals to close incrementally to drive growth. Now obviously near term here, we've seen that work the other way. If several deals that are called 50 plus consoles don't close on the timeline that you expect them to, it has a sizable impact on revenue, which is what we've seen happening in Q1 and Q2 and what informed our guidance for the back half of year. But looking forward, getting back to growth can be achieved with better, more predictable execution on a actually relatively small number of larger deals.

Nabeel Ahmed: And then, yeah, and 24, thank you, and then 24 run rate. Yeah, it's $80 million from a run rate perspective for a recurring rat.

Nabeel Ahmed: And yeah, and 24. Thank you.

Nabeel Ahmed: And yeah, and 24, thank you, and then 24 run rate, yeah, it's $80 million from a run rate perspective for recurring revenue given that. Okay, thanks. Our next question comes from Josh Jennings with TV Cohen. Your line is open.

Speaker Change: vote to you also twenty

Nabeel Ahmed: for RUNRAID.

Nabeel Ahmed: Thank you. And then, yeah, and 24, thank you, and then 24 run rate, yeah, it's $80 million from a run rate perspective for recurring RADs given our guidance.

Operator: Okay, thanks. Our next question comes from Josh Jennings with TV Cohen. Your line is open.

Speaker Change: Okay, thanks. Our next question comes from Josh Jennings with TV Cohen. Your line is open.

Josh Jennings: All right, thanks for the questions. Can you hear me okay?

Joshua Jennings: Hi, thanks for the questions. Can you hear me okay?

Operator: Yeah. Okay, great. Sorry for the technical issue. I wanted to just ask about the pipeline. I mean, it sounds like it's full.

Operator: All right, thanks for the questions. Can you hear me okay?

Operator: Yeah.

Josh Jennings: Okay, great, sorry for the technical issue. I wanted to just ask about the pipeline. I mean it sounds like it's flush.

Josh Jennings: Are you seeing some of these pipeline orders, when they don't convert, fall out of the pipeline? Any help thinking through that dynamic? And if not, should we just be thinking about the delays in pipeline conversion being pushed out to 2025 and, as we should, we could see a bolus of system revenues and an increase in the installed base in 2025?

Joshua Jennings: Are you seeing some of these pipeline orders when they don't convert fall out of the pipeline? Any help thinking through that dynamic? And if not, should we just be thinking about the delays in pipeline conversion being pushed out to 2025? And so we should; we could see a bolus of system revenues and an increase in the installed base in 2025.

Leslie Trigg: Rick, if I may, I just love to help provide sort of how we think about our model. You know, we're not providing any guidance for any period beyond 2024 or not right now, but hopefully this will give you kind of the color as you think about your models. So first of all, we always start with the recurring revenues. Implied in our guidance is that recurring revenues will be roughly $80 million or a little bit more for 2024.

Josh Jennings: Are you seeing some of these pipeline orders, when they don't convert, fall out of the pipeline? Any help thinking through that dynamic?

Josh Jennings: And if not, should we just be thinking about the delays in pipeline conversion being pushed out to 2025?

Josh Jennings: And so we should, we could see a bolus of system revenues and increase in install base in 2025.

Leslie Trigg: Yeah, yeah, I'll take that. Thanks, Josh.

Leslie Trigg: That's going to grow in 2025 as the installed-based grows and matures as it sort of always has done. Now as we've previously shared, this recurring revenue growth means that we can grow total revenue even if console placements or console revenues remain flat. And then Rick, any console growth you're on year easily gets you into the low double digit growth range for total revenue or beyond. So again, we're not giving guidance, but hopefully that helps you sort of with how we think about the model.

Leslie Trigg: Yeah, I'll take that. Thanks, Josh. Short answer, no, we are not seeing deals fall out of this pipeline.

Rick Wise: Okay, thanks Rick, next question operator.

Speaker Change: We are seeing deals push out from

Speaker Change: the quarter in which we expect them to close into another quarter.

Speaker Change: And so I think what we want to try to do better at and get stronger on is converting the pipeline to close and revenue on the timeline that we anticipate.

Leslie Trigg: Short answer. No, we are not seeing deals fall out of this pipeline. We are seeing deals push out from the quarter in which we expect them to close into another quarter. And, and so I think what we want to try to do better at and get stronger on is converting the pipeline to close and revenue on the timeline that we anticipate. So that's kind of point one.

Leslie Trigg: So that's kind of point one, but no, the pipeline has continued to grow and we have not seen really any movement of these deals falling out of the pipeline.

Shagun Singh: Yes, our next question comes from Shagun Singh with RBC Capital Market. Your line is open. Great, thank you so much. Yeah, Leslie, it does seem like there's an execution, you know, issue at Outset on multiple fronts. And I'm just wondering, you know, you're calling out commercial, but, you know, is it commercial? Is it strategy? Is it something broader than that? You know, I'm sure you guys have looked into it in more detail.

Leslie Trigg: But no, the pipeline has continued to grow, and we have not seen really any movement of these deals falling out of the pipeline. Yeah, so the second part of your question, as we think about 2025, yes, our expectation is that the deals that are in the pipeline, those that don't close in 2024, will still be available to us in 2025. And that's really not, that's not new for us, you know, that that is not a new phenomenon.

Leslie Trigg: um

Leslie Trigg: Yeah, so the second part of your question...

Leslie Trigg: As we think about 2025, yes, our expectation is that the deals that are in the pipeline, those that don't close in 2024, will still be available to us in 2025. And that's really been, that's not new for us, you know, that is not a new phenomenon.

Leslie Trigg: We really have not had deals falling out of our pipeline at any point in time. I think, again, we were overly focused in hindsight on Tableau Cart and late to the party to realize that there was another reason, another factor behind the elongation of this sales cycle and behind why some of these deals were not closing or coming to fruition when we intended them to. And that's exactly the sales execution challenges that we're attacking and expect to make significant progress on here in the next couple of quarters.

Leslie Trigg: We really have not had deals falling out of our pipeline, really, at any point in time.

Shagun Singh: So, can you share what your findings are? And then, you know, I'm just curious, how do you know that this is a sales elongation issue? Because, you know, to Rick's question, you know, earlier we were thinking it's a tabloid card issue and it's not being in the market. And perhaps, like you can give us some, you know, look into the pipeline, where does it stand versus last year, you know, have you thought of any metrics you're going to share with us going forward that gives us confidence that you have visibility into this?

Leslie Trigg: I think, again, we were overly focused in hindsight on Tableau Cart and late to the party to realize that there was another reason, another factor, behind the elongation of the sales cycle and behind why some of these deals were not closing or coming to fruition when we intended them to, and those are exactly the sales execution challenges that we're attacking and expect to make significant progress on here in the next couple of quarters.

Operator: I have no further questions in the queue at this time. I would now like to turn the call back to Leslie Trigg for closing remarks.

Leslie Trigg: I have no further questions in the queue at this time. I would now like to turn the call back to Leslie Trigg for closing remarks.

Leslie Trigg: I know there are a lot of questions, but just, you know, how can you make us more comfortable with the story that's here going forward? Thank you. Sure, yeah, I'm happy to address those questions on the pipeline front compared to last year, the pipeline in totality is significantly larger across the board. And that's actually across all of our end markets acute, sub-acute, and home than it was a year ago today with 10.1.

Leslie Trigg: Thank you.

Leslie Trigg: I show no further questions in the queue at this time. I would now like to turn the call back to Leslie Trigg for closing remarks.

Leslie Trigg: Great, thanks to everybody for joining us today. I'd like to close by thanking our entire team for the very meaningful difference that they make every day in the lives of dialysis patients and their families, as well as providers. We look forward to seeing many of you at investor conferences in September, and I hope you have a great evening. Thank you.

Leslie Trigg: Great, thanks to everybody for joining today. I'd like to close by thanking our entire team for the very meaningful difference that they're making every day in the lives of dialysis patients and their families.

Leslie Trigg: as well as providers. We look forward to seeing many of you at investor conferences in September and I hope you have a great evening. Thank you.

Operator: This does conclude today's conference call. Thank you for your participation. You may now disconnect.

Leslie Trigg: Another way that we look at our pipeline is by stage, you know, stage of this new sales process that we have introduced and trained everybody too. We have a greater percentage of deals in the late stages of the sales process than we ever have before. So, i.e., greater progress through the sales process compared to a year ago this time. And the third thing we look at is, is deal size. We have a large percentage approximately 60% a bit above of deals that equate to roughly a million dollars or substantially more in deal size sitting in the pipeline. So those are the ways that we look at the pipeline. All of those trend lines are up as you compare them to last year.

Operator: This does conclude today's conference call. Thank you for your participation. You may now disconnect.

Leslie Trigg: Regarding your question about, hey, is it execution or is it strategy or other? We feel strongly that it is execution and i'll tell you the reasons for that. First and foremost, we now have the largest evidence base we've ever had around the the financial cost savings that Tableau has driven for customers, the clinical outcomes that it has provided and the operational efficiencies. We have 75 abstracts and 15 papers and innumerable case studies and white papers that all show tangibly the benefits of insourcing with Tableau.

Leslie Trigg: I have spent a lot of time in the field, i'll add qualitatively and with our sales team really pressing on, hey, is there something that's changed in the value proposition or the implementation? And the answer to that has been resoundingly no. The feedback that we continue to get from current customers and prospective customers, is their interest level has never been higher around improving their own margins and producing tangible day one dollar one expense reduction by insourcing with Tableau.

Speaker Change: what be

Leslie Trigg: So I think our strategy is on point with acute subacute has been one of the fastest growing market segments for us for the last year or two here with rehab, LTACs and skilled nursing facilities. When we look at our expansion with the number of customers and the number of sites using Tableau and the subacute segment, that also is all up into the right. We talked about 16% growth year-over-year in facility expansion and 18% growth year-over-year in the install base, which are data points that do point to a customer validation in the model and in the technology.

Leslie Trigg: We have more demand than I ever could have hoped for a couple of years ago. What we now need to do is evolve and transition the way we get after it. I would say that, again, our sales team, our sales processes were really oriented around the first part of the market, which for any medical device company are those early adopters. It's time for us to evolve that so we can reach up to the next shelf and take advantage of the mainstream enterprise adoption that's available to us. Now.

Operator: Okay, I want to make sure you get everyone's questions so we should probably move the next question operator.

Suraj Kalia: Yes, our next question comes from Suraj Kalia with Oppenheimer. Your line is open. Leslie, can you hear me all right? Yes. Perfect.

Leslie Trigg: So, Leslie, just one question but a multi-part question. And I have to confess, Leslie, I cannot connect the dots on the reasons for the shortfall, especially given the bullish commentary over the last three years, you know, the guidance cuts almost every year. What I'm trying to understand is I understand Q1 to Q2 maybe something shorter, but is it more of an issue of internal forecasting versus execution capabilities? I guess that's one of the things that I'm trying to understand has price sensitivity increased because you all did implement an 8% console price increase.

Operator: www.OutsetMedical.com

Leslie Trigg: Is that a factor? Was there any geographic pockets of weakness? And finally I would ask is you mentioned multiple times about 50 hundreds of console deals in the pipeline. Are these deals actually signed? Is there a PO in hand? Thank you. I know the multi-part question, but hopefully you can help me reconcile. I'm not, I'm having a very hard time connecting the dots here. Thank you.

Leslie Trigg: Sure. Well, yeah, let me kind of take that one piece at a time. So you asked about sort of the connecting the dots on the on the magnitude of the impact here for the second half of the year. You know, there were a couple of factors we considered in developing our guidance for the back half of the year. First, we do expect some level of disruption from this Salesforce restructuring the process restructuring.

Leslie Trigg: And so that certainly was an element of our thought process in guidance development as we implement and continue to implement all the changes. Second, you know, I mentioned that the complexion of our pipeline has changed in a good way. It's pop it is populated much more heavily with these larger enterprise agreements that can that can be 50 plus consoles. And so at that level, it really doesn't take all that many deals to arrive at a revenue impact that's pretty significant.

Leslie Trigg: You know, $40 million is roughly a dozen or so deals. And so, hopefully that that provides a little bit of color and a connection point for you there on the first part of your question. Second, you asked about price sensitivity. No, we really have not experienced price sensitivity as a factor because in the acute and subacute setting. And again, this has been well demonstrated and documented and published on the magnitude of the cost savings that have low drive in the acute and subacute setting is extremely significant.

Leslie Trigg: 50 to 70% down on the total cost of a hospital expense line for dialysis after the implementation of insourcing with tabloids. So no price sensitivity has not really has not been a factor at all. You then asked about the pipeline. Do you have issues in forecasting and are these deals with a PO in hand? I mean, the definition of a pipeline is future forward. These are deals that are at various stages in our sales cycle.

Leslie Trigg: We stage them, just like any capital equipment company. And so when I talk about the strength of the pipeline, the size of the pipeline and the stage of the pipeline, we're referring to our visibility and our future opportunities that are in front of us across the end market. Of course, going lastly to forecasting, one of the reasons why we see the need to adjust and mature our sales process and methodologies in team are because we do believe it will reap benefits in the way that we execute against forecasting. We think it will give us greater visibility, greater control and greater predictability moving forward. Thank you.

Operator: thank they

Kristen Stewart: Great. Thanks to Raj. Next question operator.

Operator: Our next question will come from Kristen Stewart with CLK. Your line is open. Hi, thanks for taking my question. I just wanted to focus on the expenses of the company. I think he had mentioned that operating expenses were going to be about 120 this year. And if I heard you right, you said 100 million for run rate for 2025. What kind of gives you the confidence that you can make these cuts?

Operator: Where are they coming from? And just the confidence that this isn't going to be more disruptive from selling organization perspective. Yeah, Hey, Kristen, with respect to the first of all, you are right. We got it to about 120 million in all packs for 24 and a run rate of about 100 million in 2025. That cuts this time we're all around the areas that Leslie talked about. And it's really for us about right sizing our all packs structure with both our revenue revenue levels. Number one and the number two with our commitment to making sure that we remain on the path to profitability. Great. Thanks, Kristen operator.

Stephanie Piazzola: We can move to the next question.

Nabeel Ahmed: Yes, our next question comes from Stephanie Piazzola with Bank of America Securities. Your lines open. Hi, thanks for taking the question. I just wanted to follow up about this guidance for this year, moving well or by 40 million. And maybe a little bit more about how you thought about this being the new guidance level. You said it would be similar second half to first half, but maybe if you could dive a little bit more into the underlying assumptions here and confidence in this being the right thought just with some expected disruption from the commercial execution changes.

Nabeel Ahmed: Thank you. Yeah, hey Stephanie. So first of all, when we think about guidance for any period, we start with kind of the recurring revenue base, which for us is consumables and then the service and other line in our piano. Now, that for the first half is about 40 million dollars, just under 40 million dollars. And we would expect that to grow a little bit here in the second half or at least, you know, stay stable, all else being equal.

Nabeel Ahmed: So you start out for the second half with 40 million dollars of kind of recurring revenue base, the implied two H total revenue is $55 million, which leads consoles at about 50 million dollars. And again, if you look at what we've done in the first half console revenue was about 60 million dollars. So again, it's that same level of console placement in the second half as we expect as we did in the first half of the year.

Operator: That's how we thought about the guidance. Okay, thanks, Stephanie. Just want to make sure we get everybody in here. So operator, can we go to the next question, please?

Josh Jennings: Yes, our next question is from Josh Jennings with TDCO and your line is open. Josh, your line is now. Open.

Drew Rainier: Okay, our next question will come from Drew Rainier with Morgan Stanley. Your line is now open.

Leslie Trigg: Leslie, I'm available thanks for taking the questions. Maybe just one and it's on 2025, but when I think about your install base, where you're kind of ending the second quarter, or at least kind of like what are numbers you're pointing to, and it kind of gets us to recurring revenue on an annualized basis of about 110 million. So is that at least a good point to start for 2025, and then we can think about layering on maybe a similar revenue number for quarterly consults somewhere around that $7 million per quarter. It doesn't think you have at least some visibility in the back half numbers, but just thinking about holding that constant for next year.

Drew Rainier: Hey Drew, so a couple of things. So first of all, we're not guiding to 2025 or for any period beyond 2024 right now here, but let me tell you maybe the way we think about the components, right? So if you unpack recurring revenues on the consumable side, we assume between four and five treatments per console per week in the acute setting. And again, we have this notion of some consoles need to ramp up some obviously do more some do a bit less, but on average, it's between four and five treatments per console per week in the acute.

Drew Rainier: And then at home, it's between three and four treatments per console per week in the home setting. So that's kind of how you get the consumable number service. It's at the service contract and then they renew typically renewed in the 90% zone. So again, that's kind of the assumption that we have used at least as we think about the second half of the year. And then you're left with the console number.

Drew Rainier: So I don't want to comment on a specific number, but hopefully that helps you with the construct that I think about 25 24 run rate. And yeah, and 24, thank you. And then 24 run rate. Yeah, it's 80 million dollars from a run rate perspective for recurring ads given our guidance. Okay, thanks.

Josh Jennings: Our next question comes from Josh Jennings with Katie Cohen. Your line is open. All right. Thanks for the questions. Can you hear me? Okay. Yeah. Okay, great. Sorry for the technical issue. I wanted to just ask about the pipeline. I mean, it sounds like it's flush. Are you seeing some of these pipeline orders when they don't convert fall out of the pipeline any help thinking through that dynamic. And if not, should we just be thinking about that the lays and pipeline conversion being pushed out to 2025 and. And so we should we could see a ballast of system revenues and increasing install base in 2025.

Leslie Trigg: Yeah, I'll take that. Thanks, Josh. Short answer. No, we are not seeing deals fall out of this pipeline. We are seeing deals push out from the quarter in which we expect them to close into into another quarter. And, and so I think what we what we want to try to do better at and get stronger on is converting the pipeline to close and revenue on the timeline that we anticipate. So that's kind of point one.

Leslie Trigg: But no, the pipeline has continued to grow and we have not seen really any movement of these deals falling out of the pipeline. Yeah, so so second part of your question. As we think about 2025. Yes, our expectation is that the deal that are in the pipeline those that don't close in 2024 will still be available to us in 2025. And that's really been that's not new for us, you know, that that is not a new phenomenon.

Leslie Trigg: We really have not had deals falling out of our pipeline really at any point in time. I think again, we were overly focused in hindsight on Tableau Cart and late to the party to realize that there was another reason another factor behind the elongation of the sales cycle and behind why some of these deals were not closing or coming to fruition. When we intended them to and that those are exactly the failed execution challenges that were attacking and expect to make significant progress on here in the next couple of quarters. I show no further questions in the queue at this time.

Leslie Trigg: I would now like to turn the call back to Leslie Trigg for closing remarks. Great thanks to everybody for joining today. I'd like to close by thanking our entire team for the very meaningful difference that they're making every day and the lives of dialysis patients and their families, as well as providers. We look forward to seeing many of you at investor conferences in September and I hope you have a great evening. Thank you. This does conclude today's conference call. Thanks you for your participation. You may now disconnect. Thank you. [inaudible] . . Thank you. .

Q2 2024 Outset Medical Inc Earnings Call

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