Outset Medical, Inc.

Good day, and thank you for standing by. Welcome to the Outset Medical Q3 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone, and you will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jim Mazzola, Head of Investor Relations. Please go ahead.

Okay, thank you. Good afternoon, everyone, and welcome to our third quarter 2023 earnings call. Here with me today are Leslie Trigg, Chair and Chief Executive Officer, and Nabil Ahmed, Chief Financial Officer. We issued a news release after the close of market today and updated our investor presentation, both of which can be found on the investor relations pages of outsetmedical.com. This call is being recorded and will be archived on the investor section of our website. 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. These statements relate to expectations or predictions that future events are based on our current estimates and various assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied. Outset assumes no obligation to update these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of Outset's public filings with the Securities and Exchange Commission, including our latest annual and quarterly reports. With that, I will now turn the call over to Leslie.

Thanks, Jim. Good afternoon, everyone, and thank you for joining us. A few weeks ago, we provided our preliminary third quarter results and shared details on the headwinds that will continue to affect our business through this year and into next. Today, we will review our results for the full quarter, share an update on the actions we have taken to adapt and respond to the current environment, and provide our outlook for 2024 and the longer term. We will also discuss what has not changed. Despite some recent setbacks, all the structural tailwinds remain in place. We are on the front end of growth into two very large end markets anchored by 36 million patients living with chronic kidney disease. Our pipeline continues to expand, and our value proposition remains compelling. Tableau's ability to disrupt an $11 billion U.S. market with a better solution in the acute and home environment is firmly intact. To begin, revenues for the third quarter were balanced between our acute and home end markets. with a roughly equal number of consoles shipped to acute and home providers. In the acute end market, our land and expand strategy continues to support a strong pipeline and growing install base. 30% of console placements during the first three quarters of 2023 came from accounts we won during 2022. The other 70% are from expansion sites. Tableau is now used in more than 650 acute and post-acute facilities including contracts with top national health systems where we have about 20% penetration, and also within the top 50 regional IDNs where we are less than 10% penetrated today. Further, we continue to see success with initiatives such as expanded physician education and published cost reduction data, which are all having a positive impact in the acute setting. During 2023, we have reached more than 400 nephrologists and dialysis professionals with our peer-to-peer educational programs. This is in addition to the more than 10,000 nurses already trained on Tableau. Physician and nurse awareness and belief in Tableau continues to be bolstered by published clinical, operational, and economic data. To date, over 70 abstracts and 15 manuscripts on Tableau have been generated. Building on this strong foundation, last week's American Society of Nephrology annual meeting produced numerous abstracts on Tableau. In the acute setting, these abstracts continue to demonstrate Tableau's differentiated potential to reduce costs and enhance care in both the ICU and at the bedside. One large health system reported achieving more than a 50% reduction in their treatment cost per hour while also reducing length of stay in the ICU. A hospital in Alaska presented data showing that Tableau dramatically reduced the number of patients they had to transfer out of their hospital for care. After adopting Tableau, the hospital only had to transfer one patient out in 12 months compared to 70 patients transferred out the prior year before using Tableau. Several abstracts related to the use of Tableau in the home, including data from the first 500 patients home on Tableau, which demonstrated a very broad demographic spectrum of adopters, and in a separate abstract, showed improvements in physical and mental health scores over 12 months of using Tableau at home, including improvement in sleep, which is among the most frequently cited issues among patients on dialysis. In terms of our home sales in the quarter, orders and shipments were weighted toward mid-sized dialysis organizations and new home market entrants. where we continue to see a strong response to Tableau's economic value proposition, positive patient feedback, faster training time, and higher retention rates. We have made progress this year, landing or expanding within several new innovative alternative providers, evidence that our strategy to broaden the access to home hemodialysis while in the early stages is working. Overall, for 2023, we expect to place approximately 1,400 new Tableau consoles split two-thirds in the acute setting and one-third in the home setting. With these new placements, we would exit 2023 with approximately 5,400 units in the install base, which we project will reach $100 million in recurring annual revenue over time. We felt it was important to provide investors with this annual update on compo placements earlier than normal, as it is relevant to the financial guidance we will also provide today. In terms of the broader competitive market, our sales team has been working diligently over the past several weeks to address misconceptions created by competitors as a result of the FDA warning letter issued in July. While we expect this competitive response to continue through Q4, our team is better prepared to respond and is doing so accordingly. As noted previously, we believe we have addressed concerns regarding promotion, and the Tableau cart with pre-filtration 510K has been submitted with interactive 510, excuse me, with interactive FDA review underway. We have not factored in its clearance into our 2023 outlook. As we look beyond 2023, we would like to take this opportunity to share our perspectives on how this business scales over the longer term. Three years post-IPO, we recognize the need to update investors on what we believe the next several years will look like relative to revenue growth, growth margin expansion, and cash flow break even. And being in the market now at some level of scale for several years has given us a lot more data and experience from which to project forward with confidence and clarity. While the progress path won't always be linear across all our key goals, we've also heard investors loud and clear on their desire for more metrics, particularly around the install dates and use settings. And so we intend to do that going forward, starting with today's call. And finally, we are acutely aware of shareholders' desire for outset to reach profitability, and we remain committed and urgent around getting there. Cash consumption is obviously a big part of that equation, and to that end, we have already taken prudent steps to reduce spending while continuing investments that drive revenue growth, growth margin expansion, and operating leverage. Nabil will lay out the specifics in greater detail, and so with that, I will now turn the call over to him.