Outset Medical (OM) Q1 2026 Earnings Transcript

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Date

Thursday, May 7, 2026 at 4:30 p.m. ET

Call participants

• Chief Executive Officer — Leslie L. Trigg
• Chief Financial Officer — Renee M. Gaeta
• Chief Commercial Officer — Derek Elliott

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Takeaways

• Revenue -- $27.9 million, reflecting a 6% decrease from $29.8 million in 2025, attributable to timing variability in capital orders.
• Product Revenue -- $18.6 million, down 13% year over year, as $1 million in capital deals shifted to later in 2026.
• Capital Sales -- $5.4 million, with timing delays expected to be recognized in subsequent quarters.
• Consumable Sales -- $13.2 million, exceeding internal expectations for the period.
• Service and Other Revenue -- $9.3 million, representing 10% year-over-year growth from $8.5 million.
• Recurring Revenue -- $22.5 million, comprised of consumables and service, stable both sequentially and year over year.
• Non-GAAP Gross Margin -- 43.8%, expanding 620 basis points year over year.
• Product Gross Margin -- 52.4%, up 400 basis points from 48.4% in 2025.
• Service and Other Gross Margin -- 26.7%, representing a sequential increase and a rise of more than 1,600 basis points from 10.3% in 2025.
• Non-GAAP Operating Expenses -- $25.6 million, a nearly 4% increase over $24.6 million in 2025, due to investments in systems and personnel.
• Non-GAAP Operating Loss -- $13.4 million, consistent with the prior-year period.
• Non-GAAP Net Loss -- $15.4 million, representing a 32% improvement from $22.8 million in 2025.
• Cash Position -- $161 million in cash, cash equivalents, short-term investments, and restricted cash at quarter end.
• Cash Usage -- $12 million used in the quarter, which is lower than anticipated due to cost discipline and working capital controls.
• Projected 2026 Cash Usage -- Anticipated to be less than $40 million, approximately 15% better than previous forecasts.
• 2026 Revenue Guidance -- $125 million to $130 million, implying 5%-9% growth, with most growth projected for the third and fourth quarters.
• Full-Year Non-GAAP Gross Margin Guidance -- Targeting low- to mid-40% range, contingent on console mix and consumable sales.
• Console Install Base -- Over 1,000 facilities utilizing Tableau, and more than 3.5 million cumulative treatments conducted.
• Pipeline Health -- Late-stage large deals and refresh opportunities with existing customers, with "bullish" management commentary on closing timelines.
• Next-Generation Tableau Launch -- Expected limited release to begin late in the quarter, full ramp in the third quarter, with FDA 2025 cybersecurity-compliance highlighted as a key differentiator.
• Implementation Momentum -- Go-live installations at more than 30 facilities and close to 200 consoles underway in the current quarter.
• Recurring Revenue Mix -- Management confirmed "about 70%" of revenue is from recurring streams.
• Customer Impact Case -- Leslie L. Trigg cited "an approximately six-fold decrease in their dialysis costs" and improved clinical outcomes in their first year insourcing with Tableau.

Summary

Management confirmed annual guidance for both revenue and gross margin, citing growth in late-stage deals and planned next-generation product launches as core drivers. The operational transition to FDA 2025 cybersecurity-compliant Tableau is regarded by management as a principal catalyst for customer pipeline conversion and market differentiation. Substantial margin improvements and a reported decrease in cash usage versus plan were attributed to supply chain and operational efficiencies, as detailed in prepared remarks.

• Management commented, "the lumpiness of the capital sales cycle makes it less predictable," indicating variability in revenue timing rather than end-market softness.
• Planned enhancements—such as bidirectional EMR integration—are positioned as future recurring revenue opportunities, supported by explicit customer demand as voiced in customer webinars.
• The cash position is expected to support near-term operations with guidance implying improved financial runway relative to prior expectations.
• The company’s current implementation reach includes more than 8 trillion cloud data points, cited by management as central to analytics-driven service differentiation and customer retention.
• Derek Elliott, newly appointed as Chief Commercial Officer, emphasized pipeline management rigor and advanced preparations for the next-generation Tableau market entry.

Industry glossary

• Tablo Hemodialysis System: Outset Medical, Inc.’s integrated dialysis platform featuring on-demand dialysate, water purification, and EMR connectivity for acute and home settings.
• EMR (Electronic Medical Record): A digital platform for recording and managing patient medical data, referenced in relation to bidirectional integration and recurring maintenance revenue.

Full Conference Call Transcript

Leslie L. Trigg: Thanks, Jim. Good afternoon, everyone, and thank you for joining us. The first quarter reflected consistent execution across console utilization, new customer additions, gross margin expansion, and disciplined cash management. While variability in capital order timing impacted our capital sales performance in the quarter, we remain confident in our growth plan for the year, supported by the upcoming launch of the next-generation Tableau, a deep sales pipeline, and the addition of an experienced commercial leader in Derek Elliott, who I am pleased to personally introduce to you today.

Beginning with the quarter, revenue of $27.9 million was down slightly from the fourth quarter due to the lumpiness of capital sales, but we are confident in our growth plans for the full year. Treatment and service performed exactly as we expected, and we achieved excellent gross margin expansion with product margin reaching over 52%, the result of our ongoing margin expansion programs and mix. More broadly, our end markets remain healthy and providers continue to allocate capital to projects that deliver clear benefits like those we offer. We are reaffirming our annual guidance today because we remain very confident in the depth, diversity, and maturity of our pipeline.

In particular, we are in the late stages of closing several large new deals and also an emerging refresh opportunity with existing customers who have older Tableau consoles and intend to buy replacement units in future quarters and years. We had several key wins during the quarter and managed successful go-live implementations at both new customer sites and with existing customers expanding Tableau insourcing to new facilities within their network. A very recent example occurred just a few weeks ago in Texas. Over the course of two days, our team set up dialysis service lines at multiple hospitals owned by one of the largest health systems in the country.

These facilities had a total of approximately 400 beds and required support to train the nursing staff, ensure replicable procedures were in place, and prepare the internal team to manage the new service line. Our service and implementation teams are truly the shining stars of Outset Medical, Inc. Extending our unique dialysis clinical expertise to customers, these teams ensure nurses are well trained, policies and procedures are in place, and that customers have a reliable, seamless transition from their outsourced provider to an insourced model. Here in the second quarter, our team is replicating this success with go-live implementations occurring at more than 30 facilities involving nearly 200 consoles.

From an operational perspective, we are well prepared for the initial transition to next-generation Tableau later this quarter. We believe this platform is the first dialysis system cleared under the FDA 2025 cybersecurity requirements, and includes hardware and software enhancements that improve performance and system reliability. A dialysis system that meets FDA’s cybersecurity guidance helps protect hospitals by reducing the risk of compromise, limiting the risk of spread, and safeguarding patients. We view Tableau’s Secure by Design principles, layered access controls, and controls intended to reduce the risk of unauthorized access as a significant new competitive advantage.

It provides yet another compelling value proposition on top of the cost savings and clinical outcomes improvements associated with insourcing that we believe will be recognized by health systems amid ever-increasing concerns over cybersecurity, continuity of care, and patient safety. We plan to begin with a limited release extending into the third quarter, then ramp to a full launch. In early customer discussions, there has been strong reception to the cybersecurity benefits and other enhancements that next-generation Tableau will provide. We are very excited for the rollout and will share additional details on our August call. Finally, I would like to reiterate our strong cash position and unwavering focus on reaching profitability.

During the quarter, we expanded margins to record levels and remained disciplined in our spending, both of which contributed to a lower-than-expected use of cash. I am proud of the progress our team continues to make streamlining our supply chain and manufacturing operations, strengthening our service organization, becoming more efficient in every corner of the business, and expanding our partnership and presence with acute and post-acute care providers. Before Renee walks through the financials, I want to take a minute to introduce our new commercial leader, Derek Elliott. Derek has been on the job for a month and is already making an impact through his deep customer relationships, sales and marketing expertise, and disciplined approach to pipeline management.

I would like to invite Derek to say a few words about himself and his priorities. Derek?

Derek Elliott: Thanks, Leslie, and good afternoon, everyone. As Leslie said, I joined Outset Medical, Inc. about one month ago and spent that time conducting a deep dive into the business. I have met with our leadership and sales teams, conducted thorough reviews of our pipeline and forecast methodology, and visited many customers. One month in, I can say with confidence that we have a great team, a strong and differentiated product fit, and customers who are deeply interested in improving the dialysis experience for their patients and organizations. When Leslie first approached me about this position, it became clear that my background was a unique fit for Outset Medical, Inc.

I have spent more than 30 years serving many of the same customers in sales leadership positions, including 17 years at Stryker across national accounts, capital equipment, and professional services. More recently, I have worked closely with customers to sell EMR connectivity, software, and data analytics across hospitals and health systems nationwide. It is all very similar to Outset Medical, Inc.’s business, customer call points, and value proposition. My near-term priorities include working with our commercial team to prepare for the launch of next-generation Tableau and being very involved at the customer level as we advance and close business in 2026. We have a meaningful opportunity to improve the lives of patients and the providers who serve them.

I see how that mission motivates people across Outset Medical, Inc., and I am proud to now be a part of this team. With that, I will turn the call over to Renee.

Renee M. Gaeta: Thank you, Derek, and good afternoon, everyone. Revenue in the first quarter was $27.9 million, a 6% decrease from $29.8 million in 2025, largely due to some lumpiness in the timing of capital orders. Product revenue was $18.6 million, down 13%. We anticipated this year-over-year dynamic on our last earnings call and also saw about $1 million in capital deals shift from the first quarter that are expected to close later in the year. Capital sales were $5.4 million, and consumable sales were a bit stronger than anticipated at $13.2 million. We remain very focused on our forecasting methodology for treatments, which, as I mentioned last quarter, now includes closer collaboration with our largest customers on their ordering patterns.

Service and other revenue of $9.3 million grew 10% from $8.5 million in the prior-year period. Recurring revenue from the sale of Tableau consumables and service was $22.5 million, roughly flat sequentially and with 2025, both as we anticipated. Next, I will walk through gross margin and operating expenses for the quarter. Please refer to the table in today’s earnings release for a reconciliation of GAAP to non-GAAP measures. Non-GAAP gross margin expanded 620 basis points from last year, reaching 43.8% for the quarter. Product gross margin was driven by sales mix and increased 400 basis points to 52.4% from 48.4% in 2025.

Service and other gross margin was 26.7%, increasing again sequentially and growing more than 1.6 thousand basis points compared to 10.3% in 2025. This reflects strong execution and keeps us on track for the next milestone of 50% company-wide gross margin. Moving to operating expenses, non-GAAP operating expenses increased nearly 4% to $25.6 million compared to $24.6 million in 2025, driven by investments in systems and people. Non-GAAP operating loss was $13.4 million, even with the prior-year period. Non-GAAP net loss of $15.4 million improved 32% compared to $22.8 million in 2025. These results reflect continued progress as we work to achieve profitability.

Moving to our balance sheet, we ended the quarter with $161 million in cash, cash equivalents, short-term investments, and restricted cash. We used approximately $12 million during the quarter, which is less than we previously forecast due to ongoing expense discipline and working capital management. As we look ahead to our cash needs for the remainder of the year, we now anticipate using less than $40 million, which is roughly 15% better than we previously expected. Turning to our guidance for 2026, we continue to expect revenue to be in the range of $125 million to $130 million, a 5% to 9% increase over 2025, with the majority of the 2026 growth coming in the third and fourth quarters.

For non-GAAP gross margin, guidance assumes that as we ship more consoles, gross margin will approach the lower end of the range, just as a higher mix of consumables will move gross margin towards the higher end of the range. Balancing these two factors, we continue to expect gross margin to be in the low- to mid-40% range for the full year. With that, I will turn the call back to Leslie for closing comments.

Leslie L. Trigg: Thanks, Renee. I want to close by emphasizing Outset Medical, Inc.’s strong market position. With more than 1 thousand facilities using Tableau and more than 3.5 million cumulative treatments performed, we continue to gain ground as the leader of dialysis insourcing. We expect next-generation Tableau, as the only dialysis system we believe to have been cleared under the FDA’s rigorous guidelines for cybersecurity, will continue to solidify and extend that position. There are now more than 8 trillion data points in our cloud platform, which helps fuel our analytics and innovation engine, improve the customer experience, and ultimately enhance patient care.

With insights from this data repository and our strong suite of professional implementation services, Outset Medical, Inc. is increasingly recognized as the trusted partner. We improve dialysis patient care while reducing costs and streamlining operations, and we get to see the results every day for customers of all sizes. For example, a regional 400-bed multisite health system reported an approximately six-fold decrease in their dialysis costs during their first year of insourcing with Outset Medical, Inc. and Tableau. This health system performs approximately 2 thousand dialysis treatments per year; the cost savings are substantial. As meaningful, they saw no central line bloodstream infections, improved their documentation and Joint Commission readiness, and operationalized a more sustainable staffing model.

All of the progress we have made provides a powerful foundation for value creation over the long term, which we look forward to demonstrating in the coming quarters and years. We will now open the call for questions. Operator, please open the lines.

Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the queue. Your first question comes from the line of Rick Wise with Stifel. Please go ahead.

Rick Wise: Good afternoon, everybody. Hi, Leslie. You will not be surprised that I am hoping you can give us a little more color on, as you described it, the capital order variability and lumpiness. Just when I look back to the fourth quarter, you characterized the pipeline as building positively — sounds like it still is — and a healthy balance of larger and smaller deals, new and existing customers, and I doubt that has changed. What resulted in lumpiness? Why the delay? And maybe help us better understand when we are likely to see those sales happen or what you are expecting.

Leslie L. Trigg: Yes. Hi, Rick. Good to hear your voice. Let me start with the capital order variability and the pipeline. The pipeline did continue to grow in Q1 as well. We saw good sequential growth in new opportunities that were added to the pipeline. As you remember from Q4, the way we look at the health of the pipeline, of course, is in terms of its size, depth, the diversity, the size of each deal, new customers versus existing customer expansions, and then the maturity — the stage that the deals are in that pipeline. Across all these dimensions, the pipeline for 2026 and beyond is robust.

We, in particular, are in the late stages of several large new deals that we do expect to close in 2026, and are also at the cusp of an emerging refresh opportunity with existing customers who have older Tableau fleets and have conveyed an intent to buy replacement units in future quarters and in future years. In terms of the lumpiness of the capital order sales cycle, it is less predictable for us than Tableau utilization. We have talked in the past about the stability and predictability of the utilization of the consoles once sold and installed.

That continues to serve us well — it served us well in Q1 — and yet again, the lumpiness of the capital sales cycle makes it less predictable. It is really around the close timing, which might be stating the obvious. Beyond that, all the other areas of our business performed exactly as we expected, and we do remain on track with our guidance for the year, because the couple of deals that we saw slip out of the quarter are expected to close here in the Q2 through Q4 timeframe.

That gives us a lot of confidence in the guidance range, in addition to a couple of new tailwinds coming later in Q2 and through Q3 and Q4 in the form of the next-generation Tableau launch and the additional firepower our new commercial leader is going to bring to our organization. All of those things make us very bullish about executing Q2 through Q4.

Rick Wise: Gotcha. Maybe just a second one for me. There is a lot to unpack here. But just on a more mundane level, help us think through the quarterly phasing — the quarterly flow. It sounds like it is going to be a more back half–loaded year based on your comments, or at least what we should assume today for the moment. It could happen sooner — some of those delayed orders, for example. But the second quarter — does the second quarter, as opposed to stepping up like it did sequentially the way it did last year — is it flat with the first quarter or down?

And since you are holding guidance constant, if we take the midpoint of your $125 million to $130 million range, do we evenly step it up in the third, fourth quarter? And again, last year both were around $29 million. Are these going to be roughly equal quarters and whatever the remainder is to get to the midpoint of the guide? Help us think through the phasing. Thank you.

Renee M. Gaeta: Sure, Rick, I am happy to give some color here. As we sit here today with just one quarter in, we have spent a lot of time looking at not only the pipeline, as Leslie mentioned, but of course all of the factors that roll up into our full-year guidance. At this point in time, we would say that Q2 would be a modest step up, and then, as we indicated on the call, Q3 and Q4 will see the larger percentage of the growth. Whether or not Q3 and Q4 are flat, you might continue to see some step up — it will again be based on the timing of the close of these capital orders and pull-through.

But as 70% of our revenue is coming from consumables and service and other, that part we expect to see stable. The 5% to 9% growth that we are expecting for the top line would certainly be across all of those categories.

Rick Wise: So just to sum it up, modest step up in the second quarter, and it is not like you are saying that all of the remainder to get to the — just to focus on the midpoint of the guide — it is not all in the fourth quarter. You will see sequential step up in each quarter.

Renee M. Gaeta: Correct. I think that is a good way to think about it.

Rick Wise: Great. Thank you very much.

Renee M. Gaeta: Thanks, Rick.

Operator: Your next question comes from the line of Colin Clarke with TD Cowen. Please go ahead.

Colin Clarke: Hi, thanks for taking my questions. First, on the delayed orders in the first quarter, I am curious — you talked about having several large orders in the pipeline expected to get landed in the February period. What is driving your confidence there? What about those orders in size and scale and the stage of that process is driving the reiteration of guidance here? Thank you.

Leslie L. Trigg: Sure, I am happy to take that. I have had the opportunity to remain extremely close to all of our largest deals and forecast for 2026. First and foremost, we look at the staging of those deals. We have talked in the past about the stages of our sales process, and so we look at how many of those deals are in the later stages of the pipeline. We now have the ability to use historical data to inform the probability of close between, let us say, Q2, Q3, and Q4.

The confidence, to answer your question, is informed by the data that we have about where these customers are — both new customers and existing customers that, based on their financial and clinical results with Tableau, are choosing to expand into new facilities. Informed by that probability-of-close data, we feel we have a good understanding and a good handle on which of those deals are likely to land in Q2, Q3, and Q4.

In addition to that, I just alluded to next-generation Tableau, which we will be in full launch mode with in the second half of the year, and we do expect next gen to be a demand driver as hospitals and health systems continue to tell us that cybersecurity is at or very near the top of their priority list. As we believe we have the only dialysis system in the market to meet these very stringent FDA requirements, we believe that will be a demand driver based on how well this is resonating thus far in our early sales conversations. We view that as an incremental tailwind for the second half of the year.

Colin Clarke: Understood. That is very helpful. I am curious on the next-gen system — does it have the potential, do you think, to accelerate these trade-in timelines as far as replacing older-generation Tableaus?

Leslie L. Trigg: That is an excellent question. The short answer is yes, I think it could.

Colin Clarke: Perfect. One final one from me. Thank you for hosting the webinar this afternoon with the dialysis supervisor at Reid Health — we found it really helpful. We were interested in what she said about bidirectional integration of Tableau into the EMR. Can you talk about the functionality that enables and what that does for your revenue recognition when Tableau not only uploads data to the EMR, but the operators have the potential to input orders from the EMR to Tableau?

Leslie L. Trigg: Sure. Thank you for listening to the webinar — I appreciate that. Yes, Reid Health has had a lot of very positive benefits clinically and financially through insourcing with Tableau. To fill other listeners in, what is being alluded to is a potential future capability for bidirectional data transfer. Today, what we offer is uniquely one-way data transfer. We are directly integrated with Epic and Cerner and many other EMRs, which again is unique to Tableau. Health systems use that today to directly transmit or upload all of the treatment data from Tableau after every treatment up to their EHR.

There is an opportunity to add a new feature in the future that would allow prescription data or information to be transmitted directly from the EMR to Tableau. That is something we are excited about as a future direction and that we have heard — and it sounds like you heard from Reid Health — would deliver quite a bit of value to our customers. When we think about our recurring revenue foundation that Renee alluded to — roughly about 70% of our total revenue — our overarching revenue strategy is to drive the highest possible percentage of our total revenue from recurring revenue sources. It is visible and very predictable.

EMR is an example of a recurring revenue layer that we have added around service and around consumables, and we have had good early success with selling EMR both in terms of upfront implementation and recurring maintenance fees annually. Were we to add new features like bidirectional, we would view that as an incremental revenue opportunity, further fueling the recurring revenue foundation that we enjoy.

Colin Clarke: That is very helpful. Thank you. I will hop back in the queue.

Leslie L. Trigg: Thank you.

Operator: We have no further questions at this time. I will now turn the call back over to Leslie L. Trigg for more closing remarks.

Leslie L. Trigg: Terrific. Thank you to everybody for joining today. I would like to close by thanking our customers and our team for the difference that they make every day in the lives of dialysis patients. Have a great evening, everyone.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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