Good day and thank you for standing by. Welcome to Outset Medical's third quarter 2026 earnings 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. 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, Tina Jacobson, Head of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to Outset Medical's third quarter 2026 earnings call. Today's speakers are Leslie Trigg, Chair and Chief Executive Officer, and Renee Gaeta, Chief Financial Officer. The company issued a news release after the close of the market today, which can be found in the investor section of outsetmedical.com. This call is being recorded and will be archived there as well. All forward-looking statements made during today's call are intended to be protected under the Private Securities Litigation Reform Act of 1995.

Outset assumes no obligation to update these statements. For a list and description of the risks and uncertainties associated with the business, please refer to Outset's public filings with the Securities and Exchange Commission, including its latest annual and quarterly report.

I will now turn the call over to Leslie Trigg. Good afternoon, everyone, and thank you for joining us. Our team executed well in the third quarter, delivering solid progress against our strategic priorities. Just as importantly, we continued doing the foundational work that is strengthening the business and aligning our teams to drive more predictable, profitable growth. I'm confident that these efforts are positioning Outset to capture the significant opportunity ahead. With that, I'll dive right into third quarter results beginning with financial performance. Revenue of $33.6 million was up 14% year over year and up 6% sequentially. Each of our revenue line items contributed to growth both year over year and sequentially. We were particularly encouraged to see console revenue growth of 26% year-over-year, driven by new and refreshed console sales. In terms of recurring revenue, in addition to solid treatment volume, sales of our EMR offering are starting to ramp and grew 23% year-over-year. Ongoing operational initiatives improved non-GAAP gross margins, while expense discipline delivered significant operating expense leverage. Our clinical excellence team was busy again this quarter with a full lineup of new go-live implementations completed for new customers and existing customers expanding to new locations. Among those were four of the top 10 U.S. health systems. We draw on years of valuable experience to support hospitals as they transition from outsourced to insourced, starting with a detailed project plan customized to each hospital needs, then executing that plan through nurse training, physician education, and change management support. All of that requires well-oiled cross-functional execution, and our teams continue to deliver time and again. Beyond implementation, our clinical excellence team members collaborate with customers to maximize Tableau's system-wide benefits, helping to identify the outcomes that matter most to each organization. Pavlo's unique data ecosystem, now comprising more than 10 trillion data points, enables us to track and trend key performance indicators and regularly share the insights with customers. This ongoing collaboration engages clinical and corporate leaders across our larger health systems, demonstrating value, strengthening customer relationships, and creating a foundation for broader system-wide adoption. That level of commitment to delivering measurable benefits is translating into strong customer advocacy. In our recent Voice of the Customer assessment conducted by a third-party consulting firm, Outset achieved an overall customer satisfaction score that exceeded all of the consulting firm's healthcare benchmarks. The results also shed light on what customers value most about Tableau. Survey respondents scored Tableau highly for timely dialysis that improves patient satisfaction, Lower infrastructure burden and system costs and simpler dialysis delivery through easier nurse training, mobility, and ease of use. These findings validate Tableau's differentiated clinical, economic, and operational value proposition and equip our sales team to position Tableau as a platform for system-wide impact. Additionally, we took an opportunity to analyze our customer retention rate over time. The data revealed that since commercial launch, cumulative retention among parent customers that have purchased Tableau consoles is 96%. We attribute this result not only to our technology, but to the holistic customer experience our team delivers across field service, clinical excellence, data analytics, EMR, and many other functions within Outset. Strong customer advocacy and high retention feeds all three of our Forward Console growth drivers, refresh sales, expansion sales, and new customer sales. Our first significant refresh agreement, which was signed in Q2 with HCA, reinforced one of the nation's largest health systems' long-term commitment to tabloid, added meaningful contracted backlog and revenue visibility, and validated the refresh opportunity. Our sales team is actively engaged with additional large health systems whose consoles are nearing end of life and we're encouraged by the progress. We believe we are well positioned to build on this momentum across an estimated $150 million refresh opportunity. Expansion sales is another of our most compelling growth vectors. Existing customers know our team, understand the implementation process, and have firsthand experience with the benefits of in-source dialysis, creating a clearer, lower friction trajectory from individual site success to system-wide adoption. And we have a great foundation to build on. For example, all 14 of the largest health systems by estimated console opportunity are already existing customers. Additionally, Tableau is already being used in one or more facilities of roughly half of the top 100 largest IVNs. The expansion revenue opportunity is twofold. First, same-store sales growth, which means expanding Tableau's use within a given hospital site, such as moving from Tableau use outside of the ICU to ICU as well, or vice versa. Both cases involve the purchase of additional Tableau consoles and incremental treatment volumes. The second expansion opportunity is extending Tableau into new hospital facilities within the health system network. In the third quarter, we closed deals across both of these expansion avenues. Leveraging the deep expertise of our new commercial leadership, we're evolving Outset's commercial model to ensure we are well-positioned to execute across all these fronts, refresh, expansion, and new customer console sales. For example, We are reducing territory sizes so our representatives can build deeper relationships aimed at accelerating pipeline conversion. Additionally, we've realigned compensation incentives to ensure they help drive our commercial priorities while investing to reward performance and impact time to productivity. In parallel, we are expanding our capital sales team regionally and at the national account level to deepen executive level relationships and translate our enviable roster of national contracts into broad system adoption. Across sales, marketing, clinical, service and enterprise accounts, we're working as one outset, aligning our teams around a shared goal, accelerating adoption and driving conversion. This work is underway at a time when the environment for in-source dialysis is becoming increasingly favorable. Two weeks ago, the Department of Health and Human Services launched the Kidney Care National Plan, which builds on federal dialysis priorities elevated in 2019 by way of an executive order. The National Plan calls for greater patient choice, expanded access to home dialysis, and initiatives to encourage adoption of new dialysis technologies. It also emphasizes reducing barriers for new dialysis service entrants, and aims to address practices that HHS believes limit competition and constrain physicians' ability to offer patients access to a broader range of treatment options and new devices. These priorities are central to Outset's mission to drive fundamental change in how dialysis is delivered. We're encouraged by HHS's commitment as it aligns with what Tableau was designed to make possible, empowering health systems to bring dialysis in-house while giving patients greater flexibility in where they choose to receive treatment. Over time, changes to market practices and new program initiatives could broaden patient access to home-based care and new home dialysis technologies such as Tableau. While implementation of the national plan will determine its ultimate impact, we view it as a powerful recognition of the need for change and a meaningful step toward a more competitive, Innovative Dialysis Landscape. We believe Outset is well positioned to help lead that change and we applaud HHS for advancing better care for dialysis patients. Beyond this new policy tailwind, the macro backdrop for Tableau is attractive. Health systems are under increasing pressure to reduce costs and elevate the quality of care. Dozens of abstracts and papers now validate the clinical and financial benefits of Tableau. We believe there is an exceptionally strong case for bringing dialysis in-house with a simple, data-rich, EMR-connected platform that gives health systems greater control over a critical service line. Tableau's opportunity to earn market share has never been more compelling. We recognize that we have significant work ahead, but Outset has a strong foundation for scale with the right people and the right technology, and we're excited about what lies ahead. With that, I will turn the call over to Renee.

Thank you, Leslie, and good afternoon, everyone. Total revenue in the third quarter was $33.6 million, up approximately 14% compared to the third quarter of last year. Product revenue was $23.7 million, up 15% compared to last year. Console revenue of $10.5 million grew 26% compared to last year, and consumable revenue of $13.2 million was up 8% year-over-year. Service and other revenue was $9.9 million, up 12% year-over-year. Recurring revenue, which includes consumables and service, was $23.1 million, an increase of 10% compared to last year. Turning next to the P&L, please refer to the tables in today's earnings release for a reconciliation of GAAP to non-GAAP measures. Third quarter non-GAAP gross margin was 40.8% up approximately 100 basis points compared to last year and driven primarily by product cost improvements, reduced overhead, and service efficiencies. Product gross margin was 44.2% down 150 basis points compared to last year due to a higher mix of console sales within product revenue. Service and other gross margin was 32.4% of 760 basis points compared to last year as our attach rates for implementation and EMR software continue to expand. Overall, this performance reflects continued execution and keeps us on track toward our next milestone of a 50% company-wide gross margin. Moving to operating expenses. We delivered over 300 basis points of operating leverage. Third quarter non-GAAP operating expenses were $24.2 million, excluding approximately $1 million related to bad debt expense, operating expenses increased only 4% compared to revenue growth of 14%. Non-GAAP net loss was $12.9 million compared to a non-GAAP net loss of $12.4 million in the third quarter of last year. Moving to the balance sheet, we ended the quarter with $140.7 million in cash, cash equivalents, short-term investments, and restricted cash. With ongoing expense discipline and working capital management, cash use was $10.3 million in the third quarter. putting us on track to use approximately $40 million for the full year. Turning to our guidance for 2026, we are reiterating full year revenue guidance of $125 million to $130 million. We continue to expect full year non-GAAP gross margin to be in the low 40% to mid 40% range with a reminder that a higher mix of console sales could shift gross margin towards the lower end of that range. Our confidence in this outlook is supported by a strong commercial pipeline and contracted backlog related to the HCA refresh agreement. With that, I'll turn the call back over to Leslie.

Thanks, Renee. I want to close by emphasizing the one word that defined this quarter for Outset, execution. Our teams stay focused on the fundamentals, successfully implementing new sites, expanding Tableau to additional facilities within existing customers, delivering on our first refresh agreement, and advancing preparations for next-generation Tableau. We also grew our pipeline through engagement with both existing and new customers. At the same time, we accelerated revenue growth, drove non-GAAP gross margin improvement, and delivered significant operating leverage. Looking forward, we're focused on capitalizing on our three console growth drivers. First, the refresh opportunity, which represents over 3,000 consoles and an estimated $150 million revenue opportunity over the next several years. Second, the expansion opportunity, both same-store sales of additional consoles and new facility expansion. And third, the vast, unpenetrated white space of hospitals that have not yet adopted Tableau. To help ensure we are well positioned to execute across all three of these growth drivers, we are expanding our sales reach, strengthening team capabilities, and aligning sales compensation to accelerate our inroads into our key commercial focus, the nation's top 250 health systems. Our clinical excellence and customer success teams help customers realize Tableau's full value, creating a foundation to expand from single site relationships to system-wide partnerships. None of this happens by accident. It is the result of a team that shows up every day with deep expertise and an unwavering commitment to our customers and the patients they serve. I want to thank our employees for the discipline and focus they brought to this quarter, and I want to thank our customers and you, our shareholders, for your continued support. Our end market and the patients we serve need us. Our customers advocate for us because of the considerable, measurable value we have created now across 4 million cumulative dialysis treatments. We are the clear technology leader in a market with increasingly attractive dynamics. The opportunity ahead of Elset has never been more compelling. We have the strategy, the technology, and the team in place, and we look forward to sharing our continued progress. With that, we are ready for Q&A. Operator, please open the line.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, we do ask that you limit yourself to one question. Please stand by while we compile the Q&A roster. And our first question comes from Josh Jennings of TD Cal, and your line is open.

Hi, this is Colin on for Josh. I guess it seems there have been a lot of interesting developments this year for the home setting. The HHS kidney care plan you mentioned seemingly has a focus there. Vantiv seems to have sold their conventional hemodialysis business but is refocusing on home. And then we saw data at ASN showing an opportunity to serve a need with peritoneal burnout in the home setting. I was wondering if you could talk about how the home opportunity is evolving for outset this year in 2026. Thank you.

Hi, Colin. It's Leslie. Thanks for the question. Yes, there have been actually quite a number of interesting developments here just recently. So maybe I'll kind of take those piece by piece. On the HHS front, we'll obviously have to see exactly how it's implemented to understand better how it may change the landscape and more specifically benefit us through encouraging broader home adoption. But I mean, broadly speaking, we obviously view that as a very, very positive It does renew an earlier federal focus on home dialysis in particular, acknowledging some areas for improvement, shall we say, around concentration and entry barriers. And it may ease the requirements for setting up new home programs. And all of those things could be potentially powerful tailwinds for us. So we'll have to wait and see. But yes, we do view that as a positive potential policy development that could encourage the adoption of New Technologies and More Home. There was a lot at ASN this year and last year actually around home and a lot of, I think, good physician conversation and momentum around broadly how to encourage patients at home and keep more patients at home. And I think this is really where Cabelo shines kind of in both actually the front end and the long-term back end. The two KPIs that we look at as we're growing our home business are are training metrics. And we continue to kind of lead the industry in how quickly and easily patients and their caregivers can be trained on Tableau to get home. And so that really opens up the aperture, I think, in a really positive way for who can go home and how quickly they can get there. And then on the back end, our most important KPI is the retention rate. Our specific growth strategy is is through long-term retention. And even as we continue to scale home and grow our patient census, we have maintained kind of our industry leading retention rate of 90% or greater in the first 90 days. And it turns out when you look at the data, it's really that 90-day retention metric that is the most predictive and the greatest leading indicator of long-term retention at home. So we've continued to do very, very well there, even as our home population has grown. and then lastly I'd say we are growing home and our patient base in two ways. One, we're deepening the depth of the patient census in the facilities and the home programs that already offer Tableau and broad. We are seeing our existing provider customers start to offer Tableau in new facilities in new home programs. So we're excited about that and we remain focused on our partnerships with the largest called MDOs, mid-sized dialysis operators in the country. So a lot to say. I'm happy to take another question about home calling if you have it, but I think all of these developments point potentially more to be revealed, potentially do point to some upsides and some tailwinds in the future here with regard to home.

Amazing. And I guess my second question would be a little bit more about the acute setting with the rollout of the NextGen system. I'm just curious how that's progressing and how the feedback has been. Now that we're a little further into launch.

Sure. Well, yeah, let me kind of take a step back and talk about Acutes more broadly. So our big picture commercial strategy around Acutes is really threefold, as I just mentioned in the prepared remarks. One is the refresh opportunity. The second is expansion with current customers, which takes two forms, both same store sales growth. adding new consoles and expanding the clinical use of Tableau in a given hospital setting. And then lastly, of course, new customer acquisition. And we see all three of those opportunities resident in our focus on the top 250 largest IDNs in the country. And why are we focused on the largest 250? Those institutions, frankly, have the largest potential console TAM and also Treatment Volume, TAM. And so that's where our commercialization organization has redoubled their focus and their energies. The next generation, to get to your question there, we are continuing to kind of advance through preparations for a full release. We are certainly continuing to prioritize a high, high quality customer experience over speed. And fortunately, we have the luxury of ensuring that we get it right. We feel really good about the way that it's developing, but we do want to make sure that the customer experience, especially now that we're operating at a fairly substantial scale with regard to the console install base and our customer install base, that we're really doing this and getting it right from the get-go. So we're going to continue to progress through that and look forward to seeing it in the market at scale here in the coming months and quarters.

Thank you.

Thank you.

Thank you. And as a reminder, if you have a question, please press star 1-1. And our next question comes from Kendall Al of RBC Capital Markets. Your line is open.

Hi, guys. Congrats on the quarter, and thanks for taking my question. First, I just want to ask, I know you guys read your guidance right on the top of the line. I was wondering Why I Didn't Want to Raise the Low End or Change Guidance After the Beat in the Quarter. And also, do you have any, like, comments on 27? What's a good starting point for revenue next year? Do you think a 10% growth year-over-year is achievable? We'd love to hear any comments on that, too. Thank you.

Hi, Kendall. It's Renee. Thanks for the question. You know, I think really good questions and things that are, of course, top of mind for us. You know, 2026 is an important year for us with executions. We said that from the beginning of the year, and we've been holding strong to that every single quarter. We are focused on maintaining that discipline around our guidance strategy and execution against it being top of mind. Our pipeline is dynamic, and staying within that sort of disciplined guidance methodology, we just want to make sure that we set ourselves up for success. and decided that standing here today with reporting of Q3, we are where we expected to be. We're really happy with the performance for this year. And as you see, even in all of the models that are out there, the back half of 2026 does already have pretty significant growth rates built into it. And so we're comfortable with leaving it there for now. And we look forward to talking about 2027 In finer detail, when we report Q4, what I can say is, of course, we want to return to a double-digit growth company, and this organization is definitely focused on the ability to execute against that.

Yep, I appreciate that. And one quick question also on top of that. Do you see any major changes in the CapEx environment heading into 27? Do you have expectations of maybe a slowdown, or do you think it's consistent on the spending pattern for next year? Just love to hear any comments on that.

Yeah, hey Kendall, this is Leslie. We have not to date, obviously subject to change and we're all out there on the capital equipment front, you know, obviously in active monitoring mode, but based on what we've experienced and what we're hearing and discussing with customers, we're not seeing or perceiving any big changes in the capital spending climate at this time.

Thanks. I appreciate all the comments. Thank you.

Yeah, of course. Thank you.

Thank you. I show no further questions at this time. I'd like to turn it back to Leslie Trigg for closing remarks.

Great. Well, thanks to all of you for joining today. I'd like to close by thanking our customers and our team for the difference they make in the lives of dialysis patients every day. Have a great afternoon and evening.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.