Outset Medical, Inc. Q4 FY2023 Earnings Call

Thank you for standing by, and welcome to the Outset Medical Fourth Quarter 2023 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. As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Jim Mazzola, Head of Investor Relations. Please go ahead, sir.

Good afternoon, everyone, and welcome to our fourth quarter 2023 earnings call. Here with me today 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 Relations pages of outsetmedical.com. This call is being recorded and will be archived in the Investors section of our website. It is our intent that all forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. These statements relate to expectations or predictions of future events and 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. We exited 2023 having made progress in building a strong foundation from which to serve providers, patients, and investors in 2024 and for the long term. We came away from the year with clarity on areas we need to continue to strengthen and scale, pride in the difference we are making for providers and patients, confidence in the lead we have with Tablo from years of innovation and our investments in service and support infrastructure, and conviction around the opportunity based on the vast unmet need for better dialysis outcomes in both the acute and home settings. In the fourth quarter, we delivered revenue of $30.5 million, right in line with the revised expectation we set in November to close the year at $130 million, an increase of 13% over 2022. As we have grown and built scale, particularly in the acute setting, our recurring revenue business model continues to distinguish itself, anchor our guidance for the future, and support our drive to profitability. As we look at progress in our end markets, beginning in the acute setting, our focus on enterprise selling and dialysis insourcing has continued to elevate the financial benefits and strategic importance of Tablo to provider customers. During 2023, 25% of our provider customers were newly landed, and 75% were existing customers who chose to expand their Tablo use within their network. This distribution highlights the progress we are making within this large market segment and the opportunity for continued long-term growth. The percent of new to Outset customers increased in 2022 and 2023, demonstrating the network effects we have previously discussed. For example, as hospital administrators and clinicians move between facilities and health systems, they are ambassadors for Tablo and the benefits an insourcing program can provide. Additionally, we educated over 400 doctors last year alone, and we've amassed an extensive evidence base demonstrating the power of Tablo clinically, operationally, and economically. And on top of that, more than 10,000 nurses are now trained on Tablo. In terms of our footprint, we have shipped Tablo consoles to more than 700 sites in all 50 states, including to top national health systems, where we have about 20% console penetration, and within the top 50 regional IDMs, where we are less than 10% penetrated today. We estimate the acute total addressable market is roughly 40,000 consoles. And as we reported in January, we have an installed base of just over 4,000 acute and subacute consoles. So we still have a lot of runway ahead of us. As dialysis insourcing with Tablo has grown, it is no surprise to us that we saw in the fourth quarter, our Tablo PRO+ software purchased with more than 80% of the console shift in the acute setting, demonstrating its value in the ICU. The results Tablo can deliver in the ICU are clear when we look at customers like Covenant Health, a regional system with about 20 inpatient facilities. Prior to Tablo, Covenant patients on dialysis had an average length of stay in the ICU, the most expensive part of the hospital, of over 13 days. When Covenant measured the ICU length of stay of patients on Tablo, it was cut to eight days. These results demonstrate what's possible when providers control their own destiny. In addition to the decrease in length of stay, Covenant also saw total ICU dialysis treatment costs decline substantially from $1.3 million to $240,000 and cost per treatment cut roughly in half. These results have become very reproducible because our team has developed over the years proprietary expertise in guiding and supporting providers through the outsource to insource transition. With the essential investments behind us in creating a world-class field service, customer success, and clinical support organization, we are well-positioned to deliver not just an exceptional product, but an exceptional and highly differentiated change management experience. It took us years to build this infrastructure and know-how. We consider it one of the strongest competitive advantages we have as a company. The data back that up as well. For example, we continually track customer satisfaction metrics, and I am pleased but not surprised that in 2023, our customers reported a 95.4% satisfaction rate with the performance of our field service organization. This is pretty phenomenal when you consider how rapidly our installed base and treatment volume has grown, and we did it while maintaining a 97% uptime across the Tablo installed base and reducing our cost to serve by nearly 25%. Turning now to the home end market. We continue to make progress building the strong foundation we are establishing for long-term growth. In 2023, we deployed more than 500 Tablo consoles to home providers, growing our home base more than 60% to more than 1,300 consoles. We've talked on previous calls about our two-tiered home penetration strategy, which entails partnering with progressive mid-sized dialysis organizations and working upstream to create greater channel access for patients by expanding the universe of healthcare providers offering home dialysis. We saw our strategies on both fronts pay off in 2023. With the MDOs, which manage dialysis care for about 180,000 patients, translating to our roughly $9 billion addressable market, we continued to see nice growth in the number and depth of programs offering Tablo. Exiting 2023, our largest home program managed by an MDO averaged 25 patients at home on Tablo. Most home hemodialysis programs historically have had one to five patients at home with the incumbent device. Furthermore, we continue to see unparalleled retention rates. Our longest-tenured patients had dialyzed at home now for 3.5 years, demonstrating Tablo's differentiated patient experience. High retention rates not only benefit patients but also help minimize expensive churn for providers. In terms of our efforts to increase channel access by expanding the provider universe with new entrants, we hit some new milestones in 2023. For the first time, two of our fastest-growing home dialysis providers were not previously in the home dialysis business. As we've talked about in the past, the majority of patients actually start their dialysis journey in the hospital. That means hospitals, subacute providers, and others at the top of the funnel have an opportunity to direct patients home first. And many of them are starting to adopt a home-first mindset, where the patient could exit the hospital, a long-term care facility, or a skilled nursing facility and go directly home without ever entering a dialysis clinic. Like Outset, these new market entrants see the opportunity to disrupt and improve care delivery for dialysis patients. We are pleased to announce that during the fourth quarter, we successfully secured several new sales agreements with skilled nursing facilities, including with one of the nation's largest SNF providers. These partnerships underscore the growing recognition of Tablo's value proposition within the post-acute sector. Furthermore, our successes throughout the year continue to position us as a trusted partner in delivering dialysis services across the care continuum. Importantly, these agreements reflect an industry trend of SNF providers seeking to enhance patient care by offering in-house and home dialysis services, which matches our commitment to innovation and meeting the evolving needs of the dialysis community. Operationally, we made progress during Q4 and 2023, strengthening our regulatory and quality organization, processes, and best practices with lessons learned from our experiences and our ongoing focus on continuous improvement. This past quarter, we added our 8th 510(k) clearance to implement new PCB-free silicone tubing in Tablo. As we disclosed in our filings, the FDA initiated an industry-wide review of silicone tubing in 2022. With the 510(k) clearance in hand, we are proactively integrating the changes into our manufacturing process and in the coming weeks, intend to begin implementing the new PCB-free tubing in the field. Additionally, on the regulatory submission front, we remain in interactive review with the FDA on the TabloCart 510(k) submission and continue to forecast sales of TabloCart with prefiltration resuming during the second half of 2024. Our results continue to highlight the strength and potential of our recurring revenue model, which provides us with visibility into a large portion of our 2024 and longer-term financial guidance. Every Tablo in the home generates roughly $15,000 per year through its useful life. Every Tablo in the acute setting generates roughly $20,000 per year, as there are more treatments performed on each device in the hospital than with a single patient at home. Recurring revenue is driven today by the sales of disposables for every treatment and our service contracts. These components will continue to grow as we place new Tablo consoles. As we announced last month, we exited 2023 with over 50% of our total revenue coming from recurring revenue and see even greater potential over the longer term through our software pipeline. Finally, we congratulate our team member, Steve Williamson, on his appointment to lead another public medical device company. Steve joined us at a key time when we were building our national sales and service organization. Thanks to him building a team of incredibly capable and talented commercial leaders who run our sales, service, and marketing organizations today, we do not currently intend to backfill his position. Before I turn the call over to Nabeel for more detail in the quarter, I want to reiterate what I believe are the most important advances we made during the year. First, we achieved scale in the acute end market by demonstrating that Tablo and insourcing with Tablo are strategic implements to reducing costs and retaking control of care for some of the most compromised patients. Second, we expanded our home footprint via partnerships both with new market entrants and existing providers who share our vision for the better patient experience that Tablo can enable. It is early, but we are laying a strong foundation for growth in one of the largest and most unchanged corners of healthcare. Third, with recurring revenue exceeding 50% of total revenue in 2023, we have proven the strength of our business model and demonstrated how we can deliver value well into the future. Fourth, we continue to expand gross margin, exceeding our guidance and demonstrating that we remain on a clear trajectory to reach our 50% milestone. At the same time, we demonstrated strong operating leverage that we expect will persist and expand in each year toward reaching our profitability goals. And finally, we widened Tablo's competitive moat across technology, regulatory, and clinical evidence in ways that deepen connections with providers and patients. Standing by customers and helping them achieve their goals requires much more than a great product, which we certainly have with Tablo. But it also requires an experienced sales and clinical support team backed by the strength of a mature service organization, which is underpinned by software, analytics, change management know-how, and technical support. This is a very difficult-to-replicate ecosystem, and we enter 2024 in a strong competitive position from which to continue our growth. With that, I'll turn it over to Nabeel.

Thanks, Leslie. Hello, everyone. Revenue for the fourth quarter was $30.5 million, in line with our pre-announcement, slightly above the third quarter of 2023 and a decrease of 4.7% compared to $32 million in the fourth quarter of 2022. The change from last year was driven by a decrease in console revenue for the reasons we outlined in the third quarter and was partially offset by an increase in consumables revenue. Product revenue was $22.9 million, a decrease of 13% compared to the $26.4 million in the fourth quarter of 2022. Service and other revenue was $7.6 million, increasing 11% sequentially from the third quarter and 35% compared to $5.6 million in the fourth quarter of 2022. Consumable revenue was $12.6 million, up 15% from the prior quarter and 58% versus the prior year. Cartridge utilization continued to perform well, highlighting the strength of our recurring revenue model. Based on our cloud data, we see console utilization in the hospital setting of around five treatments per week and home consoles at just above three per week. Moving to gross margin and operating expenses, I will highlight our non-GAAP results. I encourage you to review the reconciliation of GAAP to non-GAAP measures, which can be found in today's earnings release. Our fourth quarter gross margin was 26.7%, a more than 100 basis point sequential improvement from the third quarter and a 9.6 percentage point increase from 17.1% in the fourth quarter of 2022. Gross margin expanded for the 11th consecutive quarter with our mix of higher-margin recurring consumable revenue and service and other revenue, representing 66% of total revenue as compared to roughly 59% in Q3 of this year. The year-over-year increase was driven by a nearly 20 percentage point expansion in product margin that was partially offset by a decline in service and other gross margin as a result of planned investments we made during the fourth quarter that we do not expect to repeat in the first quarter of 2024, including roughly $0.5 million to implement the silicone tubing updates that Leslie mentioned. Operating expenses of $36.4 million declined 14% sequentially from the third quarter and 4% from the prior year period, driven in part by the expense reductions we outlined last quarter. From Q4 of last year, the largest decrease in spending came from G&A, which declined 15%. We reported a fourth quarter non-GAAP net loss of $29.5 million or $0.59 per share compared to a non-GAAP net loss of $34.1 million or $0.71 per share for the same period in 2022. We ended the quarter with approximately $207 million in cash, cash equivalents, short-term investments, and restricted cash. In January, we added $66.5 million drawn from our term loan agreements, bringing our cash balance early in 2024 to roughly $270 million. As previously reported, revenue for the full year 2023 increased 13% to $130.4 million from $115.4 million in 2022. As a reminder, we lapped the expiry of our pandemic-related contract with HHS this year. Excluding the impact of the HHS contract in the prior period, revenue grew close to 20%. Product revenue was $103.5 million, an increase of 11% from 2022, and service and other revenue was $26.8 million, an increase of 22% from 2022. Recurring revenue for the full year was 53%, up from 44% in 2022. Gross margin for the year reached 23.6% from 16.1% in 2022. This 750 basis point increase was ahead of our initial expectations and driven by the same factors that we believe will continue to expand gross margin to 50% and beyond. These factors are: number one, console cost-down programs; two, the pull-through of higher-margin products and consumables as consoles are placed; and three, service leverage. Operating expenses were $161.9 million, including R&D expenses of $46.8 million, sales and marketing expenses of $83.8 million, and G&A expenses of $31.4 million. Net loss was $134.2 million or $2.70 per share compared to a non-GAAP net loss of $135.8 million or $2.82 per share for 2022. Turning to our guidance for 2024. We continue to expect revenue of $145 million to $153 million, growing 12% to 18% over 2023. As we have previously mentioned, we anticipate the first quarter to be roughly even with the fourth quarter revenue and then building through the year, particularly in the second half as we lap the elongation of our selling cycle and as Leslie mentioned, we plan for TabloCart with prefiltration to return to the market. Our guidance for non-GAAP gross margin continues to be in the low-30% range for the full year, exiting the year in the mid-30% range for the fourth quarter. Again, gross margin expansion is driven by console cost-down programs, recurring revenue from our larger installed base, and service leverage. With the cost reductions we undertook in 2023, we continue to anticipate OpEx in 2024 of $140 million to $145 million. As a reminder, we recorded a charge in the fourth quarter of $2.5 million associated with the cost reductions we discussed on the November call. Finally, we expect to deliver operating leverage and to consume substantially less cash in 2024 than we did in 2023 as a result of revenue growth, gross margin expansion, and reduced OpEx. With the guidance we provided, cash use is expected to move lower each year through our expected breakeven in 2027, giving us a long cash runway. We remain bullish on the tailwinds in our business and affirm the longer-term guidance we provided in November. We continue to expect revenue growth in the high teens annually beginning in 2025 and gross margin continuing to expand, reaching our 50% milestone exiting 2027. With that, I think we're ready for Q&A. Operator, please open the lines.

Certainly, one moment for our first question. And our first question comes from the line of Rick Wise from Stifel. Your question, please.

Hi, everyone. Leslie, you clearly outlined all the progress we’re making, and it seems like we’re in a steady phase of advancement. The outlook for this year appears to be positive. Can you discuss some of the key incremental drivers? I hesitate to ask where there might be potential upside, but I’m curious if TabloCart will arrive sooner than expected. Additionally, what about new skilled nursing contracts? Help us understand the implications of those as well as any upcoming product launches that aren’t included in your current guidance.

Sure. Hi, Rick. It's great to hear from you. We believe we're well positioned for 2024, which we see as a year for execution. We are dedicated to achieving the goals we've established for this year, and we feel confident in our ability to do so. To address your question, the return of TabloCart following FDA clearance is anticipated to be a positive catalyst. Additionally, we are seeing early successes in the new post-acute segment. When we entered this market, we chose to focus on long-term acute care and rehab facilities, where we've had significant success. We are now contracted with all 10 of the largest post-acute providers in these areas. We are ready to shift our focus to the skilled nursing facilities, allowing us to leverage our existing sales force and field service team effectively. Early successes in skilled nursing facilities are expected to further drive growth in 2024. Furthermore, we anticipate continued gross margin expansion, having achieved significant gains in 2023, and we expect another year of steady improvement. Our team has achieved 800 to 900 basis points of improvement, which is commendable. We have strong confidence in our ability to meet and exceed expectations on gross margins. Lastly, with recurring revenue now comprising over 50% of our total revenue, we have a solid foundation for growth and visibility. These are likely the four main growth drivers and catalysts we are looking forward to in 2024.

Okay. Great. And just on the TabloCart progress. And I apologize, you're probably sick of answering the question, but any incremental updates on your engagement with the agency? Are they asking questions? And again, second half sounds like a reasonable projection to me. But could it happen earlier? Any additional perspective there? Thank you.

Of course. I'm not tired of answering the question at all. It's a reasonable and expected inquiry. The collaboration continues to be very constructive. We are currently in an interactive review process, which involves ongoing questions and answers. This is following the same path that our other eight submissions and clearances have taken over the years. Overall, it's progressing as we anticipated. While there is always a possibility that the review could conclude sooner than expected, we remain confident in our guidance regarding the second half return of TabloCart.

Thank you so much.

Of course.

Thank you. One moment for our next question. And our next question comes from the line of Shagun Singh from RBC Capital Markets. Your question, please.

Hi. This is Avi on for Shagun. Thanks for taking my question. So Leslie, what trends are you seeing for Tablo console uptake pending TabloCart with prefiltration approval? Is there something that the company can do to drive more sales more meaningfully in the interim, including on the marketing front? And then I have a follow-up.

Yeah. Sure. Well, I really like the distribution of our growth in 2023, and I would expect it to follow a similar pattern in 2024. And what I mean by that is a catalyst always for us remains new customer wins, and we had a nice number of those in 2024, new customers that decided to insource with Tablo for the first time. At the same time, we always have our eye on expansion. Why? Because a hospital or a health system would not perpetuate its use of Tablo within other new hospitals inside of its network if the technology and the experience around it were not delivering on its promises to lower costs and deliver operational and clinical benefits. And I think the expansion numbers that we saw in '23 and then we expect in '24 proved that it is. And so I guess I would say how does it get accelerated. I'll talk maybe a little bit more about the network effect or maybe a better word for it is kind of this flywheel. We have demonstrated that the cost reduction and clinical benefits are reproducible as more and more hospitals have published their experience, shared their experiences publicly, and their data. We talked about Covenant Health in the script here just a minute ago as an example of that. And what we do see now as our reference base continues to grow and as health system executives move around and clinicians move around, the word and the ambassadorship around Tablo is continuing to grow quite substantially. Plus now that we've trained, as I mentioned, over 10,000 nurses, we're seeing sort of a flywheel effect developing within the nursing community as well with a lot of support for the benefits that Tablo provides them.

Thanks for that color. And Nabeel, what are the factors that could potentially get you to deliver at or above the top end of your guidance in '24?

Sure. Regarding guidance, as you may recall from our November call, we are estimating around 1,400 consoles for 2023 and 2022 at the midpoint of our guidance. We are also assuming that capital spending remains constant, which means its effect on our sales cycle remains unchanged. As we consider changes within our guidance range, it primarily hinges on the number of consoles we deploy. This could be influenced by receiving TabloCart earlier or simply by underlying demand in our major markets. Historically, we have also seen better than expected results from average selling prices and from additional treatment sales beyond our projections. Thus, there are multiple avenues for potential upside.

Thanks.

Thank you. One moment for our next question. And our next question comes from the line of Kristen Stewart from CL King. Your question, please.

Hi. Thanks for taking my question. Can you hear me okay?

Yes. Perfect.

Okay. Perfect. I was just wondering if you could provide insight on the cost reductions that you guys are taking the initiatives across the company. And what gives you confidence that you can get the cash burn down in 2024?

We initiated expense reduction strategies that were previously announced. We closely examined our spending and focused on two main areas. First, we wanted to protect our ability to reach our guidance and perform even better, keeping a long-term view through 2027 and beyond. This ensures we can effectively drive revenue. Second, we aimed to maintain our R&D capabilities to reduce console costs and support software development, which we believe is crucial for the future. With these objectives in mind, we reviewed our profit and loss statements to ensure spending was aligned with our expected growth rate. This analysis led to a reduction of approximately $25 million in operating expenses, resulting in about $162 million of non-GAAP operating expenses for 2023. For 2024, we anticipate these will range between $140 million and $145 million. In terms of cash flow, we reported a burn of just under $120 million in 2023, but we expect to significantly decrease that to about $100 million in 2024, with further reductions in subsequent years as we achieve revenue growth, improve gross margins, and leverage operating expenses from this new lower baseline.

Great. Thanks, Kristen.

Thank you. One moment for our next question. And our next question comes from the line of Drew Ranieri from Morgan Stanley. Your question, please.

Hi, Leslie. Hi, Nabeel. Thanks for taking the question. Maybe for Leslie, just your comments about the home market. You mentioned one of the MDOs is averaging about 25 patients on the home with Tablo. And you mentioned the historical reference of like one to five patients on incumbent devices. Just maybe help us bridge what the characteristics are of that MDO that's now up to like 25 patients. And there's such a significant population of home patients still out there. What's really going to get the market to make more progress in getting patients from in-center to the home over the next 12, 24 months? Kind of how are you thinking about that and thanks for taking the question.

Sure. It's great to connect with you, Drew. First and foremost, we are very enthusiastic about the examples we see in our home programs, particularly with the increased home patient census, which has reached levels we have not seen before. Our top home program is currently averaging 25 patients, and that is not the limit. I am particularly curious about how much higher we can go beyond 25, and I believe it can be significantly more. This is largely due to the fact that our training time with Tablo is much quicker than with existing devices, regardless of patient demographics, allowing patients to return home sooner. The retention rates are crucial in this context. We have observed a significantly higher retention rate, both in the short term within 90 days and longer term at 12 months, which is a tremendous help. Our objective is to facilitate patients' return home and ensure they can remain there successfully, and I believe our technology has been effective in this regard. As for your second question on how to increase our patient numbers in homes even further, I see it as twofold. For existing dialysis providers, we aim to increase the number of patients in each home program, and we are concentrating on deepening our engagement with our current programs, which we are beginning to notice. Additionally, we want to maintain high retention rates while also bringing more patients into the system, as mentioned in our prepared remarks. We are observing the emergence of new market entrants that are motivated by the financial advantages of home dialysis and are considering their approach to getting patients home, including how they train and support them. These innovative perspectives are likely to enhance the flow of patients directly into home care with a home-first philosophy. Transformation of this magnitude won’t occur overnight, and we have always anticipated a steady, linear growth. However, I believe the right initiatives are currently in place, which we expect to result in a sustained high double-digit growth rate well into the future for both our home and acute services.

Does that answer your questions.

Operator, I think we can go to the next question. Thank you.

Okay. Thank you. One moment for our next question. Our next question is a follow-up from the line of Shagun Singh from RBC Capital Markets. Your question, please.

Hey, Leslie. Thank you for squeezing me in. I was just wondering if you can talk a little bit about what the Street is missing about the Outset Medical story. And given where the stock is at, is there any change in strategy or anything you're looking to do differently? Thank you for taking the follow-up.

Sure. I’d be happy to share my thoughts. When I reflect on the Outset story, I notice a few key points. First, we’re operating in a market with significant barriers to entry. We've reached a level of scale that raises these barriers for both existing players and potential newcomers. Second, our business relies heavily on recurring revenue, which enhances our visibility and stability, and I anticipate that this recurring revenue will keep increasing over time. Additionally, I see that incumbent competitors offer products and services that are leading to dissatisfaction among health systems and patients, prompting them to look for better alternatives. Lastly, it's important to recognize that our success goes beyond just technology; it encompasses the ecosystem we've created around Tablo. We've developed a unique expertise in helping hospitals and health systems navigate change management effectively. We're also excelling in patient support at home, and our field service and clinical support teams are performing at a high level, providing education and training for physicians and nurses. One aspect that might be underappreciated is the recurring revenue aspect of our business, along with our outstanding retention rate in home care and the solid gross margin improvements we've achieved. We have a clear plan in place to reach 50% gross margins and progress toward becoming not just a high-growth company, but also a profitable one.

Just any change in strategy or is it business as usual?

Our strategy remains exactly the same. I think we are in the early innings of both acute and home. We're very proud of the roughly 10% or 11% penetration we have on the acute side, but that leaves 90% to go. And so I think our strategy of focusing on what we call kind of land and expand, both landing new customers adopting in-sourcing with Tablo and delivering a product and team experience that motivates existing customers to expand within their network continues to pay dividends. And then on the home front, I think the strategy remains resonant at the mid-sized dialysis organizations, continuing to deepen the patient census and volume in our existing programs and sort of similarly landing new market entrants at the top of the funnel who are very motivated to enter this business and provide patients with additional channels of access through which to go home. So I think when we look at our growth, if I look, for example, at 60% growth just on the home console front in 2023, we feel very confident in the components and the commercial strategy at large moving through 2024.

Thank you so much.

Of course.

Thank you. One moment for our next question. And our next question comes from the line of Joshua Jennings from TD Cowen. Your question, please.

Hi. Good afternoon. Thanks for taking the question. I was hoping to just ask about the competitive counter marketing that was ongoing in 2023 and where that stands today. I believe it's most impactful in some ICU settings and competitors inferring that Tablo XT is not appropriate for all care settings or just the dynamic between CRRT versus some of the on-label treatment types for Tablo. Has that died down or has your team been able to counteract that effectively? Where does that stand, Leslie?

It's great to hear from you, Josh. In summary, our team has done an excellent job in addressing this issue. We were initially a bit unprepared in Q3 and Q4, but that's behind us now. I should also mention that we haven't observed any new competitive activity since then. We are now operating in a competitive environment, which isn't surprising given the market share we've captured and our rapid growth. Therefore, I anticipate competitive activity, and we're better equipped to handle it now than ever before. Additionally, we are strengthened by our technology. Tablo is the only device capable of providing dialysis therapy for any duration between 0 and 24 hours. The value of this capability in the ICU is further highlighted by the fact that 80% of our console sales last quarter included the Tablo PRO+ software, which features the 24-hour capability specifically for ICU use. This underscores the clinical value that Tablo brings to the ICU, and none of this has changed due to the recent competitive activities. That's the positive takeaway.

Excellent. I have a follow-up regarding the home opportunity. You've mentioned that about 40% of the U.S. dialysis population utilizes Medicare Advantage, and that payers may encourage more patients to opt for home treatment to increase cost-effectiveness. Have there been any actions from payers so far, or do you anticipate any in 2024? How might this situation develop? Additionally, could you remind us of the economic advantages that home treatment offers to these payers? Thank you.

Yeah. Of course. I'm happy to. Well, and maybe I'll take a half step back and say, I think all of the structural tailwinds and kind of the more foundational growth drivers for home are all still firmly intact. As a reminder, the ETC model from CMS is in place and providing increasing benefits or increasing incentives, I should say, between now and 2027. So that model, we believe, will continue to incent providers of all types to send more patients home quickly. We do still see patient preferences being influenced in a positive way towards home as a result of COVID. I think patients are more confident sort of forwarding leaning to our homes than ever. And that's also aided by, I think, kind of the normalization of the hospital-to-home environment and movement. And then the third big structural tailwind is one that you cited. Yes, we do continue to see data that roughly 40% of the dialysis population is already signed up for Medicare Advantage. These payers prior to Medicare Advantage eligibility for dialysis patients used to be able to transition their commercial patients over to Medicare at month 30, and now that's no longer the case. So they will be supporting their dialysis members effectively in perpetuity. And so we do expect to see increasing involvement amongst the Medicare Advantage providers to urge their partners to move more patients into the home. I'll say, as I said a couple of minutes ago, I think transformation at this level in any market rarely happens overnight. And so I would not necessarily expect to have results to report back to you on that next quarter per se. But in almost every conversation we are having with payers, it involves a discussion around how do we move more patients home. We believe that the cost of care is lower and that the quality of care is higher in the home. So the conviction and the belief and the motivation are certainly already present.

Great. Thanks so much.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Leslie Trigg for any further remarks.

Thank you, and thanks to all of you for joining today. We look forward to our next update on our first quarter call and hope you all have a great evening.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.