10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2024

Commission File Number 001-39513

Outset Medical, Inc.

(Exact name of Registrant as specified in its Charter)

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (669) 231-8200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class TradingSymbol(s) Name of each exchange on which registered

Common Stock, par value $0.001 per share OM The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒

Non-accelerated filer ☐ Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No☒

Aggregate market value of registrant's common stock held by non-affiliates of the registrant, based upon the closing price of a share of the registrant's common stock on June 30, 2024 (the last business day of the registrant's most recently completed second quarter) as reported by Nasdaq Global Market on that date was approximately $198.2 million.

The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of February 24, 2025 was 53,896,936.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for its 2025 Annual Meeting of Stockholders, which is to be filed with the Securities and Exchange Commission within 120 days of the registrant’ fiscal year ended December 31, 2024, are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein.

Table of Contents

Page

PART I

Item 1. Business 3

Item 1A. Risk Factors 21

Item 1B. Unresolved Staff Comments 63

Item 1C. Cybersecurity 63

Item 2. Properties 65

Item 3. Legal Proceedings 66

Item 4. Mine Safety Disclosures 66

PART II

Item 6. [Reserved] 67

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 77

Item 8. Financial Statements and Supplementary Data 78

Item 9A. Controls and Procedures 109

Item 9B. Other Information 109

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 109

PART III

Item 10. Directors, Executive Officers and Corporate Governance 111

Item 11. Executive Compensation 111

Item 14. Principal Accounting Fees and Services 111

PART IV

Item 15. Exhibits, Financial Statement Schedules 112

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this Annual Report) contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact contained in this Annual Report are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements about:

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our future results of operations and financial position, including our expectations and projections regarding our revenues, recurring revenues and revenue growth rate, cost of revenues, gross margin, operating expenses, capital expenditures, cash burn and cash position;

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our business strategy, plans and objectives of management;

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key factors we believe affect our performance, including our beliefs about the opportunities presented by these factors, our ability to successfully address each of these factors and the anticipated impacts of these factors on our business, financial condition and result of operations;

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continued execution of our various initiatives designed to expand gross margins, including by continuing to sell Tablo cartridges, services and accessories for Tablo console, reducing the cost of service and reducing the cost of Tablo consoles;

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our ability to achieve and sustain future profitability, including our ability to expand gross margins, optimize operating expenses (including the anticipated benefits from cost reduction initiatives such as organizational restructurings) and optimize working capital;

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our expectations regarding the market sizes and growth potential for Tablo, and the total addressable market opportunities for Tablo in the acute care and home settings;

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our planned expansion within the home dialysis market and our assumptions about the home market, including expected drivers of home dialysis adoption;

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any ongoing impact of macroeconomic factors on our business and results of operations, and on our customers and suppliers;

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our ability to retain our commercial team, optimize our sales processes and expand the adoption of Tablo as we focus more heavily on enterprise selling;

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our plans to continue to invest in our research and development efforts to enhance existing products and develop new products;

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our ability to respond to any reports, observations or other actions by the FDA or other regulators in a timely and effective manner; and

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our expectations regarding the uses and sufficiency of our capital resources.

The forward-looking statements in this Annual Report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Such risks and uncertainties include those described throughout this Annual Report, including in the sections titled “Risk Factors” under Part I, Item 1A below and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II, Item 7 below.

The forward-looking statements in this Annual Report are based upon information available to us as of the date of this Annual Report and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These forward-looking statements, like all statements in this Annual Report, speak only as of their date, and except as required by applicable law, we undertake no obligation to update or revise these statements, whether as a result of any new information, future developments or otherwise. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Unless the context requires otherwise, all references in this Annual Report to “we,” “us,” “our,” “Outset” and “the “Company” refer to Outset Medical, Inc.

We have proprietary rights to trademarks, trade names and service marks appearing in this Annual Report that are important to our business. Solely for convenience, the trademarks, service marks, logos and trade names referred to in this Annual Report are without the ® and TM symbols, but such references are not intended to indicate that we will not assert our rights or the rights of the applicable licensors in these trademarks, service marks and trade names. All trademarks, trade names and service marks appearing in this Annual Report are the property of their respective owners.

PART I

Item 1. Business.

Our Company

Outset is a medical technology company pioneering a first-of-its-kind technology to reduce the cost and complexity of dialysis. We believe the Tablo® Hemodialysis System (Tablo) represents a significant technological advancement that transforms the dialysis experience for patients and operationally simplifies it for providers. We designed Tablo from the ground up to be a single enterprise solution that can be utilized across the continuum of care, allowing dialysis to be delivered anytime, anywhere and by virtually anyone. Tablo is currently cleared by the U.S. Food and Drug Administration (FDA) for use in the hospital, clinic or home setting. Our technology is designed to elevate the dialysis experience for patients, and help providers overcome traditional care delivery challenges. Our focus on flexibility, ease of use and user experience translates to meaningfully reduced training times and fixed infrastructure requirements. Requiring only an electrical outlet and tap water to operate, Tablo frees patients and providers from the burdensome infrastructure required to operate traditional dialysis machines. The integration of water purification and on-demand dialysate production in a single 35-inch compact console enables Tablo to serve as a dialysis clinic on wheels. Tablo leverages cloud technology, making it possible for providers to monitor devices and treatments remotely, perform patient and population analytics and automate clinical recordkeeping. With a simple-to-use touchscreen interface, two-way wireless data transmission and a proprietary data analytics platform, Tablo is a new holistic approach to dialysis care. Unlike traditional hemodialysis machines, which have limited clinical versatility across care settings, Tablo can be used seamlessly across multiple care settings and a wide range of clinical applications.

We have generated meaningful evidence to demonstrate that providers can realize significant operational efficiencies, including reducing the cost of their dialysis programs. In addition, Tablo has been shown to deliver robust clinical care. In studies and surveys we have conducted, patients have reported quality of life benefits on Tablo compared to other dialysis machines. We believe Tablo empowers patients, who have traditionally been passive recipients of care, to regain agency and ownership of their treatment.

Kidney failure can be temporary and occur spontaneously due to an underlying medical condition, as is the case in acute kidney injury (AKI), or can worsen gradually over time, as is the case in chronic kidney disease (CKD), which may result in end-stage renal disease (ESRD). Kidney failure is commonly managed with hemodialysis, a procedure by which waste products and excess fluid are directly removed from a patient’s blood using an external dialysis machine. ESRD patients require complex management and the cost burden of administering dialysis is significant. Hemodialysis can be performed in multiple care settings, including the hospital, clinic or the patient’s home. Typically, different types of dialysis machines are used in different care settings and for different clinical needs. Tablo is an enterprise dialysis solution that allows providers to standardize to a single technology platform.

Driving adoption of Tablo in the acute setting has been our primary focus since Tablo’s clearance by the FDA for use in an acute or chronic care facility. We have invested in growing our economic and clinical evidence, built veteran field service, sales and clinical support teams with significant expertise, and implemented a comprehensive training and customer experience program. Our experience in the acute market has demonstrated Tablo’s clinical flexibility and operational versatility, while also delivering meaningful cost savings to the providers. In addition, we are working with skilled nursing facilities (SNFs), long-term acute care hospitals (LTACHs), and other post-acute providers to raise awareness of Tablo’s economic and clinical benefits to them and to patients. We plan to continue leveraging our commercial infrastructure, including our sales, field service and marketing teams, to broaden our installed base in the acute and post-acute care markets, as well as driving utilization and fleet expansion with our existing customers.

Tablo is also utilized for home-based dialysis. In 2020, Tablo was cleared by the FDA for patient use in the home. We believe our ability to reduce training time, patient dropout, and supplies and infrastructure required to deliver dialysis in the home can drive efficiency and economic improvements to the home care model. In our home investigational device exemption (IDE) trial, patients reported specific quality of life improvements compared to their experience on the incumbent home dialysis machine. To penetrate this market successfully, we have made investments in, and continue to focus on refining our home distribution, logistics, service and support systems to help ensure they continue to scale. We are also working with providers, patients and payors to increase awareness and adoption of transitional care units (TCUs) as a bridge to home based therapy. To demonstrate the cost advantages of Tablo in the home setting, we are continuing to collect additional patient clinical experience and outcomes data.

Tablo Hemodialysis System

Tablo is an FDA-cleared single enterprise solution for hemodialysis, comprised of a compact console with integrated water purification, on-demand dialysate production and advanced software and connectivity capabilities. We designed Tablo from the ground up to be a single enterprise solution that can be utilized across the continuum of care, allowing dialysis to be delivered anytime, anywhere, and by virtually anyone. Unlike traditional hemodialysis machines, Tablo can be used seamlessly across multiple

care settings and a wide range of clinical applications, all with the benefit of remote system management, monitoring and maintenance through two-way wireless data transmission capabilities.

Tablo is comprised of the following components:

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Tablo Console. A proprietary, compact, mobile and versatile machine consisting of an integrated water purification, on-demand dialysate production system and simple-to-use touchscreen interface with 3D animations that guide the user through treatment from start to finish. Using advanced sensors, the console automates much of treatment setup and management and can automatically self-diagnose for potential machine issues. Tablo console can accommodate a wide range of treatment modalities, durations and flow rates, allowing for broad clinical applications. Tablo console requires only a standard electrical outlet and tap water to operate. This eliminates the need for industrial water treatment rooms, separate water purification machines and pre-filled bags of dialysate associated with traditional dialysis machines. We also offer TabloCart with Prefiltration drawer or storage drawer, an accessory for Tablo, that is configured based on the customer’s needs.

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Tablo Cartridge. A proprietary, disposable single use pre-strung cartridge that easily clicks into place, minimizing steps, touch points and connections, allowing for set up of treatment supplies in less than 12 minutes. Tablo cartridge was designed to simplify and streamline treatment setup to minimize the potential for user error. Tablo cartridge is intended to facilitate extracorporeal blood purification for patients. One cartridge is used per treatment, except in the case of extended therapy, where multiple cartridges can be used if needed. Tablo cartridge consists of a user-friendly pre-configured blood, saline, and infusion tubing. Tablo cartridge requires only two connections to operate as compared to other machines that require stringing, hanging, snapping and tapping multiple lines. In our home IDE trial, patients were able to set up Tablo cartridge and dialysate concentrates in less than 12 minutes, on average. With an average prime period of approximately eight minutes, an uninterrupted patient can initiate therapy in as little as around 20 minutes, representing a significant improvement over traditional machines, which can take approximately 45 minutes to set up.

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Tablo Data Ecosystem. As further described below in the section entitled “Tablo Data Ecosystem”, with Tablo, we are bringing data to dialysis. Tablo is built to live in a connected setting with cloud-based system monitoring, patient analytics and clinical recordkeeping.

Tablo Data Ecosystem

Tablo's two-way wireless data transmission and connectedness help reduce maintenance costs and enable ongoing system improvements. This is all made possible by our growing team of experienced software, data science, and machine learning engineers.

Tablo leverages cloud technology to make it possible for providers to monitor devices remotely, view treatment data, perform patient and population analytics, and automate clinical recordkeeping. Tablo’s wireless connectivity enables us to release training, new features, and enhancements over-the-air (OTA) without interventions by field service engineers (FSEs). This means that customers can train and upgrade their device on their own schedule. We use these OTA updates to add new features designed to extend Tablo’s clinical applicability and enhance device uptime. We believe these OTA updates help Tablo get smarter over time.

Tablo’s connectedness allows continuous streaming of over 500,000 device performance data points to the cloud for every treatment. We use this data in conjunction with our diagnostic and predictive algorithms to monitor device performance, identify and diagnose failures and, in some instances, predict and prevent potential future device failures or malfunctions. Equipped with this information, our FSEs can visit sites knowing they have the correct parts and consumables to address the issues reported, and sometimes even those that are yet to come. In effect, this contributes to a reduction in service hours and an increase in device uptime.

The above functionality is enabled through the following key platforms: TabloHub®, a customer-facing portal; MyTablo, a patient-facing portal; and TabloDash, an internal data analytics platform.

TabloHub

TabloHub is designed to be a one-stop shop for providers that allows customers to monitor treatments in real-time across their fleet, visualize historical treatment records and statistics, see system disinfection and service records, search documentation, read news about Tablo, and perform various training. It is accessible from any device equipped with a web browser, be it a smart phone, a tablet, or a computer.

Through the Tablo application programming interface (API), providers can integrate Tablo with their Electronic Medical Records (EMR) to receive Tablo treatment data and flowsheets automatically. This helps reduce manual record keeping, record-entry errors, and auditing risks. This additional point of connectedness is designed to deliver data in compliance with the federal Health Insurance Portability and Accountability Act (HIPAA) Security Rule, and does not require any special equipment from the providers: it connects to the cloud using any standard Ethernet or Wi-Fi internet connections. TabloHub strengthens care, simplifies meeting documentation requirements, and makes system management easy.

MyTablo

MyTablo is a version of TabloHub designed for patients who are dialyzing at home or performing self-care at a clinic. Using MyTablo, patients can access training and download their treatment reports.

TabloDash

TabloDash is a powerful data analytics platform used by Outset team members to analyze diagnostic data produced by connected devices across all fleets, data from our customer relationship management system, and various other sources. Tablo captures more than 500,000 machine performance data points during every treatment, which is then used to fuel data analytics and machine learning algorithms that drive our research and development pipeline.

Through TabloDash, data can be visualized, graphed, aggregated, and queried to answer complex business intelligence questions, and build performance monitoring dashboards. For example, our service team uses TabloDash to analyze field response times, categorize failures by types, diagnose specific device issues, and monitor customer fleet performance.

The real-time nature of TabloDash allows our FSEs to troubleshoot and adjust a device remotely during a call with a customer and avoid the need to send FSEs to a site unnecessarily. If it is necessary to dispatch an FSE, we can use TabloDash to help ensure they arrive with the correct parts to complete the repair and are able to address any preventive maintenance predicted by our algorithms, all during the same visit. TabloDash is the linchpin that helps us optimize the cost of service while increasing the quality of service by reducing unnecessary visits, time spent on-site, and device downtime.

With the above features and benefits in mind, we believe Tablo is well-positioned as a differentiated, all-in-one solution enabling transformational dialysis across the continuum of care, from hospital to home, in one of the largest, most expensive, least changed areas of healthcare.

Competition

There are a number of dialysis machine manufacturers in the United States, Europe and Asia. Notable competitors in the United States include Fresenius Medical Care AG & Co. KGaA (Fresenius), Vantive, formerly the Baxter kidney care segment, and B. Braun. Medical Inc. (B. Braun). In addition, Quanta Dialysis Technologies Ltd.’s (Quanta) dialysis system has received FDA 510(k)

clearance for use in acute and/or chronic and home settings. Of these competitors, Fresenius is the largest, and is vertically integrated, both manufacturing dialysis products and operating dialysis clinics along with providing inpatient dialysis services to hospitals and health systems. Additionally, companies with dialysis machine development programs include Medtronic plc (Medtronic). With the exception of Quanta, our competitors are significantly larger than us with greater financial, marketing, sales and personnel resources, greater brand recognition and longer operating histories. We believe our ability to compete effectively will be dependent on our ability to build the commercial infrastructure necessary to effectively demonstrate the value of Tablo, maintain and improve product quality and feature functionality, build the infrastructure to support the operating needs of the business and achieve cost reductions.

Acute Care

While historically customers in this market have focused on machine functionality and price, we believe they are increasingly focused on the total cost of patient care, which favors technology that can provide clinical versatility and improve operational efficiency. In the acute care setting, the dialysis machine manufacturers that we compete with include Fresenius, Vantive and B. Braun. We compete primarily on the basis that Tablo is designed to drive operational efficiency through ease of use and cost reduction by reducing infrastructure and supplies cost.

Further, hospital and post-acute customers in this market have generally outsourced their dialysis services to third party providers, for example, Fresenius, rather than offering on-site inpatient dialysis services on their own. We may also compete against these outsourced dialysis providers. In such instances, we believe our ability to compete effectively will depend on our ability to demonstrate Tablo’s economic, clinical and operational benefits relative to outsourcing dialysis services.

Home Care

We believe competition in the home setting is based on a system’s clinical performance, its cost efficiency, its ease of use and patient preference. In the home hemodialysis setting, competitors include Fresenius (through its acquisition of NxStage) and Quanta which received FDA 510(k) clearance for home use in 2024. We believe through Tablo’s unique advantages it is easier and faster for patients to learn, and simpler for patients to operate at home, which may position us well against existing or future competitors. We believe these factors will reduce patient or caregiver burn-out, thereby extending patient retention, increasing home hemodialysis growth and improving associated margin for providers. We do not consider peritoneal dialysis (PD) to be competitive to our products given the differences in treatment modality, that PD is clinically limited to patients with certain pre-existing conditions such as congestive heart failure and obesity and that PD is regarded as a “temporary” modality since approximately 80% of patients are on the therapy for less than three years.

Intellectual Property

Our success depends in part on our ability to protect our proprietary technology and intellectual property rights. We rely on a combination of federal, state, common law and international rights, as well as contractual restrictions, to protect our intellectual property.

We seek patent protection for certain of our key innovations, processes and other inventions. We pursue the registration of our trademarks, service marks and domain names in the United States and in certain other locations. We control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties. Our intellectual property includes specific algorithms for Tablo console, including those related to pressure sensors, blood leakage and pump control loops.

Patents

As of December 31, 2024, we had 23 issued U.S. patents, as well as 10 pending U.S. patent applications. We had an aggregate of 40 issued patents in Australia, Canada, China, France, Germany, Hong Kong, Japan, Spain, Sweden and the United Kingdom, as well as 36 pending patent applications in Australia, Brazil, Canada, China, the European Patent Office, Hong Kong, Japan, Saudi Arabia and United Arab Emirates. Some of our patents and other intellectual property cover aspects of Tablo that enable it to be used by anyone, including the patient, through the automation of functions formerly performed by dialysis center technicians using traditional dialysis systems. Our proprietary data ecosystem provides what we believe is a unique way of connecting providers and patients for real-time treatment monitoring, automated treatment documentation, and simplified compliance and record-keeping.

Our patents expire between October 2025 and April 2040. The term of individual patents depends upon the legal term for patents in the countries in which they are granted. In most countries, including the United States, the patent term is 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the United States Patent and Trademark Office (USPTO) in examining and granting a patent, or it may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date. We cannot be sure that our pending patent applications or future patent applications will result in issued patents or that any patents that have issued or might

issue in the future will protect our current or future products, provide us with any competitive advantage or will not be challenged, invalidated, or circumvented.

Various aspects of Tablo, including, without limitation, sensor technology, connectivity, automation, analytics and interface are covered by software, algorithms, processes, trade secret or other proprietary rights. We protect our trade secrets through a variety of measures, including confidentiality agreements and proprietary information agreements with suppliers, employees, consultants and others who may have access to our proprietary information. Trade secrets and proprietary information can be difficult to protect, however. While we have confidence in the measures we take to protect and preserve our trade secrets and proprietary information, such measures can be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets and proprietary information may otherwise become known or be independently discovered by competitors.

There is no active patent litigation involving any of our patents, and we have not received any notices claiming that our activities infringe a third party’s patent.

Manufacturing, Supply Chain and Logistics

We direct the manufacturing and supporting supply chain, distribution and logistics for Tablo console, Tablo cartridge and other consumables (electrolyte concentrates and plastic tubing that transports the concentrates into Tablo to enable on-demand dialysate production). We operate under a Quality Management System that has been certified to ISO 13485 Medical Device Quality Management System standard.

We manufacture our Tablo consoles and a majority of Tablo cartridges at our manufacturing facility in Tijuana, Mexico. We are operating in Mexico in collaboration with TACNA Services (TACNA), a well-known outsourced business administration service provider that provides all the back-office and facility infrastructure support, allowing us to focus on our core competencies – design and high-volume manufacturing for reliability and cost reduction. Tablo consoles manufactured in our Mexico facility are tested at the facility using an integrated system testing protocols designed by us, and then direct-shipped to our distribution centers, using a network of short-haul and long-haul freight forwarders optimized for time and cost efficiency.

Pursuant to the terms of our manufacturing services agreement with TACNA (the TACNA Agreement), TACNA provides support services in connection with our manufacturing activities in Mexico. Under the TACNA Agreement, TACNA hires employees as requested by us and is responsible for human resource functions including maintenance of employee files and reports. TACNA is also responsible for performing internal statutory accounting and payroll services, as well as payables processing. Additional services that TACNA is obligated to provide under the TACNA Agreement include interfacing with both Mexican and U.S. governmental agencies, preparing import-export documentation, coordinating shipment of equipment, raw materials and finished products, and obtaining necessary permits and licenses required in Mexico. Under the TACNA Agreement, TACNA’s services are generally performed under a pass-through cost model under which costs incurred are approved by us. We are also obligated to pay TACNA fees based on the number of employees under the TACNA Agreement. The TACNA Agreement has an initial three-year term and will continue thereafter until terminated by us or TACNA in accordance with the terms of the TACNA Agreement.

We also manufacture a portion of Tablo cartridges through Infus Medical Co. Ltd. (Infus), a contract manufacturer with two facilities in Thailand.

The number of suppliers required for Tablo console production is approximately 100 worldwide. We consider a discrete number of these suppliers, located in the United States, Mexico, Europe and Asia, as critical providers of components such as pumps, motors, valves and PCBA boards. The various components for Tablo cartridge are manufactured by 13 different single and dual-source suppliers located in various countries including the United States, Mexico, Europe and Asia.

Government Regulation

United States Food and Drug Administration

In the United States, our products are subject to regulation by the FDA as medical devices pursuant to the Federal Food Drug and Cosmetic Act (FDCA). The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.

FDA Premarket Clearance and Approval Requirements

Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, approval of a de novo application, or approval of a premarket approval (PMA). Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ensure its safety and

effectiveness. Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be assured by adherence to the FDA’s General Controls for medical devices, which include compliance with the applicable portions of the Quality System Regulation (QSR), facility registration and product listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional materials. Class II devices are subject to the FDA’s General Controls, and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, post-market surveillance, patient registries and FDA guidance documents.

While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device. The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as life sustaining, life supporting or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA. Some pre-amendment devices are unclassified, but are subject to FDA’s premarket notification and clearance process in order to be commercially distributed. Tablo is a Class II device subject to 510(k) clearance.

510(k) Clearance Marketing Pathway

To obtain 510(k) clearance, we must submit to the FDA a premarket notification submission demonstrating that the proposed device is “substantially equivalent” to a predicate device already on the market. A predicate device is a legally marketed device that is not subject to PMA, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process. The FDA’s 510(k) clearance process usually takes from three to twelve months, but often takes longer. The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence. In addition, the FDA collects user fees for certain medical device submissions and annual fees for medical device establishments.

If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device. If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the device is automatically designated as a Class III device. The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the “de novo” process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device. If a de novo request is granted, the device may be legally marketed and a new classification is established. If the device is classified as Class II, the device may serve as a predicate for future 510(k) submissions. If the device is not approved through de novo review, then it must go through the standard PMA process for Class III devices.

After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on the modification, PMA approval. The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k) or a PMA in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) marketing clearance or PMA approval is obtained. Also, in these circumstances, the manufacturer may be subject to significant regulatory fines or penalties.

PMA Approval Pathway

Class III devices require approval of a PMA before they can be marketed, although some pre-amendment Class III devices for which the FDA has not yet required a PMA are cleared through the 510(k) process. The PMA process is more demanding than the 510(k) premarket notification process. In a PMA application, the manufacturer must demonstrate that the device is safe and effective, and the PMA application must be supported by extensive data, including data from preclinical studies and human clinical trials. The PMA application must also contain a full description of the device and its components, a full description of the methods, facilities, and controls used for manufacturing, and proposed labeling. Following receipt of a PMA application, the FDA determines whether the application is sufficiently complete to permit a substantive review. If the FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA application, although in practice, the FDA’s review often takes significantly longer, and can take up to several years. An advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a pre-approval inspection of the applicant or its third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR. PMA devices are also subject to the payment of user fees.

The FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA application constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s). A PMA may include post-approval conditions intended to ensure the safety and effectiveness of the device, including,

among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical study that supported the PMA or requirements to conduct additional clinical studies post-approval. The FDA may condition PMA approval on some form of post-market surveillance when deemed necessary to protect the public health or to provide additional safety and efficacy data for the device in a larger population or for a longer period of use. In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those patients. Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval.

Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, which affect the safety or effectiveness of the device, require submission of a PMA supplement. PMA supplements often require submission of the same type of information as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and may not require as extensive clinical data or the convening of an advisory panel. Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness. None of our products are currently marketed pursuant to a PMA.

De novo Classification

Medical device types that the FDA has not previously classified as Class I, II or III are automatically classified into Class III regardless of the level of risk they pose. To market low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, a manufacturer may request a de novo down-classification. This procedure allows a manufacturer whose novel device is automatically classified into Class III to request classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application. A medical device may be eligible for de novo classification if the manufacturer first submitted a 510(k) premarket notification and received a determination from the FDA that the device was not substantially equivalent, or a manufacturer may request de novo classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a not substantially equivalent determination. The FDA is required to classify the device within 120 calendar days following receipt of the de novo application, although in practice, the FDA’s review may take significantly longer. During the pendency of the FDA’s review, the FDA may issue an additional information letter, which places the de novo request on hold and stops the review clock pending receipt of the additional information requested. In the event the de novo requestor does not provide the requested information within 180 calendar days, the FDA will consider the de novo request to be withdrawn. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. In addition, the FDA may reject the de novo request for classification if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk or that general controls would be inadequate to control the risks and special controls cannot be developed. In the event the FDA determines the data and information submitted demonstrate that general controls or general and special controls are adequate to provide reasonable assurance of safety and effectiveness, the FDA will grant the de novo request for classification. When the FDA grants a de novo request for classification, the device is granted marketing authorization and further can serve as a predicate for future devices of that type, through a 510(k) premarket notification.

Breakthrough Device Program

The FDA has implemented a Breakthrough Device Program that is intended to help patients receive more timely access to breakthrough medical technologies that have the potential to provide more effective treatment or diagnosis for life-threatening or irreversibly debilitating diseases or conditions. A device also must meet one of the following criteria: (i) it represents breakthrough technology; (ii) there is no approved or cleared alternative; (iii) it offers significant advantages over existing cleared or approved devices; or (iv) availability of the device is in the best interest of patients. Under the program, a manufacturer is eligible to receive priority review and interactive communications from the FDA regarding device development and clinical trial protocols, all the way through to commercialization decisions.

Clinical Trials

Clinical trials are almost always required to support a PMA and are sometimes required to support a 510(k) submission. All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s IDE regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a “significant risk,” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials. A significant risk device is one that presents a potential for serious

risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject. An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical trial to proceed under a conditional approval.

In addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board (IRB) for each clinical site. The IRB is responsible for the initial and continuing review of the IDE study, and may pose additional requirements for the conduct of the study. If an IDE application is approved by the FDA and one or more IRBs, human clinical trials may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA. If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements. Acceptance of an IDE application for review does not guarantee that the FDA will allow the IDE to become effective and, if it does become effective, the FDA may or may not determine that the data derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials. An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.

During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them. The clinical investigators in the clinical study are also subject to FDA regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements. Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.

Post-market Regulation

After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:

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establishment registration and device listing with the FDA;

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QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process;

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labeling regulations and FDA prohibitions against the promotion of investigational products, or the promotion of ‘‘off-label’’ uses of cleared or approved products;

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requirements related to promotional activities;

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clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of certain modifications to PMA-approved devices;

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medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;

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correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health;

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the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and

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post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.

Quality Systems Regulation Requirements

Our manufacturing processes are required to comply with the applicable portions of the QSR, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use. The QSR requires that each manufacturer establish a quality systems program by which the manufacturer monitors the manufacturing process and maintains records that show compliance with FDA regulations and the manufacturer’s written specifications and procedures relating to the devices. The QSR also requires, among other things, maintenance of records and certain documentation, a device master file, device history file, and complaint files. QSR compliance is necessary to receive and maintain FDA clearance or approval to market new and existing products. As a manufacturer, we are subject to periodic scheduled or unscheduled audits or inspections by the FDA. Our failure to maintain compliance with the QSR requirements could result in the shut-down of, or restrictions on, our manufacturing operations and the recall or seizure of our products, which would have a material adverse effect on our business. The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.

The FDA has broad regulatory compliance and enforcement powers. If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:

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FDA untitled letters, FDA Form 483s, FDA warning letters, it has come to our attention letters, fines, injunctions, consent decrees and civil penalties;

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unanticipated expenditures to address or defend such actions;•customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;

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recall, detention or seizure of our products;•operating restrictions, partial suspension or total shutdown of production;•refusing or delaying our requests for regulatory approvals or clearances of new products or modified products;

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withdrawing of 510(k) clearances or PMA approvals that have already been granted;

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refusal to grant export approval for our products; or

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criminal prosecution.

The FDA can also publish Safety Communications or Letters to Health Care Providers when the agency becomes aware of new issues involving a specific product or, or more broadly, a product family. These communications are posted on the FDA’s website and describe the FDA’s analysis of a current issue and provide specific regulatory approaches and clinical recommendations for patient management.

Current FDA Regulatory Status

We currently have regulatory clearances required to market Tablo in the U.S. for use in patients with acute and/or chronic renal failure, with or without ultrafiltration, in an acute or chronic care facility. Tablo is also indicated for use in the home and observed by a trained individual. Treatments must be administered under a physician’s prescription and observed by a trained individual who is considered competent in the use of the device. The FDA’s authorizations for the Tablo System, Tablo Cartridge and TabloCart with Prefiltration have thus far been granted as 510(k) clearances.

Since Tablo’s original clearance by the FDA for home use in March 2020, we have made certain changes to the device over time and, where appropriate, have submitted 510(k) applications for certain modifications to Tablo. In May 2021, we submitted a 510(k) application to the FDA covering the design changes for patient use in the home. In May 2022, after further discussions with the FDA and receiving indications that the clearance of this 510(k) application would be delayed beyond our original expectations, we implemented a shipment hold on the distribution and marketing of Tablo for use in the home environment pending the FDA’s review and clearance of this 510(k) application. In late July 2022, the FDA cleared this 510(k) application of Tablo for patient use in the home and we resumed marketing and shipping Tablo for home use.

We continue to seek opportunities for product improvements and feature enhancements, which will, from time to time, require FDA clearance or approval before commercial launch. For example, in October 2022, we submitted a 510(k) notification to the FDA seeking clearance of a new software version intended to offer new commercial features and enhancements designed to improve the reliability and serviceability of Tablo, as well as other previously implemented modifications. In June 2023, the FDA cleared this 510(k) application.

In May 2022, the FDA published a Letter to Healthcare Providers stating that it is evaluating the potential risk of exposure to non-dioxin-like (NDL) polychlorinated biphenyl acids (PCBAs) and NDL polychlorinated biphenyls (PCBs) with certain

hemodialysis machines marketed in the United States from the silicone tubing used in those machines. Although Tablo was not the subject of the FDA’s letter, the FDA reached out to us regarding the tubing then used in Tablo and, at the FDA's request, we conducted a targeted analysis and a screening analysis on the tubing. In parallel, we filed a 510(k) application, and received subsequent 510(k) clearance from the FDA for, PCB-free silicone tubing in December 2023. In March 2024, we proactively initiated a field action to replace the remaining few silicone segments in new and existing Tablo consoles with the new, PCB-free, silicone tubing, which was subsequently designated by the FDA as a Class 1 recall, similar to the classification they have made with respect to other manufacturers whose medical devices contain NDL PCBAs and NDL PCBs. We continued with the field correction as planned, and impacted installed and active devices in the field have now been upgraded.

The FDA conducted their first quality system inspection of our San Jose, California facility which concluded in February 2023. At completion, the FDA issued a Form FDA-483 identifying four inspectional observations. We provided our response plan to the FDA in March 2023, completed the associated remediation workstreams, and submitted our final update to the FDA regarding actions taken to address these observations. The FDA conducted a follow-up inspection of our San Jose, California facility, which concluded in September 2024. At completion, the FDA did not issue a Form-483. The FDA Establishment Inspection Reports for the 2023 and 2024 inspections were received in February 2025. The FDA concluded that no further regulatory action is necessary and the two inspections are “closed” under 21 CFR 20.64(d)(3). Although we believe we are in material compliance with the QSR, there is no guarantee that subsequent inspections of our facility by the FDA or other regulatory authorities will not result in similar observations with respect to our quality system, which could adversely affect our business.

In July 2023, we received a warning letter (the Warning Letter) from the FDA that raised two observations. The first observation asserted that certain content reviewed by the FDA and found on our website promotes Continuous Renal Replacement Therapy (CRRT), a modality outside of the current indications for Tablo. The second observation asserted that TabloCart with Prefiltration required prior 510(k) clearance for marketing authorization. TabloCart with Prefiltration is an accessory to Tablo launched in the third quarter of 2022. We took action to address the first observation regarding CRRT promotion through revision of processes and procedures and updates to existing labeling and promotional materials. We also took action to address the second observation regarding TabloCart with Prefiltration. Although we evaluated TabloCart with Prefiltration prior to marketing and distributing the product and concluded that no marketing authorization was necessary, we paused distribution of TabloCart with Prefiltration pending the FDA’s review and clearance of a 510(k) application for TabloCart with Prefiltration, which we submitted in September 2023. In early May 2024, we received 510(k) clearance from the FDA for TabloCart with Prefiltration, and we have resumed distribution of TabloCart with Prefiltration. In February 2025, we were notified by the FDA that the issues cited in the Warning Letter have been addressed.

Healthcare Fraud and Abuse Laws

Certain U.S. federal healthcare fraud and abuse laws apply to our business because our customers submit claims for payment for our products and services to federal healthcare programs (as that term is defined at 42 U.S.C. § 1320a–7b(f)), such as Medicare and Medicaid. The principal federal fraud and abuse laws that apply in these circumstances are discussed below.

The U.S. federal Anti-Kickback Statute is a broad criminal statute that prohibits, among other things, the knowing and willful offer, solicitation, receipt, or payment of any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, for the purpose of inducing or rewarding the order, purchase, use or recommendation of items or services that may be paid for, in whole or in part, by a federal healthcare program, such as Medicare or Medicaid. This includes products, like Tablo, that are purchased and used in a service that is paid for by such programs. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Further, the term “remuneration” has been broadly interpreted to include anything of value. The Patient Protection and Affordable Care Act and the Health Care Reconciliation Act of 2010, as amended (collectively, the ACA), specified that any claims submitted as a result of a violation of the federal Anti-Kickback Statute constitute false claims and are subject to enforcement under the federal False Claims Act, which is discussed in more detail below. Government officials continue to focus their enforcement efforts on the sales and marketing activities of medical device manufacturers and other healthcare companies, and routinely bring cases under the federal Anti-Kickback Statute and False Claims Act against individuals or entities who allegedly offer unlawful inducements to potential or existing customers in an attempt to procure their business. Judgments and settlements of these cases by healthcare companies have involved significant fines and, in some instances, criminal pleas and convictions, as well as exclusion from participation in federal healthcare programs. A violation of the federal Anti-Kickback Statue includes per violation civil monetary penalties and significant criminal fines under the statute, additional civil penalties and treble damages under the False Claims Act, as discussed in more detail below, possible imprisonment, and mandatory exclusion from participation in the federal healthcare programs, meaning that federal healthcare programs would no longer reimburse (directly or indirectly) for products or services furnished by the excluded entity or individuals.

Given the breadth of the federal Anti-Kickback Statute, in order to protect certain common business arrangements and activities that may otherwise implicate the law, there are statutory exceptions and regulatory safe harbors that protect certain arrangements from liability under the law when all elements of an applicable exception or safe harbor are met. However, these exceptions and safe harbors are narrowly drawn, and there are no exceptions or safe harbors for many other common business

activities, like the provision of meals, educational grants or reimbursement support programs, among others. Given that the federal Anti-Kickback Statute is an intent-based law, the failure of a transaction or arrangement to fit precisely within an exception or safe harbor does not necessarily mean that it is illegal or that prosecution will be pursued. Rather, the determination of a violation then turns on the specific facts and circumstances, and arrangements that fall outside an available exception or safe harbor are typically subject to greater scrutiny.

The federal civil False Claims Act (FCA) imposes civil penalties against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment of government funds that are false or fraudulent, or knowingly making, using, or causing to be made or used a false record or statement material to an obligation to pay money to the government, or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. This statute also permits a private individual acting as a “qui tam whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties for each false claim submitted or statement made, which currently set at $13,946 up to $27,894 per false claim or statement for penalties assessed after January 15, 2024 and which we expect will increase incrementally in early 2025 due to inflationary adjustments. Government enforcement agencies and private whistleblowers have investigated medical device manufacturers for, or asserted liability under, the FCA for a variety of alleged inappropriate promotional and marketing activities, including those involving the provision of free product or other items of value to customers, certain financial arrangements with healthcare providers, the provision of billing, coding, and reimbursement advice, and purported “off-label” promotion of products, among other things.

Another key federal healthcare law is the federal healthcare fraud statute, which was added by HIPAA. The federal healthcare fraud statute imposes liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for healthcare benefits, items or services by a healthcare benefit program, which includes both government and privately funded benefits programs. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate them in order to have committed a violation.

The Physician Payments Sunshine Act (Sunshine Act) requires us to track and report annually certain data on payments and other transfers of value we make to U.S. teaching hospitals and U.S.-licensed physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants, and certified nurse-midwives. Manufacturers are also required to report ownership and investment interests held by the physicians described above and their immediate family members. The data are sent to the Center for Medicare and Medicaid Services (CMS) for public disclosure on the Open Payments website. Failure to timely and accurately report information in accordance with the Sunshine Act may result in significant financial penalties.

In addition to these federal laws, there are often state laws and regulations, including state anti-kickback and false claims laws, that may apply to our business practices, including but not limited to: research; sales and marketing arrangements; claims involving healthcare items or services reimbursed by any third- party payor, including private insurers; state laws that require medical device companies to comply with the medical device industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws and regulations that require drug and device manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities. In some states, applicable state anti-kickback laws apply with respect to all payors, including commercial health insurance companies.

Through our compliance efforts, we strive to design our business operations and relationships with our customers to comply with all applicable law. However, many of the laws and regulations applicable to us are broad in scope and may be interpreted or applied by prosecutorial, regulatory or judicial authorities or whistleblowers in ways that we cannot predict. Thus, it is possible that governmental entities or other parties could interpret these laws differently or assert non-compliance with respect to one or more of our business operations and relationships. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, damages, fines, imprisonment, and/or exclusion from government-funded healthcare programs, such as Medicare and Medicaid. In addition, we may become subject to additional oversight and reporting requirements under a corporate integrity agreement as part of a settlement to resolve allegations of non-compliance with these laws (even if we do not admit violations). We may also need to curtail or restructure our operations as a result of being found to violate these laws, having such violations asserted against us, or based on enforcement actions instituted with respect to comparable practices by others. Any of these outcomes could have an adverse effect on our financial condition and ability to conduct our operations.

Privacy and Security

In the course of performing our business we obtain personally identifiable information (PII), including health-related information. Numerous federal and state laws and regulations, including the Healthcare Insurance Portability and Accountability Act

(HIPAA), govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information or personal information. Such laws and regulations relating to privacy, data protection, and consumer protection are evolving and subject to potentially differing interpretations. These requirements may be interpreted and applied in a manner that varies from one jurisdiction to another and/or may conflict with other laws or regulations.

HIPAA establishes a set of national privacy and security standards for the protection of individually identifiable health information, including protected health information (PHI) for certain covered entities, including healthcare providers that submit certain covered transactions electronically, as well as their ‘‘business associates,’’ which are persons or entities that perform a function or provide certain services for, or on behalf of, a covered entity that involve creating, receiving, maintaining or transmitting PHI. HIPAA also imposes breach reporting obligations on such covered entities and their respective business associates. Penalties for failure to comply with a requirement of HIPAA vary significantly depending on the failure and could include civil monetary or criminal penalties. HIPAA also authorizes state attorneys general to file suit under HIPAA on behalf of state residents. Courts can award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for HIPAA violations, its standards have been used as the basis for a duty of care claim in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI. The Department of Health and Human Services Office for Civil Rights (OCR) has adopted privacy regulations to govern the use and disclosure of PHI (the Privacy Rule). HHS has also adopted data security regulations that require covered entities and business associates to implement administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of PHI that is electronically created, received, maintained or transmitted (such as between us and our affiliated practices) (the Security Rule). OCR has recently increased its enforcement of compliance with HIPAA, including the Security Rule, bringing actions against entities which have failed to implement security measures sufficient to reduce risks to electronic PHI or to conduct an accurate and thorough risk analysis, among other violations. HIPAA enforcement actions may lead to monetary penalties and costly and burdensome corrective action plans. We are also required to report known breaches of PHI consistent with applicable breach reporting requirements set forth in applicable laws and regulations. Finally, on December 10, 2020, OCR issued proposed revisions to the Privacy Rule aimed at reducing regulatory burdens that may exist in discouraging coordination of care, including creating an exception to the minimum necessary standard for healthcare coordination, and other proposals to increase patient access to their health information, among other changes. On April 22, 2024, OCR issued a Final Rule, HIPAA Privacy Rule to Support Reproductive Health Care Privacy, which is intended to strengthen the Privacy Rule by prohibiting the disclosure of PHI related to lawful reproductive health care in certain circumstances. These changes require us to update our HIPAA policies and procedures to comply with the new requirements.

Additionally, on December 1, 2022, OCR issued a bulletin on the requirements under HIPAA for online tracking technologies (e.g., cookies, pixels) to protect the privacy and security of health information. This bulletin outlined OCR’s position on the use of online tracking technology vendors, when certain information received by such vendors constitutes PHI under HIPAA. While subsequent judicial developments vacated the guidance, we may incur additional expense to comply with this bulletin and future guidance from the OCR, and agency’s heightened focus on website tracking technologies could pose enforcement risk in the future.

In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection and consumer protection. For instance, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (CCPA) gives California residents rights to access, correct and delete their personal information, to opt out of the sale or sharing of certain personal information, to limit uses of certain sensitive data under certain circumstances, and to receive detailed information about how their personal information is used by requiring covered companies to provide disclosures to California consumers (as that term is broadly defined). The 2020 amendments also created a California data protection agency authorized to issue substantive regulations and has resulted in increased privacy and information security enforcement. The CCPA regulations also impose proscriptive requirements on businesses regarding how to properly demonstrate compliance with the law’s requirements. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Rulemaking by the California Privacy Protection Agency (CPPA) has begun – the CPPA has administrative enforcement authority over CCPA and oversees CCPA rulemaking. Although there are limited exemptions for PHI and the CCPA’s implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, the CCPA may increase our compliance costs and potential liability. Additional compliance investment and potential business process changes may be required. Laws similar to the California laws have passed or have been proposed in several other states and also have been proposed at the federal level. To the extent these laws apply to our operations, they may ultimately have conflicting requirements that would further complicate compliance. Further, new health information standards, whether implemented pursuant to HIPAA, congressional action or otherwise, could have a significant effect on the manner in which we handle health-related information, and the cost of complying with these standards could be significant. If we do not comply with existing or new laws and regulations related to patient health information, we could be subject to criminal or civil sanctions.

Additionally, the Federal Trade Commission (FTC) and many state attorneys general are interpreting existing federal and state consumer protection laws to impose evolving standards for the online collection, use, dissemination and security of health-related and other personal information. Courts may also adopt the standards for fair information practices promulgated by the FTC, which

concern consumer notice, choice, security and access. Consumer protection laws require us to publish statements that describe how we handle personal information and choices individuals may have about the way we handle their personal information. At the state level, for example, the Washington State My Health My Data Act, which went into effect in 2024, contains requirements such as the provision of specific health-data consumer disclosures and consumer rights (including the right to consent to the processing of their health data) in addition to other compliance and security requirements. The My Health My Data Act considers violations of this law to be an unfair or deceptive act in trade or commerce and an unfair method of competition subject to the Washington Consumer Protection Act. To the extent this or other similar laws apply to us, and the information that we publish is considered untrue or our practices are deemed not to comply with these requirements, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences. Furthermore, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair or deceptive acts or practices in violation of Section 5 of the FTC Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards. The FTC has also been active with respect to enforcement of its Health Breach Notification Rule and in scrutinizing the use and disclosure of sensitive personal information. The FTC also finalized changes to the Health Breach Notification Rule in April 2024. The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA Security Rule. Enforcement by the FTC under the FTC Act can result in civil penalties or enforcement actions.

We may also be subject to laws and regulations in foreign countries covering data privacy and other protection of health and employee information that may be more onerous than corresponding U.S. laws. These regulations may require that we obtain individual consent before we collect or process personal data, restrict our use or transfer of personal data, impose technical and organizational measures to ensure the security of personal data, add obligations to our data analytics services, and require that we notify regulatory agencies, individuals or the public about any data security breaches. If we expand our international operations, we may be required to expend significant time and resources to put in place additional mechanisms to ensure compliance with multiple robust and evolving data privacy laws as they become applicable to our business.

Failure to comply with applicable data protection laws and regulations could result in government enforcement actions (which could include civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business. Compliance with these laws is difficult, constantly evolving, time consuming, and requires a flexible privacy framework and substantial resources. Compliance efforts will likely be an increasing and substantial cost in the future.

For information related to our cybersecurity risk management, strategy and governance, see the section entitled “Cybersecurity” under Part I, Item 1C below.

Reimbursement in the Clinic and Home Settings

We sell our Tablo to dialysis clinics. These clinics, in turn, provide equipment and services to the patient and are reimbursed by Medicare, Medicaid, and other third-party payors, such as private insurance.

Medicare

In the clinic and home setting, the largest payor of dialysis services is Medicare, and Medicare requires all dialysis patients to be under the care of a dialysis clinic provider, whether they are in the clinic or in the home.

Most patients who require regular dialysis, that is, those with ESRD, have coverage through Medicare Part B, which, effective January 1, 2011, pays dialysis clinics through a prospective, bundled payment system. Reimbursement is generally provided on a per treatment basis, and it is the same whether the patient is treated in the clinic or in the home setting. We believe that the current per treatment reimbursement amount received by our customers under Medicare Part B adequately covers the amortization of the cost of capital equipment, and specifically our Tablo console, as well as the per treatment supplies and disposables cost for Tablo, whether it is in the home or the in-clinic setting. Dialysis clinics’ continuing use of Tablo, however, will depend on whether the cost of treatments involving Tablo (including the amortized cost of Tablo console and other capital equipment) will continue to be adequately covered by the reimbursement that the dialysis clinics receive from Medicare and any other third-party payors.

Under the ESRD Prospective Payment System (PPS), CMS generally makes a single bundled payment to the dialysis facility for each dialysis treatment that covers all renal dialysis services, which is broadly defined and includes home dialysis and most related drugs. On November 12, 2024, CMS published the final rule for Calendar Year (CY) 2025, which increased the base reimbursement rate per dialysis treatment to $273.82, an increase of $2.80 over the CY 2024 base rate of $271.02. CMS may adjust the base rate to account for factors that increase the cost of providing dialysis to a certain patient, for example, based on patient factors such as age, body surface area, low body mass index, and certain comorbidities, and based on facility factors like volume and geographic location. With a vast majority of U.S. ESRD patients covered by Medicare, the Medicare reimbursement rate is an important factor in a

healthcare provider’s decision to use Tablo and limits the fees for which we can sell or rent Tablo. As part of the CY 2025 final rule, CMS also extended Medicare coverage to allow payment for renal dialysis services furnished to acute kidney failure (AKI) patients in their homes beginning on January 1, 2025 at a payment rate of $273.82, in line with the updated ESRD PPS base rate. Additionally, the final rule will allow ESRD facilities to bill Medicare for the home and self-dialysis training add-on payment adjustment for beneficiaries with AKI in CY 2025 and updated the ESRD Facility Conditions for Coverage to clarify that home dialysis is available to all AKI and ESRD renal dialysis beneficiaries.

Current CMS rules limit the number of hemodialysis treatments paid for by Medicare Part B to three times a week, unless there is medical justification provided by the dialysis facility based on information from the patient’s physician for additional treatments. Using currently available technology, most patients who receive home dialysis have been prescribed to receive more than three treatments per week. Tablo can allow providers to prescribe as few as three home dialysis treatments per week. However, to the extent that providers continue to prescribe more than three home dialysis treatments per week and Medicare contractors determine they will not pay for such additional treatments, use of Tablo could be adversely impacted. As there is not a uniform national standard for what constitutes medical justification, a clinic’s decision as to how much it is willing to spend on home dialysis equipment and services will be at least partly dependent on the number of weekly treatments prescribed for home dialysis with Tablo and, if greater than three, the level of confidence the center has in the predictability of receiving reimbursement from Medicare for additional treatments per week based on submitted claims for medical justification.

Since January 1, 2021, there has been a significant increase in dialysis patients enrolled in a Medicare Advantage plan as a result of the 21st Century Cures Act, which amended the Social Security Act to allow ESRD patients covered under Medicare to enroll in Medicare Advantage plans for the first time. While Medicare Advantage plans must provide at least the same level of coverage for Medicare beneficiaries as traditional Medicare, reimbursement to dialysis facilities is most often higher than traditional Medicare with a wide range of variability in payment rates to providers. Reimbursement rates depend on each Medicare Advantage plan’s contracts and network agreements with each dialysis facility. The CY 2021 Medicare ESRD PPS final rule, among other things, encouraged the development of new and innovative home dialysis machines to give Medicare beneficiaries more dialysis treatment options in the home and improve their quality of life. Specifically, the CY 2021 final rule included capital equipment in transitional add-on payment adjustments for new and innovative equipment and supplies (TPNIES). For home dialysis equipment CMS provided a pathway for capital related assets (CRA) to secure TPNIES. We applied for and received CRA TPNIES in connection with the use of Tablo by one patient per one machine in the home, pursuant to which Medicare paid 65% of the Medicare Administrative Contractor-determined pre-adjusted per treatment amount for two calendar years beginning in CY 2022. However, this two-year eligibility period ended on December 31, 2023, meaning Tablo is no longer eligible for, and providers have not received, TPNIES since January 1, 2024.

Medicaid

Many ESRD patients also have Medicaid coverage that is supplemental to Medicare coverage, as it helps cover Medicare Part B coinsurance and items and services not covered by Medicare Part B. Some ESRD patients, however, may have Medicaid as their primary coverage. Because Medicaid is a state-administered program, Medicaid reimbursement for dialysis services varies by state.

Private Insurance

Finally, some patients may have coverage through private insurance, for example through a marketplace plan set up under the ACA or through an employer or union group health plan. Private insurance reimbursement is generally higher than government reimbursement, but private insurance coverage and reimbursement varies by sponsor and plan.

Reimbursement in the Critical Care Setting

For Medicare patients, both AKI and fluid overload therapies provided in an in-patient hospital setting are reimbursed under Medicare Part A through the Hospital Inpatient Prospective Payment System using the Medicare Severity Diagnosis Related Group System (MS-DRG). Under this system, reimbursement is determined based on a patient’s diagnoses, demographics, and procedures furnished during the stay, and is intended to cover all of the hospital’s costs of treating the patient. Longer hospitalization stays and higher labor needs, which are typical for patients with acute kidney failure and fluid overload, must be managed in order for care of these patients to be cost-effective. Similar to dialysis clinics that are reimbursed by Medicare Part B under the ESRD bundled payment methodology, we believe that there is a significant incentive for hospitals to find the most cost-efficient way to treat these patients in order to improve hospital economics for these therapies.

In the in-patient setting under Medicare, dialysis and ultrafiltration (UF) are not directly reimbursed, but rather are paid for out of the amount paid to inpatient hospitals in connection with the patient's applicable MS-DRG for his/her admission. In most cases, AKI or fluid overload requiring dialysis or ultrafiltration will increase the severity of the underlying diagnosis, and therefore could result in higher reimbursement than those cases without dialysis. Given that dialysis is a “fixed cost” for providers within the MS-DRG, we believe that there is significant motivation for providers to attempt to reduce costs associated with dialysis in order to improve overall service line profitability.

United States Health Reform

Changes in healthcare policy could increase our costs and subject us to additional legislative and regulatory requirements that may interrupt commercialization of our current and future products, decrease our revenue and adversely impact sales of, and pricing of and reimbursement for, our current and future products. The United States and some foreign jurisdictions are considering or have enacted a number of other legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit coverage of or lower reimbursement for the procedures associated with the use of our products. The cost containment measures that payors and providers are instituting and the effect of any healthcare reform initiative implemented in the future could impact our revenue from the sale of our products.

The implementation of the ACA in the United States, for example, has changed healthcare financing and delivery by both governmental and private insurers substantially, and affected medical device manufacturers significantly. The ACA, among other things, implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models. Additionally, the ACA encouraged states to expand eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

There have been judicial and Congressional challenges to various elements of the ACA, as well as efforts to modify certain aspects of the ACA. For example, Congress eliminated, starting January 1, 2019, the tax penalty for not complying with the ACA’s individual mandate to carry health insurance. The Further Consolidated Appropriations Act of 2020, Pub. L. No. 116-94, signed into law December 20, 2019, fully repealed the ACA’s “Cadillac Tax” on certain high-cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share (repeal effective in 2021), and the medical device excise tax on non-exempt medical devices. The American Rescue Plan of 2021, Pub. L. No. 117-2, enacted on March 11, 2021, temporarily increased premium tax credit assistance for those eligible for subsidies for 2021 and 2022 and removed the 400% federal poverty level limit that otherwise applies for purposes of eligibility to receive premium tax credits. Recently, the Inflation Reduction Act of 2022 extended this increased tax credit assistance and removal of the 400% federal poverty limit through 2025. It is unclear if efforts to challenge, or modify, or alter the implementation or interpretation of the ACA will affect our business, financial condition and results of operations.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, the Budget Control Act of 2011, among other things, resulted in reductions in payments to Medicare providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect into 2032 unless additional Congressional action is taken, with the exception of a temporary suspension of the 2% cut in Medicare payments from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. The law provided for 1% Medicare sequestration in the second quarter of 2022, with the full 2% sequestration going into effect thereafter through the first eight months of the FY 2032 sequestration order, unless additional Congressional action is taken. As long as these cuts remain in effect, they could adversely impact payment for any products we may commercialize in the future. Additionally, the American Taxpayer Relief Act of 2012, among other things, reduced CMS payments to several types of providers, including hospitals, and extended the statute of limitations period for the government to recover Medicare overpayments to providers from three to five years.

Moreover, other legislative and executive actions have encouraged the development of new payment and care models for ESRD patients. For example, an executive order signed in July 2019 directed the Secretary of HHS to develop, among other things, Medicare payment models designed to identify and treat at-risk populations earlier in disease development, and in connection with the executive order, HHS announced a goal of having 80% of new ESRD patients in 2025 either receive dialysis at home or receive a transplant. CMS subsequently published a final rule on September 29, 2020, among other things, to implement the End-Stage Renal Disease Treatment Choices (ETC) Model. The ETC Model is a mandatory payment model that adjusts certain Medicare payments to select ESRD facilities, nephrologists, and other clinicians managing beneficiaries with ESRD starting January 1, 2021 and continuing through June 30, 2027. Specifically, the ETC Model adjusts certain ESRD facilities’ treatment base rates under the ESRD Prospective Payment System and manages clinicians’ monthly Medicare capitation payments to incentivize greater use of home dialysis and kidney transplants. CMS continues to propose modifications to the ETC Model as it evaluates the model against the agency’s stated goals for the program and last released a formal Evaluation Report that included results from Measurement Years 1 through 3 (MY3) on February 8, 2024.

Additionally, on January 1, 2022, CMS implemented the Kidney Care Choices Model, a voluntary Medicare payment model with four distinct payment options designed to help providers reduce costs and improve quality of care for patients with late-stage chronic kidney disease and ESRD, to delay the need for dialysis, and to encourage kidney transplantation. More recently, on November 26, 2024, CMS issued a final rule announcing a six-year mandatory alternative payment model, the Increasing Organ Transplant Access Model (IOTA Model). The IOTA Model, which will begin on July 1, 2025 and end on June 30, 2031, will test

whether performance-based incentives (including both upside and downside risk payments) for participating kidney transplant hospitals will incentivize increased numbers of kidney transplants for patients with ESRD. Specifically, in performance year 1, participating transplant hospitals will only have the potential for a positive payment adjustment, but in performance year 2, the participating hospitals will have the potential for both positive and negative payment adjustments. The final rule also established standard provisions, applicable to the ETC and IOTA Models, that address beneficiary protections, cooperation in model evaluation and monitoring, audits and record retention, rights in data and intellectual property, monitoring and compliance, remedial action, model termination by CMS, limitations on review, provisions on bankruptcy and other notifications, and the reconsideration review process. Changes to the models of patient care, including an increased focus on treatments earlier in disease progression, may adversely affect our customers’ businesses and potentially decrease the demand for our product or result in additional pricing pressures. Further, with home dialysis as a growing trend in the industry, a failure to implement our expansion into home dialysis could have a material adverse impact on our business.

We believe that there will continue to be proposals and other actions by legislators and other policymakers at both the federal and state levels, and by regulators and third-party payors to reduce costs and/or expand individual healthcare coverage. Changes to federal and state legislatures and executive offices have resulted in and will likely continue to result in further healthcare policy changes. For example, on July 9, 2021, former President Biden issued an executive order to promote competition in the American economy, including in the healthcare sector. Among the provisions in the executive order was a directive to HHS to standardize plan options in the national health insurance marketplaces (i.e., the Exchanges) to facilitate improved comparison shopping for insurance plans. Additionally, on June 21, 2022, in the case of Marietta v. DaVita, the Supreme Court of the United States addressed the question of whether a group health plan that provides limited benefits for outpatient dialysis – but does so uniformly for all plan participants – violates the Medicare Secondary Payer Act (MSPA), a law which makes Medicare a “secondary” payer to an individual’s existing insurance plan for certain medical services, including dialysis, when that plan already covers the same services. Specifically, the Supreme Court held that because the Plan’s terms apply uniformly to all covered individuals, the Plan does not “differentiate in the benefits it provides” to individuals with ESRD or “take into account” whether an individual is entitled to or eligible for Medicare, and thus does not violate the MSPA.

Results of the 2024 Presidential and Congressional elections, and potential subsequent developments, increase the uncertainty related to the healthcare regulatory environment. For example, President Trump has issued a number of Executive Orders that signal his administration’s intent to reduce federal spending on government-funded healthcare programs, such as Medicaid. In addition, on June 28, 2024, the U.S. Supreme Court issued an opinion holding that courts reviewing agency action pursuant to the Administrative Procedure Act (APA) “must exercise their independent judgment” and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” The decision will have a significant impact on how lower courts evaluate challenges to agency interpretations of law, including those by CMS and other agencies with significant oversight of the healthcare industry. The new framework is likely to increase both the frequency of such challenges and their odds of success by eliminating one way in which the government previously prevailed in such cases. As a result, significant regulatory policies may be subject to increased litigation and judicial scrutiny. Any resulting changes in regulation may result in unexpected delays, increased costs, or other negative impacts that are difficult to predict but could have a material adverse effect on our business and financial condition. For example, certain of these changes could impose additional limitations on the rates we will be able to charge for our current and future products or the amounts of reimbursement available for our current and future products from governmental agencies or third-party payors.

Human Capital Resources

As of December 31, 2024, we had 354 full-time employees, with 52% in our field sales and service teams and 48% in the rest of the company. Our workforce hails from across industries, including technology, medical devices, life sciences and retail management.

As of December 31, 2024, our manufacturing facility in Tijuana, Mexico had 187 full-time team members on-site across quality, engineering, manufacturing, supply chain, and other support functions. TACNA facilitates the hiring of new team members and is responsible for human resource functions and payroll processing.

Starting in 2023 through the beginning of 2025, we implemented four workforce reductions. These actions were taken to align our level of investment with our key strategic priorities, with the goal of continuing to drive efficiency and effectiveness in serving both our patients and our shareholders.

There are no unions represented within our employee base and no members of our workforce are covered under collective bargaining agreements.

Additional information about our human capital programs and initiatives can be found in our most recent Environmental, Social & Governance (ESG) Report, which is available on our website. Nothing contained on or accessible through our website, including our ESG Report or sections thereof, shall be deemed incorporated by reference into this Annual Report.

Talent and Pay Philosophies

We are committed to attracting the best talent we can find, while providing our employees with challenging work in a fast-paced environment. We recruit broadly and purposefully, and welcome diverse candidates.

Our work environment is goal-driven, and we believe in paying for outstanding performance and future potential. We offer competitive, market-based salaries, an annual cash bonus program tied to individual and company performance, a broad-based equity incentive compensation program including an employee stock purchase plan, a 401(k) retirement savings plan with company match, a comprehensive benefits package, team incentives and peer incentives.

Performance Management, Career Development and Engagement

We have a structured approach for employee performance management, development and growth. Managers generally have two key performance conversations per year with their team members. Our year-end performance conversation is focused on evaluating the success and learning of the past year. Our mid-year performance conversation is focused on skill development and future growth opportunities.

We offer numerous avenues for employees to gain experience, exposure and build new skills. For example, we have invested in various training and development opportunities for our employees, including access to on-demand learning resources.

We strongly believe in growing from within and provide opportunities for in-role stretch assignments, cross-group short assignments, internal mobility, and promotions. We conduct an enterprise-wide employee survey at least annually to monitor employee engagement and identify areas of focus for our human capital management program. Information on the results of these surveys is included in our ESG Report.

Diversity, Equity and Inclusion

We are committed to creating and nurturing an inclusive workplace, where everyone feels respected, valued, and included – not only because it’s the right thing to do, but also because we strongly believe that it’s vital to our success and crucial to fully support the diverse communities we serve.

Employee Health and Safety

At Outset, safety is a priority and is part of everyone’s job. We are committed to providing a safe workplace and we comply with applicable health and safety laws and regulations. We strictly prohibit any violent or threatening behavior on our premises or during any work-related activities. Our employees participate in applicable emergency response training and periodic drills to help maintain awareness of security, safety and emergency response protocols.

As an organization, one of our top priorities is to maintain the wellbeing of our employees and their families. Our comprehensive and competitive benefits program is designed to help employees balance their work lives and personal lives by giving them a sense of peace of mind related to their healthcare. We maintain a whole person wellbeing approach, providing resources to support physical, mental, financial, professional and social wellbeing.

Available Information

We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, available free of charge at our website as soon as reasonably practicable after they have been filed with the Securities and Exchange Commission (SEC). Our website address is www.outsetmedical.com. Information on our website is not part of this report. The SEC maintains a website that contains the materials we file with the SEC at www.sec.gov.

Information About Our Executive Officers

The following table sets forth information concerning our executive officers and directors as of the date of this Annual Report:

Name Age Position(s)

Executive Officers

Leslie Trigg 54 President, Chief Executive Officer and Chair of the Board

Nabeel Ahmed 49 Chief Financial Officer

John L. Brottem 51 General Counsel and Secretary

Marc Nash 36 Senior Vice President, Operations and R&D

Leslie Trigg

Leslie Trigg has served as our President and CEO and a member of our Board since November 2014 and as Chair of our Board since February 2022. Ms. Trigg joined the Company from Warburg Pincus, a private equity firm, where she was an Executive

in Residence from March 2012 to March 2014. Prior to that, Ms. Trigg served in several roles at Lutonix (acquired by CR Bard), a medical device company, from January 2010 to February 2012, most recently as Executive Vice President, and as Chief Business Officer of AccessClosure (acquired by Cardinal Health), a medical device company, from September 2006 to June 2009. She also previously held positions with FoxHollow Technologies (acquired by ev3/Covidien), a manufacturer of devices to treat peripheral artery disease, Cytyc, a diagnostic and medical device company, Pro-Duct Health (acquired by Cytyc), a medical device company, and Guidant, a cardiovascular medical device company. Ms. Trigg also serves as the Chair of the board of directors of the Medical Device Manufacturers Association (MDMA). Previously, Ms. Trigg served on the boards of directors of Adaptive Biotechnologies Corporation, a biotechnology company, from March 2021 to June 2023, and of ARYA Sciences Acquisition Corp IV, a special purpose acquisition company, from March 2021 to July 2024. Ms. Trigg holds a B.S. degree from Northwestern University and an M.B.A. from The Haas School of Business, University of California, Berkeley.

Nabeel Ahmed

Nabeel Ahmed has served as our Chief Financial Officer since August 2021. Mr. Ahmed joined the Company in May 2020 as Vice President, Controller, was named Vice President, Finance in May 2021, and was appointed as Interim Chief Financial Officer effective July 2021. Prior to joining the Company, Mr. Ahmed served as Vice President, Finance at 8x8, Inc., a communications platform provider, from April 2019 through January 2020, and as Vice President, Finance at Vocera Communications, Inc., a provider of clinical communication and workflow solutions, from December 2014 through April 2019. Prior to that, he held various leadership positions in accounting and finance, including as CFO at Wanderful Media from 2013 to 2014, as well as Vice President, Finance and then CFO at MarketTools, Inc. from 2009 to 2012. Earlier in his career, Mr. Ahmed held various positions of increasing responsibility at Ernst & Young LLP from 1997 to 2004 and at eBay, Inc. from 2004 to 2008. Mr. Ahmed holds a Bachelor of Commerce degree from Laurentian University and an M.B.A. from The Wharton School, University of Pennsylvania.

John L. Brottem

John L. Brottem has served as our General Counsel and Secretary since May 2020. Prior to joining the Company, Mr. Brottem served in a number of roles at Omnicell, Inc., a leading provider of medication management automation solutions and adherence tools for healthcare systems and pharmacies: as Vice President, Legal and Deputy General Counsel from September 2019 to May 2020; as Vice President, Legal and Associate General Counsel from April 2016 to September 2019; and Senior Director, Legal and Associate General Counsel from November 2011 to April 2016. Prior to Omnicell, Mr. Brottem was Corporate Counsel at Brocade Communications Systems, Inc., a networking solutions company, from January 2009 to November 2011; Corporate Counsel at Foundry Networks, Inc., a networking solutions company, from February 2008 to January 2009; and Associate at Cooley Godward Kronish LLP, an international law firm, from November 2001 to February 2008. Mr. Brottem holds a B.A. from Occidental College and a J.D. from the University of California, Davis, School of Law.

Marc Nash

Marc Nash has served as our Senior Vice President, Operations and R&D since July 2023. Mr. Nash joined the Company in December 2019 as Senior Director of Operations and was named Vice President, Manufacturing in March 2021. Prior to joining the Company, from June 2016 through June 2019, Mr. Nash served as Director of Operations at Epocal Inc., a medical technology company (and a subsidiary of Alere, Inc. acquired by Siemens Healthineers), during which time he was responsible for the end-to-end manufacturing operations of point of care diagnostics products and platforms. From 2012 through 2016, Mr. Nash held various positions of increasing responsibility at Alere Inc., a medical technology company, where he was responsible for the transfer, consolidation and enhancement of class II and class III point of care and rapid diagnostic products globally. Mr. Nash holds a B.S. from Union College and an M.B.A. from the University of Haifa, Israel.

Item 1A. Risk Factors.

Risk Factors Summary

The following summarizes the principal factors that make an investment in our company speculative or risky, all of which are more fully described in the risk factors section below. This summary should be read in conjunction with the risk factors section and should not be relied upon as an exhaustive summary of the material risks facing our business. The following factors could result in harm to our business, reputation, revenue, financial results, and prospects, among other impacts:

Risks Related to Our Business and Industry

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Our history of net losses and expectation that we will continue to incur losses

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Our ability to achieve sustainable gross margins, including by reducing manufacturing and service costs

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Our ability to attain market acceptance for Tablo among providers and patients

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Concentration of our revenues in a single product and concentration of a large percentage of our revenues from a limited number of customers

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Financial pressures faced by our customers including capital budget constraints, staffing shortages and increased costs

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Our ability to expand into the home hemodialysis market and the expansion of the home hemodialysis market itself

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Risks associated with our international manufacturing operations, including the potential for tariffs and other trade disputes

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Our reliance on third-party suppliers, including single source suppliers and a contract manufacturer, and our ability to overcome any manufacturing or supply chain disruptions

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Our ability to retain our commercial team, optimize our sales processes and expand the adoption of Tablo as we focus more heavily on enterprise selling

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Our ability to continue innovating and improving Tablo, ensure strong product performance and reliability, offer high quality support, ensure proper training and use of Tablo, and increase our sales and marketing capabilities

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Our ability to compete effectively with existing manufacturers and new entrants

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Our ability to effectively manage privacy, information and data security risks, including our ability to adequately defend against, respond to and manage increasingly sophisticated cyberattacks in an increasingly complex cyber ecosystem

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Our estimates of the sizes of the markets for Tablo

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Our ability to accurately forecast customer demand and manage our inventory

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The impact of pandemics, natural or man-made disasters and similar events on our business

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Potential disruptions of service provided by third parties that host our cloud-based ecosystem and information technology systems

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Our ability to obtain additional financing, as well as risks related to our credit agreement, including interest rate risk and our ability to access additional capital and/or meet certain covenants

Risks Related to Government Regulation

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Our compliance with FDA and other medical device regulations applicable to our products and operations, including our ability to: recover from disruptions to our business and operations as a result of the warning letter we received from the FDA in 2023 and our prior distribution pause on TabloCart with Prefiltration; obtain and maintain necessary FDA regulatory clearance or approvals for Tablo, related products, or any future product modifications or new products; comply with ongoing FDA requirements, including related to the manufacturing, marketing and promotion of our products, and the ability of our suppliers to so comply; and manage the risks and expenses associated any clinical trials necessary to support future product submissions to the FDA

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Impact of potential changes to scope of coverage and reimbursement rates for dialysis treatments or healthcare reform measures

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Impact of potential adverse medical events associated with Tablo, product failures or malfunctions, or our failure to report such events to the FDA

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Our ability to comply with various laws and regulations regarding healthcare, data privacy and security, and environmental and occupational safety

Risks Related to Our Intellectual Property

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Our ability to obtain, maintain, protect and enforce our intellectual property rights, including our patents, copyrights, trademarks and trade secrets

Risks Related to Ownership of Our Common Stock

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Fluctuations in the market price of our common stock in response to numerous factors regardless of our operating performance

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If our stockholders do not approve the conversion of all outstanding shares of our Series A Preferred Stock into shares of our common stock, the Series A Preferred Stock will contain rights, preferences and privileges that may limit our business flexibility or reduce the value of our common stock

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Our ability to maintain the listing of our common stock on Nasdaq

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Influence of principal stockholders and management over matters subject to stockholder approval

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Our organizational documents include certain provisions that may make a change of control more difficult, as well as exclusive forum requirements

General Risks

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General economic and financial market conditions

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Substantial resources associated with complying with the laws and regulations affecting public companies

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Our ability to attract and retain key personnel and maintain our corporate culture

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Risks associated with potential future acquisitions or investments

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Our ability to comply with anti-corruption, anti-bribery, anti-money laundering and similar laws

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Our estimates or judgments relating to our accounting policies

•

Expectations relating to ESG factors

The summary risk factors described above should be read together with the text of the full risk factors below and the other information set forth in this Annual Report, including our financial statements and the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as in other documents that we file with the SEC. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial, may also arise and materially impact our business. If any of these risks occur, our business, results of operations and financial condition could be materially and adversely affected and the trading price of our common stock could decline.

Risks Related to our Business and Industry

We have a history of net losses, and we expect to continue to incur losses for the foreseeable future. If we ever achieve profitability, we may not be able to sustain it.

We have incurred losses since our inception and expect to continue to incur significant net losses for the foreseeable future. We have incurred net losses of $128.0 million, $172.8 million and $163.0 million for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, we had $162.0 million in cash, cash equivalents, restricted cash and short-term investments, and an accumulated deficit of $1.1 billion. Based on our current planned operations, we believe that our existing cash, cash equivalents and short-term investments, cash generated from sales, as well as proceeds received from the debt financing and the sale of our Series A Preferred Stock, each of which are described in Note 13, Subsequent Events, to our audited financial statements included in this Annual Report, will be sufficient to meet our anticipated needs for at least the next 12 months from the date of this Annual Report. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Our revenue is derived, and we expect it to continue to be derived, primarily from sales of Tablo, its associated consumables and related services. Because of its relatively recent commercial introduction, Tablo may continue to have limited product and brand recognition. In addition, demand for Tablo may decline or may not increase as quickly as we expect. Our ability to generate revenue from sales of Tablo, associated consumables and related services, or from any products we may develop in the future, may not be sufficient to enable us to transition to profitability and generate positive cash flows within the timeframe we anticipate or at all.

While we have recently undertaken various initiatives designed to reduce operating expenses and working capital to align with anticipated revenue growth, including implementing restructuring plans to streamline our overall organizational structure and renegotiating commitments with suppliers to reduce inventory, we expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term while we make investments to support our anticipated growth. Our ability to achieve and sustain profitability will depend on our ability to grow our revenue while expanding gross margins, as well as the success of our efforts to optimize spending and working capital, including inventory. We may never achieve profitability, and even if we do achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time. If we do not achieve or sustain profitability, it will be more difficult for us to finance our business and accomplish our strategic objectives, either of which would have a material adverse effect on our business, financial condition and results of operations.

Our ability to achieve sustainable gross margins depends on the success of our various initiatives designed to expand gross margin.

We have undertaken a number of initiatives designed to expand gross margins. Our ability to expand gross margins will depend in part on our ability to control the average selling prices of our products and services, including by selling higher-margin accessories, consumables and services. Our ability to maintain our product pricing is dependent on our customers’ recognition that the benefits outweigh the higher upfront purchase price. If we are unable to maintain our product pricing or continue to sell higher-margin accessories, consumables and services at the levels we anticipate, our ability to expand gross margins will be adversely affected, which would harm our business, financial condition and results of operations.

In addition, our ability to expand gross margins is also dependent on the success of our initiatives to better leverage our field service team and drive down service costs per console, including through our cloud-based data system, remote monitoring, remote diagnostics and repairs, and other enhancements designed to improve the performance and reliability of Tablo. If we are unable to continuously improve the performance and reliability of Tablo, broaden our installed base or if these initiatives are otherwise unsuccessful, we may fail to better leverage our field service team and drive down service costs per console within the timeframe we anticipate or at all, which could delay or prevent us from achieving sustainable gross margins, and adversely impact our financial condition, results of operation and future growth.

Over the past several years, we have moved the production of Tablo consoles and a majority of Tablo cartridges in-house to our manufacturing facility in Tijuana, Mexico which we operate in collaboration with our outsourced business administration service provider, TACNA. This has helped further our long-term gross margin expansion and supply continuity strategies while reducing the costs of Tablo console production and improving the flexibility of our operations. We plan to continue to use our design, engineering, supply chain, and manufacturing capabilities to help further advance and improve the efficiency of our manufacturing processes, lower the cost of parts and components, and lower our costs of production. However, there is no guarantee that we will be able to sustain cost reductions, achieve planned cost reductions, or otherwise achieve the anticipated benefits from our various initiatives. For example, we may be unable to sustain the savings associated with producing Tablo consoles at our manufacturing facility with TACNA, or the benefits we anticipate will result from insourcing Tablo cartridge production at this same facility may not materialize or be as significant as projected or realized within the timeframe we currently estimate. Moreover, increased tariffs imposed by the new administration, including on goods imported into the United States from Mexico and China, could adversely impact our supply chain and distribution costs, as well as our ability to achieve sustainable gross margins. While we do not believe we have exposure to these potential tariffs as Tablo, TabloCart and Tablo consumables are covered under a special exemption, we cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and other countries (including Mexico and China), what products may be subject to such actions, or what actions may be taken by the other countries in retaliation. There may also be unforeseen occurrences that increase our costs, such as increased prices of raw materials, changes to labor costs, less favorable terms with third party suppliers, freight providers, or contract manufacturing partners, or disruptions to the operations of our contract manufacturers or third-party suppliers including as a result of public health crises such as the COVID-19 pandemic. If we are unable to reduce our costs or if cost reductions or other anticipated benefits are less significant or less timely than projected, we will not be able to achieve sustainable gross margins, which would adversely affect our ability to invest in and grow our business and adversely impact our business, financial condition and results of operations.

The commercial success of Tablo will depend upon attaining significant market acceptance among providers and patients.

Our success will depend, in part, on the acceptance of Tablo as safe, easy to learn, easy to use, clinically flexible, operationally versatile and, with respect to providers, cost effective. We began commercializing Tablo throughout the United States in 2018 and began the process to commercialize Tablo for home-based dialysis in 2020. Our relatively limited commercialization experience makes it more difficult to evaluate our current business and predict our future prospects. It is difficult to predict how

quickly, if at all, providers and patients will accept Tablo or, if accepted, how frequently it will be used. These constituents must believe that Tablo offers benefits over traditional machines. The degree of market acceptance of Tablo will depend on a number of factors, including:

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whether providers and others in the medical community consider Tablo to be a safe and cost-effective treatment method;

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the potential and perceived advantages of Tablo over traditional machines;

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the potential and perceived advantages of Tablo relative to our customers’ other capital and operating purchase requirements;

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the cost of treatment, maintenance and upkeep using Tablo in relation to traditional machines;

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the cost of treatment, and convenience and ease of use of Tablo in the acute setting relative to outsourcing dialysis services to third-party providers;

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the convenience and ease of use of Tablo relative to traditional machines;

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the effectiveness of our sales and marketing efforts for Tablo;

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our ability to expand into the acute market as well as the post-acute market, including SNFs, LTACHs, and other post-acute providers;

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the success of our initiatives to optimize our commercial organization, infrastructure and sales processes to support the growth of our business in the acute care market as we focus more heavily on enterprise selling;

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our ability to provide incremental data that show the clinical benefits and cost effectiveness of, and operational benefits from, Tablo;

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any changes to the availability of coverage and adequate reimbursement for dialysis from payors, including government authorities;

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pricing pressure, including from Group Purchasing Organizations (GPOs), seeking to obtain discounts on Tablo based on the collective buying power of their GPO members;

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product labeling or product insert requirements by the FDA or other regulatory authorities; and

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limitations or warnings contained in the labeling cleared or approved by the FDA or other authorities.

Additionally, even if Tablo achieves widespread market acceptance, it may not maintain that market acceptance over time if competing products or technologies, which are more cost effective or received more favorably, are introduced. Failure to achieve or maintain market acceptance and/or market share would limit our ability to generate revenue and would have a material adverse effect on our business, financial condition and results of operations.

We currently derive substantially all of our revenue from the sale of Tablo and associated consumables and are therefore highly dependent on Tablo for our success.

We derive substantially all of our revenues from sales of Tablo and its associated accessories and consumables, with the remainder of our revenues largely coming from services provided for the support and maintenance of Tablo. Accordingly, our business is exposed to risks that our revenues are concentrated in a single product. As a result, any event that adversely affects Tablo or the market for Tablo and associated accessories and consumables could adversely affect our business, financial condition and results of operation.

Our customers may face financial pressures including, but not limited to, capital budget constraints, staffing shortages and increased costs, that have had, and may continue to have, a negative impact on our financial condition or results of operations.

Beginning in the third quarter of 2023, we began to observe an increasing number of our existing and prospective customers deferring their decisions to purchase Tablo in an environment of rising interest rates and more cautious capital spending. These deferrals served to further elongate our sales cycle and the timing of delivery and installations which in turn, contributed to an adverse impact on our bookings and revenues starting in the second half of 2023, and through 2024. We have no assurance that these impacts will abate in future periods. Beginning in 2022, our existing and prospective customers faced shortages of skilled nurses and other clinical personnel as well as increased labor costs, combined with economic pressures resulting from general economic and financial market conditions, primarily escalating inflation, tightening hospital operating budgets and increased scrutiny of capital purchase decisions, all of which generally have the effect of lengthening the average sales cycle and elongating the timing of installations. These factors negatively impacted our customer base on pipeline development and installation schedules, which, in turn, negatively impacted our bookings, delayed our shipments and adversely impacted our revenues for 2022 and, to a lesser extent, 2023. Moreover,

in February 2024, Change Healthcare, a large provider of healthcare payment systems, experienced a cyberattack on its information technology systems, causing disruptions to healthcare providers across the United States, including financial impacts such as reduced reimbursements and cash flow. We believe several of our customers experiencing these disruptions deferred both Tablo console and treatment purchases until their cash flow normalized, adversely impacting our revenues for the first quarter of 2024. If our customers continue to face prolonged periods of rising interest rates, capital budget constraints, volatility, uncertainty, staffing shortages, cash flow challenges, rising costs and other financial pressures, whether due to general macroeconomic conditions, cybersecurity events or otherwise, it could ultimately adversely impact our ability to expand existing customer relationships or attract new customers of Tablo, timely collect amounts due, effectively manage our inventory levels, and have a material adverse effect on our bookings, revenues, results of operations, financial condition, and, ultimately, our future growth and profitability.

In 2022, we launched a pilot clinical and administrative services program designed to help bridge our healthcare provider customers, particularly those challenged by staffing shortages, as they transition from using an outsourced inpatient dialysis provider to offering on-site inpatient dialysis services on their own. We continue to offer this pilot program to assist facilities that are transitioning from an outsourced dialysis provider. In return for a fair market value service fee, we assign members of our own employed nurses on a temporary basis to support participating providers to launch and manage an inpatient dialysis program using Tablo and, as full-time staff is hired, to help train and onboard those nurses. This program may not be successful in achieving the objectives we intend and anticipate, may fail to meet our customers’ expectations, may not generate sufficient returns to justify our investment, or may result in unanticipated costs, which could harm our reputation and customer relationships and adversely impact our operating margins and results of operations.

Our financial condition or results of operations, including our ability to generate revenue from home-based and post-acute dialysis, is subject to certain risks and uncertainties, including around the use of Tablo in the home and post-acute settings.

In March 2020, Tablo was cleared by the FDA for patient use in the home of patients with acute and/or chronic renal failure, with or without ultrafiltration, and we intend to expand within the home market. However, this goal is subject to certain risks, including our ability to attract, retain and manage patients, as well as our ability to further evolve our commercial infrastructure and sales processes as we scale our business in the home market. Our business strategy, including our pricing of Tablo, while informed by our relatively limited history of selling Tablo in the home care setting, continues to be based in part on certain assumptions about the adoption of Tablo by home dialysis patients, as well as patient retention. If these assumptions about the home market are inaccurate and we are unable to increase our share of the home dialysis market by attracting new patients, or retain such market share once achieved, we would need to significantly change certain aspects of our business strategy, including the pricing of Tablo console, associated consumables and support and maintenance, which could adversely affect our business, financial condition and results of operations.

Our relatively limited experience in the distribution, logistics and service support that relate to the use of Tablo in the home care setting may also negatively impact our ability to generate revenue from home-based dialysis. Currently, the provision of in-clinic and home dialysis is largely dominated by DaVita and Fresenius, and our expansion within the home dialysis market is dependent on our ability to grow new home programs with health systems and innovative dialysis clinic partners.

In addition, patients and their care partners using Tablo for home dialysis may not successfully operate Tablo, or may require increased service and support from us. Further, providers of dialysis in the home or post-acute setting may not successfully obtain or maintain necessary certifications or approvals to operate a dialysis program, which may negatively impact our financial condition or results of operations. Moreover, given that the home dialysis and post-acute markets remain relatively novel for us, we also face the risk that we may encounter difficulties whose precise nature or magnitude we cannot accurately predict at this time, but which may have a material adverse effect on our business, financial condition or results of operations.

With a significant portion of our manufacturing operations located outside of the United States, we may experience manufacturing disruptions, and be subject to additional risks associated with international manufacturing operations, including uncertain or changing regulatory and/or labor requirements.

We have insourced the production of Tablo consoles, and a majority of Tablo cartridges, at our manufacturing facility in Tijuana, Mexico which we operate in collaboration with our outsourced business administration service provider, TACNA. Under our arrangement with TACNA, we control the operations, engineering, quality and materials supply functions at the facility, while TACNA provides manufacturing space, the workforce, utilities, cross-border logistics, local permits and licenses. We are subject to a number of additional risks associated with operating our Mexico-based manufacturing facility, and many of these risks may heighten to the extent we continue to ramp our cartridge manufacturing capabilities and increase our dependence on our Mexico-based manufacturing operations. We may experience strikes, work stoppages, work slowdowns, high personnel turnover, grievances, complaints, claims of unfair labor practices, other collective bargaining disputes or other labor disputes at our new facility. Our manufacturing operations at the facility may also suffer disruptions from global or regional public health crises such as the COVID-19 pandemic, natural disasters, cyber security attacks, vandalism, terrorism or other political hostilities. Any such occurrences could negatively impact our ability to produce Tablo consoles and cartridges.

We are also subject to a variety of foreign laws and regulations, including trade and labor restrictions and laws relating to importation, exportation and taxation of goods, and U.S. laws and regulations relating to foreign operations, including anti-corruption, anti-bribery and anti-money laundering laws. For example, the new administration has advocated greater restrictions on trade generally and, in particular, tariff increases on certain goods imported into the United States, including from Mexico and China. In February 2025, the new administration issued executive orders imposing additional 25% tariffs on products imported from Mexico and additional 10% tariffs on products imported from China. While the tariffs on products from China went into effect in February 2025, the tariffs on products from Mexico were suspended for an additional month. These tariffs could potentially impact certain areas of our supply chain, including raw materials entering Mexico, raw materials entering the United States from China to be utilized by our Unites States-based suppliers, and finished goods imported from Mexico into the United States. While we do not believe we have exposure to these potential tariffs as Tablo, TabloCart and Tablo consumables are covered under a special exemption, we cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and other countries (including Mexico and China), what products may be subject to such actions, or what actions may be taken by the other countries in retaliation. The adoption and expansion of trade restrictions, the occurrence of a trade war, other governmental action related to tariffs or trade agreements or policies, or the related uncertainties, has the potential to adversely impact our supply chain and distribution costs, which could in turn adversely affect our business, financial condition, and results of operations, including our ability to expand gross margins. Furthermore, proposals to amend Mexico’s federal labor law, including a reduction in maximum workweek hours from 48 to 40 hours, were rejected by the Mexican Congress in 2024, but are expected to return in future legislative efforts. If passed, these potential legislative changes are expected to increase our labor costs and, ultimately, could potentially negatively impact the productivity of our manufacturing operations to the extent our efforts to mitigate the impact of the changes are not successful. In addition, because certain of our Mexico-based manufacturing operations incur costs that are denominated in Mexican Pesos (MXN), we are exposed to additional risk of currency fluctuations between the U.S. dollars (USD) and MXN, which could increase our product and labor costs, thus reducing our gross profit. Moreover, while certain members of our management team have some manufacturing experience, as an organization, we do not have any prior experience in this type of manufacturing arrangement, and we could accordingly experience other risks, the nature and magnitude of which we are unable to assess precisely at this time. Furthermore, we are subject to increased risks related to changes in export or import regulation, other trade barriers, security measures and uncertainties impacting the cost and the ability to move inventory and manufacturing equipment across the United States-Mexico border. These risks may disrupt our Mexico-based manufacturing operations, subject us to increased costs, restrict or delay our ability to deliver products to our customers and meet our customers’ demand on a timely basis, and result in customer dissatisfaction, all of which would adversely impact our results of operations.

In addition, we continue to rely on a contract manufacturing partner in Southeast Asia, for the production of a portion of our Tablo cartridges. If this contract manufacturing partners’ facilities were disrupted, by labor disputes, work stoppages, public health crises such as the COVID-19 pandemic, riots, terrorism, vandalism, cyber security attacks, natural disaster, regulatory action or otherwise, it could cause substantial delays in our operations and result in our having insufficient Tablo cartridge in inventory to fulfill orders. For example, in late 2021, supply chain disruptions exacerbated by COVID-19 outbreaks and protocols escalated, and we faced increased supply constraints, which increased freight costs associated with the transportation of Tablo cartridges. Further, to the extent we seek to renew or renegotiate our arrangements with our contract manufacturing partner, and cannot agree to the terms and conditions of future contract manufacturing arrangements, our ability to produce and sell Tablo cartridges could be delayed until we are able to ramp our own in-house manufacturing capabilities to meet demand, or until an alternative manufacturing partner or arrangement is identified, a new contract manufacturing agreement is negotiated and new production lines are established.

We depend upon third-party suppliers, including a contract manufacturer and single source suppliers, making us vulnerable to supply problems and price fluctuations.

We rely on third-party suppliers, including in some instances single source suppliers, to provide us with certain components of Tablo. The number of suppliers required for Tablo console production is approximately 100 worldwide. We consider a discrete number of these suppliers, located in the United States, Mexico, Europe and Asia, as critical providers of components such as pumps, motors, valves and Printed Circuit Board Assembly (PCBA) boards. While we are undertaking a second source qualification process for the majority of these critical components, we may not ultimately be successful in securing second sourcing for all of them.

In addition, we purchase supplies through purchase orders and do not have long-term supply agreements with, or guaranteed commitments from all, our suppliers, including single source suppliers. Moreover, while we manufacture a majority of Tablo cartridges in-house, we rely on a contract manufacturer for the production of a portion of Tablo cartridges. Many of our suppliers and our contract manufacturer are not obligated to perform services or supply products for any specific period, in any specific quantity or at any specific price, except as may be provided in a particular purchase order. We depend on our suppliers and contract manufacturer to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements. These suppliers and contract manufacturer may encounter problems during manufacturing for a variety of reasons, including as a result of public health crises such as the COVID-19 pandemic, labor disputes, work stoppages, damage or interruption from fires, severe weather or other natural disasters, vandalism, terrorism or other political hostilities, any of which could delay or impede their ability to meet our demand. These suppliers and contract manufacturer may cease producing the components we purchase from them

or otherwise decide to cease doing business with us. As part of our supply continuity planning, we maintain limited quantities of raw material, work in progress and finished good product at both suppliers and contract manufacturers. However, if we inaccurately forecast demand for finished goods, we may be unable to meet customer demand which could harm our competitive position and reputation. Further, if we fail to effectively manage our relationships with our suppliers and contract manufacturer, we may be required to change suppliers or contract manufacturers. While we believe replacement suppliers exist for all most all materials, components and services necessary to continue manufacturing Tablo, establishing additional or replacement suppliers for any of these materials, components or services could be time-consuming and expensive, may result in interruptions in our operations and product delivery, may affect the performance specifications of Tablo or could require that we modify Tablo’s design. Even if we are able to find replacement suppliers, we will be required to verify that the new supplier maintains facilities, procedures and operations that comply with our quality expectations and applicable regulatory requirements. Any of these events could require that we obtain a new regulatory authority approval before we implement the change, which could result in further delay and which may not be obtained at all. If our third-party suppliers fail to deliver the required commercial quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the continued commercialization of Tablo, the supply of our products to customers and the development of any future products will be delayed, limited or prevented, which could have a material adverse effect on our business, financial condition and results of operations.

For example, we have worked closely with our manufacturing partners and suppliers to enable us to source key components and maintain appropriate inventory levels to meet customer demand, and have not experienced material disruptions in our supply chain to date. However, macroeconomic factors such as rising inflation, increasing labor costs, and surges and shifts in consumer demand, have disrupted the operations of certain of our third-party suppliers, resulting, in some cases, in increased lead times and higher component costs. We faced increased supply chain constraints during late 2021, resulting in increased transportation and related costs associated with delivering adequate supply of Tablo treatments to our customers from our contract manufacturing partner in Southeast Asia. During 2023, we saw moderation in these costs. Moreover, we believe that localizing production of a majority of Tablo cartridges in Mexico (in-house at our manufacturing facility) has helped achieve cost reductions through lower freight costs, further our long-term gross margin expansion and supply continuity strategies and improve the flexibility of our operations. However, we may face increased supply chain constraints or the impact of tariffs in the future, which could negatively impact our ability to meet customer demand on a timely basis, result in customer dissatisfaction and adversely impact our operating margins and results of operations.

If we fail to effectively retain our commercial team and optimize our sales processes, or fail to expand the utilization of Tablo as we focus more heavily on enterprise selling, we may not be able to generate revenue growth.

OM US Equity

OM · 10-K · period ended 2024-12-31

Item 1. Business.

Item 1A. Risk Factors.

OM US Equity☆

OM · 10-K · period ended 2024-12-31

Item 1. Business.

Item 1A. Risk Factors.

OM US Equity