TransMedics Group Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 3, 2023

There are 9 speakers on the call.

Operator

Good afternoon, and welcome to TransMedics Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call. I now would like to turn the call over to Ryan Johnston from the Girl Martin Group for a few introductory comments.

Speaker 1

Thank you. Earlier today, TransMedics released financial results for the quarter ended June 30, 2023. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call, including during this question and answer section that include forward looking statements within the meaning of federal Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward looking statements. All forward looking statements, Including without limitation, our examination of operating trends, the potential commercial opportunity for our products and our future financial which include expectations for growth in our organization and guidance and or expectations for revenue, gross margins and operating expenses in 2023 are based upon our from those anticipated or implied by these forward looking statements.

Speaker 1

Accordingly, you should not place undue reliance on these statements. Additional information regarding these risks and uncertainties appears under the Risk Factors on our Form 10 ks filed with the Securities and Exchange Commission on February 27, 2023, End our subsequent filings with the Securities and Exchange Commission, which are available at www.sec.gov and on our website at www.transmedix.com. TransMedics disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward looking statements, Whether because of new information, future events or otherwise, this conference call contains time sensitive information and is accurate only as of the live broadcast today, August 3, 2023. And with that, I will now turn the call over to Walid Hassaneen, President and Chief Executive Officer.

Speaker 2

Thank you, Brian. Good afternoon, everyone, and welcome to TransMedics' 2nd quarter 2023 earnings call. As always, joining me today is Stephen Gordon, our Chief Financial Officer. The first half of twenty twenty three was an important period for TransMedix as we successfully executed on several Our efforts have culminated in 2Q being our highest revenue quarter to date. We also buttressed our balance sheet with a successful convertible debt offering.

Speaker 2

And earlier this week, we entered Into agreements for 2 acquisitions that will propel us further on our growth trajectory, both short and long term. In 2Q, we demonstrated significant commercial momentum and accelerated clinical adoption through NOP across all three organs. Operationally, we opened our new clean room on schedule and secured a second large sterilization partnership, further enhancing our production and throughput capacity. This will better position us to meet the high and growing demand for OCS. Now let me cover the specifics of our 2Q Performance.

Speaker 2

In the second quarter, we achieved total revenue of $52,500,000 representing 156 percent year over year growth and 26% growth over 1Q 'twenty three. U. S. Sales represented $49,000,000 in revenue, growing 170% year over year with OUS sales up 48 Percent to $33,500,000 We also demonstrated continued improvement down the P and L as we benefit from increasing operating leverage. Stephen will cover the detail in his section of today's call.

Speaker 2

Importantly, we buttressed our balance sheet by issuing convertible debt at highly favorable terms, which provided a net of approximately $393,000,000 to enable us to invest in standing up the TransMedics Aviation and Logistics network. 2Q also represented another new high watermark for case volume, driven by growth across all three organs For the Q1 in many quarters, we saw growth in liver, heart and lungs. Liver and heart increased sequentially for the 6th Consecutive quarter. Meanwhile, lung volume was the highest we've achieved in the past 8 quarters. We are planning to continue to build on this early lung momentum and hope to see continued growth going forward.

Speaker 2

In line with our outlined growth strategy, we also grew the number of liver, heart and lung transplant programs using OCS and NOP. In 2Q, 35 liver programs used OCS and NOP, 20 of which were active users. For heart, there were 40 programs that use the OCS and NOP, 12 of which were active users. There were 13 lung programs that used OCS and NOP, 5 of which were repeat users. We're encouraged by the early signs of recovery of our lung program.

Speaker 2

However, we remain focused on continuing to grow the lung segment of our business over the next 12 to 18 months. In terms of NOP contribution, approximately 93% of our total U. S. Case volume came from NOP. On a per organ basis, approximately 98% of liver, 81% of heart and 97% of lung cases We're from NOP.

Speaker 2

As we stated before, we expect the NOP to continue to drive the lion's share of our revenue in the U. S. Adding more capacity to meet demand for OCS. We are currently building up and training the 1st and second shifts for the new cleanroom space. We expect to produce over 10,000 OCS perfusion modules per year in this new clean room once it's fully staffed.

Speaker 2

Finally, in 2Q, we are able to add significant sterilization capacity by qualifying a second large sterilization partner. This will further enhance our throughput capacity going forward. Our 2Q results Have once again demonstrated the growth trajectory of our business. As we described in our 1Q call, Our experience operating the NOP model in the United States over the past 18 months have shown us how inefficient And unscalable the current industry model for organ transportation logistics is. TransMedics is committed to developing a more efficient National model for organ transplantation in the U.

Speaker 2

S. By launching TransMedics Aviation as the 1st national Transplant dedicated logistics network. Our goal is to control the entire end to end process of donor To recipient logistics to directly manage all NOP transplant volume in the U. S. By the second half of twenty twenty four.

Speaker 2

This will help remove a critical bottleneck to our growth and to the U. S. Transplant volumes broadly. We are making this investment because we are seeing NOP volumes starting to outpace the capacity, The availability and importantly, the limited flight radius of the fragmented older transplant air charter that is being used today. To that end, I'm delighted that we recently signed a definitive agreement to acquire Summit Aviation, One of the premier U.

Speaker 2

S. Flight charter operators. This acquisition represents a cornerstone element of our strategy Designed to create a dedicated national transplant logistics network to expand the NOP reach and capacity. Please allow me to provide more color on this important acquisition and how we envision the next steps to getting our aviation service operational over the next several months. From a timing perspective or a timeline perspective, this acquisition is To the current President of Summit and a veteran of the assume the role of VP of TransMedics Aviation Services.

Speaker 2

We also intend to maintain and transition the entire operations team and the majority of the pilots from Summit to TransMedics. Further, the TransMedics logistics team here in Andover is currently establishing a national digital command and dispatch center That will be located in Andover, Massachusetts. This center will efficiently deploy the TransMedics aviation fleet From approximately 8 dedicated aviation hubs capable of covering 100% of the continental U. S. We will use a data driven approach to continue to refine the National TransMedics Transplant Logistical Network to maximize coverage And efficiency of the operations.

Speaker 2

We have also begun the process of acquiring several additional aircrafts To expand the TransMedics fleet, to reach our target goal of initially having 10 to 15 operational airplanes By first half of twenty twenty four, subject to the closing, we intend to maintain Summit's existing flight school operations We strongly believe this is an important strategic advantage for our long term success. As part of our agreement with Summit, We will have a short transition period during which we intend to wind down all private charter and aircraft management operations To transition to 100% TransMedics aviation transplant focused operation. And finally, We intend to maintain the dispatch operations in Bozeman, Montana to complement our Andover National Transplant Dispatch and Command Center. As we are continuing to grow the NOP footprint and reach in the U. S, we must also continue to invest in expanding the NOP infrastructure to meet the significant growth in front of us.

Speaker 2

Especially or specifically, we intend to grow our and field clinical staffing throughout the next 18 months to 24 months to meet the growing demand for our NOP clinical services across the U. S. Meanwhile, our logistics team is working on revamping and scaling the NOP workflow and logistics dispatch to maximize coverage and efficiency of the process. As I've stated publicly before, we at TransMedics are focusing on growing our NOP Transplant volume to reach 10,000 transplants per year over the next 5 years. To achieve this goal, We devised a multifaceted strategy, which goes as follows: 1st, maintain technological leadership In the field by developing a next gen OCS platform that is optimized for NOP workflow and clinical management.

Speaker 2

This will enable scalability of the clinical case volume. 2nd, expand our clinical indications for the OCS platform. And finally, expand the overall TransMedics product offering. To execute on the above strategy, we recently acquired assets an IP related to 2 perfusion technologies from Bridge to Life. The first was warm perfusion EVAS technology for lung and heart transplant And the second was Whole Perfusion Life Kraton for heart transplant.

Speaker 2

We plan to use unique elements of these technologies To supplement our OCS platform, 2, accelerate the OCS next gen product development, Expand our OCS heart clinical indications to cover standard criteria hearts that are currently preserved today using merely cold static storage. We believe that there may be a better advantage to using cold perfusion technology. Support our broad long term effort to reignite the momentum for machine perfusion for lung transplant in the U. S. And worldwide.

Speaker 2

We demonstrated our ability to significantly grow our annual transplant volume and revenue in 2022, and we are on track To deliver similar results again in 2023. It is important to note that we strongly believe that this is only the beginning And we are determined to reach our goal of 10,000 transplants over the next 5 years. We must, however, take the time to scale and buttress our NOP infrastructure and allow the time I can best describe it as the following. On the path to a very high TransMedics Growth Sumit, we must stage or pace ourselves to allow for acclimatization And integration to ensure achieving our long term growth target. We see the next 4 to 6 months as the critical time needed to be ready for our next growth stage or wave in 2024 and beyond.

Speaker 2

Given our strong 2Q and H1 'twenty three results, balanced with potential scalability challenges, We are increasing our annual revenue guidance for the full year 2023 to be between $180,000,000 $190,000,000 Up from our previously communicated guidance of $160,000,000 to $170,000,000 and representing a 93 to 103 growth over full year 2022 total revenue. With that, let me turn the call to Stephen Gordon to cover the detailed financial results for the quarter.

Speaker 3

Thank you, Waleed. I will now provide some additional details on the This is an increase of 156 percent from the Q2 of 2022 and a 26% sequential increase from last quarter. In the U. S. Revenue was $49,000,000 an increase of 170% from Q222 and 31% sequentially from last The organ breakdown on U.

Speaker 3

S. Revenue is the following: $32,700,000 of OCS Liver, 13,500,000 of OCS Heart and 2,800,000 of OCS Lung. Let me repeat that, 32,700,000 liver, 13,500,000 Heart and 2,800,000 Lung. Ex U. S.

Speaker 3

Revenue was 3,500,000, 48% increase from the Q2 of 2022 The breakdown there was $3,100,000 of heart and $400,000 of lung. Now regarding the breakout of product and service revenue for the As a reminder, the service revenue is the added amounts we charge for the surgical procurement and organ management as part of the NOP. In Q2, product revenue was $42,500,000 and service revenue was $10,000,000 So service revenue was 19% of the total. The gross margin for the Q2 of 2023 was 70%. This is flat from a year ago Q2 2022 And up from 69% in the Q1 of 2023.

Speaker 3

The margin on product revenue was 80% in Q2, 2023, that's up from 77% in Q2 of 2022 and it's up from 79% in the Q1 of 2023. The margin on service was 28% in Q2 2023, that's up from 20% in Q2 2022 And up from 27% last quarter. The modest sequential improvement in margin is a result of the higher revenue in the quarter. Total operating expenses for the quarter were $37,600,000 that's 56% above Q2 2022 operating expense. We have continued to make critical investments in the company to ensure scalability to support growth.

Speaker 3

In R and D, we are developing next generation Technologies and digital tools to improve OCS capabilities and the NOP process. And in SG and A, we're adding resources to both our NOP as well as the company's overall infrastructure. Operating loss for the quarter was $900,000 in the Q2 of 'twenty three, as compared to $9,700,000 loss in And our net loss for the Q2 of 2023 was $1,000,000 even and that compares to $11,500,000 in the Q2 of 2022. Total cash on the balance sheet is $582,200,000 as of June 30, 23, which includes the proceeds of the convertible note that we issued in May, Which provided net cash of $393,000,000 to TransMedix after the cost of the capital related to the debt. Our weighted average common shares outstanding for the quarter was 32,500,000.

Speaker 3

As Waliz mentioned earlier this week, we have signed 2 agreements to support our long term strategy. We have purchased 2 aircraft in early Q3. Overall, our financial results in Q2, 2023 reflected the growth and adoption and utilization of our OCS technologies And our NOP service solution. In Q3, we have made several investments to enhance both our products and services And allow us to continue to grow our business in the long run. And as a concluding statement, I'll just repeat our updated revenue guidance of $180,000,000 to $190,000,000 for the year, which represents 93% to 103% growth over 2022.

Speaker 3

Now, I'll turn the call back over to Waleed for closing comments.

Speaker 2

Thank you, Stephen. We are motivated and humbled by our commercial traction and execution throughout the first half of twenty twenty three. That said, and as I said before, we strongly believe that we are in the early innings of a long runway of sustained growth for TransMedics. We must now allow for the time needed to scale our NOP infrastructure, integrate our new national logistic network That will enable us to fully capitalize on our unique NOP market opportunity. Our TransMedics NOP and the broader TransMedics team are working diligently and tirelessly to deliver the best clinical support And technology for our clinical transplant programs globally.

Speaker 2

I want to take this moment to recognize their efforts and contribution. Importantly, I want to take this moment to welcome the Summit team, the entire Summit team, operations, pilots and leadership To the TransMedics family, we are looking forward to their contribution to transforming the field of organ transplant logistics under the TransMedics Aviation umbrella. From where I stand, I see a very bright future for TransMedics. We just need the time to continue to execute so we can reach our TransMedics goal and summit of revenue growth. With that, I will now turn the call to the operator for Q and A.

Speaker 2

Operator?

Operator

Yes. Thank you. At this time, we will begin the question and answer session. And today's first question comes from Bill Poznaniak with Canaccord.

Speaker 4

Hey, great. Thanks. Good evening and thanks for taking my questions. I'm going to skip over guidance here and go right to, one, just Looking at the U. S.

Speaker 4

Heart number, you were up $13,000,000 to $13,500,000 So the sequential increase There's maybe a little less than what investors were looking for. And that I'm sure there's some guidance translation. But I was wondering if you could help us understand kind of what are the challenges you're facing in terms of the scale, which you referenced in your prepared comments And the NOP and then also, have we worked through the manufacturing supply challenges? Kind of where are you enabled to meet

Speaker 2

Thank you, Bill. Let me start with the second part of the question. We missed cases in the quarter mainly not because of supply chain issues, but because of logistical issues. We could not find planes to get us to where we need to be to achieve our missions. We've done the same.

Speaker 2

We lost Few missions as well for heart and liver as well in Q3 because of lack of logistical support and capacity in the system. So let me as far as the other capacity constraint, it's really We are not satisfied by the growth we're achieving now. We see Even bigger growth ahead of us, Bill. And with the NOP cases now are transitioning from your Additional 8 to 12 hour case to 20 to 30 hour case, given that many of the transplant programs across the U. S.

Speaker 2

Are now more comfortable allowing the organ to be managed overnight and doing the transplant procedure in the morning, to do a To have better quality and better support, that's we need to beef up our team to be able to withstand that demand and that growth. And we need to beef up our surgical capacity. But most importantly, we need to get the TransMedics Aviation and TransMedics Logistics, The broad logistics network up and running to be able to not to lose any case going forward. As far as specifics to the heart, I don't see this as I see this as a little bit of a blip. We're not concerned about it one bit.

Speaker 2

It's part of the normal ebbs and flows that happens in transplant, But we're not concerned about it. And we're obviously tracking all that. And we hope to see this recover in Q3 and Q4.

Speaker 4

Okay. And if I could circle back to guidance. The revenue guidance contemplates $86,000,000 to $96,000,000 in the back half And you've already done $94,000,000 So you're essentially saying the business is going down. Can you help us understand kind of what's Driving that down in the back half of the year or just any more granularity on the thought process behind guidance? Thanks for taking my questions.

Speaker 2

Thank you, Bill. Three things. 1, second half of the year is have summer holiday summer vacations, some holidays at End of the year, that always we are concerned about and what their potential impact on the overall transplant volumes. 2, We need time to integrate and Stand up the logistical network in the second half of the year. That's going to require attention and We may have additional cases in the second half of the year that goes uncovered because we don't have access to 3rd party Aircraft until we have our own network up and operational.

Speaker 2

And 3, just conservatism. We need to be conservative given that The huge growth that we're experiencing that we're already on the path to doubling our revenue from last year. I don't think Investors should be concerned about where we are. We have a bigger growth wave ahead of us. And right now, it is prudent for our TransMedics Team to focus on what's coming in 2024 and beyond, given what we've done already in 2023.

Speaker 2

So I don't want this to be misinterpreted in any way other than we are growing with a net breaking speed, And we need to take that time to acclimatize and integrate on our way to the top of the summit. And we're not anywhere close yet.

Operator

Thank you. And the next question comes from Alan Gong with JPMorgan.

Speaker 5

Hi, team. Congrats on the good quarter. I just had one question on lung. It was kind of encouraging to see that inflect upwards a little bit given the challenges you I'm also curious around the acquisition that you announced with EVOS. How should we think about What that platform can kind of bring to OCS and what features from that you're planning to maybe incorporate into OCS to help revitalize that market?

Speaker 2

Thank you, Alan. We're excited as well about lung performance this quarter. By no means, we're Clearing victory, we're continuing to monitor the situation and continue to invest mindshare in reviving that. And There are other initiatives we'll be announcing in the second half of this year to help the lung, specifically around the EVOS And OCS, and being fully transparent, we believe the current OCS design is far Superior than EVOS on many fronts. However, EVOS brings 2 unique attributes that we think might Of a clinical importance, we need to do the studies to prove it or disprove it.

Speaker 2

1 is the negative pressure ventilation And 2, just a better smaller footprint. Again, we need to leave the first two The results of a clinical program, but we did not want to lose an opportunity to integrate that into the OCS and have The clinicians have access to both positive and negative pressure ventilation. So that's what we see It's unique there and we believe it might add some significant clinical benefit. We need to do the trials to prove it.

Speaker 5

Got it. And then just a quick follow-up on profitability. I think it's definitely encouraging to see gross margins for both The product and service piece of your business improved as well as pretty good expense control on the operating side. When we think about the further investments you might need to make On building out TransMedics, the airfreight piece of the business, how should we think about that for the back half of the year once the Summit

Speaker 3

Yes. Hi, Alan. This is Steven. Yes, definitely we're seeing some You've got a modest improvement in margin with volume growth, but we're going to continue to invest by incorporating Summit. Summit, I think, is A modest increase in the overall spend rate, but we're going to bolster that with aircraft that we intend to purchase.

Speaker 3

And so we will see Depreciation come on to our books for aircraft over the second half of the year.

Speaker 2

Next question, if

Speaker 6

you could walk us through. That would be question number 1. In terms of Bridge to Life integration with the next gen form factor, Waleed, can you give us a little more Specifics in terms of how you're thinking about it, the timing of this acquisition of assets And the incremental clinical improvements that you are thinking about that necessitated this asset acquisition. And finally, Stephen, for you in terms of Summit Aviation, is this the end of the road or should we start thinking 12, 18, 24 months down the line, we would need to buy more planes to complement this fleet. Gentlemen, thank you for taking my questions.

Speaker 2

Thank you, Suraj. Suraj, the heart was up in Q2 over Q1. They may be not at the same pace that it was in Q1 over Q4, but it's up. It's not down and it's not flat. Factors to that is, again, I we're not concerned about it one bit.

Speaker 2

This is the ebbs and flows of organ transplantation. There were a few cases that we lost because we couldn't find planes to meet the mission. But it's not the only reason. It's just the epsom flows of organ transplant. Coming out of ISHLP, there may have been some confusion confusing remarks made at ISHLP.

Speaker 2

We took care of that and we feel very strongly that the heart will rebound in the second half of the year and going forward. And we're monitoring this very closely. Net net, we are not concerned about that dynamic one bit. The heart is growing and We are tracking it and we hope to report better that this issue is it's not existence in Q3. Remind me again, what's the second half of the second part before we go to the aviation?

Speaker 2

There was a

Speaker 5

second part.

Speaker 6

Yes. Walid, I was curious about the EVAS.

Speaker 2

The EVAS, yes. So Suraj, As you know, the next gen program for TransMedics has already started. We're not it's been ongoing for the last year. So the reason for the timing for the EVOS acquisition is three things. We think that negative pressure ventilation might add a Clinical benefit to combine it with our positive pressure ventilation, we are not going to release a product that has OCS name on it That has one ventilation mode.

Speaker 2

It will have both ventilation mode. To the form factor, the bottom line is we need to make sure that We the final form factor would be the right form factor for the OCS2 lung system That'd be lighter, smaller than the existing, OCS platform. So that's All we can comment on at the moment. Let me turn it on to Stephen to address the specific question about Summit.

Speaker 3

Yes. The answer, Suraj, well, Sumit is not the end all. Sumit is a relatively smaller operator and we need to buttress The fleet by investing in additional planes, we've already started that process, which we bought too early in Q3 and we're going to continue to buy more as we go through The next 12 months. So, it's definitely not the it's the beginning. It's definitely not the end.

Speaker 6

Thank you.

Speaker 2

Thank you, Suraj. Thank you.

Operator

And the next question comes from Ryan Daniels with William Blair. Yes.

Speaker 7

Thanks for taking the questions. Congrats on the strong performance. Waleed, one for you. I think you mentioned 8 aviation hubs. And I'm curious how that will correlate to the current NLP hub infrastructure, meaning will you consolidate that a bit and Change it now that you actually own the assets and could be a little more flexible there given your internal ownership?

Speaker 2

Ryan, it's good to have you On our call, thank you for the question. We are exploring all of the above at the moment, Ryan. I hate to Give an answer that might send people to think that there's a definitive direction. The definitive direction is we did the math. We based on data and historical performance and national Heat map of donors and we believe that if we put air assets At 8 out of our 15 hubs across the United States will result in nearly 100% coverage of the continental U.

Speaker 2

For us, that's huge. The workflow part is still underway for workflow optimization. We might actually open new hubs. Let us do the work. I hate to Front run this.

Speaker 2

I want the team in TransMedics to take the time to do it right. And definitely, once we have it, we will be sharing it on our upcoming calls.

Speaker 7

Okay.

Speaker 2

But for us, the priority is to provide 100% coverage, percent availability, 100 percent coverage across the continental U. S. That is the number one priority for the network to get operational.

Speaker 7

Yes, makes sense. And then regarding your comments about clients getting more comfortable with NOP and going to 20 to 30 hour cases, kind of improving the Work life balance in outcomes by allowing them to be in the morning versus anytime at night. I'm curious if that's something Also driving active and repeat users and maybe increasing the overall use of NOP such that there might be cases that before they didn't use it, Didn't use OCS, but now just because of that luxury, in order to improve the work life balance, they're actually moving more of their cases to the platform.

Speaker 2

Brian, absolutely correct. But it's not just it's well beyond work life balance at the moment. It's safer. It's safer for the patient. It's safer for the staff.

Speaker 2

It is less cost intense to have your primary transplant staff Operate in the morning and actually could enable them to do multiple cases back to back versus paying Double time in the middle of the night with the emergency or trauma teams that are on call. And it may or may not be The right talent assemble to do a safe transplant procedure. The other benefit in addition to that is in major academic It provides a better teaching and training opportunity for the fellows that are involved in organ transplantation. So it's well beyond just work life balance for the clinical staff. It's really it's a comprehensive benefit.

Speaker 2

And we've as you know, we've always stated that one of the benefits of NOPs to enable that to happen and we're really glad to see this happening and taking off that soon. We expect this to be A late transition. We're seeing this transition happening sooner than what we expected. It's great, But we need to make sure that we are staffed up for it and making sure that our team is fresh, safe and ready to cover these cases for as long as they need to.

Speaker 7

Perfect. That's very helpful. And then one last one, just in regards to the potential CapEx for Plains. I don't know if you mentioned this, but should we be thinking of Outright purchases or leases? And then if it's a purchase as a CapEx, kind of $10,000,000 to $12,000,000 range, is that what we should be thinking per plane?

Speaker 7

Thanks.

Speaker 3

Yes, Ryan. I think in the near term, it is CapEx, it is purchases and the range is pretty close to what you just described.

Speaker 2

And Brian, just to add to what Steven said, The reason why we looked at both options, we believe strongly that this is the right initial assumption To have the best cost profile for the operation. Leasing an aircraft adds significant margin to the laser That we want to make that an efficient process, so we can pass some of the cost savings and efficiencies to our transplant users.

Speaker 7

Thanks again for taking the questions and congrats on all the strategic momentum.

Operator

Thank you. Thank you, Ryan. Thank you. The next question comes from Josh Jennings with TD Cowen.

Speaker 8

Hi. Thanks for taking the questions. I will just I have to follow-up on OCF Lung franchise and just the lung initiative that you guys have in place in trying to help Double lung transplant volumes in the United States. I know there's been some talk on this call about the technology acquisition. But can you just help us just remind us of, I guess, the thrust there, both in terms of collaboration with the lung transplant surgeon community And other any other societies and just the cadence of how you see OCS being adopted At a higher clip in 2024 and beyond.

Speaker 2

Thank you, Josh. I think, Josh, we're in the early stages of of these initiatives. I think the second half of this year, we will start ramping up. We wanted to wait until we announce the acquisition, Because we believe this is going to be one of the catalysts that will get people's attention. As you may know, in the community, There was a lot of focus on what's coming next and EVOS had some Attention, focus on it.

Speaker 2

We wanted to get that Out of the get that acquisition completed, we'll use that as a potential catalyst. But there are other Several catalysts that we're working on with the existing OCS platform. It's going to take some time to get the next gen lung system Integrated with negative pressure ventilation and the new form factor operational and we will probably use that as second wave of growth, not the first wave of growth. We have other ideas and concepts to how do we can get the lung Growing in 2024, maybe the next gen lung system will be sort of late 2024, early 2025 time horizon, but we have others That we are planning to enact and implement in later this year and early next.

Speaker 8

Great. And I apologize if this question was already asked. I had another earnings call as well. But just in terms of the roadmap to profitability, I know you're adding the aviation Business. Tucking that in, but any high level comments?

Speaker 8

And I think we frequently get asked about just the revenue run rate Where TransMedics could hit EBITDA positivity. I don't know if there's any updated thoughts. I know that acquisition is not closed yet, but Anything on roadmap to profitability or just any margin impact from a high level from this Summit Aviation acquisition?

Speaker 3

Hey, Josh, it's Steven. Well, first I would say we were EBITDA positive this quarter. But no, it's a very good question. I would say we're not prepared to say that at this call about where we think it's going to be once we integrate Aviation. It's probably going to change.

Speaker 3

It's going to change so much, Some on the investment side, but it's also we're going to be adding additional revenue from aviation, which we haven't had before. So give us some time to model that through and we'll

Operator

Thank you. And this concludes the question and answer session. I would like to return the call to Oliad Hassanin for any closing comments.

Speaker 2

Thank you.

Operator

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

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Key Takeaways

  • TransMedics delivered $52.5 million in Q2 revenue, up 156 percent year-over-year and 26 percent sequentially, with US sales of $49 million.
  • The company issued convertible debt at favorable terms, raising net proceeds of about $393 million to fund the build-out of its TransMedics Aviation and Logistics network.
  • TransMedics agreed to acquire Summit Aviation to launch a dedicated national transplant logistics network, targeting 8 hubs and 10-15 operational aircraft by the first half of 2024.
  • It acquired perfusion technology assets from Bridge to Life—including negative pressure EVAS for lung and heart and Kraton for heart—to accelerate development of a next-gen OCS platform.
  • Management raised full-year 2023 revenue guidance to $180-190 million (93–103 percent growth) while emphasizing investments to scale NOP infrastructure ahead of its 10,000-transplant goal.
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Earnings Conference Call
TransMedics Group Q2 2023
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