Q1 2023 TransMedics Group Inc. Earnings Call
Good afternoon, and welcome to transmit ex first 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.
As a reminder, this call is being recorded for replay purposes.
I would now let's turn the call over to Brian Johnson from the Gilmartin group for a few introductory comments.
Thank you earlier today <unk> released financial results for the quarter ended March 31, 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 the question and answer portion and include forward looking statements within the meaning of federal Securities laws.
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 expectations, which include expectations for growth in our organization and guidance and our expectations for revenue.
Gross margin and operating expenses in 2023 are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements additional information regarding these risks and uncertainties.
Appears under the heading risk factors in our Form 10-K filed with the Securities and Exchange Commission on February 27, 2023, and our subsequent filings with the Securities and Exchange Commission, which are available at Www Dot FCC Dot Gov and on our website at Www Dot <unk> dot com trends medical 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 may one 2023.
That I will turn the call over to Waleed, Hassanein, President and Chief Executive Officer.
Thank you Brian Good afternoon, everyone and welcome to <unk> first quarter 2023 earnings call.
As always joining me today is Stephen Gordon, our Chief Financial Officer.
Since our last update we have continued building on our strong 2022 performance, making progress on many of our previously outlined growth goals for 'twenty to 'twenty three.
I am thrilled to report that our first quarter results demonstrated significant commercial momentum and accelerated clinical adoption through the <unk> N O P.
Importantly in Q1, we also made progress in scaling our supply capacity of our Ocs perfusion module.
Here are the topline results.
In Q1, we achieved total revenue of $41 $6 million, representing 162% year over year growth and 32% growth over <unk> 2022.
As predicted NOP continued to be the primary driver for our revenue growth a trend we expect to continue for the foreseeable future.
Importantly, we also demonstrated continued improvement down the P&L as we benefited from increasing operating leverage which Stephen will detail in his section of today's call.
Before I move on to discuss the <unk> details I would like to take a moment to mention that <unk> has released our first annual ESG report, which.
Which was published this morning on our website.
Now, let me move on and provide some more granular highlights on <unk> 2023.
Overall <unk> represented another new high watermark for case volume driven by liver and heart cases, which increased sequentially for the fifth consecutive quarter.
Meanwhile, lung volumes continued to lag as we work to help rebuild this very important market.
In line with our outline growth strategy. We also grew the number of liver and heart transplant programs, using ocs and N O P.
There were 32 liver programs that use ocs and NOP and <unk> of which 15 were active repeat users for heart. There were 40 programs that use the ocs in MLP of which 11 were active and repeat users. There were nine lung programs that use the ocs in N O P of which six were repeat users.
We're not concerned by the lung centered trend given the small numbers and our previous guidance that our initiatives will take approximately 12 to 18 months to materially impact lung program growth.
In terms of the NOP contribution approximately 91% of our total U S case volume came from N O P.
On a per Oregon basis, approximately 96% of liver, 83% of heart and 91% of lung cases, where from N O P program.
We view these NOP penetration rates are as very encouraging and in line with our goal of having trends medics NOP managing the lion's share of U S transplant volume over the next several years.
In <unk>, we also began to increase production and sterilization capacity.
The increase was driven primarily by the scaling of our second shift in our operational existing clean room.
We expect to see further gradual capacity expansion as we bring our new clean room online and fully operational.
That we received FDA certification of our new clean room in <unk>, we are confident that the timeline for the new clean room to be operational remains on track for late Q2.
Our <unk> results clearly demonstrated the fast pace of growing clinical demand for our Ocs technology and the N O P service model.
We remain laser focused on bolstering our supply chain and NOP infrastructure to sustain and further accelerate our growth.
Let me outline our key focus area areas to keep up with this accelerated demand.
Specifically on Ocs production availability and NOP infrastructure capacity.
So first.
Production.
Product availability.
As we as we as mentioned, we're continuing to invest in our manufacturing capacity and supply chain to ensure continuous product availability.
More specifically, we are enhancing production and sterilization capacity as well as raw materials supply chain management.
For production sterilization capacity as stated we are on track to bring our new clean room production space online by mid year.
But we are not stopping here.
We have already secured additional new space in our current facility to support the increased production build as well as raw material and finished goods inventory growth.
In addition, we are working with specialized third party workflow optimization experts to revamp our production process workflow to maximize efficiencies within both clean room spaces.
Lastly, we are significantly increasing our sterilization capabilities by qualifying a brand new measure sterilizer, while working to expand the capacity and the throughput of our current sterilization partner.
This expanded sterilization capacity will be online in age to 2023.
For raw material management, historically, we've never had a raw material shortage. However, as we are significantly increasing our production capacity to meet the growing clinical demand for Ocs technology.
We have established a new dedicated raw material planning and monitoring team within our operations team.
This new team.
This new teams function is to establish a scalable process to closely track our growing demand for raw material and proactive later plenish, a raw material to meet our near mid and long term needs.
Second we continue.
To expand our NOP infrastructure.
Specifically, we will grow our surgical and field clinical staffing throughout the next 12 to 18 months to meet the growing demand for the MLP clinical services across the U S.
We are also planning to Opportunistically add two to three new launch points later this year to expand our coverage and reach larger pools of potential donors faster and more efficiently.
Next we will revamp and scale the logistical management of the NOP.
Case flow.
We have recruited a senior logistics executive from Amazon to lead our initiatives to streamline and scale and digitize the entire logistical workflow of our NOP program.
Literally starting from the initial transplant centers call to the NOP hotline through the Oregon, arriving at the transplant Center.
One key feature of this exciting new initiative is creating a digital central command and control and Dispatch Center.
I'm sorry creator.
Creating a digital central command control and dispatch center here in Andover to oversee and manage our national NOP workload.
We hope to start sharing more granular detail on this exciting initiative towards the end of 2020 three.
Additionally, we announced at ISC show T. In April that we are planning for the launch of our customer facing portion of the transmitter Ocs connect application.
This is a secure and HIPAA compliant app that will provide surgeons and clinicians with real time updates on the overall status of the Oregon on Ocs as well as logistics and travel time information.
It will also enable secure real time communication of case information between our team managing the Oregon and the transplant program clinical staff.
We are very excited about this new function of our Ocs connect and we hope it will provide more transparency and confidence to our users about the status of their Oregon's en route to the transplant center.
Finally.
And as we have stated several times, we fully intend to eventually control the entire air and ground transport function for the NOP transplant cases.
This will help remove a critical bottleneck for our growth.
We are seeing our N O P volumes are starting to outpace the capacity the availability and flight radius of the fragmented transplant air charter model that we and the transplant programs are using today.
We also announced at ISC chose D that we expect to launch this important transmit ex aviation initiatives sometime in <unk> 2020 three.
We are actively engaged on several fronts to establish a national dedicated NOP transplant charter flight network to cover our existing and potential new hubs.
I'm looking forward to discussing this exciting initiatives further in the latter half of this year.
In the meantime, please allow me.
To take this opportunity to discuss in detail and clarify the current way of air transportation for organ transplants in the United States.
To start it is important to recognize that all I repeat all air transport for heart lung and liver transplanted in United States are transported via charter flights.
These flights costs are a part of the organ acquisition cost center.
And our and allow charge for the CMS cost support.
All commercial transplant payers and CMS routinely reimburse these costs.
Historically, when Oregon Transport was limited to a short distance within the donor service area or D. S. A of the involved organ procurement organization or OPO, the opioids, where the main flight coordinators for the transplant programs.
Consequentially, our few OPO purchase their own short range aircrafts to manage local travel.
Back then more than 90% of donor organ allocation came from that transplant programs local OPO DSA literally less than 250 miles.
And only less than 10% came from outside of the local DSA.
Today, the reality is the complete opposite.
Let me explain why and how.
Approximately five or six years ago, Oregon allocation for them for lung heart and liver transplant shifted from regional to national allocation in the United States.
This effectively means that at Doner San Francisco.
Can and should be allocated to the.
Matched.
Recipient in Boston, or New York, or Raleigh, Durham, North Carolina.
This led to many OPO selling their jets and shifting most of the responsibility if not all of the responsibility of air transport coordination back to the transplant programs.
To make this more interesting between 'twenty 'twenty 2020 'twenty two the Ocs technology became FDA approved in the United States and the N O P was established.
This shift led to a very important shift in the United States, Oregon placements, because the ocs enable safe longer distance procurement across the entire country and from outside the Continental U S like Hawaii, Alaska, Puerto Rico and Canada.
So how do transplant programs coordinate their Oregon transport charter flights today.
They rely exclusively on a few regional charter flight brokers, who owns no jets or even have the license to operate a charter flight.
They rely those those.
Those charter flight brokers rely exclusively on a third party owners and operators of charter flights. This.
This is a very cost and operation the inefficient way of running organ transplant transportation.
And will become a major bottleneck for NOP growth going forward.
This antiquated fragmented approach is not geared to the distances that we are now covering the volume of dorner, Oregon missions that we do on a daily basis, using NOP or the volume expected in the near and long term future.
Importantly, many of the jets used today are older vintage with very limited flight range and Lax Wi Fi communication capabilities.
We saw firsthand in 2022 the massive cost inefficiencies that exist in the current model.
And we believe transmit ex managing our own logistical network will create value for our clinical users their patients.
And other critical stakeholders in Oregon transplantation in the United States.
We believe strongly that securing this dedicated national network of charter flights under transmit ex Aviation would act as an additional significant catalyst for the growth of NOP and transmit X business in the United States.
Again, I hope to share more details as we get this initiative operational later this year.
There is no doubt our Ocs technology, an NOP service model.
Our driving a transformative shift in organ transplantation in the United States as demonstrated by our first quarter performance and strong growth trajectory thus far.
It is important to note that we strongly believe that this is only the beginning.
We are not stopping or slowing down.
We have bigger goals in mind, and we fully intend to execute on our strategy to achieve sustained long term growth for our business.
We remain laser focused on execution and navigating the steep growth curve to drive continued success.
As I've done in the past I would like to share with you all what we see as a potential challenges that could temporarily impact our growth trajectory for the remainder of 2023.
First constraints on our supply chain and production capacity.
As stated earlier, we need to be cognizant of our demand.
For raw materials as we increased production capacity.
Though we do not currently foresee any issues, we could face some delays regarding some some parts availability or obsolescence issues that could temporarily hamper our immediate term growth.
Second clinical NOP staffing delay.
Delays could limit our ability to cover new regions hubs temporarily until we resolve it.
Finally delays in securing our logistical network in air transport could temporarily slowed down.
Slowest down later later this year and into 'twenty 'twenty four.
That said given our strong <unk> 23 results and increased confidence in the trajectory of our finished goods supply.
Balanced with potential scalability challenges above we are increasing our annual revenue guidance for the full year 2023 to be between $160 million to $170 million up from our previously communicated guidance of $138 million to $145 million.
This new guidance represents 71% to 82% growth over full year 2022 total revenue.
With that let me turn the call to Steven to cover the detailed financial results for the quarter.
Steven.
Thank you Walid.
I'll provide some additional details on the Q1 results and other financial information for the quarter.
For the first quarter of 2023, our total revenue was $41 $6 million.
This was an increase of 162% from the first quarter of 2022 and.
And a 32% sequential increase from last quarter.
In the U S revenue was $37 $5 million, an increase of 177% from Q1, 2022, and 29% sequentially from last quarter.
The Oregon breakdown on U S revenue was $23 1 million Oh Ocs liver.
$13 million of Ocs heart.
And $1.4 million of lung.
Yeah.
X U S revenue was $4 1 million, a 75% increase from Q1 of 2022.
And ex U S revenue was made of $3 8 million apart and point $2 million of lung.
Regarding the breakout of product and service revenue this quarter.
As a reminder, the service revenue includes the other the amounts we charge for the surgical procurement and Oregon management as part of the N O P. And Q1 product revenue was 34 point or $34 million and service revenue was $7 6 million.
Gross margin for the first quarter of 2023 was 69%.
While this is down from 76% in the first quarter of 2022. It is a sequential increase from the 66% reported in Q4 of 2022.
The margin on product revenue was 79% in Q1.
And the margin on service revenue was 27% in Q1 2023.
The sequential improvement in service margin reflected some of the improvements in production capacity and drove the overall the higher overall sequential gross margin.
Total operating expenses for the quarter were $39 million, 44% above Q1, 2022 operating expense driven primarily by our continued investment in scaling both the MLP as well as the overall company operations.
Operating loss was $2 1 million in the first quarter of 2023 compared to $9 4 million. The first quarter of 2022, demonstrating the strong leverage in the business as we grow our revenue.
Our net loss for the first quarter of 2023 was $2 6 million.
Third to $10 6 million in the first quarter of 2022.
And our total cash was $195 4 million as of March 31, 2023, which equates to a reduction of $5 8 million from the balance at the end of Q4 2022.
Our weighted average common shares outstanding for the quarter were $32 3 million.
Overall, our financial results in Q1, 2023 reflect our continued execution of the Ocs and NOP growth plan, we have been able to unlock additional production capacity.
Planned, which was reflected in both our top and bottom line results.
And just to repeat our guidance update we are increasing annual revenue guidance to the range of $160 million to $170 million, which represents 71% to 82% growth.
Now I would like to turn the call back to Lee for closing comments.
Thank you so much Stephen.
We are thrilled by our <unk> results and continued growth of clinical demand for our Ocs technology and the NOP clinical services.
That said.
As I said before we strongly believe we're still in the early stage of the long term sustained growth trajectory, we envision for transplant X.
We are not basking in our success, we understand that this steep growth curve could pose potential challenges. We remain focused laser focused on driving our operational commercial and clinical initiatives, while navigating any potential channel challenges to meet our near and long.
Term growth potential.
We look forward to continuing to make strides on our strategic initiatives throughout 2023.
With that I will now turn the call to the operator for Q&A operator.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you were using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question is from Bill prevent <unk> with Canaccord. Please go ahead.
Okay, great. Thanks for taking my questions and good evening.
I'm going to start out with and congratulations on the quarter.
Just curious how did capacity issues impact new account adoption like are you are you constraining. Your sales folks are are you from bringing on new accounts and what are you over this past quarter end.
And then what does the new clean room.
And in terms of net capacity and how does that come online over the next few quarters and then how does that impact gross margin.
So bill. Thank you for the question I'll address the first two parts.
Parts of the question and then I'll, let Steven address the impact on gross margin so the ramping up of the capacity.
Ltd.
To a lesser extent in Q1 compared to Q3 and Q4 of last year, our ability to go deeper in some of the accounts.
We we tried not to limit new accounts addition in Q1, that's why you see the growth on the new accounts for our heart and liver.
But you notice that the that the repeat.
And active users remain.
Slightly up or remain flat, it's because we wanted to get new accounts in yet we wanted to supply our traditional users with with that with the added capacity that started in the beginning of Q1 and the end of Q1. This this constrained pretty much dissolve based on the increased capacity.
As far as the new clean room capacity, we expect.
At least at least in this is this is it.
Guesstimate at this point.
Because I believe the additional.
Workflow optimization and efficiencies with even increase that.
Substantially I, we guesstimate approximately four times the capacity I would say over the next 18 to 24 months because that when we opened that new clean room, it's not going to be fully staffed it's not going to be double shift it will take time, but it will add additional capacity gradually that's why I said <unk>.
Julie but definitely over the next 18 to 24 months, we expect a significant capacity increase the key point to the audience or the people listening is we're not just stopping at current we are constantly looking at capacity we're constantly.
We do not want to get back to a situation, where we were at in Q2, Q3, and Q4 of last year. So Nick and the team are constantly monitoring that and we are going to be aggressive on making sure that we avoid.
A significant back order situation from happening to us again with that I'll turn it on to Stephen to discuss the gross margin.
Yeah, Hi, Bill this is Stephen so regarding gross margin. We did we were able to see a sequential increase.
Primarily that was around the service margin of this quarter, because we didn't have as much.
Logistical cost of moving our disposables quickly around the country to meet <unk> needs. So we're able to to kind of reduce that some.
At the same time, we do have additional costs from the new clean room, that's already kind of baked into our margin. So.
As I've said in the past I expect moderate increase in margin as our revenue grows in them sequentially.
Sequentially and I still feel like that's the right answer.
Great.
For my second question just on the aviation you talked about the potential expansion and thanks for going through that in detail.
What's the most likely pathway is to business in the cost to do so to get into is this an acquisition or is it building it kind of plane by plane and then B do you think you'll need to raise capital or equity or debt or some form.
Do what you are looking to do and then she how does this impact the revenue gross margins as the P&L revenue gross margin operating and thanks for taking my question.
Thank you Bill again I'll address the first two parts of your question and let Steven address that.
That impact in the P&L.
Yeah.
We evaluated all different options.
Of how to build the transmit ex aviation.
Business and transmit X.
We've completely eliminated the organic option of adding one plane at a time because it will take significantly long time for transplant X to secure a part 135 charter operating license is going to take at least 12 to 18 months. So our two most efficient paths are either.
Acquiring a part 135, operator that had significant assets of jets.
That we can leverage quickly or creating a joint venture with one operator that had again a license and a significant number of assets. These are the two options that we are actively pursuing across the United States.
As far as the the ability to finance. This we've always stated publicly that we do not expect to tap into our current balance sheet to finance anything related to.
Modalities of financing that is.
Non dilutive or less dilutive forms of financing options in front of us.
And where we're working with our advisors on the different options.
I'll turn it on Stevens Bill from a from a P&L perspective, so today.
The revenue for flights is not in our P&L. So we would think of that as an adder from a revenue perspective for each transplant, whether it's a.
$20000 30000 depends on the length of the flight.
So that'll be one change so more of our revenue would be on the service bucket. Although we think the service revenue. The service margin will be improved the overall company gross margin percent may come down a bit.
But from a dollar perspective it should be.
And accretive to our income and once were in positive EPS it would be favorable to EPS.
Great. Thanks for taking my questions.
Thank you Bill.
The next question is from Allen Gong with J P. Morgan. Please go ahead.
Hi, Thanks for taking my question congratulations on the really strong quarter.
We there's obviously a lot of really exciting things to talk about when it comes to heart and liver, but I do want to kind of touch on the lung a little bit.
It is clearly continuing to face pretty significant challenges even as the rest of your portfolio is taking off I understand that lung really was impacted quite a bit by COVID-19 and has not really come back necessarily in the same way for you even as transplants have recovered so what.
What kind of details can you provide on your strategy to really get that market back up and running for ocs.
Okay.
Thank you Alan for the question I think.
I think as I I'll focus on what I stated.
Publicly before and hopefully as the year progresses, we will be able to reveal some of <unk>.
More granular detail about our initiatives. So basically what we're doing is literally.
We are trying to leverage three things, we're trying to leverage the NOP.
And the success of the MLP and liver and heart.
To wrap up the lung market.
So that's one.
Angle and we discussed that in detail at the ISC show T.
The second angle is we're trying to re educate the market market in general including patients group about the importance of Ocs lung and what does it mean to our patients on the waiting list waiting for a lung transplant and you're also the market in the form of the Pulmonologist and net.
Transplant surgeons, because I believe the last three years of coal you mean that three years with Covid people just kind of lost focus on even understanding what the importance of machine perfusion for lung.
Would be.
And this is the area that I'm going to be as vague as I can and hopefully as the year progresses, we will provide more granularity around it we're trying to find the right mix of a catalyst to kind of quickly galvanize a major clinical focus on machine perfusion for lung.
Using our platform our NOP I leave it at that Alan but I promised you that hopefully within the next quarter or two we will we will discuss in detail again I am not concerned about the trend. We saw in Q1, we were watching what's happening in Q2, and and we feel that.
The early initiatives are starting to bear fruit.
But we're not stopping here, we're going to continue to push forward with all three.
Prongs as we move forward and we will explore other modalities as well. So this is an important market for us and we're not going to give it up that easy.
Thanks, and then another question with a bit of a more positive slant when I look at your updated guidance. It looks like a really impressive beat and raise quarter, but when I look at what you've kind of left for yourself in two Q3, Q4, Q, you're basically implying flat revenues right on.
Quarterly basis, now I'm, not saying the cadence will exactly be like that but what's really holding you back from meaningfully outperforming that once you have capacity up and running at the end of <unk>.
Like why why shouldn't you be able to really outperform this by yourself. It yourself. Thank you.
Thank you Alan.
So Alan I.
We were trying in the script, we're trying to identify and nuance that is taking place as we ramp up production capacity, which has been our achilles' heel for the last three quarters, now where were straining our ability to secure raw material at the same pace or the same.
At the same.
Volume as we couldn't.
They don't know what's coming around the corner, we are ramping up our purchasing of every raw material, we use for the build of all of our products.
Solutions, So we had to leave.
We have to leave some room to allow for some surprises to take place.
And also as you know we are conservative by nature, and we like to be realistic.
We know what that is.
You know I think in Med Tech.
Having 70% to 80% growth. It is not an easy thing to do and we think this is this is very realistic and we hope to do better but right now I cannot we have to be prudent that the team is working very hard to make sure that we don't run out of raw materials. The other area as I stated in our not on the call.
This is this is really when I feel confident that you know.
Going forward in our long term growth trajectory, but this is a year that we're still building we're still building our.
Supply.
Infrastructure, our NOP infrastructure, where we're upgrading and scaling our logistics, we're adding a whole new.
The business unit and transmit ex called transmit ex aviation. So we have to be prudent we have to be realistic and we feel pretty strongly and pretty.
Excited about the the.
The next question is from Cecilia furlong with Morgan Stanley . Please go ahead.
Great. Good afternoon, thanks for taking the questions and congrats on another strong quarter and I wanted to start well, even some of your comments and the Q&A I'm just about the center targeting balance on that you talked about in <unk> as you went through some of the supply.
And as you think going forward just as capacity increases can you talk about how youre thinking about the focus on bringing on new or the earlier stage N appeasers versus really retail circling on and driving deeper utilization across your current repeat users and then also as we think about 'twenty three two what are you contemplating the <unk>.
Yeah.
Thank you Cecelia for the question I think my answer for both questions will be the same Cecilia. We've always said from the day. We went public we said transmitted is not a single Oregon company.
Company, we're not a single trick pony.
Transmit <unk> full potential happens when we have all.
All three organs firing in all cylinders also as we gained FDA approval of heart and liver. We also stated publicly that that kind of make the business more resilient to any headwinds in one Oregon I E. The lung delays so from our perspective, we are going to continue to push on.
On all three fronts to achieve our overall growth for the business, regardless, where it's coming from so that's number one or the second half of your question. The first half of your question.
Again, we stated this last quarter that our growth strategy is not a single focus point, we're focusing and going deeper in our existing accounts our existing centers, but also growing the number of users in the United States.
And <unk>.
And that's something we're going to continue to pursue that's why at some point hopefully in the future at some point the number of centers is really going to be moved to us.
As long as we're demonstrating growth.
And the third element to the strategy is growing the overall U S transplant volume. So one can argue.
If we just stay with one core group of centers, and we were able to penetrate their existing volume deeper and grow their overall volume by 30 or 40% that could achieve significant success growth wise for <unk>, but that's not what we're doing we're doing all of the above what we're targeting existing centers to grow.
Their penetration and overall volume, we're targeting new centers to hook them up on NOP and its benefits for them and for their patients and for their staff and going deeper and growing their overall volume. So that's what we'd be doing over the next few years and that we believe that if we achieve that.
Coherent strategy that is that is the recipe for a huge growth and success were transmitted.
In our humble view makes sense medics more resilient to any of these headwinds that we could experience throughout this growth potential.
Okay Super helpful and if I could follow up as well I'm just on margins and specifically the service margin and component of gross margin that we thought tick up and Stephen if you could talk through how we should think about just that component of gross margin did the balance of the year and then secondly on opex as well.
Specifically SG&A and some of the initiatives. He talks about in terms of building out adding incremental components to N O. P. Just how we should think about the balance of this year and the Opex and SG&A standpoint, and thank you for taking the question.
<unk>.
Device or disposable shortage situation, so that will help as our revenue grows the help our overall margin for the company as far as Opex.
We grow Opex at about 44% I think I mentioned in the last our last call.
Growth overall annually in the 30% to 35% range that includes a lot of these initiatives. So I think that gives a sense of.
How we're investing.
Great. Thank you.
The next question is from Suraj Kalia with Oppenheimer. Please go ahead.
Good afternoon Waleed, Stephen Tamar can you hear me alright.
Yes, perfect Suraj.
Perfect gentleman congrats on another nice quarter, so well if I was asked a question by our client and suffice it to say it threw me for a loop maybe you can help clarify so the question was.
Sure transmit X have waited to get into the logistics I E train's medics aviation.
Critical mass mass of Oregon.
Oregon's you know.
Under their belt I.
I believe you gave a number of 535 done till sometime in April would it have made more sense.
To reach <unk> thousand 2000, and any additional color there would be great.
Sure.
So raj Thank you for the question.
We of course, we would have never entertain this thought if we do not believe that not only we've achieved a critical mass that what we see coming.
We're literally.
It could literally.
You know put the entire logistics and to a screeching halt.
So we feel very confident.
That we are on the we have enough critical mass today, but more importantly, we're very concerned that.
You know our volume by year end is going to literally be at a much higher scale that could actually start becoming a bottleneck finding airplanes, we're having problems finding airplanes for our mission today.
Not at the end of the year, and we know where our volume is going to be significantly higher by year end and definitely into 2024. So it.
It makes perfect sense that question makes sense and they said we want to reiterate that we believe we are we have reached a critical mass today and what we see coming would even behoove us to act quickly and decisively before it becomes another area that that we are talking.
About on these calls.
Fair enough Walid one for you and one for Steve and then I'll hop back in queue. So we'll eat it.
It's been a little over a year, but the heart approvals.
Victor its heart, whether its livers.
How should we think about the pie you all taking away share from cold storage.
Or do you think the overall pie is increasing well leave that for you.
And Steven for you would find me so when transmit aviation we look at it would it be a separate quote unquote subsidiary. So the P&L would be different or would everything be under the transmit X umbrella traditional.
Traditional reporting so to speak and Opex and so on and so forth and stiffened would I be too far off in saying all set and done in two years.
Including 25 surgeons per Oregon, Let's say 16 planes lease.
Obviously, the form, but you're going to be talking about an incremental expense somewhere $50 million to $70 million per year gentlemen, Thank you for taking my questions and congrats again.
Thank you Suraj. So let me address the first question the answer is both.
We're taking a significant portion of the existing market and we're growing the overall market.
And again the numbers speak for themselves. We've seen heart grew by 9% last year lung grew by 7% lever grew by 3%. We expect that overall growth of these organs to be higher in 2022.
And sorry, 2023, and we're taking it to <unk>.
A meaningful percentage of their of their current volume why because we're streamlining the process through the NOP and this is what I said earlier to <unk> question. Our strategy is not just to cannibalize the existing market our strategies to do that plus grow the overall market and I think our I believe.
Is that our results speak for themselves we have demonstrated our ability to do both in our 2022 results and we are continuing to see that trajectory in 'twenty three and we expect that to continue going forward.
And Suraj, let me address the question on the the subsidiary I don't expect it to be a separate subsidiary reporting separately I expect it to be part of our overall P&L and when it comes to what while I can't really talk about the investment.
At this moment, what I can say is it will include it will include a revenue component added revenue as well as Cogs. So it's not going to be a breakeven that will be added.
Bottom line to transmit likes as well okay.
Makes sense.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Waleed Hassanein for any closing remarks.
Thank you we thank you all for your time this evening and we look forward to having our next call.
Our Q2 results have a wonderful evening.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yes.