Q2 2023 TransMedics Group Inc Earnings Call
Good afternoon, welcome transparency second quarter 'twenty, what do they say earnings conference call.
At this time all participants are in a listen only mode.
There will be facilities and any question and answer session towards the end of today's call.
As a reminder, this call is being recorded for replay purposes, and all the charcoal over to Brian Johnston from the Girl Marr group for a few introductory comments.
Thank you earlier today <unk> released financial results for the quarter ended June 32023, a copy of the press release is available on the company's website before we begin I'd like to remind you that management will make statements. During this call including during the question and answer section that include forward looking statements.
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.
<unk> and guidance and our expectations for revenue gross margins and operating expenses in 2023 are based upon our 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.
Information regarding these risks and uncertainties appears under the heading risk factors on our form 10.
<unk> 10-K filed with Securities and Exchange Commission on February 27th 2023.
And our subsequent filings with the Securities and Exchange Commission, which are available at Www Dot SEC Gov and on our website at Www Dot <unk> dot com trends nice 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 three 2023, and with that I will now turn the call over to Waleed, Hassanein, President and Chief Executive Officer.
Thank you Brian .
Good afternoon, everyone and welcome to <unk> second quarter 2023 earnings call.
As always joining me today is Stephen Gordon, our Chief Financial Officer.
The first half of 2023 was an important period for <unk> as we successfully executed on several operational and strategic growth initiatives.
Our efforts have culminated in <unk> being our highest revenue quarter to date.
We also bought us our balance sheet with a successful convertible debt offering.
Earlier this week, we entered into into agreeing.
Agreements for two acquisitions that will propel us further on our growth trajectory, both short and long term.
Into Q, we demonstrated significant commercial momentum and accelerated clinical adoption through NLP across all three oregon's.
Operationally, we open our new clean room on schedule and secured a second large sterilization partnership.
Further enhancing our production and throughput capacity.
Will better position us to meet the high and growing demand for Ocs.
Now, let me cover the specifics of our <unk> performance.
In the second quarter, we achieved total revenue of $52 5 million.
Representing 156% year over year growth and 26% growth over <unk> 23.
U S sales represented 49 million in revenue growing 170% year over year with O U S sales up 48% to $33 5 million.
We also demonstrated continued improvement down the P&L as we benefit from increasing operating leverage.
Stephen will cover the detail in his section of today's call.
Importantly, we buttress our balance sheet by issuing convertible debt at highly favorable terms, which provided a net of approximately $393 million to enable us to invest in standing up that transmits aviation and logistics network.
<unk> also represented another new high watermark for volume driven by growth across all three organs for the first quarter in many quarters, we saw growth in liver heart and lungs.
Liver and heart increased sequentially for the sixth consecutive quarter mean.
Meanwhile, one volume was the highest we've achieved in the past eight quarters.
We are planning to continue to build on this early lung momentum and hope to see continued growth going forward.
In line with our outline growth strategy. We also grew the number of liver heart and lung transplant programs using ocs and MLP.
In two Q35, liver programs use the ocs in the MLP.
20 of which were active users.
Or heart they were 40 programs that use the ocs in N O P 12 of which were active users.
There were 13 lung programs that use the ocs in N O P five of which were repeat users.
We're encouraged by the early signs of recovery of our lung program. However, we remain focused on continuing to grow a long segment of our business over the next 12 to 18 months.
In terms of N O P contribution approximately 93% of our total U S case volume came from N O P.
On a per Oregon basis, approximately 98% of liver eight 1% of heart and 97% of lung cases, where from N O P.
As we stated before we expect the MLP to continue to drive the lion's share of our revenue in the U S going forward.
In <unk>, we initiated production in our new clean room, right on schedule, adding more capacity to meet demand for ocs.
We are currently building up in training the first and second shifts for the new clean room space, we expect to produce over 10000, Ocs perfusion modules per year and this new clean room once it's fully staffed.
Finally in <unk>, we are able to add significant sterilization capacity by qualifying our second large sterilization partner.
This will further enhance our throughput capacity going forward.
Our tubular results have once again demonstrated the growth trajectory of our business as we described in our one to call our experience operating the MLP model in the United States over the past 18 months have shown us how inefficient and on scalable the current industry.
Model for Oregon Transportation logistics is.
<unk> is committed to developing a more efficient national model for organ transplantation in the U S by launching transmitted aviation as the first 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 N O P transplant volume in the U S by the second half of 'twenty 'twenty four.
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 N O P 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.
Did that and I am delighted that we recently signed a definitive agreement to acquire summit aviation.
One of the Premier U 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 N O P reach and capacity.
These 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.
Yeah.
From a timing perspective, or a timeline perspective. This acquisition is expected to close in Q3 2023.
And subject to fulfillment of satisfactory closing conditions, we intend for Ben Walton to the current president of summit and a veteran of the.
I assumed the role of VP of transmitted aviation services.
We also intend to maintain and transition the entire operations team and the majority of the pilots from summit to transplant X.
Further that transparency 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 deployed that trans medics aviation fleet.
From approximately eight dedicated aviation hubs capable of covering 100% of the continental Continental U S.
We will use a data driven approach to continue to refine the national transmit ex transplant logistical network to maximize coverage and.
And efficiency of the operations.
We have also begun the process of acquiring several additional aircrafts to expand the trans medics 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 remain summit existing flight school operations for the foreseeable future to ensure future supply of trained pilots to support that transparent fleet.
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 an aircraft management operations to transition to 100% transmit 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 MLP footprint and reach in the U S. We must also continue to invest in expanding the MLP infrastructure to meet the significant growth in front of us.
Especially or specifically, we intend to grow our surgical and field clinical staffing throughout the next 18 to 24 months to meet the growing demand for our <unk> clinical services across the U S.
Meanwhile, our logistics team is working on revamping and scaling the MLP workflow and logistics dispatch to maximize coverage and efficiency of the process.
As I've stated publicly before we have transmit X are focusing on growing our NLP transplant volume to reach 10000 transplants per year over the next five years.
To achieve this goal we just we devised a multifaceted strategy, which goes as follows.
First maintain technological leadership in the field by developing a next gen. Ocs platform that is optimized for NOP workflow and clinical management.
This will enable scalability of the clinical case volume.
Second expand our clinical indications for the Ots platform and finally expand the overall transmit X product offering.
To execute on the above strategy, we recently acquired assets and IP related to two perfusion technologies from bridge to life.
The first was warm perfusion E Vos technology for lung and heart transplant and the second was whole perfusion life creative for heart transplants.
We plan to use unique elements of these technologies to supplement our ocs platform too.
Accelerate the Ocs Nexgen product development.
Expand our Ocs heart clinical indications to cover standard criteria Hearts that are currently preserve today using merely cold static storage.
We believe that there may be a 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.
And then finally expand the breadth and value of our intellectual property portfolio.
We hope to have more to share about these technology development programs in the near future.
Our commercial performance over the past six quarter quarter have demonstrated the significant and growing demand for ocs and NOP.
We have successfully demonstrated our ability to significantly grow our annual transplant volume and revenue in 'twenty two and we are on track to deliver similar results again in 'twenty three.
It is important to note that.
We strongly believe that this is only the beginning.
And we are determined to reach our goal of 10000 transplants over the next five years.
We must however, take the time to scale and buttress, our MLP infrastructure and allow the time for integration of the aviation and logistics operation to grow our NLP capacity to the next level.
I can best describe it as.
The following.
On the path to a very high transmitters transmit X growth salmon summit.
We must stage or pace ourselves to allow for acclimated nation and integration to ensure achieving our long term.
<unk> target.
We see the next four to six months as the critical time needed to be ready for our next growth stage or wave in 'twenty 'twenty four and beyond.
Given our strong <unk> and H $1 23 results.
Balanced with potential scalability challenges, we are increasing our annual revenue guidance for the full year 2023 to be between 180 and $190 million.
Up from our previously communicated guidance of $160 million to $170 million 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.
Thank you Walid I'll now provide some additional details on the second quarter results and other financial information for the quarter.
For the second quarter of 2023, our total revenue was $52 5 million.
This is an increase of 156% from the second quarter of 2022.
The 26% sequential increase from last quarter.
In the U S revenue was $49 million an increase of 170%.
From Q2, 2022, and 31% sequentially from last quarter.
The Oregon breakdown on U S revenue is the following $32 7 million of Ocs liver <unk>.
$13 5 million well she is heart of $2 8 million of Ocs lung.
Let me repeat that $32 7 million liver $13 5 million part and $2 8 million loan.
X U S revenue was three and a half million, 48% increase from the second quarter of 2022, and the breakdown there was $3 1 million of heart.
And <unk> 4 million of loans.
Now regarding the breakout of product and service revenue for the quarter. As a reminder, the service revenue is the out of the amounts we charge for the surgical procurement in Oregon management as part of the MLP in Q2 product revenue was $42 5 million and service revenue was $10 million. So service revenue was 19% of the total.
The gross margin for the second quarter of 2023 was 70%.
This is flat from a year ago, Q2, 2022 and up from 69% in the first quarter of 2023.
The margin on product revenue was 80% in Q2 2023, that's up from 77% in Q2 of 2022.
Up from 79% in the first quarter of 'twenty three.
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 as a result of the higher revenue in the quarter.
Total operating expenses for the quarter were $37 6 million, that's 56% above Q2 2022 operating expense.
We have continued to make critical investments in the company to ensure scalability to support growth.
In R&D, we are developing next generation technologies and digital tools to improve ocs capabilities in the MLP process.
And then SG&A, where other resources to both our MLP as well as the Companys overall infrastructure.
Operating loss for the quarter was point 9 million in the second quarter 23, let's compared to $9 $7 million loss in the second quarter of 'twenty two.
And improved from a $2 $1 million loss last quarter.
Our net loss for the second quarter of 2023 was $1 million, even and that compares to $11 5 million in the second quarter of 2022.
Total cash on the balance sheet is $582 2 million as of June 30 June 32003, which includes the proceeds of the convertible note that we issued in May which provided net cash of $393 million to transplant.
After the cost of the capped call related to the debt.
Our weighted average common shares outstanding for the quarter was $32 5 million.
As <unk> mentioned earlier this week, we have agreements to support our long term strategy first we signed an agreement and closed the purchase of the assets and IP of EU, Boston Love Cradle technologies from bridge to life.
Second we signed an agreement to acquire 100% of the equity of summit aviation.
Which we expect to close in Q3.
And finally as a second step in our aviation strategy. We have purchased two aircraft in early Q3.
Overall, our financial result in Q2, 2023 reflected the growth in adoption and utilization of our Ocs technologies and our MLP service solution.
In Q3, we have made several investments to enhance enhanced with our products and services.
But allow us to continue to grow our business in the long run.
Concluding statement I'll, just repeat our updated revenue guidance of $180 million to $190 million for the year, which represents 93% to 103% growth over 2022.
Now I'll turn the call back over to our lead for closing comments.
Thank you Steven.
We are motivated and humbled by our commercial traction and execution throughout the first half of '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 transplants.
We must now allow for the time needed to scale, our MLP infrastructure.
Integrate our new National Logistics network.
That will enable us to fully capitalize on our unique MLP market opportunity.
Our transmit ex MLP and the broader trends medics team.
Our working diligently and tirelessly to deliver the best clinical support and technology for our clinical transplant programs globally.
I wanted 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 transplant X family. We are looking forward to their contribution to transforming the field of organ transplant logistics under the transplant aviation umbrella.
From where I stand I see a very bright future for transplant X. We just need the time to continue to execute so we can reach our trans medics global.
<unk> and summit revenue growth.
With that I will now turn the call to the operator for Q&A operator, yes. Thank you at this time, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre 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 the roster.
And today's first question comes from Bob <unk> with Canaccord.
Okay, great. Thanks, good evening and thanks for taking my questions.
I'm going to skip over guidance here and go right to <unk>.
One.
Just looking at the U S Heart number you were up.
<unk> 13 million and 13 5 billion. So the sequential increase was maybe a little less than investors were looking for and.
Im sure Theres 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 MLP and then also have.
Have we worked through the manufacturing supply challenges kind of where you enable to meet demand and if you missed any cases in the quarter because of.
You didn't have supply thanks.
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 mission.
We've done the same we lost few missions as well for heart and liver as well in Q3 because of lack of logistical support and.
And capacity in the system.
So as far as that.
The other.
Capacity constrained it's really.
We are we are not satisfied.
By the growth, we're achieving now we see even bigger growth ahead of us Bill and.
With the MLP cases, now are transitioning from your traditional eight to 12 hour case to 20 to 30 hour case, given that many of the transplant programs across the U S are now more comfortable allowing the Oregon to be managed overnight and during the transplant procedure in the morning.
To do a to.
To have better quality and better support.
That's what we need to beef up our team to be able to withstand that demand in that growth.
And we need to beef up our surgical capacity, but most importantly, we need to get that transmit ex aviation and transmitted 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.
A little bit of a blip, we're not concerned about it one bit it's it's part of the normal ebbs and flows that happens in transplant.
But we're not concerned about it than we were.
We're obviously tracking all that and we hope to see this recover in Q3 and Q4.
Okay, and if I could circle back to guidance.
The revenue guidance contemplate $86 million to $96 million in the back half of the year and you've already done $94 million. So youre 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.
Thank you Bill.
Three things one.
The second half of the year is have summer haulage summer vacation some holidays at the end of the year that always we are concerned about and what they are.
And their potential impact on the overall transplant volumes too.
We 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 third party aircrafts until we have our own network up and operational.
And three just conservatism, we need to be conservative given that.
Given 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 transmit X team to focus on what's coming in 'twenty four and beyond.
Given what we've done already in 'twenty three.
I don't want.
Don't want this to be misinterpreted in any way other than we are growing with and then with a neck breaking speed and we need to take that time to acclimate ties and integrate on our way to that to the top of the summit and.
And we're not anywhere close yet.
Great. Thanks for taking my questions and see at our conference next week.
We're looking forward to it thank you.
Thank you and the next question comes from Allen Gong with J P. Morgan.
Hi team congrats on the good quarter I just had one question on long it was kind of encouraging to see that inflect upwards, a little bit given the challenges you've seen im also curious around the acquisition that you announced with Ddos how should we think about.
What that platform to kind of bring to ocs interest from that Youre planning to maybe incorporated into ocs to help revitalize that market.
Thank you Alan.
We're excited as well about the lung performance this quarter.
By no means we're declaring victory we are continuing to monitor the situation and continue to invest mind share and reviving that in there. There are other initiatives, we will be announcing in the second half of this year to help the lung.
Specifically around the <unk>.
And <unk> and <unk>.
Being fully transparent.
We believe the current Ocs design is far superior than E. Vos from many fronts. However E Voss.
Brings to unique attributes that we think.
Right.
<unk>.
Of our clinical importance, we need to do there are studies to prove or disprove. It one is the negative pressure ventilation.
And two just a better.
Smaller footprint.
Again, we need to leave the first two.
Results of our 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 that's what we see.
As unique there and we believe it.
It might add some significant clinical benefit we need to do the trials to prove it.
Got it and then just a quick follow up on profitability I think it was incurred definitely encouraging to see gross margins for both the product and service piece of your business improve as well as pretty good expense control on the operating side when we think about the <unk>.
Further investments you might need to make.
Building, our transmit ex <unk>.
Airfreight piece of the business, how should we think about that for the back half of the year once the summit aviation deposits as well as into 2024. Thank you.
Yeah, Hi, Allen this is Steven Yeah, definitely we're seeing some kind of modest improvement in margin with volume growth, but we're going to continue to invest.
By incorporating summit.
Some of it I think is.
Modest increase in the overall spend rate, but we're going to bolster that with.
With aircraft that we intend to purchase and so we will see depreciation come onto our books.
Four four aircrafts over the second half of the year.
Next question operator.
Operator next.
The next question comes from Suraj Kalia with Oppenheimer.
Hi, Waleed Stephen can you hear me all right.
We can hear you just right.
Perfect Congrats on a nice quarter.
I'll leave a bunch of questions I'll, just throw them your way and hop back in queue. So I'll leave I missed you forgive me many calls going on I missed your comments about heart it was sequentially flat.
Are there any mitigating factors you could walk us through that would be question number one.
In terms of bridge to life integration with next Gen form factor relief.
Can you give us a little more specifics in terms of how you're thinking about it the timing of this acquisition of assets.
The incremental clinical improvements that you're thinking about that necessitated this.
Asset acquisition and.
And finally stiffen for you in terms of summit aviation.
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.
Thank you Suraj.
Suraj.
The heart was up in Q2 over Q1.
Maybe 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 again.
We're not concerned about it one bit this is the ebbs and flows of organ transplantation.
There were a few cases that we lost because we couldnt find planes to meet.
Meet the.
The mission.
But it's not the it's not the only reason it just the ebbs and flows of organ transplant.
Coming out of IAC Trophy, there may have been.
Some.
Confusion.
Confusion remarks made at <unk>.
We took care of that and we feel very strongly that the heartware 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.
This issue is it.
Not existence in Q3.
Remind me again, what the second half of the second part before we go to the aviation there was there was a success.
Uh huh.
Yes that was curious about the Avon student life gave us the Eva so yes. So.
Suraj.
As you know the next Gen program for transplant X has already started.
It's been it's been ongoing for the last year. So the reason for the timing for the <unk> acquisition.
Three things, we think that negative pressure ventilation might add a clinical benefit to combine it with our positive pressure ventilation, we're not going to release a product that has ocs name on it that that has won ventilation mode. It will have both ventilation mode.
Two the form factor.
<unk> line is we need to make sure that we the final form factor would be the right form factor for the ocs lung system that be lighter smaller than the existing.
Ocs.
Platform.
So thats all we can comment on at the moment and let me turn it on to Steven to address the specific question about summit.
Yes.
Sure Suraj about some of this this isn't this is not the end all.
It is a.
Relatively smaller operator.
And we need to buttress the fleet by investing in an additional players we've already started that process, which we bought two 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 beginning it's simply not there yet.
Okay.
Thank you.
Thank you Suraj.
Thank you and our next question comes from Ryan Daniels with William Blair.
Yes, thanks for taking the questions. Congrats on the strong performance. We have one for you I think you mentioned eight aviation hubs and I'm curious how that will correlate to the current MLP hub infrastructure meeting when you consolidate that a bit in <unk>.
<unk> now that you actually own the assets and can be a little more flexible there given your internal ownership.
Ryan it's good to have you on our call.
Thank you for the question.
We are we are exploring all of the above at the moment, Brian I hate to.
Given answer that might send people to think that there is.
There's a definitive direction.
The definitive direction as we did the math, we based on <unk>.
Data and historical performance and national.
<unk>.
Heat map of donors and we believe that if we put.
Air assets at eight out of our 15 hubs.
Across the United States will result in nearly 100% coverage of the Continental U S.
For us that's that's huge.
The workflow part.
Still underway a foot workflow optimization.
We might actually opened new hubs.
Yeah.
Let us do the work I hate to front run this I want the the team in transplant X to take the time to do it right and definitely once we have it we will be sharing it.
On our upcoming calls.
But for us that priority is to provide 100% coverage one.
100% availability of 100% coverage across the Continental U S that is their number one priority for the network too to get operational.
Yes, It makes sense and then regarding your comments about climb.
Clients getting more comfortable with NLP and going to 20% to 30 hour cases kind of improving the work life balance and outcomes by allowing them to be in the morning versus anytime at night I'm curious if that's something that's also driving active and repeat users and maybe increasing the overall use of MLP 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 are actually moving more of their cases to the platform.
Brian absolutely correct, but it's not just it's well well beyond work life balance at the moment it's safer.
Safer for the patient it's safer for the staff 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 that with the emergency or trauma teams that are on the call.
And it may or may not be the right talents assembled to do our safe transplant procedure. The other benefit. In addition to that is in major academic institution. It provides a better teaching and.
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 is really its a comprehensive.
Benefit and we've.
As you know we've we've.
We've always.
Stated that one of the benefits of mlps to enable that to happen and where we're really glad to see this happening and taken off that soon we expect this to be a late two.
Transition, we're seeing this transition happening.
Sooner than what we expected.
Great, but we need to make sure that we're 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.
Perfect. That's very helpful. And then one last one just in regards to the potential capex for planes I don't know if you mentioned this but should we be thinking of outright purchases or leases and then if it's a purchases of capex kind of $10 million to $12 million range is that we should be thinking propane. Thanks.
Yes, Ryan I think in the near term it is capex. It is purchases and the range was pretty close to what you just described.
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 and aircraft adds significant.
Margin to the lessor that we want to make that an efficient process. So we can pass some of the cost savings and efficiencies to our transplant users.
Great. Thanks, again for taking my questions and congrats on all the strategic momentum.
Thank you. Thank you Ryan.
Thank you and our next question comes from Josh Jennings with Cowen.
Hi, Thanks for taking the questions.
I will lead to just.
Ask a follow up on.
Okay.
<unk>.
Franchise, and just lung initiatives that you guys have in place trying to help.
Double lung transplant volumes in the United States.
There's been some talk on this call Bob about the technology acquisition, but can you just help us just remind us.
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 <unk>.
Higher clip into 2024 and beyond.
Thank you Josh.
Think Josh we're in the early stages.
These initiatives I think the second half of this year, we will start ramping up we wanted to wait until we announced 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 <unk> had some.
Some.
Our attention.
<unk>.
Our focus on it.
We wanted to get that out of the get 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 Nextgen lung system integrated with negative pressure ventilation and the new form factor operational and we we will probably use that as a 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 'twenty, four maybe that there.
The nexgen lung system will be sort of late 24 early 'twenty five time horizon, but we have others that we are planning to.
Enact and implement in later this year and early next.
Okay and I apologize if this question was already asked.
Other earnings calls as well, but just in terms of the <unk>.
The roadmap to profitability and you're adding the aviation business.
Tucking that in.
But any any high level comments and I think we frequently get asked about just the revenue run rate where.
Transplants could hit EBITDA positivity I don't know if there's any updated thoughts of that acquisition closed yet, but anything on roadmap to profitability or just any margin impact from the from a high level from this summit aviation acquisition. Thanks for taking the questions.
Hey, Josh it's Stephen well first I would say we were EBITDA positive this quarter.
No. It's a very good question I would say, we're not prepared to say that this this call about where we think it's going to be once we integrate aviation suddenly going to change 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 havent had before so give us some time to model that through them.
We will prepare that for future calls.
Understood. Thanks, Steven.
Thank you.
A question and answer session I would like to return like auto related Husnain for any closing comments.
Thank you. Thank you all for joining us on the Q2 call. We look forward to speaking with you again for Q3 have a great afternoon, everyone. Thank.
Thank you.
This is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.