Q4 2023 TransMedics Group Inc Earnings Call

Operator: Good afternoon, and welcome to the TransMedics 4th Quarter and Full Year 2023 Earnings Conference. At this time, all participants are in a listen-only mode.

Good afternoon, and welcome to the transmit <unk> fourth quarter and full year 2023 earnings conference call.

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.

Operator: 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 like to turn the call over to Brian Johnson from the Gilmartin Group for a few introductory comments. Thanks, operator. Earlier today, TransMedics released financial results for the fourth quarter and full year ended December 31st, 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, that are forward-looking statements within the meaning of federal securities laws. Furthermore, any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking.

As a reminder, this call is being recorded for replay purposes I.

I would now like to turn the call over to Brian Johnston from the Gilmartin group for a few introductory comments.

Thanks, Operator earlier today <unk> released financial results for the fourth quarter and full year ended December 31, 2023, a copy of the press release is available on the Companys 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 that 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.

Operator: 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 or expectations for revenue, gross margins, and operating expenses in 2024 and beyond, 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. According Additional information regarding these risks and uncertainties appears under the heading Risk Factors on our Form 10-K, filed with the Securities and Exchange Commission on February 27, 2022.

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 margins and operating expenses in 2024 and beyond are based upon current estimates and various assumptions.

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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 on our Form 10-K filed with the Securities and Exchange Commission on February 12.

7% 2023, our subsequent Form 10-Q filings.

Brian Johnson: Our subsequent Form 10-Q filings and the forward-looking statements included in today's earnings press release, all of which are available at www.sec.gov and on our website at www.transmedics.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, February 26, 2024. With that said, I will now turn the call over to Waleed Hassanein, President and Chief Executive Officer. Thank you so much, Brian.

Forward looking statements included in today's earnings press release, all of which are available at Www Dot FCC Dot Gov and on our website at www Dot transplants Dot com.

<unk> 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 February 26, 2024 with that I will now turn the call over to Waleed, Hassanein, President and Chief Executive Officer.

Thank you so much Brian good afternoon, everyone and welcome to transplant Inc's fourth quarter and full year 2023 earnings call.

Waleed H. Hassanein: Good afternoon, everyone, and welcome to TransMedics' fourth quarter and full year 2023 earnings call. As always, joining me today is Stephen Gordon, our chief financial officer. Our fourth quarter performance represents a new high watermark for TransMedics' business. We ended the year on a very strong note, laying a solid foundation for continued growth. Also, the fourth quarter was the first quarter that we had TransMedics transplant logistics services operational during the full three months of the quarter. Although it is early, TransMedics logistics is in its early innings. I am thrilled to report on the early successes of the logistical services.

As always joining me today is Stephen Gordon, our Chief Financial Officer.

Our fourth quarter performance represents a new a new high watermark for transplant X business we.

We ended the year on a very strong note.

A solid foundation for continued growth.

Also the fourth quarter was the first quarter that we had transmit ex transplant logistics services operational during the full three months of the quarter.

Although it is early it is.

<unk> logistics is in its early innings.

I am thrilled.

To report on the early successes of the logistical services.

Waleed H. Hassanein: We successfully executed on every front and overcame early operational challenges as we continue to expand our footprint and team. Let me share the summary of our results for Q4 and full year 2023. Total revenue for 4Q grew to $81.2 million, representing 159% growth from 4Q 2022 and a 22% sequential growth from 3Q 2023. For the full year 2023, total revenue was $241.6 million, representing 159% growth over 2022.

We successfully executed on every front and overcame early operational challenges as we continued to expand our footprint and team.

Let me share the summary of our results for Q4 and full year 2023.

Total revenue for <unk> grew to $81 $2 million, representing 159% growth from <unk> 2022.

And 'twenty 'twenty and at 22% sequential growth from Q2 thousand 23 for.

For the full year of 23 total revenue was 241 6 million, representing a 159% growth over 2022.

Waleed H. Hassanein: So for the second consecutive year, we delivered on and even exceeded our aspirations to double revenue year over year in the first years of OCS commercial launch. TransMedics Logistics Services revenue for 4Q was $9.2 million, up from $2.1 million in 3Q. We are proud of this success in the first full quarter of operation.

So for the second consecutive year, we delivered on and even exceeded our aspirational aspirations to double revenue year over year in the first years of Ocs commercial launch.

<unk> logistics services revenue for <unk> was $9 2 million up from $2 1 million in Q.

We are proud of this success in the first full quarter of operations.

Waleed H. Hassanein: Based on everything we know today, we are growing extremely confident and bullish on the significant potential positive impact of TransMedics' logistical services to help us grow the use of NLP platforms. We fully expect our integrated NOP and logistics services to enable TransMedics to deliver an end-to-end, seamless, efficient, and safe solution to transplant programs across the U.S. Simply stated, providing a world-class service through a highly cost-efficient model. Our overall gross margin for 4Q was 59%, down from 66% in 4Q 2022. The full year 2023.

Based on everything we know today, we are growing extremely confident and bullish on the significant potential positive impact of trash medics logistical services to help us grow the use of NLP platform.

We fully expect our integrated N O P and logistics services to enabled transmitted to deliver an end to end seamless efficient and safe solution to transplant programs across the U S C.

Simply stated providing a world class service through highly cost efficient model.

Our overall gross margin for <unk> was 59% down from 66% in <unk> 2022.

The full year 2023.

Waleed H. Hassanein: Our gross margin was 64% compared to 70% in 22. I know Stephen is going to detail this in his section of today's presentation. However, I want to take this opportunity to give you my perspectives on this important topic of transmedics' gross margins. Please remember, we are still very early in our commercial ramp, and more so with our logistics services. There are several leverage points.

Our gross margin was 64% compared to 70% in 'twenty two.

I know Stephen is going to detail. This in his section of today's presentation. However, I want to take this opportunity to give you my perspectives on this important topic of transmit X gross margins.

Please remember we are still very early in our commercial ramp.

And more so with our logistics services.

There are several leverage points I repeat there are several leverage points for both product and service revenues that are not fully reflected in our models yet.

Waleed H. Hassanein: I repeat, there are several leverage points for both product and service revenues that are not fully reflected in our models yet. Based on everything we know today, we are extremely confident that we will be able to ramp up the gross margin over the next 12 to 18 months as we achieve more leverage of scale in our operations. In the meantime, we are thrilled that we achieved a 35% gross margin for our service business faster than we had projected, exceeding our early expectations. But, again, this is just the beginning.

Based on everything we know today, we are extremely confident that we will be able to ramp the gross margin up over the next 12 to 18 months as we achieve more leverage of scale in our operations.

In the meantime, we are thrilled that we achieved a 35% gross margin for our service business faster than we had projected exceeding our early expectations again. It is just the beginning.

Waleed H. Hassanein: We also achieved a critical profitability milestone in 4Q as we delivered our first GAAP operating profit quarter. Specifically, we delivered $2.6 million of operating profit and $4 million of net profit in the fourth quarter. This marks a critical step forward as we strive to reach and sustain positive cash flow in the very near future. Before moving on, I'd like to take a moment to recognize that these exceptional results were only possible through the hard work of the entire TransMedics team. Let me send a message to Team TransMedics.

Yeah.

We also achieved critical profitability milestone in four Q as we delivered our first GAAP operating profit quarter specifically.

Specifically, we delivered $2 6 million of operating profit and 4 million of net profit in the fourth quarter.

This marks a critical step forward as we strive to reach and sustained positive cash flow in the very near future.

Before moving on I'd like to take a moment to recognize that these exceptional results were only possible through the hard work of the entire transmit X team.

Let me send a message to team transmit X.

Waleed H. Hassanein: We are grateful for your world-class effort, commitment, and creativity in navigating every operational challenge of our rapidly growing business in 2023. Importantly, I want to make it crystal clear that we are now gearing up for another strong year of execution in 2024. Now, let me move on to provide my perspectives on some important trends and what they mean for our business. In line with our growth strategy, we grew our case volume across all three organ markets in 2023 compared to 2022. Our OCS lung case volume grew by approximately 11%, our OCS heart case volume grew by approximately 82%, and our OCS liver case volume grew by approximately 199%, almost tripling from 2022. For the full year, we have transplanted approximately 2,300 OCS transplants in the U.S. compared to approximately 1,000 transplants in 22.

We are grateful for your world class effort.

<unk> and creativity in navigating every operational challenge of our rapidly growing business in 2023.

Importantly, I want to make it crystal clear that we are now gearing up for another strong year of execution in 2024.

Now let me move on to provide my perspectives on some important trends and what do they mean for our business.

In line with our growth strategy, we grew our case volume across all three Oregon markets in 23 compared to 22, our Ocs lung case volume grew by approximately 11% our Ocs heart case volume grew by approximately 82% and our Ocs liver case volume grew by approximately 100.

And 99% almost tripling from 'twenty to 'twenty two.

For the full year, we have transplanted approximately 2300 ocs transplants in the U S compared to approximately 1000 transplants in 'twenty two.

Waleed H. Hassanein: We plan to report our annual OCS case volume in the U.S. going forward as a benchmark towards the stated goal of performing 10,000 transplants in the U.S. by 2028. In terms of NOP contribution, as we predicted, NOP represented the lion's share of OCS transplants in the US. We ended the year with an overall NOP rate of more than 98% across all three organs.

We plan to report our annual Ocs keys volume in the U S going forward as a benchmark towards the stated goal of performing 10000 transplants in the U S by 2028.

In terms of N O P contribution as we predicted N O Peter presented the lion's share of Ocs transplants in the U S. We ended the year with an overall N O P rate of more than 98% across all three organs.

Waleed H. Hassanein: We are confident that this sustained growth and success of NLP is based solely on the operational efficiency to grow transplant volumes, the highest level of clinical care for donor organs, and the overall cost efficiency experienced by transplant programs across the United States. Importantly, we are planning to present several data analyses during the upcoming transplant conferences in 2024 to unequivocally demonstrate the improved clinical outcomes achieved using OCS NOP in the U.S. Again, I want to stress a key point. The success of the OCS NOP program is based on better clinical, economic, and operational outcomes experienced by the transplant centers and not based on anything else. In Q4, we strengthened the NOP clinical staffing by adding 37 new clinical specialists and four procurement surgeons.

We are confident that this sustained growth and success of N. O. P is based solely on the operational efficiency to growth transplant volumes.

Highest level of clinical care of donor organs, and the overall cost efficiency experienced by transplant programs across the United States.

Importantly, we are planning to present several data analysis during the upcoming transplant conferences in 'twenty 'twenty four to unequivocally demonstrate the improved clinical outcomes achieved using ocs MLP in the U S.

Again.

I want to stress a key point.

The success of Ocs N O P program is based on better clinical economic and operational outcomes experienced by the transplant centers and not based on anything else.

In Q4, we bought trust the MLP clinical staffing by adding 37, new clinical specialists and for procurement surgeons.

Waleed H. Hassanein: Now, let me share the impact of our OCS technology and NOP on the overall national transplant volume in the US. For the first time in nearly eight plus years, both liver and heart transplant volumes grew by 12% nationally in the U.S. Based on our OCS case numbers and donor mix, we are confident that our OCS technology and NOP services were primary drivers for this annual transplant volume growth. The overall national growth came from both increased use of DCD donors driven by OCS use, as well as a modest increase in DVD donor utilization.

Now, let me share the impact of our Ocs technology.

And N O P on the overall national transplant volume in the U S.

For the first time in nearly eight plus years, both liver and heart transplant volumes grew by 12% nationally in the U S.

Based on our Ocs case number and donor mix, we are confident that our ocs technology, an NLP services were primary drivers for this annual transplant volume growth.

The overall national growth came from both increased use of DCD donors, driven by Ocs use as well as a modest increase in DVD dorner utilization.

Waleed H. Hassanein: This is a great first step to prove the ability of the OCS and NOP to grow the overall U.S. transplant market. We are looking forward to continuing this trend in 24 and hopefully seeing similar growth in lung driven by OCS and NOP over the next few years. Now, let's discuss the percent, percentage penetration of the OCS use in each organ market segment nationally in the U.S. We ended 23 with the OCS case volume representing approximately 17% share of the national liver transplant volume, approximately 16% share of the heart national transplant volume and approximately 4% share of the lung national transplant volume in the U.S. For anyone who may be assuming that TransMedics has maxed out on our growth potential, these data provided crystal clear evidence that we have a long way to go to continue to grow our market share in the U.S.

This is a great first step to prove the ability of the Ocs and N O P to grow the overall U S transplant market.

We are looking forward to continuing this trend in 'twenty, four and hopefully seeing similar growth in lung driven by Ocs and MLP over the next few years.

Now, let's discuss the percent.

Percentage penetration of the Ocs use in each Oregon market segment nationally in the U S.

We ended 23 with the Ocs case volume representing approximately 17%.

Share of the national liver transplant volume approximately 16% share of the heart national transplant volume and approximately 4% share of the lung national transplant volume in the U S.

For anyone who may be assuming that transplant X has maxed out on our growth potential. These data provided crystal clear evidence that we have a long way to go to continue to grow our market share in the U S.

Waleed H. Hassanein: This will be fueled further by our unique ability to also expand the overall national growth of transplant volumes in the US to help patients who are desperately in need of a life-saving transplant procedure. Our vision is that by the time we reach 10,000 U.S. OCS transplants, this number, 10,000, would represent only a portion of the overall U.S. transplant market and not the total addressable U.S. market. Now, let me turn to a more detailed discussion of our transplant logistics service strategy and review its early performance in late 2023. I want to start by highlighting our strategy and value proposition. Please allow me to share some important facts and background on this important topic. 1, Historically, for cold preservation and organ transport, transplant centers relied exclusively on charter flights. Brokers and small local operators.

This will be fueled further by our unique ability to also expand the overall national growth of transplant volumes in U S to help patients who are desperately in need for a life saving transplant procedure.

Our vision is that by the time, we reached 10000 U S. Ocs transplants that this number 10000 would represent a portion of the overall U S transplant market and not the total addressable U S market.

Now, let me turn to a more detailed discussion.

On our transplant and logistics service strategy and review its early performance in late 2023.

I want to start by highlighting our strategy and value proposition.

Allow me to share some important facts and background on this important topic.

One.

Historically for cold preservation, and Oregon transport.

<unk> center relied exclusively on charter flight.

Brokers and local small operators.

Waleed H. Hassanein: I repeat, transplant centers rely on charter flight brokers and or local small airlines try to operate. These brokers typically use what they promote as an asset-light model, meaning they don't own or operate any aircraft. The role is simply to contract a charter flight and a crew from a local or regional operator when a donor mission is needed. When TransMedics first deployed the NOP program, you all remember, we too relied on the same network of charter brokers. Unfortunately, we quickly learned through first-hand experience that the brokered charter flight model had significant limitations to help grow transplant volume in the U.S. and was becoming a huge bottleneck for our NOP program. This regional charter brokerage approach was very operationally inefficient and added significant costs to the transplant centers due to, one, fragmented local and regional operators using older aircraft that were not capable of covering the new longer-range donor missions now afforded by the new U.S. national organ allocation laws and the use of OCS technology and its NOP's capability to go longer distances to increase utilization of donor organs for transplant.

Pete transplant center relied on charter flight brokers and or local small.

Charter operators.

These brokers typically have used what the promote as an asset light model, meaning they don't own or operate any aircrafts. Their role is simply to contract at charter flight and accrue from a local or regional operator, when a donor mission as needed.

When transmit X first deployed the N O P program you all remember we too relied on the same network of charter brokers and.

Unfortunately, we quickly learned through firsthand experience that the brokered charter flight model had significant limitations to help grow the transplant volume in the U S and was becoming a huge bottleneck, where our N O P program.

This regional charter brokerage approach was very operationally inefficient and added significant costs to the transplant centers Youtube one fragmented local and regional operators using older aircrafts that were not capable of covering the new longer range donor missions now.

Afforded by the new U S National Oregon allocation laws, and the use of Ocs technology, and and it's an N O piece capability to go longer distances to increase utilization of donor organs for transplant.

Waleed H. Hassanein: Two, significant shortage of chartered plane availability for 24-7 to cover the growing demand for transplant missions. This resulted in the loss of approximately 20 to 30% of donor retrieval missions for NOP in 22 and early 23. Three, the lack of control over the planes and pilots by most charter brokers often resulted in the use of more than one plane and multiple crews to complete a single mission, which sometimes doubled the transportation bill paid by the transplant center. Four, lack of control over the starting location of the aircraft led to the use of highly inefficient routes, which added even more costs in order to reposition the aircraft.

Two significant shortage of chartered plane.

Availability for 24 seven to cover the growing demand for transplant mission.

This resulted in the loss of approximately 20% to 30% of donor retrieval missions for N O P. In 'twenty, two and early 'twenty three.

Three the lack of control over the planes and pilots by most charter brokers, often resulting in the use of more than one plane and multiple crews to complete a single mission.

Which sometimes doubled that transportation bill paid by the transplant Center.

For lack of control over the starting location of the aircrafts led to use of highly inefficient routes, which added even more costs in order to reposition the aircraft.

Waleed H. Hassanein: Five, lack of control over air safety standards of these contracted charter, sorry, of these contracted local or regional operators flying 20, 30-year-old aircraft. In fact, our own NOP clinical and surgical teams experienced a few near catastrophic events on brokered aircraft in 22 and 23, an inefficient round-trip cost model even if the donor organ is not procured for transplant or if a DCD donor never progressed to become a donor. Finally, a very complex cost structure with multiple middlemen that pays with associated profit margins for the owner of the aircraft, the operator of the aircraft, and the broker of the chartered flight.

Five lack of control over air safety standards of these contracted charter outright of these contracted local or regional operators flying 2030 year old aircrafts in fact, our own MLP clinical and surgical teams experienced a few near catastrophic events.

On brokered aircrafts in 'twenty, two and 'twenty three.

Fix and inefficient route round trip cost model, even if the donor Oregon is not procured for transplant or if a D. C D.

The owner never progressed to become a donor.

Finally at very complex cost structure with multiple middlemen that paid with associated profit margins for the owner of the aircraft. The operator of the aircraft and the broker of the charter flight.

Waleed H. Hassanein: All these added a significant and unnecessary cost burden to the transplant center. So while this asset model might be light for the broker, it is clearly a very heavy financial burden to the transplant centers and payers, who end up paying multiple middlemen. Importantly, it also severely limits the ability to grow transplant volumes due to the shortage of dedicated aircraft. And we saw it as a roadblock to our stated goal and commitment to growing the U.S. transplant volume to address these significant inefficiencies, safety issues, and capacity constraints in the historical model above. TransMedics created a new, more scalable model that meets the current and future needs of the transplant markets in the U.S. while providing significant operational and cost efficiencies to the transplant center.

All these added significant and unnecessary cost burden to the transplant centers.

So while this asset model might be light for the broker. It is clearly a very heavy financial burden to the transplant centers and payers who ended up paying multiple middlemen.

Importantly, it is also severely it also severely limits the ability to grow transplant volumes due to the due to shortage of dedicated aircrafts and we saw it as a roadblock to our stated goal and commitment to growing the U S transplant volume.

To address these significant inefficiencies safety issues and capacity constraints in the historical model above.

Transmit <unk> created a new more scalable model that meets the current and future needs for growth of the transplant markets in the U S, while providing significant operational and cost efficiencies to the transplant centers.

Waleed H. Hassanein: Let me share with you our vision and our goals that we've actually achieved today. 1, We set out to maximize donor organ utilization for transplants by building and operating a modern fleet of jets that can go longer distances. This fleet is dedicated to transplant missions and not charter flights. Using newer model aircraft allows us to use less fuel, so we can be environmentally responsible.

Let me share with you our vision and our goals that we've actually achieved to date.

One we set out to maximize donor organ utilization for transplant by building and operating a modern fleet of jets that can go longer distances.

This fleet is dedicated to transplant mission and not charter flights.

Using newer model aircrafts allows us to use less fuel. So we can be environmentally responsible reduce maintenance costs and reduced downtime to maximize availability to conduct transplant missions.

Waleed H. Hassanein: reduce maintenance costs and reduce downtime to maximize availability to conduct transplant missions. Two, our goal was to maximize operational efficiency, which will reduce costs at the transplant center. Three, our goal is to maintain the highest level of air safety for our staff, our clinical users, and the precious donor organs we are caring for. Four, maximize logistics availability to ensure that we reduce the waste of donor organs that do not get used due to a lack of plane availability. And finally, leveraging the unique NOP network and proprietary modern dispatching algorithm with a digital command and control center, a structure to significantly reduce the cost burden of DCD donors that don't progress to become donors.

Two our goal was to maximize operational efficiency, which will reduce cost on the transplant centers three.

Three our goal is to maintain the highest level of air safety for our staff, our clinical users and the pressures dorner Oregon's we are caring for.

Four maximize logistics availability to ensure that we reduce the waste of donor organs that do not get used due to lack of plain availability.

And finally, leveraging their unique MLP network and proprietary modern dispatching algorithm with a digital command and control center structure to significantly reduce cost burden of DCD donors that don't progress to become a donor.

Waleed H. Hassanein: The NOP network infrastructure created by TransMedics has given us a unique ability to share our cost efficiencies with our transplant center users. Now, with the above background, let me share with you some important early performance metrics for TransMedics' transplant logistics service, which encompasses aviation and ground logistics for NOP missions. As mentioned earlier, revenue from the transplant logistics service alone was $9.2 million in 4Q compared to $2.1 million in 3Q, as we were only operational for approximately four to five weeks in 3Q. The average number of active TransMedics aviation planes was approximately seven planes in 4Q compared to approximately 3.5 in 3Q.

The N O P network infrastructure created by transplant ex has given us a unique ability to share our cost efficiencies with our transplant center users.

Now with the above background, let me share with you. Some important early performance metrics for transmitted transplant logistics service.

Which encompasses aviation and ground logistics for NOP missions.

As mentioned earlier revenue from transplant logistics service alone was $9 2 million in <unk> compared to $2 1 million in <unk> as we are only operational for approximately four to five weeks in <unk>.

The average number of active transmitted aviation planes were approximately seven planes in for Q compared to approximately 3.5 in <unk>. We ended the year with a total of 11 owned aircrafts that will become fully operational in early 2024.

Waleed H. Hassanein: We ended the year with a total of 11 owned aircraft that will become fully operational in early 2024. Additionally, approximately 98 transplant programs in the U.S. use TransMedics Logistics Service in 4Q compared to approximately 36 programs in 3Q. This is an important metric to unequivocally show that operational availability, cost efficiency, and high safety standards enabled us to disrupt the inefficient historical model and take market share relatively quickly. We were able to cover only approximately 35% of our NOP flight needs in 4Q using TransMedics aviation planes, compared to 13% in 3Q. At scale, we are hoping to cover 80% of the NOP cases using our TransMedics logistics service for both air and ground transport. We will use carefully selected, highly reliable, and safe operators for supplemental lifts to support our mission.

Approximately 98 transplant programs in the U S use transmit ex logistics service in <unk> compared to approximately 36 programs in <unk>.

This is an important metrics to unequivocally show that operational availability cost efficiency and high safety standards enabled us to disrupt the inefficient historical.

Model and take market share relatively quickly.

We were able to cover only approximately 35% of our N O P flights needs in <unk> using transmit aviation planes compared to 15% in <unk>.

At scale, we are hoping to cover 80% of the MLP case cases, using our <unk> logistics service for both air and ground transport.

We will use carefully selected highly reliable and safe operators for supplemental lifts to support our missions.

Waleed H. Hassanein: So far, we are humbled and proud by these early results. We are continuing to expand our air fleet and crew to operate the aircraft. We are hoping to have 15 to 20 aircraft operational by the end of 24 or early 25. We opened the digital command and control, or should I say, command and dispatch center in Andover at the end of December, and we are now fully operational 24-7-365 from this state-of-the-art facility.

So far we are humbled and proud by these early results we are continuing to expand our air fleet and crew to operate the aircrafts.

We are hoping to have 15 to 20 aircrafts operational by end of 'twenty four or early 'twenty five.

We opened the digital command and control.

Alright command and dispatch center and Andover at the end of December and we are now fully operational 24, seven 365 from this state of the art facility.

Waleed H. Hassanein: This dispatch center is designed to maximize operation availability and efficient routing of our NOP resources to minimize plane repositioning costs for the transplant program. Again, based on everything we know today, we are extremely confident and bullish on the potential positive impact of transplant logistics services on the growth of our NOP case volume and a more efficient utilization of our clinical resources. Before I leave the TransMedics Logistics section, I want to share some perspective on a matter that recently entered the public domain. Many of you may be aware that a letter was emailed to TransMedics on February 21st from a member of the U.S. Congress, writing in his capacity as an individual member of Congress regarding TransMedics business practices. Prior to receiving this letter, we had never communicated with this congressman nor with any member of his staff.

This dispatch center is designed to maximize operational availability.

If fish and efficient routing of our N O P resources to map to minimize planed repositioning cost on the transplant programs.

Again based on everything we know today, we are extremely confident and bullish on the potential positive impact of transplant logistics services on the growth of our N O P case volume.

And a more efficient utilization of our clinical resources.

Before I leave that transparency logistics section I want to share some perspective on a matter that recently entered the public domain.

Many of you may be aware that a letter was emailed to trust medics from a member of the U S. Congress on February 21st.

Writing in his capacity as an individual member of Congress regarding transmit <unk> business practices.

Prior to receiving this letter we had never communicated with this congressman nor with any member of his task.

Waleed H. Hassanein: This letter contains serious accusations which are grossly inaccurate, unfounded, and based on wrong information. Let me repeat that. This letter contains serious accusations which are grossly inaccurate, unfounded, and based on wrong information. Rest assured, TransMedics has responded to this letter with the same level of seriousness, with factual evidence to set the record straight. Our formal response is posted publicly on the Investors section of our website. It is clear that what TransMedics is doing in the area of transplant logistics is disrupting this antiquated charter brokerage model for organ transplantation. This is creating some competitive dynamics in this area by some of our historical competitors, by some of the historical brokers that are struggling to compare or to compete with our operationally efficient and cost-effective logistical capabilities.

This letter contained serious accusations, which are grossly inaccurate.

Unfounded and based on wrong information.

Let me repeat again.

This letter contained serious accusation, which are grossly inaccurate unfounded and based on wrong information.

Rest assured transmit X has responded to this letter with the same level of seriousness with factual evidence to set the record straight.

Our formal response is posted publicly on the investors section of our website.

It is clear that what transmit X is doing in the area of transplant logistics is disrupting this antiquated charter brokerage model for organ transplantation.

This is creating some competitive dynamic in this area by some of our historic up by some of the historical brokers that are struggling to compare or to compete with our operationally efficient and cost effective logistical capabilities.

Waleed H. Hassanein: Finally, let me give you a bird's eye view of our growth and strategy in 2024, and I hope to detail these initiatives in our 1Q 2024 call in May. Our goal in 2024 is to continue to invest in building out our TransMedics transplant logistical services throughout 2024 to give us more operational leverage and efficiency. We will focus on growing our NOP case volume in all three market segments by driving both growth in the overall transplant volume and take share of existing volume; we will initiate a new clinical program to try to reinvigorate lung transplant activities in the United States. Finally, we are investing in our next-gen OCS technology platform that will be more optimized for NOP workflow and streamline the support process for our clinical staff to maintain the highest clinical management quality and achieve better product leverage. We are humbled by our success in 23.

Finally, let me give you a bird's eye view.

Of our growth.

Strategy in 'twenty, 'twenty, four and hope to detail these initiatives in our <unk> 'twenty, one 'twenty 'twenty four call in May.

Our goal in 'twenty four is to continue to invest in building out our trans medics transplant logistical services throughout 'twenty four.

To give us more operational leverage and efficiencies.

We will focus on growing our NLP case volume in all three market segments by driving both growth and the overall transplant volume and take share of existing volumes.

We will initiate a new clinical program to try to reinvigorate the lung transplant activities in the United States.

Finally, we are investing in our Nexgen Ocs technology platform that will be more optimized for NOP workflow and streamlined the support process on our clinical staff to maintain the highest clinical management quality and achieve better product leverage.

We are humbled by our success in 23. However, we are not standing still we are laser focused on our execution plan for 'twenty four to help drive growth in the overall transplant volumes in the U S and for <unk> business.

Waleed H. Hassanein: However, we are not standing still. We are laser focused on our execution plan for 24 to help drive growth in the overall transplant volumes in the US and for TransMedics' business. That being said, we need to be balanced.

That being said, we need to be balanced we need to balance our bullish plans with potential scalability and competitive challenges. We are providing an annual revenue guidance between 360 million to $370 million, which represent 49% to 53% growth over 2023 with that.

Stephen Gordon: We need to balance our bullish plans with potential scalability and competitive challenges. We are providing annual revenue guidance between $360 million and $370 million, which will present 49% to 53% growth over 2023. With that, let me turn the call over to Stephen Gordon to cover the detailed financial results for the quarter. Thank you, Waleed.

Now, let me turn the call to Stephen Gordon to cover the detailed financial results for the quarter.

Thank you Elliot.

Stephen Gordon: I will now provide some additional detail on the QPOR results and other financial information for the quarter and the year. So, starting with revenue, for the fourth quarter of 2023, our total revenue was $81.2 million. This is an increase of 159% from the fourth quarter of 2022 and a 22% sequential increase from last quarter. The $81.2 million included $1.1 million related to our flight school and $1.4 million related to Summit Aviation's legacy business.

I will now provide some additional detail on our Q4 results and other financial information for the quarter and the year.

So starting with revenue.

For the fourth quarter of 2023, our total revenue was $81 2 million. This was an increase of 159% from the fourth quarter of 2022.

The 22% sequential increase from last quarter.

The $81 2 million included $1 1 million related to our flight school.

And $1 4 million related to summit Aviation's legacy business. So a total of $2 5 million that is non transplant related.

Stephen Gordon: So a total of 2.5 million that are non-transplant. The $1.4 million of legacy business is not continuing and is expected to be zero in the first quarter of 2024, so that leaves $78.7 million of transplant-related revenue worldwide. In the U.S., transplant revenue was $75.2 million.

So $1 4 million of legacy business is not continuing and is expected to be zero in the first quarter of 2024, so that leaves $78 7 million of transplant related revenue worldwide.

In the U S transplant revenue was $75 2 million.

Stephen Gordon: U.S. revenue also increased by over 159% from the fourth quarter of 2022, and the U.S. grew 26% sequentially from last quarter, and this included the $9.2 million of TransMedics logistics revenue. The organ breakdown on U.S. revenue was 54.7 million of liver, 17.6 million of heart, and 2.9 million of lung, all organs growing substantially over Q4 of 2022. We did see a modest sequential decline in lung revenue, while liver and heart continued strong sequential growth in Q4. Ex-U.S. revenue was $3.5 million, a 51% increase from Q4 of 2022, but also a sequential decline from Q3 of 2023. As we have stated in the past, our revenue outside the U.S. may not be consistent due to the nature of transplant and the lack of reimbursement outside the United States. The OUS organ breakdown was 3.2 million heart and 0.3 million lung.

U S revenue also increased over 100, 159% from the fourth quarter of 2022.

In the U S grew 26% sequentially from last quarter and this included the $9 2 million of trends, but transmit looks logistics Robyn.

The Oregon breakdown on U S revenue was 54 points $54 7 million of liver $17 6 million apart and $2 9 million of lung.

Oregon's growing substantially over Q4 of 2022.

We did see a modest sequential decline in lung revenue, while Luberon heart continued strong sequential growth in Q4.

X U S revenue was $3 5, million% to 51% increase in Q4 of 2022.

But also a sequential decline from Q3 of 2023 as we have stated in the past our revenue outside the U S may not be consistent due to the nature of transplant and the lack of reimbursement outside the United States.

The O U S. Oregon breakdown was $3 2 million of heart and point $3 million of blood.

Stephen Gordon: Next, I will cover product and service revenue. Our service revenue includes the added amounts we charge for surgical procurement and organ management and now also includes the amount we charge for organ procurement and transplant logistics, including air and ground services. In Q4, product revenue was $51.9 million, and service revenue was $29.3 million. So the service portion was 36% of the total in Q4, and that includes the non-transplant service rep. Gross margin for the fourth quarter of 2023 was 59%.

Next I will cover the product and service revenue.

Our service revenue includes the other the amounts we charge for the surgical procurement in Oregon management and they'll also includes the amount we charge for organ procurement and transplant logistics, including air and ground services.

In Q4 product revenue was $51 9 million and service revenue was $29 3 million.

So the service portion was 36% of the total in Q4 and that includes the non transplant service Robyn.

Gross margin for the fourth quarter of 2023 was 59%. This was down from 66% in the fourth quarter of 2022 and reflects the higher MLP service component of our business, which was still in the early stage in Q4 of 2022.

Stephen Gordon: This is down from 66% in the fourth quarter of 2022 and reflects the higher NOP service component of our business, which was still in the early stage in Q4 of 2022. Drilling down one level, the product margin was 73% in Q4, and the service margin was 35%. We did experience an unfavorable impact on product margin of about 300 basis points that will not repeat in Q1, which was related to the end-of-year inventory cleanup and adjustment.

Drilling down one level the product margin was 73% in Q4 and service margin was 35%.

We did experience an unfavorable impact of product margin of about 300 basis points that will not repeat in Q1, which was related to the end of your inventory cleanup and adjustments. We have made changes to our processes. So we will not see this type of quarterly anomaly in the future.

Stephen Gordon: We have made changes to our processes, so we will not see this type of quarterly anomaly in the future. On the service side, we are pleased that we were able to deliver 35% service gross margin in our first full quarter of providing our logistics service. And just to repeat, the service portion of the business includes the NOP clinical service as well as air and ground logistics. So this achievement gives us confidence that we will be able to provide this service with a mid-30s service gross margin or better as we grow our footprint in the utilization of aviation. As a reminder, all costs related to aviation, including fuel, pilots, maintenance, and depreciation, are included in the service cost of goods sold. Total operating expenses for the quarter were $45.3 million.

On the service side, we are pleased that we were able to deliver 35% service gross margin in our first full quarter of providing our logistics service.

And just to repeat the service portion of the business includes the MLP clinical service as well as air and ground logistics.

So this achievement gives us confidence that we will be able to provide this service with the mid thirties service gross margin or better as we grow our footprint and utilization of aviation.

As a reminder, all costs related to aviation, including fuel pilots maintenance and depreciation are included in the service cost of goods sold.

Total operating expenses for the quarter were $45 3 million.

Stephen Gordon: 65% above Q4 of 2022 operating expense. This expense growth was driven by investment throughout the organization, including 87% growth in R&D related to investments in new products, development, and NOP tools, and 59% growth in SG&A for both NOP support and overall corporate infrastructure. The growth and operating expenses of 65%, while growing revenue by 159%, allowed TransMedics to deliver its first gap operating profit of $2.6 million and a net profit of $4 million for the fourth quarter of 2023. These compare with an operating loss of $6.8 million in Q4 of 2022 and a net loss of $6.7 million in Q4 of 2022. Total cash at the end of the year was $394.8 million as of December 31st, 2023, which equates to cash usage of $32.3 million from the balance at the end of Q3 of 2023. However, operating cash was a positive $8.3 million in the quarter, which was offset by the purchase of three additional planes in the quarter for about $39 million. The basic weighted average common shares outstanding for the quarter were $32.6 million, and the diluted weighted average common shares outstanding for the quarter were $34.2 million.

65% above Q4 of 2022 operating expense.

And this expense growth was driven by investment throughout the organization, including 87% growth in R&D related to investments in new products.

Development in MLP tools.

At 59% growth in SG&A for both an op support and overall corporate infrastructure.

The growth in operating expense of 65%, while growing revenue by 159%.

Hello transmit likes to deliver its first GAAP operating profit of $2 6 million and net profit of $4 million for the fourth quarter of 2023.

These compared with an operating loss of $6 8 million in Q4 of 'twenty, two and a net loss of $6 7 million in Q4 of 'twenty two.

Total cash at the end of the year was $394 8 million as of December 31, 2023.

Which equates to cash usage of $32 3 million from the balance at the end of Q3 of 2023.

However, operating cash was a positive $8 3 million in the quarter.

Which was offset by the purchase of three additional planes in the quarter for about $39 million.

Basic weighted average common shares outstanding for the quarter were $32 6 million.

And diluted weighted average common shares outstanding for the quarter were $34 2 million.

Stephen Gordon: Now, let me share some summarized information on the full fiscal year 2023 results. For the full year, total revenue was $241.6 million, again a 159% increase over the prior year. The U.S. organ breakdown for the full year was 151.5 million liver, 59.4 million heart, and 10.5 million lung. XUS had 14 million heart, 1.3 million lung, and 0.1 million liver transplants. And again, non-transplant revenue for the year was $4.9 million. Product revenue for the year was $176.1 million, and service revenue was $65.6 million.

Now, let me share some summarized information on the full fiscal year 2023 results for the full year total revenue was $241 6 million again at 159% increase over the prior year.

In the U S. Oregon breakdown for the full year was $151 5 million of liver fat.

$59 4 million of heart and $10 5 million of lung.

Ex U S was 14 million apart $1 3 million of lung and point $1 million of liver.

And again non transplant revenue for the year was $4 9 million.

Product revenue for the year was $176 1 million in service revenue was $65 6 million.

Stephen Gordon: Gross margin for the full year 2023 was 64%, compared to 70% in 2022. Again, this is a result of a higher portion of NLP service revenue. Product margin was 77%, and service margin was 29% for the full year of 2020. Total operating expenses were $182.5 million for the full year 2023, up 89% from $96.7 million in 2022, and included $27.2 million of one-time acquired in-process R&D related to our acquisition of technology from Bridge to Life and $2 million of acquisition-related expenses from our acquisition of Summit, both in the third quarter of 2023. Our operating loss for the year was $28.7 million in 2023 compared to $31.4 million in 2022, and our net loss was $25 million in 2023 compared to $36.2 million in 2022.

Gross margin for the full year of 2023 was 64% compared to 'twenty compared to <unk> 70 per cent itself 2022 again. This was a result of the higher portion of NOP service revenue.

Margin was 77% and service margin was 29% for the full year of 2023.

Total operating expenses were $182 5 million for the full year 2023 up 89%.

From $96 7 million in 2022 and included $27 2 million of <unk>.

One time acquired in process R&D related to our acquisition of technology from bridge to life and $2 million of acquisition related expenses from our acquisition of summit, both in the third quarter of 2023.

Our operating loss for the year was $28 7 million or 23 compared to $31 4 million in 2022, and net loss was $25 million in 2023 compared to $36 2 million in 2022.

Stephen Gordon: Overall, 2023 was a tremendous year for TransMedics, as we demonstrated the potential to grow our business while helping to increase the overall number of TransMedics. By adding logistics services to our NOP offering, we can now provide a true turnkey solution to our transplant center customers. We continue to be extremely optimistic about our opportunity to continue to grow in 2024 and beyond. To repeat Waleed's earlier comment, we are providing annual revenue guidance in the range of $360 million to $370 million, which represents 49% to 53% growth over the full year of 2022. Also, for modeling purposes, we expect gross margins to improve throughout 2024.

Overall 2023 was a tremendous year for transmitter.

As we demonstrated the potential to grow our business, while helping to increase the overall number of transplants.

By adding logistics services to our N O P offering we can now provide a true turnkey solution to our transplant center customers.

We continue to be extremely optimistic about our opportunity to continue to grow in 2024 and beyond.

To repeat what these earlier comment we are providing annual revenue guidance in the range of 360 million to $370 million, which represents 49% to 53% growth over the full year of 2023.

Also for modeling purposes, we expect gross margins to improve throughout 2024.

Stephen Gordon: We would expect to exit 2024 in the 63 to 64% range for overall gross margin. We would expect the product mix and ServiceMix to be around 65% product and 35% service in 2024. We expect expenses to grow in 2024, likely in the 30% to 40% range. Now, I would like to turn the call back to Waleed for closing comments. Thank you, Stephen. We're very humbled by and proud of TransMedics' performance in 2023. We more than doubled our overall revenue.

And we would expect to exit 2024, and the 63% to 64% range for overall gross margin.

We expect the product mix.

And service mix to be around 65% product and 35% service in 2024.

We expense expect expenses to grow in 2024 likely in the 30% to 40% rich.

I would like to turn the call back to our lead for closing comments.

Thank you Steven.

We're very humbled by and proud of transplant ex performance in 2023.

We more than doubled our overall revenue.

Waleed H. Hassanein: We help grow the national U.S. heart and liver transplant volumes by double-digit numbers. We launched a new transmedics logistics network to drive more operational and cost efficiency for our clinical users, and we achieved our first GAAP operating profit quarter for the business. In totality, we set a solid foundation for sustained growth of our business and our mission of growing transplant volumes to help patients in need of an organ transplant. Now we are laser focused on our 2024 operational plans and on our path towards achieving 10,000 OCS transplants by 2028. With that, I will now turn the call back to the operator for Q&A. We will now begin the question-and-answer session. To ask a question, you may press the star, then one on your touch-tone phone.

We helped grow the national U S heart and liver transplant volumes by double digit numbers.

We launched a new transmit ex logistics network to drive more operational and cost efficiency for our clinical users.

And we achieved our first GAAP operating profit quarter for the business.

In totality, we set a solid foundation for sustained growth of our business and our mission of growing transplant volumes to help patients in need for an organ transplant.

Now we are laser focused on our 2024 operational plans.

And on our path towards achieving 10000, ocs transplants by 2028.

With that I will now turn the call back 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 Touchtone phone.

Operator: If you're using a speakerphone, please pick up your handset before pressing. If at any time your question has been answered and you would like to withdraw your question, please press star then two. Our first question comes from Allen Gong with J.P. Morgan. Please go ahead. Hi team. Thanks for the question. Congratulations on a good quarter. I wanted to start off, you know, diving a little bit deeper into your guidance. You provided the gross margin outlook by disposables versus service. But I think, you know, a big question that we still have is, when we think about your disposables versus service on the top line, how should we think about the drivers of the growth that you're expecting to see?

If youre using a speakerphone please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Our first question comes from Allen Gong with J P. Morgan. Please go ahead.

Hi team. Thanks for the question congrats on the good quarter I wanted to start off diving a little bit deeper into your guidance you provided the gross margin outlook by disposables versus service, but I think a big question that we still have is when we think about your disposables versus.

His service on the top line, how should we think about the drivers of the growth that you're expecting to see.

Yes, Alan as far as drivers of growth I mean, we continue to as Waleed mentioned, we want to penetrate deeper.

Operator: Yeah, as far as drivers of growth are concerned, I mean, we continue to, as Waleed mentioned, we want to penetrate deeper across all three organs. And we want to deliver a clinical program in the lung that will help increase lung volume later in the year. And the impact of... The logistics business is not just about the growth in logistics; it's also about growing the case volume, which we expect.

Across all three organs and we wanted to deliver a clinical program in lung that will help increase the lung.

Later in the year and the impact of <unk>.

The logistics business does not just for the growth in logistics is also to grow the case volume, which we expect to happen.

Alan Thank you for the question.

Allen Gong: Alan, thank you for the question. From our perspective, I agree with Stephen, but let me give you a little bit more of a granular response. We're nowhere close to being done growing our transplant volume. We will grow our transplant volume by growing, by going deeper into existing accounts, by adding more DCD and DBD organs across all three organs, by reinvigorating the lung program, by adding new accounts in areas where we don't have enough accounts like the lung program, as well as adding more DBD to our heart franchise. We are just in the beginning of this commercial ramp-up.

From our perspective.

I agree with Steven but let me give you a little bit more granular response.

We're nowhere close to being done growing and transplant volume, we will grow our transplant volume by growing.

By going deeper into existing accounts by adding more DCD and DVD Oregon's across all three oregon's by reinvigorating the lung program by.

Adding new accounts and areas, where we don't have enough accounts like the lung program as well as adding more DVD to our heart.

Franchise. We are we are just in the beginning of this commercial ramp up.

Waleed H. Hassanein: The other impact is the indirect or direct impact of operational efficiency with TransMedics logistics may even drive more growth into the actual case volume and the overall revenue growth from the logistics aspect of our business. We monitor and drive both sides of our business, the disposable and product, as well as the service. And the synergies that exist between the two will also be an important catalyst for the adoption of the disposable.

The other impact is the indirect or direct impact of operational efficiency with the transmitter logistics may.

May even drive more growth into the actual case volume.

And the overall revenue growth from the logistics aspect of our business. So it is a it's a.

We monitor and drive both sides of our business.

Disposable and the product as well as the service and the synergies that exists between the two will also have an important catalyst to adoption of the disposables.

Waleed H. Hassanein: And then just as a quick follow-up, you know, we've seen the letter that you sent in response to the congressional letter, so I won't dive more into that. But there also was an article out, you know, kind of talking about a more thorough investigation of OPOs as a, you know, kind of a continuation of the investigation that's been ongoing over the last few years. How should we think about the potential for that to disrupt the underlying transplant market? And how should we think about the longer-term impact on transmedics? Thank you. Thank you, Alan.

Got it and then just as a quick follow up.

We've seen the letter that you sent in response to the congressional letter side won't dive more into that but there also was an article out kind of talking about a more thorough investigation of <unk> as a.

A kind of a continuation of the investigation that has been ongoing over the last few years.

How should we think about the potential for that to disrupt the underlying transplant market and how should we think about the longer term impact on transplant ex thank you.

Thank you Alan.

Waleed H. Hassanein: As you said, what was announced today in The Washington Post is just a continuation of what's been ongoing for several years, trying to disrupt or revamp the OPO network in the US. The bottom line is, TransMedics, why now? alone, and developed a unique model called the NOP.

As you said, what what was announced today and the Washington Post is just a continuation of what's been ongoing for several years.

Trying to disrupt.

Or revamp the OPO network.

In the U S. The bottom line is is the phone.

<unk> went out.

Alone.

And developed a unique model pulled the NLP.

Waleed H. Hassanein: We built it. We executed it, and we delivered results to grow transplant volumes in this country by double digits, numbers that haven't been seen in almost a decade. We are gonna continue to do that, and we are proud of what we've accomplished.

We build it.

We executed it.

And we delivered results to grow too.

Transplant volumes in this country by double digits numbers that hasnt been seen in almost a decade.

We are going to continue to do that.

And we are proud of what we've accomplished we don't thing what's happening with the opioids or what what's been announced earlier today has anything to do with us.

Waleed H. Hassanein: We don't think what's happening with the OPOs or what was announced earlier today has anything to do with us, but we are here, and we're proud to show anybody who cares how to grow transplant volumes in this country. We've already done it, and we will continue to do it. So again, it's unfortunate what's going on, but as you said, it's been going on for several years.

But we are here and we are proud to show anybody who cares to know how to grow transplant volumes in this country. We've already done it and we will continue to do it.

So again its unfortunate what's going on but as you said, it's been going on for several years.

Operator: In the meantime, we are focusing on our business. We're focusing on driving more organ transplants in this country successfully with excellent results using our NOP service and now our logistics. Next question, operator. The next question comes from Josh Jennings with TD Cowen. Please go ahead. Hi, good evening.

In the meantime, we are focusing in our business, we're focusing on driving more organ transplants in this country successfully with excellent results using our MLP service and now our logistics service.

Next question operator.

Our next question comes from Josh Jennings with TD Cowen. Please go ahead.

Hi, good evening, thanks for taking the questions and congrats on the strong finish to a remarkable year.

Joshua Jennings: Thanks for the questions. Congratulations on a strong finish to a remarkable year. Wanted to just ask about the congressman's letter. He provided a strong rebuttal, proving every accusation and allegation.

Wanted to just ask about the congressman's letter you provided us a strong rebuttal shooting every every accusation allegation.

Waleed H. Hassanein: Waleed, do you think there could be any short-term disruption to the business with these headlines floating around? And our sense is that you've added so many transplant programs as customers. They're all aware of the business model, and don't seem to have any issues with it. But just one, any short-term disruption potential.

Well, if you think there could be any short term disruption to the business with these headlines swimming around in our sense is that you've added so many <unk>.

Transplant programs as customers, they're all aware of the business model.

To have any issues with it but.

Just one any any short term disruption potential into.

Waleed H. Hassanein: Two, any next steps that you expect from this inquiry by the congressman? Thank you, Josh. Josh, the first part of your question, listen, you know, one has to assume some level of confusion. Okay, this letter came out of left field. It was not supported by any facts.

Any next steps that you expect from this inquiry by the Congressman.

Thank you Josh.

Josh.

First part of your question.

Listen.

One has always to assume.

Some level of confusion okay.

This letter.

Came out of left field.

It was not supported by any facts.

Waleed H. Hassanein: It was completely, completely unfounded. I am sure. Whomever is behind this is going to try to use that letter to try to distract from TransMedics' business. But what they're not counting on, or what you guys should expect, is TransMedics is not going to stand still. We are going to fight.

It was complete.

Completely unfounded.

I am sure whomever.

Whomever's behind us is going to try to use that letter to.

Tried to distract.

From transplant ex business.

But what they're not counting on.

Or what you guys should expect as transmission is not going to stand still we are going to defend.

Waleed H. Hassanein: Our practice, our success. Our goal to grow transplant volumes, and our ability to support these transplant institutions to deliver the best clinical support for their organs and for their patients, as we have been doing for the past 25 years. And you all know that TransMedics defends our positions very vigorously and fairly. So we're not going to be standing still. We're going to try to minimize that distraction as much as we can. Do we expect distractions? Absolutely, because, you know, it's natural.

Our practice.

Our success.

Our goal to grow transplant volumes.

Our ability to support these transplant institutions to deliver the best clinical support for their organs and for their patience as we have been doing for the past 25 years.

And we all you all know that transmit ex defend our positions very vigorously and.

Fairly so we're not going to be standing still we are going to try to minimize that distraction as much as we can do.

Do we expect distraction absolutely because it's.

It's natural.

Waleed H. Hassanein: As far as the next part of the question, I really don't know, Josh. I really don't know. I don't know how this letter came about, other than it appears that there's some misinformation being propagated. But our response is pretty strong, and it was designed as such to make sure that if anybody wants to go down the same path, they need to know exactly the facts before they come and levy these accusations against TransMedics. And of course, we're doing that with the full coordination of our senior advisors and legal team in Washington, D.C. But we don't know what the next steps are, other than we have responded on time and in a comprehensive fashion, and we are propagating our positions to all the right people around TransMedics and in Congress as well. Thanks for that!

As far as the next part of the question.

I really don't know Josh.

I don't.

I don't know I don't know where this letter how this letter came about other than it appears that there is some misinformation being propagated but our response is pretty strong and it was designed as such to make sure that if anybody wants to.

Go down the same path that they need to know exactly the facts before they come and levy. These accusations against transplants and of course, we're doing that with a full coordination of our senior advisors.

And legal team in Washington D C, but we don't know what that what the next steps or other than we are responded on time and in a comprehensive fashion and we we are propagating our positions too.

All the right people around.

Around transmit X and on.

In the Congress as well.

Waleed H. Hassanein: And just a follow-up. You mentioned, Waleed, about the plan to present some data analyses demonstrating improved clinical outcomes in U.S. transplant centers using the NOP and the OCS within the NOP. Any metrics you can share with us that we should be looking for, and how impactful do you think these data analyses can be in terms of driving increased demand and adoption trends for the NOP and the OCS?

Thanks for that and just a follow up just you mentioned will eat about the plan to present, some data analyses demonstrating improved clinical outcomes.

U S transplants using transplant centers using.

<unk> and <unk>.

Yes within the MLP any metrics you can you can.

Share with us that we should be looking for and how impactful you think these data analysis can be.

Traveling and the increased demand and adoption trends for <unk> and <unk>.

Waleed H. Hassanein: Thanks for taking the question. Thank you. Thank you, Josh.

Yes, thanks for taking the questions.

Thank you Josh I think are our key metrics are the ones. We've been monitoring all the time, we're looking at both short and long term.

Waleed H. Hassanein: I think our key metrics are the ones we've been monitoring all the time. We're looking at both short and long-term definitive outcomes. We're looking at rates of PGD, primary graft dysfunction, and early allograft dysfunction.

Definitive outcomes, we're looking at grades of PGD primary graft dysfunction early allograft dysfunction, we're looking at patient and graft survival, both at six and 12 months.

Waleed H. Hassanein: We're looking at patient and graft survival, both at 6 and 12 months. These are the metrics that transplant programs are measured by. And also, we're looking at, you know, the penetration and growth of the case volume within each transplant program in each market. So these are the metrics we'll be discussing at ISHLT and ATC and ILTS. The next question comes from Bill Plovanic of Canaccord. Please go ahead. Great, thanks. Good evening.

<unk>.

So these are the metrics. We are these are the metrics that transplant programs are measured by.

And also we're looking at.

<unk>.

Penetration and growth of their case volume within each transfer.

Transplant program in each market. So these are the metrics, we'll be discussing at IAC, solti and ATC and Lts.

The next question comes from Bill <unk> with Canaccord. Please go ahead.

Great. Thanks, Good evening, thanks for taking my questions.

Bill Plovanic: Thanks for taking my questions. Yeah, a very strong quarter. It looks like it's especially in the liver.

Very strong quarter, it looks like especially in the liver and I'm. Just curious I mean, you know by our math it looks like the deliver procedures were probably up about 20% sequentially and almost triple year over year.

Waleed H. Hassanein: And I'm just curious. I mean, by our math, it looks like the liver procedures were probably up about 20% sequentially and almost tripled year over year. You know, I was just kind of wondering if you could help us understand what is kind of really driving the liver adoption, because it seems to be going much faster than the heart, which, you know, looks like it was up sequentially, but just not at the scale and pace at which liver is. Thank you, Bill. I think I think there's, you know, several reasons and, frankly, several expected reasons for that. We all know that liver transplant procedures are nearly double or even two and a half times more expensive than heart transplant procedures. So that's number one. Number two, liver transplantation is a dedicated service at transplant programs versus heart transplantation, which is always adjunct to regular open heart surgery and cardiothoracic surgery in general.

I was just kind of if you could help us understand what is kind of really driving the liver adoption because it seems to be going much faster than the heart, which it looks like it was up sequentially, but just not at the scale and pace at which deliver is.

Thank you Bill I think I think there are several reasons and frankly several expected reasons for that.

We all know that liver transplant procedures are nearly double or even two and a half ex the heart transplant procedures.

So that's number one number two.

Liver transplantation is a dedicated.

Service at transplant programs versus heart transplant is always adjunct to.

Regular open heart surgery, and cardio thoracic surgery in general.

Waleed H. Hassanein: That's number two. I think we are confident that the heart will pick up, and the liver will always lead the way just because of the sheer number of procedures. I think over the next two or three years, the heart will get up there as we continue to demonstrate growth and the overall transplant volume. We will get the number of procedures up. We will see the long-term effect of OCS as we will start reporting that at the next ISHLT, and we are extremely confident that the heart will pick up the pace. And more importantly, we're going to go out on a limb and say that over the next couple of years, we should see the lung start to really become more contributing to our overall growth.

Yes.

That's number two.

I think we are confident that the heart will pick up.

Liver will always lead the way just because of the sheer number of procedures I think over the next two or three years. The heart will get up there as we continue to demonstrate growth in the overall transplant volume.

We will get the number of procedure up we will see the long term effect of Ocs as we will start.

Reporting that at the next <unk> and we are extremely confident that our heart will pick up the pace and more importantly, we're going to go out and 11, and we would say that over the next couple of years, we should see the lung.

Starting to really become more contributing to our overall growth again not at the same level of liver because of the sheer number of procedures, but that's our goal is to get all three or against to be contributing close to each other.

Waleed H. Hassanein: Again, not at the same level of liver because of the sheer number of procedures, but that's our goal is to get all three organs to be contributing close to each other. Great, thanks. And then my second question, if I could, is just, you know, the aviation ramp has gone a lot faster than we expected. You know, you're 13 planes now; you said you'd get to 16 to 20.

Great. Thanks, and then my.

Second question, if I could is just <unk>.

Aviation ramp has gone a lot faster than we expected.

Youre 13 planes now you said you get to 16% to 20, how do we think you gave us the metric of 80% when do you expect to hit the 80% and then how should we think about average revenue per case for aviation is you get a little more information you're getting deeper into this and then.

Bill Plovanic: How do we, I think you gave us the metric of 80%. When do you expect to hit 80%? And then how should we think about average revenue per case for aviation as you get a little more information and you're getting deeper into this? And then how do we think about that service gross margin longer term? Because I think originally you thought it'd be 30%. You're already surpassing 35.

How do we think about that service gross margin longer term because I think originally you thought it would be 30% youre already surpassing 35, and thanks for taking my questions.

Waleed H. Hassanein: And thanks for taking my question. Thank you, Bill. As always, three layered questions. The first aspect is that we hope to be fully operational at the scale of doing 75-80% of our transplant missions with our own fleet when we surpass 20 operating TransMedics flights or aircraft, which means we're talking sometime in the second half of 2025. So that's number one.

Thank you Bill is always related questions. The first the first aspect.

We hope to be.

Fully operational at the scale of doing 75%, 80% of our transplant missions with our own fleet. When we surpassed 20 operating transmits flights or aircrafts, which means we're talking sometime second half of 2020.

<unk>.

Waleed H. Hassanein: The second part of the question was, remind me again, Bill, please, the average price per mission. We can't comment on that until we are completely dispersed equally across the two sides of the United States, the East and West, because the mix is different.

So that's number one.

The second part of the question was remind me again Bill please.

Oh, yeah, the price per the average price permission.

We can't comment on that until we are completely disbursed equally across the the two sides of the United States, the east and West.

Because the mix is different.

Bill Plovanic: And that will hopefully happen as we exit 2024. And then, finally, as far as the margin is concerned, I think it's early. I think we are going to be in the 30s, and I will leave it that way for now.

And that will happen hopefully as we exit 2024.

And then finally as far as the margin is concerned I think you know.

Its early I think we are going to be in net <unk> and I will leave it as that.

Waleed H. Hassanein: And then we will see how we're executing going forward. Thank you. I would just add, you know, as I mentioned, we do expect modest improvement over the year as we really focus on what's important as we ramp up the number of hours on the planes that we have and cover more of the fixed costs. Great thing.

For now and then we will we will see how we are executing going forward.

Okay great.

I would just add you know as I mentioned, we do expect modest improvement over over the year as we really what's important as we ramp the number of hours on the planes that we have and cover more of the fixed cost.

Sure.

Great. Thanks.

Okay.

Ryan Daniels: The next question comes from Ryan Daniels with William Blair. Please go ahead. Yeah, guys, congrats on the strong quarter and year, and thanks for the questions. Stephen, maybe we wanted to start with on the margin front, and it's more revenue related, actually. This quarter, it looks like about 34.5% of your sales came from logistics, and that's with you only covering about 35% of your NLP cases with your own logistics solution. So why would that percentage, 65.35, stay the same as it ramps towards 80% given that you're only at 35% today? I'm just trying to square that up.

The next question comes from Ryan Daniels with William Blair. Please go ahead.

Hey, guys congrats on the strong quarter and year and thanks for the questions. Stephen maybe wanted to start with on the margin front, it's more revenue related actually this quarter. It looks like about 34, 5% of your sales came from the logistics and Thats with you only covering about 35% of your MLP cases with your own logistics solution.

So why would that percentage to $65 35 stay the same as it ramps towards 80%.

Given that you're only at 35% today, just trying to square that up.

Stephen Gordon: Yeah, I think it's important to note that that mix today is not just logistics; that's all of the NLP service. So we only had 9 million in logistics service, which is a, you know, smaller percent of the total. And so as we grow this business, a couple things are different. One is that part of the service revenue this quarter was some, some overhang from non-transplant related revenue, that's going to go away in Q1. So that's a little bit coming out of the other thing is we expect international to kind of come back to where it was last quarter. And so that is higher product revenue. So both of those are kind of skewing the service, you know, and product mix in the wrong direction.

I think it's important note that mix today, that's not just logistics that's all of the MLP service. So we only had $9 million of logistics service, which is a smaller percent of the total.

And so as we grow this business couple of things are different one is.

Part of the service revenue this quarter was some.

Some overhang from non transplant related revenue that's going to go away in Q and Q1, so that's a little bit coming out of the service. The other thing is we expect international to kind of come back to where it was last quarter and so that is a higher product revenue. So both of those are kind of skewing the service.

Mix in the wrong direction I would say in Q4, it will change a bit in Q1, and then it remains to be seen how we passed is how we go through the rest of the growth of the rest of the year, but generally speaking I think the service portion is going to be in the mid to maybe slightly upper 30% range I don't think it ever gets to.

Stephen Gordon: I would say in Q4, it will change a bit in Q1. And then, you know, it remains to be seen how we get on, how we go through the rest of the year. But generally speaking, I think the service portion is going to be in the mid to kind of slightly upper 30% range. I don't think it ever gets to like 40%. That's a very helpful color.

Like 40% of our business. Okay. That's very helpful color and then maybe a broader strategic question, obviously with the growth in dynamic opportunity here ton on your plate, but.

Waleed H. Hassanein: And then maybe a broader strategic question, obviously with the growth and dynamic opportunity here, you've got a ton on your plate. You've also got Bridges to Life, technology acquisitions, new product development, you're really building out the logistics business, and hiring a lot of clinicians to support your growth targets. So I'm curious if you could perhaps outline maybe two or three of the largest strategic initiatives that we should be keeping an eye on in 2024, not to set the platform so much for this year but really to set that platform, getting to 10,000 cases. Thanks.

You've also got.

Just the life technology acquisitions, new product development, you're really building out the logistics business.

Hiring a lot of clinicians to support your growth targets I'm curious if you could perhaps outline maybe two or three of the largest strategic initiatives that we should be keeping an eye on in 2024 not to set the platform as much for this year, but really just shut that platform getting to the 10000 cases. Thanks.

Waleed H. Hassanein: Ryan, thank you for the question. We're planning to detail all these in our next earnings call. But you know, very important.

Brian Thank you for the question.

We're planning to detail all of these in our next earnings call.

Very important.

Waleed H. Hassanein: We are doing all of the above, and we are looking forward to sharing more specific and granular details about our goals in 24 and beyond in our next earnings call. I look forward to that. Thank you. The next question comes from Suraj Kalia with Oppenheimer & Company. Please go ahead.

We are doing all of the above.

And we are looking forward to sharing more specific and granular details about our goals.

In 'twenty four and beyond in our next earnings call.

Okay I look forward to that thank you.

Next question comes from Suraj Kalia with Oppenheimer <unk> Company. Please go ahead.

Suraj Kalia: Waleed, can you hear me all right? We can hear you just fine, Suraj. Perfect. Gentlemen, congratulations on an excellent quarter. So, Waleed, two questions.

Can you hear me all right.

We can hear you just fine.

Gentlemen, congrats on an excellent quarter.

So really two questions first are amounts as you exited Q4.

Stephen Gordon: Our math says you exited Q4 with liver, heart, and lung market shares of approximately 25, 20 and 4%. You guys do not put out guidance lightly, especially given your performance in the last two years, and you know how the street starts building things in. And Ruff Mathis is telling us, based on the FY24 guide, you guys are looking to get somewhere close to 25% to 30% share in heart and livers and 10% to 15% lung. I'll be approximately right on our maps, and can you give us some additional granularity? How are y'all thinking through DVD, DCD, or sight movement? I guess just strip down the 360, and 70 million guide a little more for us, if you could. Yes, Suraj. This is Stephen.

With liver heart and lung market shares of approximately 25, 24%.

You guys do not put out guidance lightly.

Especially given your performance in the last two years in.

How the street start spilling things.

And rough math is telling us based on your FY 'twenty four guide you guys looking to get somewhere close to 25% to 30% share in heart and levers and 10% to 15% of the lungs.

I'll be approximately right in our maps and can you give us some additional granularity.

How are you thinking through DVD DCD or slight movement.

Yes, just stripped down the the 363 70 million guide a little more for us if he could.

Yes, Suraj. This is Stephen so I don't think we can give.

Stephen Gordon: So, you know, I don't think we can give you an idea of where we expect SHARE to be. But we definitely expect SHARE to improve from where we are today. As we said, we looked at it on an annual basis, and we were kind of back, 16% to 17% share in heart and liver, and we certainly expect to improve that as we go. 2024, and the next part of your question, Suraj, remind me.

Where we expect share to be we definitely expect share to improve from where we are today.

As we said we looked at it on an annual basis, and we were kind of about 60% to 70% 17% share in.

In the heart and liver and we certainly expect to improve that as we go into 2024.

And.

The next part of your question Suraj remind me.

Waleed H. Hassanein: It's just in terms of any additional color, how are y'all thinking about DPD versus DCD and also the bell curve for site distribution, I guess just trying to understand is that how are y'all targeting or getting to those numbers? Yes, Suraj, let me address that one, and thank you for the question. I think, Suraj, the way we approach this is, you know, very broad. I mean, we look at our case distribution, and here's what we expect. We expect that if we're heavily used in DCD, we expect that to continue, and we expect to continue to drive that forward across all three organs. But we're not going to stop here.

It just in terms of any additional color. How are you thinking about DVD versus DCD and also the bell curve distribution I guess, just trying to understand is that how you're targeting or getting getting to those numbers.

Suraj, Let me let me, let me address that one and thank you for the question I think suraj the way we approach this.

It's very.

It's very broad I mean, we look at our case distribution and here's what we expect we expect.

If we're heavily used in BCD, we expect that to continue and we expect to continue to drive that for it.

Across all three organs.

But we're not going to stop here, we are going to find ways to.

Waleed H. Hassanein: We are going to find ways to invigorate DBD utilization. We do that through a variety of different programs and mechanisms to drive adoption in that area and increase overall national transplant volume. So number three, we look at areas that are quiet or relatively quiet or have lower penetration, like the lung, and we find ways to reinvigorate the lung, and it doesn't matter at that point whether it's DBD or DCD. Can you imagine if we were, you know, more than where we are in the lung and near the heart, at least? What would that do to our revenue mix and penetration overall? It would be great.

Invigorate DVD utilization.

We do that through a variety of different programs and mechanisms.

To drive adoption in that area to drive overall national transplant volume.

So at <unk>.

Number three we look at areas that are quiet or relatively quiet or lower.

Lower penetration like the loan and we find ways to reinvigorate the lung and it doesn't matter at that point, whether its DVD DCD can you imagine if we are.

No.

More than where we are in the lung and near heart at least.

What would that do to our revenue mix and penetration overall it would be great.

Waleed H. Hassanein: After that, you know, as far as the transplant program is concerned, you know, again, our service is universal. Our service has been proven to result in every promise that we set to achieve or every hypothesis or value that we set to achieve. And now it's up to transplant programs to decide whether or not they wanna be thriving and growing in the future as a leading transplant program. And that is the way every transplant program should look at OCS and NOP and transmedical logistics. This is the future.

After that.

As far as the transplant programs is concerned.

Again, our service is.

Universal our service has been proven.

Two results in every promise.

That we set to achieve or every hypothesis or <unk>.

Value that we set to achieve and now it's up to transplant programs to decide whether or not they want to be.

Thriving and growing and that in the future of being a leading transplant program and that is the way.

Every transplant program should look at Ots, NLP and transportation logistics.

Waleed H. Hassanein: And we know that, we've proven it, and we are standing by our commitment to transforming the field. And we welcome and expect many of the transplant programs will be contributing part of our growth going forward because we are contributing to their growth. So it's not a one size fits all.

This is the future and we know that we've proven it.

And we are standing.

By our commitment to transforming the field.

And.

We welcome and expect many of the transplant programs will be contributing part of our growth going forward, because we are contributing to their growth.

So and if I could not it's not as it's not at all.

Waleed H. Hassanein: We have to be dynamic. We have to be flexible. We have to tackle it across all three organs, across the two different types of donors and be creative in how.

One size fits all we have to be dynamic we have to be flexible we have to tackle it in a broad range across all three oregon across.

The two different types of donors and be creative on how we.

Waleed H. Hassanein: We pull the levers to achieve our goals. And again, we are very early, given the penetration rates we discussed. Fair points.

We pulled the levers to achieve our goals and again, we are very early.

Given the penetration rates we discussed.

Suraj Kalia: Waleed, if I could quickly ask a follow-up question. Very nice sequential jump in the number of sites using TransMedics Aviation. So Waleed, as it normally happens, right, even at our site visit, one of the comments you had made was like, look, we want to make it like a one-stop shop, attach TransMedics Aviation to every run. So you go to the site. The 98 sites you talked about in Q4.

Okay Fair point, while it if I could quickly ask a follow up very nice sequential jump in the number of sites using transmit aviation.

So we'll leave it as it normally happens right even at our site visit one of the comments you had made was like look we want to make it like a one stop shop attach transmit ex aviation to everyone.

So you go to sites.

<unk> 98 sites you talked about in Q4.

Waleed H. Hassanein: What has been the reception? And I'm trying to understand, is it like you all went to, I don't know, pick a number, 200 sites, 98 are on board, the remaining one or two are resisting for whatever reason? Just set the stage for us to slice and dice how aggressive TransMedics is, or lack thereof. Gentlemen, you guys are on a roll.

What has been the reception.

And I'm trying to understand is that like your old went to I don't know pick a number 200 sites 19 year term board. The remaining one or two are resisting for whatever reason just set the stage for us to slice and dice.

How aggressive transmit xs or lack thereof, gentlemen, you guys are on a roll. Congrats again, thank you for taking my questions. Thank.

Waleed H. Hassanein: Congratulations again. Thank you for taking my question. Thank you. Thank you very much, Suraj. Unfortunately, I might disappoint you by saying I cannot give you more granular detail other than to remind you that there are not 250 programs out there that we would go to. Again, our approach to these programs is very, very simple.

Thank you.

Very much suraj. Unfortunately.

I might disappoint, you by saying I cannot give you more granular detail other than to remind you that there are not 250 programs out there that we would go to.

Again, our approach to these programs is very very simple when we get cold for an MLP case, we provide them the option to use our transmit ex logistics, we provide them a price quote and it's up to them to decide.

Waleed H. Hassanein: When we get called for an NOP case, we provide them with the option to use our TransMedics logistics service. We provide them with a price quote, and it's up to them to decide whether they want to use us or not. Some centers liked using us, came back, and asked Tamar and Andrej for a long-term contract. Some centers are, we don't require that, but some centers wanted to do that, and we are there to help them achieve that goal. The bottom line for us is we know and we are confident that we are providing an operationally scalable and the most efficient cost structure in transplant logistics in the United States, and it's going to get better from here as we have more leverage and more planes and more capacity to meet many of these cases. And it's up to the transplant program to participate in this, if it is a cost-effective or efficient model or not. I hope I addressed the question, and I'm sorry. I can't give you more granular detail than that at this early stage of launching logistics.

Whether they want to use it or not some centers like using us to came back and asked Tamara and Andre for a long term contract. Some centers are we don't require that but some center wanted to.

Do that and we are there to help them achieve that goal.

The bottom line for US is we know and we are confident that we are providing.

And operationally scalable and the most efficient cost structure in transplant logistics in the United States and it's going to get better from here as we have more leverage and more plain and more capacity to meet many of these cases and it's up to the transplant program.

Two.

Participate in this if cost effective or efficient model or not.

I hope I address that question and I'm, sorry, I can't give you more granular detail than that at this early stage of launching logistics.

Operator: It's only one quarter; it's only one quarter, Suraj. No, fair enough, fair point, 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, operator. Thank you all very much for being with us this evening, and we look forward to speaking to you again in May. Have a wonderful evening. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

It's only one quarter, so right, it's only one quarter suraj.

Fair enough fair points. Thank you.

This concludes our question and answer session I would like to turn the conference back over Q, while lead Hoffman.

For any closing remarks.

Thank you operator, thank you all very much for being with US This evening.

And we look forward to speaking again in May.

Have a wonderful evening.

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