Q1 2024 TransMedics Group Inc Earnings Call

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Operator: Good afternoon, and welcome to TransMedics' First Quarter 2024 Earnings Softness Fall. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Lane Morgan from the Gilmartin Group for a few introductory comments.

Good afternoon.

Speaker Change: And welcome to <unk> first quarter 2024 earnings conference call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: We will be facilitating a question and answer session towards the end of today's call.

Speaker Change: As a reminder, this call is being recorded for replay purposes.

Speaker Change: I would now like to turn the call over to Mike Moore from the Gilmartin group for a few introductory comments.

Mike Moore: Thank you operator earlier today trends medics released financial results for the quarter ended March 31st 2020 for a copy of the press release is available on the company's website.

Lane Morgan: Thank you, operator. Earlier today, TransMedics released financial results for the quarter ended March 31st, 2024. Before we begin, I would like to remind you that management will make statements during this call, including during the question and answer portion of the call, that are forward-looking statements within the meaning of federal securities law. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

Mike Moore: Before we begin I would like to remind you that management will make statements. During this call including during the question and answer portion of the call May include forward looking statements within the meaning of federal Securities laws.

Mike Moore: Statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.

Lane Morgan: All forward-looking statements, including without limitation, our examination of operating trends, the potential commercial opportunity for our products, and the timing of new clinical programs, 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 our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Mike Moore: All forward looking statements, including without limitation, our examination of operating trends the potential commercial opportunity for our products and timing of new clinical programs and our future financial expectations, which include expectations for our organization and guidance and our expectations for revenue gross margins and operating expenses in 'twenty two.

Mike Moore: Four and beyond are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements.

Lane Morgan: Accordingly, you should not place undue reliance on these statements. Additional information regarding these risks and uncertainties appears under the heading risk factors in our Form 10-K filed with the Securities and Exchange Commission on February 27, 2024 and our subsequent Form 10-Q filings and forward-looking statements, including today's earnings press release, which are available at www.sec.gov and on our website at www.transmedics.com. TransMedics does not claim 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, April 30th, 2024. And with that, I will now turn the call over to Waleed Hassanein, President and Chief Executive Officer.

Mike Moore: Additional information regarding these risks and uncertainties appear appears under the heading risk factors of our Form 10-K filed with the Securities and Exchange Commission on February 27, 2020 for our subsequent form.

Mike Moore: And our subsequent Form 10-Q filings and the forward looking statements included in today's earnings press release, which are available at Www Dot I see the.

Mike Moore: Dot Gov and on our website at Www Dot two kinetics dot com.

Mike Moore: And I used the same any intention or obligation except as required by law 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 if I could.

Mike Moore: The only I think the library has today April 30 of 'twenty 'twenty, four and with that I will now turn the call over to Waleed Hassanein.

Waleed H. Hassanein: And Chief Executive Officer.

Waleed H. Hassanein: Thank you Lynn good afternoon, everyone and welcome to <unk> first quarter 'twenty 'twenty four earnings call.

Waleed H. Hassanein: Good afternoon, everyone, and welcome to TransMedics' First Quarter 2024 Earnings Call. As always, joining me today is Stephen Gordon, our Chief Financial Officer.

Waleed H. Hassanein: As always joining me today is Stephen Gordon, our Chief Financial Officer.

Waleed H. Hassanein: For the past few years transmit X has delivered exceptional revenue growth, while making transformational investments in our business.

Waleed H. Hassanein: For the past two years, TransMedics has delivered exceptional revenue growth while making transformational investments in our business. 2024 represents another crucial year, not only for exceptional growth but also for broadening our infrastructure and product pipeline to drive further growth, profitability, and importantly, increased transplant volume, specifically. We are focused on three verticals.

Waleed H. Hassanein: 'twenty 'twenty four and it presents another crucial year not only for exceptional growth, but also for broadening our infrastructure and product pipeline to drive further growth.

Waleed H. Hassanein: The ability and importantly increased transplant volumes.

Waleed H. Hassanein: Specifically.

Waleed H. Hassanein: We are focused on three verticals.

Waleed H. Hassanein: First, completing the initial build-out phase of our transmedics aviation fleet and transplant logistics infrastructure. Second, preparing for the launch of three major new clinical programs to accelerate OCS lung and OCS heart adoption and expand our clinical indications for OCS heart in the US. And finally, growing the overall national transplant volumes even further through our one-of-a-kind NOP program. On every front, we have started the year with very strong momentum towards achieving these goals, with 1Q Results representing a new high-water mark for our business. Let me review the key highlights for the first quarter performance.

Waleed H. Hassanein: First completing the initial build out phase of our transmit excavation fleet and transplant logistics infrastructure.

Waleed H. Hassanein: Second preparing for the launch of three major new clinical programs to accelerate ocs lung and Ocs heart adoption and expand our clinical indications for Ocs heart in the U S and finally growing the overall national transplant volumes, even further through our one of a kind N O P.

Program.

Waleed H. Hassanein: On every front, we have started the year with very strong momentum towards achieving these goals.

Waleed H. Hassanein: With the <unk> results, representing a new high watermark for our business.

Waleed H. Hassanein: Total revenue for Q1 grew to $96.9 million, representing 133% growth over Q1 2023 and a 19% sequential growth from Q4 2023. This growth was achieved through increased utilization of both OCS products across lung, heart, and liver, as well as TransMedics transplant logistics service. I want to highlight the diversified nature of our growth to dispel any potential misperception that our growth is only driven overwhelmingly by transplant logistics revenue growth. Said differently, we fully expect, and I repeat, we fully expect our future growth to be driven by both increased product and transplant logistics adoption. TransMedics.

Waleed H. Hassanein: Let me review the key highlights for the first quarter performance.

Waleed H. Hassanein: Total revenue for Q1 grew to $96 $9 million.

Waleed H. Hassanein: Representing 133% growth over Q1, 2023 and a 19% sequential growth from Q4 2023.

Waleed H. Hassanein: This growth was achieved through increased utilization of both ocs product across lung heart and liver as well as transmit ex transparent logistic service.

Waleed H. Hassanein: I want to highlight that the diversified nature of our growth to dispel any potential mis perception that our growth is only driven overwhelmingly by transplant logistics revenue growth.

Said differently, we fully expect I repeat we fully expect our future growth to be driven by both increased product and transplant logistics adoption.

Waleed H. Hassanein: Transfer medics.

Waleed H. Hassanein: Transplant logistic service revenue for Q1 was $14.5 million, up from $9.2 million in Q4 of last year, representing approximately 58% growth quarter over quarter. We are continuing to demonstrate that our integrated and cost-efficient TransMedics NOP and Logistics Service infrastructures are delivering real value to transplant programs across the U.S. We remain focused on expanding our operational capabilities for Transmedics logistics throughout 2024, which I will detail further later in the presentation today. Our overall gross margin for Q1 was 62%, up from 59% last quarter and in line with our expectations.

Waleed H. Hassanein: Transplant logistics service revenue for Q1 was $14 $5 million up from $9 $2 million in Q4 of last year.

Waleed H. Hassanein: Representing approximately 58% growth quarter over quarter.

Waleed H. Hassanein: We are continuing to demonstrate that our integrated and cost effective efficient transmitter N O P and logistics service infrastructures are delivering real value to transplant programs across the U S.

Waleed H. Hassanein: We remain focused on expanding our operational capabilities for <unk> logistics throughout 'twenty, 'twenty, four which will which I will detail further.

Waleed H. Hassanein: Later in the presentation today.

Waleed H. Hassanein: Our overall gross margins for Q1 was 62% up from 59% last quarter and in line with our expectations.

Waleed H. Hassanein: We are extremely confident that we will be able to further improve the gross margin over the next 12 to 18 months as we achieve more leverage of scale in both product and service operations. The strong growth in revenue and gross margins enabled us to deliver GAP operating profit of $12.4 million, which represents 13% of total revenue. Net income was $12.2 million.

We are extremely confident that we will be able to further improve the gross gross margin over the next 12 to 18 months as we achieve more leverage of scale in both product and service operations.

The strong growth in revenue and gross margins enabled us to deliver GAAP operating profit of $12.4 million, which represents 13% of total revenue.

Net income was $12 $2 million.

Waleed H. Hassanein: We are very proud to have achieved these profitability metrics while still investing heavily in future growth. We remain laser focused, however, on delivering sustainable, positive operating cash flow over the next several quarters. Before moving on to our momentum beyond our financial performance, I'd like to take a moment to recognize the entire TransMedics team who have worked tirelessly to achieve these results. We are focused on execution to build upon the Q1 results. Now, with that background, let me provide more detail on key operating metrics.

Waleed H. Hassanein: We are very proud to have achieved these profitability metrics, while still investing heavily in future growth.

Waleed H. Hassanein: We remain laser focused however on delivering sustainable positive operating cash flow over the next several quarters.

Speaker Change: Before moving on to our momentum beyond our financial performance I'd like to take a moment to recognize the entire transmit X team.

Speaker Change: Yeah.

Speaker Change: Which had which.

Speaker Change: He has worked tirelessly to achieve these results.

Speaker Change: We are focused we are focused on execution to build upon the Q1 result.

Speaker Change: Yeah.

Speaker Change: Now with that background, let me provide more detail across key operating metrics.

Speaker Change: As I stated above.

Waleed H. Hassanein: As I stated above, we set a new high-water mark for case volume across all three organ markets in Q1. Overall, NOP contribution remains at 98 plus percent of our case volume, a trend which we expect will continue throughout the foreseeable future. Turning now to the key transmedics transplant logistics metrics. Through Q1, we continue to expand our fleet of owned aircraft, reaching 14 owned aircraft by the end of the quarter.

Speaker Change: We set a new high watermark for Keith volume across all three Oregon markets in Q1.

Speaker Change: Overall N O P contribution remains at 98 plus percent of our case volume at trend, which we expect will continue throughout the foreseeable future.

Speaker Change: Turning now to the key transmit ex transplant logistics metrics.

Speaker Change: Through Q1, we continued to expand our fleet of owned aircrafts, reaching 14 on aircrafts by end of the quarter.

Speaker Change: Meanwhile, the daily average number of active transmit ex aviation planes were nine planes in Q1 compared to seven in Q4 of 2023.

Waleed H. Hassanein: Meanwhile, the daily average number of active TransMedics aviation planes was nine planes in Q1 compared to seven in Q4 of 2023. We expect this number will continue to increase throughout the year as we strive to reach 15 to 20 operational aircraft by year end. Our owned aircraft covered approximately 49% of our NOP flight missions in Q1, compared to 35% in Q4 of 23. This further underscores the potential long runway to drive additional growth and maximize efficiency across our transplant logistics operation. As we stated before, at scale.

Speaker Change: We expect this number will continue to increase throughout the year as we strive to reach 15 to 20 operational aircrafts by year end.

Our owned aircrafts covered approximately 49% of our N O P flight missions in Q1 compared to 35% in Q4 of 'twenty three.

Speaker Change: This further underscores the potential long runway to drive additional growth and maximizing efficiency across our transplant logistics operations.

Speaker Change: As we stated before at scale.

Speaker Change: We would fully expect to cover 880 plus percent of that total N O P missions, using our transmit ex logistics services for both air and ground transport.

Waleed H. Hassanein: We fully expect to cover 80 plus percent of the total NOP missions using our TransMedics logistic services for both air and ground transport. We will continue to use carefully selected, highly reliable, and safe operators for supplemental lifts to support our additional missions. From a customer footprint perspective, we have also continued to grow the number of programs that are using our transplant logistics services. In Q1, approximately 105 U.S. transplant programs used TransMedics logistics, compared to approximately 97 in Q4 of 2023. As we have rapidly achieved this critical mass of users,

Speaker Change: We will continue to use carefully selected highly reliable and safe operators for supplemental lifts to support our additional missions.

Speaker Change: From a customer footprint perspective, we have also continued to grow the number of programs that are using our transplant logistics services in Q1, approximately 105 U S transplant programs use trends medics logistics compared to approximately 97 in Q4 of 2023.

Speaker Change: As we have rapidly achieved this critical mass of users.

Speaker Change: It users.

Waleed H. Hassanein: We are now focusing on going deeper within these programs and meeting more of their transplant logistics needs going forward. Overall, we're very pleased with the early success of our transplant logistics services and are confident that transplant programs are seeing the significant cost efficiency and reliability of transmedics logistics compared to historical models. We look forward to expanding further throughout the year and into 2025 as we scale our air, fleet, and ground operations.

Speaker Change: We are now focusing on going deeper within these programs and meeting more of their transplant logistics needs going forward.

Speaker Change: Overall, we're very pleased with the early success of our transplant logistics services and are confident that transplant programs are seeing the significant cost efficiency and reliability of transparency logistics compared to historical model.

Speaker Change: We look forward to expanding further throughout the year and into 2025, as we scale, our air fleet and ground operations.

Speaker Change: We are also encouraged by our growing base of clinical evidence from real world outcomes, and the growing excitement around our offering across clinical transplant users.

Waleed H. Hassanein: We are also encouraged by our growing base of clinical evidence from real-world outcomes and the growing excitement around our offering across clinical transplant users. We saw this excitement firsthand in April of this year as we attended the International Society of Heart and Lung Transplant Conference in Prague. At the meeting, several scientific presentations by transplant academic experts demonstrating the value of OCS heart and OCS lung were presented. Here are the key highlights.

Speaker Change: We saw this excitement firsthand in April of this year as we attended the International Society of Heart and lung transplant conference in Prague.

Speaker Change: At the meeting several scientific presentations by transplant academic experts demonstrating the value of Ocs heart and Ocs lung were presented.

Here are the key highlights.

Speaker Change: Dr. Jacob charter from Duke presented the Ocs heart perfusion or all H P registry experience with DCD heart transplants in the U S.

Waleed H. Hassanein: Dr. Jacob Schroeder from Duke presented the OCS heart perfusion or OHP registry experience with DCD heart transplants in the U.S. The data demonstrated that OCS heart was used in approximately three quarters of all DCD hearts transplanted at OHP Registry Center. The data also demonstrated that OCS DCD heart transplants had superior patient survival outcomes compared to NRP DCD transplants in high-risk recipients. This provided evidence that OCS Heart affords better protection of the DCD donor hearts as compared to NRP. During his presentation, Dr. Schroeder commented that the overall OCS NOP cost is more favorable to NRP costs when factoring in the cost of dry runs, the clinical support overhead, and the hardware costs.

Speaker Change: The data demonstrated that Ocs heart was used in approximately three quarters of all DCD heart transplanted at OHP registry centers.

Speaker Change: The data also demonstrated that Ocs DCD heart transplants had superior patient survival outcomes compared to N. R. P. DCD transplants in high risk recipients.

Speaker Change: This provides evidence this provided evidence that ocs heart affords better protection of the DCD donor hearts as compared to N. R. P.

Speaker Change: During his presentation. Dr. Schroeder commented that the overall ocs MLP cost is more favorable to MRP costs when factoring in the cost of bright runs the clinical support overhead and and the hardware costs.

Waleed H. Hassanein: Importantly, Dr. Schroeder highlighted that the OCS NOP enhances the ability for any heart transplant program in the U.S. to offer the clinical service of DCD heart transplantation to their patients without the burden of overhead costs and clinical learning curves relating to the standard or unified procurement and management of donor hearts by the TransMedics NOP staff. Next, Dr. Mani Dhanushman from Emory University Medical Center presented the outcomes of OCS-DCD compared to standard of care DBD hearts in the U.S. The data showed that OCS DCD hearts were transported nearly double the distance from donor to recipient and had double the cross-clamp time. This signifies the broader access to DCD donors afforded by OCS NOP.

Speaker Change: Importantly, Dr shorter highlighted that the Ocs N O P enhances the ability for any heart transplant program in the U S to offer the clinical service, a DCD heart transplantation to their patients without the burden of overhead costs and clinical learning curves, giving the standard or unified procure.

Speaker Change: Men and management of donor hearts by that transmit ex N O P staff.

Speaker Change: Next Dr. Danny Dunn Eschmann from money banishment from Emory University Medical Center presented the outcomes of Ocs DCD compared to standard of care DVD Hearts in the U S.

Waleed H. Hassanein: The data also showed that despite higher risk donor factors, OCS clinical outcomes were similar to standard criteria DVD outcomes in the U.S. This further validates the safety profile of the OCS heart. Simply stated, OCS enabled a DCD heart transplant to have similar survival outcomes to the U.S. National DVD heart transplant outcomes, which are the best in the world. Dr. Dineshman also highlighted that the increased use of OCS NLP has led to a significant reduction in moderate and severe primary graft dysfunction, or PGD, after OCS DCD heart transplant. Severe PGD is the most severe early post-heart transplant clinical complication and historically has been associated with worse short and long-term patient survival.

Speaker Change: The data showed that Ocs DCD hearts were transported nearly double the distance from donor to recipient and had double the cross clamp time.

This signifies the broader access to DCD donors afforded by Ocs N O P.

Speaker Change: The data also showed that despite higher risk donor factors Ocs clinical outcomes were similar to standard criteria D V D outcomes in the U S.

Speaker Change: This further validates the safety profile of the Ocs heart.

Speaker Change: Simply stated the Ocs enabled a DCD heart transplant to have similar survival outcomes to the U S National DVD heart transplant outcomes, which are the best in the world.

Speaker Change: Dr. <unk>. The nest men also highlighted that the increase of the increased use of Ocs N. O. P has led to significant reduction in moderate and severe primary graft dysfunction or P. G D. After ocs DCD heart transplants.

If you're a P. G. D is the most severe early post heart transplant clinical complication and historically has been associated with worse short and long term patient survival.

Speaker Change: Next Dr. Mauricio Villavicencio from Mayo clinic presented the Ocs Heart D. B D experience from the OHP registry.

Waleed H. Hassanein: Next, Dr. Maurizio Vellaticencio from Mayo Clinic presented the OCS Heart DVD experience from the OHP Registry. The data showed that OCS NOP resulted in excellent post-transplant clinical outcomes from DBD donors compared to standard criteria donors preserved with static cold storage, despite having 3x longer distance traveled and double the cross-clamp time in the OCS NOP arm. Again, this data validates the broader access to distant donors and potential for improved workflow afforded by the OCS NOP.

Mauricio Villavicencio: The data showed that Ocs N O P resulted in excellent post transplant clinical outcomes from DVD donors compared to standard criteria donuts preserved with static cold storage, despite having three X longer distance travel and doubled across time time in the Ocs and O. P. R. Again this data valley.

Mauricio Villavicencio: Today, the broader access to distant owners and potential for improved workflow afforded by the Ocs N O P.

Mauricio Villavicencio: Next.

Mauricio Villavicencio: Dr. Gabe War from Baylor St. Luke's presented the Ocs lung expand trial five year clinical results.

Waleed H. Hassanein: Dr. Gabe Bloor from Baylor St. Luke's presented the OCS Lung Expand Trial 5-Year Clinical Results. The data showed that the OCS lung expand lungs from extended criteria DBD and DCD donors had similar survival and freedom from chronic rejection at five years post-transplant compared to routine standard criteria DBD lungs transplanted at the same program over the same time period. These results support the huge clinical potential of increasing donor lung utilization for transplants using extended criteria DBD and DCD donors in the U.S. Finally, Dr. Steve Huddleston from the University of Minnesota shared the latest data from the thoracic OCS perfusion registry, or the TOP registry.

Speaker Change: The data showed that the ocs lung expand lungs from extended criteria D V D and DCD donors had similar survival and freedom from chronic rejection at five years post transplant compared to routine standard criteria DVD long transplanted at the same program over the same time.

Speaker Change: Period.

Speaker Change: These results support the huge clinical potential of increasing donor lung utilization for transplant using extended criteria DVD and DCD donors in the U S.

Speaker Change: Finally, Dr. Steve Huddled stem from the University of Minnesota shared the latest data from the thoracic Ocs perfusion registry or the top registry the.

Waleed H. Hassanein: The data showed that the OCS lung enabled the use of extended criteria donor lungs from DVD and DCD donors and resulted in post-transplant survival outcomes that are similar to standard criteria lung transplantation, despite nearly having double the cross-clamp time, again further validating the huge clinical impact of expanding the donor pool and the potential growth of lung transplant volumes in the U.S. Collectively, these presentations once again highlighted our ever-growing body of positive clinical evidence, as well as the exceptional clinical outcomes enabled by OCS and NOP.

Steve Huddled: The data showed that the ocs lung enabled the use of extended criteria donor lungs from DVD and DCD donors and resulted in post transplant survival outcomes that are similar to standard criteria lung transplant, despite nearly having double the cross clamp time again further validating the huge clinical impact on <unk>.

Steve Huddled: Spanning the donor pool and the potential growth of lung transplant volumes in the U S.

Steve Huddled: Collectively these presentations once again highlighted our ever growing body of positive clinical evidence as well as the exceptional clinical outcomes enabled by Ocs and N O P.

Steve Huddled: Now, let me shift gears and talk about our plans to further grow ocs adoption and the overall national U S transplant volumes even further.

Waleed H. Hassanein: Now, let me shift gears and talk about our plans to further grow OCS adoption and the overall national U.S. transplant volume even further. Specifically, I want to discuss three new major clinical programs designed to grow adoption of our OCS lung and OCS heart, as well as expand our OCS, Heart, FDA clinical indications in the U.S. Pending FDA approval, we expect that all three programs will initiate enrollment within the next year.

Steve Huddled: Specifically I wanted to I want to discuss three new major clinical programs designed to grow adoption of our ocs lung and Ocs heart as well as expand our ocs.

Heart FDA clinical indications in the U S.

Steve Huddled: Pending FDA approval, we expect that all three programs will initiate enrollment within the next year.

Speaker Change: Let me start with detailing the Ocs lung program.

Waleed H. Hassanein: Let me start by detailing the OCS Lung Program. As we have stated many times, we believe that the clinical stakeholders across the United States lung transplant market need to be reintroduced to the potential positive clinical value of OCS lung perfusion and assessment. More specifically, we believe the ability of the OCS lung and NOP to increase their transplant volumes, improve their post-transplant clinical outcomes, and enhance workflow remains underappreciated. Our goal is to replicate the successful outcomes achieved with OCS liver, where 62 percent of transplant volumes at OCS NLP programs are now done in the morning working hours compared to the middle of the night, and replicate that with the OCS lung, said differently.

As we stated many times we.

We believe that the clinical stakeholders across the United States lung transplant market need to be reintroduced to the potential positive clinical value of the ocs lung perfusion and assessment.

Speaker Change: More specifically, we believe the ability of the ocs lung and N O P to increase their transplant volumes improve their post transplant clinical outcomes and enhance workflow remain under appreciate it.

Speaker Change: Our goal is to replicate the successful outcomes achieved with ocs liver, where 62% of transplant volumes at Ocs N. O. P programs are now done in the morning, working hours compared to middle of the night.

Speaker Change: And replicating that with the Ocs lung.

Speaker Change: Said differently.

Speaker Change: We want to have lung transplant programs and clinical and surgeons experienced firsthand.

Waleed H. Hassanein: We want lung transplant programs and clinical and surgeons to experience firsthand the value of OCS NLP to enable morning transplants while growing their overall transplant volumes and improving their post-transplant clinical outcomes. To do this, we are planning to launch a new clinical program to achieve the following. First, we will target a minimum of 12 to 24-hour plus of OCS lung perfusion using the NOP model to increase access to transplantable donor lungs and optimize work hours for transplant program staff. Importantly, we aim to prospectively randomize between OCS NLP versus controlled cold static storage to assess the clinical value.

Speaker Change: The value of Ocs N O P to enable morning transplants, while growing their overall transplant volumes and improving their post transplant clinical outcomes.

Waleed H. Hassanein: We also plan to use newly developed near physiologic OCS perfusion solution combined with blood to minimize the impact of longer perfusion on lung edema and potentially eliminate any clinical concerns of long perfusion times on lung function. We will also use next-gen perfusion circuitry and ventilation modality to maximize protection for the donor lungs during prolonged OCS perfusion and ex vivo ventilation. We expect the entire clinical program to be managed by NLP to increase the rate of enrollment and adoption during the trial phase.

Speaker Change: To do this we're planning to launch a new clinical program to achieve the phone.

Speaker Change: First we will target a minimum of 12 to 24 hour plus of Ocs lung perfusion using the N O P model to increase access to Transplantable donor lungs, and optimize work hours for transplant program staff.

Speaker Change: Importantly, we aim to prospectively randomize between Ocs N O P versus controlled cold static storage to assess the clinical value.

Speaker Change: We also plan to use newly developed near free geologic Ocs profusion solution combined with blood to minimize the impact of longer perfusion on lung edema, and potentially eliminate any clinical concerns of lung perfusion times on lung function.

Speaker Change: We will also use nextgen perfusion circuitry and ventilation modality to maximize that protection for the donor lungs during prolonged ocs perfusion and ex vivo regulation.

Speaker Change: We expect the entire clinical program to be managed by a N O P to increase the rate of enrollment and adoption during the trial phase.

Waleed H. Hassanein: From a timing perspective, we are targeting initiation of this program sometime around the end of 2024. Now, let me move on to our planned OCS Heart Program. We are also actively working on two distinct large OCS heart programs in the U.S. that will also be managed exclusively via the OCS NOP model. The first is OCS Heart Therapeutic Warm Perfusion for DBD Heart. This program is aimed at increasing the utilization of DVD hearts from both standard and extended criteria donors to increase the overall number of heart transplantations in the US.

Speaker Change: From a timing perspective, we are targeting initiation of this program sometimes around the end of 2024.

Speaker Change: Now, let me move on to our planned Ocs heart programs.

Speaker Change: We are also actively working with two distinct large ocs heart programs in the U S that will be also manage exclusively via the Ocs N O P model there.

Speaker Change: The first.

Speaker Change: Ocs heart therapeutic warm perfusion or D V D Hearts.

Speaker Change: This program is aimed at increasing utilization of DVD Hearts from both standard and extended criteria Donuts to increase the overall heart transplant volumes in the U S.

We intend to target 12 hour plus of Ocs heart perfusion using the N O P model to increase access to donor hearts and optimize the work working hours for our transplant programs task.

Waleed H. Hassanein: We intend to target 12-hour plus of OCS heart perfusion using the NOP model to increase access to donor hearts and optimize the working hours for our transplant program staff. We will also aim to prospectively randomize OCS NLP versus controlled cold static storage to assess the clinical value. We're planning not only to use our newly developed near physiologic OCS perfusion solution combined with blood, but in this particular program, we're adding a new proprietary metabolic enhancing therapeutic agent to maximize protection of the donor heart and improve its post-transplant clinical performance.

Speaker Change: We will also aim to prospectively randomize them.

Speaker Change: Oh C S N O P versus controlled cold static storage to assess the clinical value.

Speaker Change: Where we're planning not only to use our newly developed near for geologic Ocs perfusion solution combined with blood, but in this particular program, we're adding a new proprietary metabolic enhancing therapeutic agents to maximize protection of the donor heart and improve its post transplant clinical performance.

Speaker Change: Yes.

Speaker Change: From a timing perspective, we are targeting initiation some of this program sometimes around the end of 'twenty 'twenty four.

Waleed H. Hassanein: From a timing perspective, we are targeting initiation of this program sometime around the end of 2024. Finally, our second heart program is a new program that will require new technology from the ground up, aiming at OCS heart cold oxygenated perfusion for DBD hearts that are preserved for less than six hours. This program is designed to support a new FDA clinical indication for OCS hearts in the U.S. that will allow us to perfuse and preserve standard criteria DBD hearts for less than six hours, which is not our current clinical indication in the U.S. To do this, we're planning to offer a new, lower-cost product that utilizes cold oxygenated blood-based perfusion technology.

Speaker Change: Finally.

Speaker Change: Our second heart program is a new program that will require a new technology from the ground up.

Speaker Change: Aiming at Ocs heart called oxygenated perfusion for DVD Hearts that are preserved for less than six hours.

Speaker Change: This program is designed to support and U F D. A clinical indication for Ocs heart in the U S that will allow us to profuse and preserve standard criteria DVD heart for less than six hours.

Speaker Change: Which is not our current clinical indications in the U S.

Speaker Change: To do this we're planning to offer a new lower cost product.

Speaker Change: That utilize this cold oxygenated blood based perfusion technology.

Waleed H. Hassanein: More specifically, we're developing our new pulsatile, fully portable cold perfusion technology and cold perfusion circuitry to achieve an easy-to-use system for use within our existing NOP model. Again, we'll aim to prospectively randomize patients to controlled cold static storage to assess the clinical value.

More specifically, we are developing our new pulsatile fully portable cold perfusion technology, and cold perfusion circuitry to achieve easy to use system for use within our existing MLP model.

Speaker Change: Again, we'll aim to prospectively randomized.

Speaker Change: Too cold controlled.

Our controlled cold static storage to assess the clinical value.

Waleed H. Hassanein: And we are targeting early 2025 to initiate this important clinical program. As you can see, we are advancing a very strong pipeline of clinical programs designed to drive significant growth in OCS case volume and the overall national cardiothoracic transplant volume in the U.S. However, we're not stopping here.

Speaker Change: And we are targeting early 'twenty 'twenty five to initiate this important clinical program.

Speaker Change: As you can see we are advancing a very strong pipeline of clinical programs designed to drive significant growth in the Ocs case volume and the overall national cardio thoracic transplant volume in the U S.

Speaker Change: However, we're not stopping here.

Waleed H. Hassanein: We are also continuing to invest heavily in our next-gen OCS technology platform for all three organs, which will be highly automated, optimized for NLP workflow, and designed to streamline the clinical support workload to allow us to continue to deliver the highest clinical quality of care and achieve better product leverage. We plan to share more details about this initiative later this year. To summarize... We are highly encouraged by our Q1 performance and are focused on several initiatives designed to further propel growth for transmedics products and services.

Speaker Change: We are also continuing to invest heavily in our Nextgen Ocs technology platform for all four for all three organs that.

That will be highly automated optimized for NLP workflow and designed to streamline the clinical support workload to allow us to continue to deliver the highest clinical quality of care and achieve better product leverage.

Speaker Change: We plan to share more details on this details in this initiatives later this year.

To summarize.

Speaker Change: We are highly encouraged by our Q1 performance and our focus on several initiatives designed to further propel growth for transplant X products and services.

Waleed H. Hassanein: Given our strong performance in Q1, we are increasing our annual revenue guidance to $390 to $400 million, which represents 61% to 66% growth over full year 2023 revenue. With that, let me turn the call over to Stephen to cover the detailed financial results for the quarter.

Speaker Change: Given our strong performance in Q1, we are increasing our annual revenue guidance to $390 million to $400 million, which.

Speaker Change: Resents, 61% to 66% growth over full year 2023 revenue with that let me turn the call to Stephen to cover the detailed financial results for the quarter.

Stephen Gordon: Thank you Walid.

Stephen Gordon: I will now provide some additional detail on the Q1 results and other financial information for the quarter. So starting with revenue, for the first quarter of 2024, our total revenue was $96.9 million. This is an increase of 133% from the first quarter of 2023 and a 19% sequential increase from last quarter. The $96.9 million included $0.9 million related to our flight school. We have now exited all of the Summit Legacy Charter business, so other than this $900K from the flight school, all revenue is transplant related. In the U.S., transplant revenue was $91.9 million.

Stephen Gordon: I will now provide some additional detail on the Q1 results.

Stephen Gordon: Other financial information for the quarter.

Stephen Gordon: So starting with revenue for the first quarter of 2024, our total revenue was $96 $9 million.

Stephen Gordon: U.S. revenue increased 145% from the first quarter of 2023 and 22% sequentially from last quarter. And, as Waleed said, Q1 2024 revenue included $14.5 million of logistics... The organ breakdown on U.S. revenue was 67 million of liver, 20.2 million of heart, and 4.7 million of lungs, all organs growing substantially over Q1 2023 and sequentially from Q4 2020. Ex-U.S. revenue was $4.1 million, a 1% increase from Q1 of 2023 and a 16% sequential increase from last quarter.

This was an increase of 133% from the first quarter of 2023.

Stephen Gordon: And a 19% sequential increase from last quarter.

Stephen Gordon: The $96 9 million included point, <unk> 9 million related to our flight school.

Stephen Gordon: We have now exited all of the summit legacy charter business. So other than this 900 K from the flight school all revenue is transplant related.

Stephen Gordon: In the U S transplant revenue was 91 9 million.

Stephen Gordon: U S revenue increased 145% from the first quarter of 2023, and 22% sequentially from last quarter.

And as well he said Q1 2024 revenue included $14 5 million of logistics revenue.

Stephen Gordon: The Oregon breakdown on U S revenue was $67 million of liver.

Stephen Gordon: $22 million of heart and $4 7 million of loan.

All Oregon's growing substantially over Q1 2023.

Stephen Gordon: Sequentially from Q4 2023.

X U S revenue was $4 1, million% to 1% increase from Q1 of 2023, and a 16% sequential increase from last quarter.

Stephen Gordon: The XUS breakdown was 3.1 million heart and 1 million lung. Next, on the product and service rep. And as a reminder... Our service revenue includes the added amounts we charge for the NOP clinical service of surgical procurement and organ management and also includes the logistics revenue. The flight school is also included in service.

Stephen Gordon: The ex U S breakdown was $3 1 million apart.

And $1 million of lung.

Stephen Gordon: Next on the product and service revenue.

Stephen Gordon: As a reminder, our.

Stephen Gordon: Our service revenue includes the other the amounts we charge for the N O P clinical service of surgical procurement in Oregon management. It also includes the logistics revenue.

Stephen Gordon: The flight School is also included in service revenue.

Stephen Gordon: In Q1, product revenue was $61.3 million, and service revenue was $35.5 million. So the service portion was 36.7% of the total. Gross margin for the first quarter of 2024 was 62%. This is down from 69% in the first quarter of 2023 and up from 59% last quarter. In comparison to Q1 last year, this reflects the higher service component of our business, which did not include logistics in the first quarterline. Product margin was 77% in Q1, recovering as expected to more normalized product margins from the 73% we saw in Q4, which included a one-time unfavorable. Service margin was 36%, improved from 35% last quarter as we continue to gain efficiency in our service. And as a reminder, all costs related to aviation, including fuel, pilots, maintenance, and depreciation, are included in our service cost.

Stephen Gordon: In Q1 product revenue was $61 3 million and service revenue was $35 5 million.

Stephen Gordon: So the service portion was 36, 7% of the total.

Gross margin for the first quarter of 2024 was 62%.

This is down from 69% in the first quarter of 2023 and up from 59% last quarter.

Stephen Gordon: In comparison to Q1 last year. This reflects the higher service component of our business, which did not include logistics in the first quarter last year.

Stephen Gordon: Product margin was 77% in Q1 recovering as expected to more normalized product margins from the 73%. We saw in Q4, which included a one time unfavorable it.

Stephen Gordon: Service margin was 36% improved from 35% last quarter, because we continue to gain efficiency in our service offering.

Stephen Gordon: And as a reminder, all costs related to aviation, including fuel pilots maintenance and depreciation are included on our service Cogs.

Stephen Gordon: Total operating expenses for the quarter were $47 5 million.

Stephen Gordon: Total operating expenses for the quarter were $47.5 million, 54% above Q1 2023 OPEC. This expense growth was driven by 94% growth in R&D, related to investments in new product development, NOP tools, and product quality and regulatory resources. SG&A grew 45%, primarily related to higher personnel costs and overall corporate infrastructure.

Stephen Gordon: 54% above Q1 2023 opex.

Stephen Gordon: This expense growth was driven by 94% growth in R&D.

Stephen Gordon: Related to investments in new product development, and O P tools and product quality and regulatory resources.

Stephen Gordon: SG&A grew 45% primarily related to higher personnel costs and overall corporate infrastructure.

Speaker Change: I want to point out that our operating expenses grew significantly throughout the year last year. So the year on year growth comparison next quarter should not be as pronounced as it was this quarter.

Stephen Gordon: I want to point out that our operating expenses grew significantly throughout the year last year, so the year-on-year growth comparison next quarter should not be as pronounced as it was. Given the strong revenue and margin performance, we were able to deliver a gap operating profit of $12.4 million, or 13% of revenue, that income was $12.2 million. This compares with an operating loss.

Speaker Change: Given the strong revenue and margin performance, we were able to deliver GAAP operating profit of $12 4 million or 13% of revenue.

Speaker Change: Net income was $12 2 million these compared with an operating loss of $2 6 million and also a net loss of $2 6 million in Q1 of 2023.

Stephen Gordon: $2.6 million and also a net loss of $2.6 million in Q1 of 2020, and basic earnings per share in the quarter were $0.37, and diluted earnings per share in the quarter were $0.35. Total cash at the end of the quarter was $350.2 million as of March 31st, 2024. This is down 44.6 million from December 31st, 2023. $39 million of cash was used to purchase three additional jets in Q1, bringing our total number of owned jets to 14. The basic weighted average common shares outstanding for the quarter were $32.8 million, and the diluted weighted average common shares outstanding for the quarter were $34.7 million.

Speaker Change: And basic earnings per share in the quarter was 37 cents and diluted earnings per share in the quarter was 35 cents.

Speaker Change: Total cash at the end of the quarter was $350 2 million as of March 31st 2024.

Speaker Change: This is down $44 6 million from December 31, 2023.

Speaker Change: $39 million of cash was used to purchase three additional jets in Q1, bringing.

Speaker Change: Bringing our total number of older jets to 14th.

Basic weighted average common shares outstanding for the quarter were $32 8 million.

Speaker Change: And diluted weighted average common shares outstanding for the quarter were $34 7 million.

Speaker Change: In summary, Q1 was a very successful quarter financially for <unk>.

Stephen Gordon: In summary, Q1 was a very successful quarter financially for TransMedics. We grow our revenue both annually and sequentially. We've improved our gross margin and shown a good drop-down to profitability. All of this continues to validate our strategy of leveraging our NOP clinical service and logistics service to increase utilization of the organ care system and increase the number of transplants in the U.S. Finally, just to repeat Waleed's earlier comment, we are updating our annual revenue guidance to be in the range of $390 million to $400 million, which represents 61% to 66% growth over the full year 2023. Now, I will turn the call back to Waleed for closing comments.

We grew our revenue both annually and sequentially.

Speaker Change: Improved our gross margin.

Speaker Change: And showed good dropdown to profitability.

Speaker Change: All of this continues to validate our strategy of leveraging our N O P clinical service and logistics service to increase utilization of the organ care system and to increase the number of transplants in the U S.

Speaker Change: Well I only just to repeat while these earlier comment we are updating our annual revenue guidance to be in the range of $390 million to 400 million, which represents 61% to 66% growth over the full year 2023.

Speaker Change: Now I will turn the call back to our lead for closing comments.

Speaker Change: Thank you Steven.

Waleed H. Hassanein: Overall, we're humbled and proud of our Q1 results as we simultaneously drove continued revenue growth, expanded our infrastructure, and achieved profitability while advancing our clinical and R&D pipeline. We're looking forward to continuing to execute on all the major initiatives throughout 2024 to drive broader adoption of OCS NOP and growth of the overall transplant volumes to help patients in need of an organ transplant. With that, I will now turn the call over to the operator for Q&A. Operator?

Speaker Change: Overall, we are humbled and proud of our Q1 results as we simultaneously drove continued revenue growth expanded our infrastructure and achieve profitability, while advancing our clinical and R&D pipelines.

Speaker Change: We're looking forward to continuing to execute on all the major initiatives throughout 2024 to drive broader adoption of the Ocs MLP and growth of the overall transplant volumes to help patients in need of an organ transplant with that I will now turn the call to the operator for Q&A operator.

Operator: Thank you. If you would like to ask a question, please press star then 1 on your telephone keypad. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Today's first question comes from Allen Gong from JPMorgan. Please go ahead.

Speaker Change: Thank you.

Speaker Change: To ask a question. Please press Star then one on your telephone keypad.

Speaker Change: If you are using a speaker phone. We ask you. Please proceed with your handset before pressing the keys.

Speaker Change: To withdraw your question. Please press Star then two.

Speaker Change: Today's first question comes from Allen Gong with J P. Morgan. Please go ahead.

Speaker Change: Okay.

Allen Gong: Alright, Thanks for the question and congratulations on a really strong quarter out of the gate.

Allen Gong: Hi, thanks for the question, and congratulations on a really strong quarter out of the gate. You know, I understand that, you know, aviation likely helped support the beat in the services, but I think it was the beat in disposables that might be a little bit more surprising than the fact that it kind of, you know, on a dollar basis, at least relative to my forecast, drove more of the upswing.

I understand that aviation.

Allen Gong: Likely helps the poor.

Speaker Change: The beat in the services, but I think it was the.

Speaker Change: The beat in disposables that might be a little bit more surprising you didn't impact any kind of even on a dollar basis.

Speaker Change: Relative to my forecast drove more of the upside. So I guess you know other than pull through of some of the NOP cases that you were maybe previously losing due to the limitations of outside logistics, what else kind of went right in the quarter for you to drive these additional volumes.

Allen Gong: So I guess, you know, other than pulling through some of the NOP cases that, you know, you were maybe previously losing due to the limitations of outside logistics, what else kind of went right in the quarter for you to drive these additional volumes?

Waleed H. Hassanein: Thank you, Allen, for the question. A lot of things went right in the first quarter, and we hope to continue to execute in the same tone going forward. The most important thing is, you know, the outcomes. The outcomes that are being achieved across the board are now, you know, more transparent to clinical users. Specifically, you know, the liver continues to grow, you know, but specifically for heart and lungs, you know, there was, you know, the lung outcomes are getting better.

Speaker Change: Thank you Alan for the question.

Speaker Change: A lot of things when.

Speaker Change: Went right in the first quarter and we hope to continue to execute in the same tone going forward. The most important thing is.

You know the outcomes the outcomes that are being achieved across the board.

Speaker Change: Now are you now more transparent to the clinical users specifically the liver continues to grow.

Speaker Change: But specifically for heart and lungs.

Speaker Change: The there was a you know the lung outcomes are getting better our team has been working very hard at.

Speaker Change: Educating the market demonstrating the better outcomes in achieved with our newer use model.

Waleed H. Hassanein: Our team has been working very hard at educating the market, demonstrating the better outcomes achieved with our newer use model, and it's resonated in the quarter. Also, we're seeing, you know, outcomes in heart are really helping grow the heart market, and certainly, the discouraging results we heard at the ISHLT from the cold perfusion study may have fueled that, but, you know, it's really the outcomes that are driving our growth, and we plan to continue to lean on outcomes, and that's why we are investing in these three major cardiothoracic programs.

Speaker Change: And it resonated in the quarter also where we're seeing.

Speaker Change: You know the the outcomes in heart.

Speaker Change: <unk> is really helping growing the heart market and certainly the discouraging results we heard at the ice control T from the KOL perfusion.

Speaker Change: Study may have may have fueled that but.

Speaker Change: You know, it's really the outcomes that is driving our growth and we plan to continue to lean on the outcomes and that's why we are investing in these three major cardio thoracic programs.

Waleed H. Hassanein: The liver, you know, is already there and continues to grow, and we will continue to add centers and go deeper with an existing center. So, everything went right. Also, the growth and the logistics business were important to help us get access to the cases that we couldn't get access to. That also helped, but the fundamental growth and product are based basically on clinical outcomes.

Speaker Change: Deliver deliver as you know is already there and continues to grow and we will continue to add centers and go deeper within existing centers. So everything went right also the growth in the logistics business was important to help us get access to the cases that we couldnt get access to that also helped but the.

Speaker Change: It'll grow from product is based basically in clinic based on clinical outcomes.

Speaker Change: Got it and then a follow up just kind of on seasonality and how should we think about that strength carrying forward.

Allen Gong: Got it. And then, you know, a follow-up just kind of on seasonality and how should we think about that strength carrying forward, you know, if we kind of take the quarter you just put up, back it out of your updated guide, it really looks like you're setting, you know, what should hopefully be a very achievable bar for, you know, the balance of the year, especially as you're, you know, you're adding more planes, you're going to be starting the quarter with more planes than you, you know, had on average in first quarter.

Speaker Change: If we kind of take the quarter you just put up back it out of your updated guide. It looks like you are setting you know what should hopefully be a very achievable bar for the balance of the year, especially as year, you're adding more planes youre going to be starting the quarter with more planes than you.

Speaker Change: On average in first quarter. So why is this kind of the right target to go with and how should we think about the seasonal cadence implied by that guidance should it be relatively flat I guess why would that be the case I shouldn't you be able to grow sequentially. Thank you.

Allen Gong: So why is this kind of the right target to go with? And how should we think about the seasonal cadence implied by that guidance? You know, should it be relatively flat? I guess, like, why would that be the case? Why shouldn't you be able to grow sequentially?

Operator: Thank you.

Speaker Change: Thanks, Alan and I think they know theres many layers to answering that question now and then and Steven Please comment as well from your perspective I think we we always are.

Waleed H. Hassanein: Thanks, Allen. I think, you know, there's many layers to answering that question. Allen, and Stephen, please comment as well from your perspective.

Speaker Change: Cognizant of what a potential.

Speaker Change: Operational challenges in front of US for example, we are very proud to have up operating 14 planes hopefully in Q2, but we know that in the second half of the year. We have some of these planes are due for some annual service so they're not going to be accessible to us. So.

Waleed H. Hassanein: I think we are always cognizant of the potential operational challenges in front of us. For example, we are very proud to have, you know, operating 14 planes, hopefully in Q2, but we know that in the second half of the year, some of these planes are due for some annual service, so they're not going to be accessible to us. So we factor that into the guidance. We also factor in, you know, some of the potential seasonality from, you know, summer vacations coming up or the holidays. So we are always prudent when it comes to guidance. When we issue guidance, we take it very seriously. So that's layered into our expectations here.

So we factor that into the guidance. We also factor in you know.

Speaker Change: Some of the you know any potential seasonality from summer vacations coming up for the holiday. So we always are prudent when it comes to guidance. We want we want to when we issue guidance. We we take it very seriously so that's layered into our expectations here even in all.

Stephen Gordon: And Al, I would just say, look, we don't expect a down quarter sequentially. We expect modest growth, quarter over quarter, and that's the way we've modeled it, and I would expect that's the way we'll come in. Also, Allen, to Port-au-Prince.

But I would just say look we don't expect a down quarter sequentially, we expect modest growth quarter over quarter and that's the way we've modeled it.

Speaker Change: That's why we've come in.

Waleed H. Hassanein: Also, finally, Allen, to put a bracket around that, you know, we're operating from a much bigger starting point now, so we have to be cognizant of that.

Speaker Change: Also finally attitude to put a bracket around that you know we're operating from a much bigger.

Speaker Change: Our starting point now so we have we have to be cognizant of that so.

Speaker Change: So.

Speaker Change: Thank you.

Operator: Thank you. And our next question today comes from Josh Jennings with TD Cowen. Please go ahead.

Speaker Change: So that it comes from Josh Jennings with Cowen. Please go ahead.

Joshua Thomas Jennings: Hi, good evening.

Joshua Thomas Jennings: Hi, good evening. It's great to see such an impressive start to the year. I was hoping, Waleed, to just circle back on the discussion we had earlier in the quarter just about... You have a lot of pipeline initiatives, initiatives both on the technology front and on the clinical development front, but just how should we be thinking about the OCS system potentially reducing the percentage of DCO donors, DCD donors that do not progress in heart, liver, and lung, and is that something that could happen in the next 12 to 24 months?

Joshua Thomas Jennings: Great to see such an impressive start to the year.

Joshua Thomas Jennings: Hoping that will lead to just circle back on the discussion we had earlier in the quarter just about yeah.

Joshua Thomas Jennings: Do you have a you have a lot of a lot of pipeline initiatives initiatives, both on the technology front and on the clinical development front, but just how should we be thinking about the ocs system potentially reducing the percentage of D. C. O donors DCD donors do not progress in heart liver and lung and is that something that could happen in the next 12 to 24 months.

Waleed H. Hassanein: Josh, that's exactly our goal. As we discussed, this is the only system that we're aware of that exists out there that could help that picture, the OCS. So that's something we're planning to leverage over the next 12 to 24 months for sure. And we're hoping that, you know, once we launch these clinical programs, that becomes an opening to the next program being focused on specifically growing DCD utilization.

Speaker Change: Josh that's exactly our goal.

Speaker Change: As we discussed this is.

Speaker Change: The only system that we're aware of that exist out there that could help that picture is the ocs. So that's something we're planning to leverage over the next 12 to 24 months for sure.

Speaker Change: And we're hoping that.

Speaker Change: Once we launch these clinical programs that becomes an opening.

Speaker Change: To the next program being focused on specifically.

Speaker Change: Growing the DCD utilization.

Speaker Change: Excellent.

Joshua Thomas Jennings: And then another topic, just in with ILTS kicking off this week, wanted to just ask about, just get a better understanding of the benefits and advantages of using OCS, warm normothermic perfusion in fatty livers, and just the percentage of donors that have fatty livers and how dramatic a difference there is in preservation with OCS versus cold storage, called Fibroxynated Perfusion. Thanks for taking the questions. Thank you.

Speaker Change: Other topic, just in with a L. P. S. Kicking off this week wanted to just ask about just get a better understanding on the benefits.

Speaker Change: Advantages of using Ocs warm normothermic.

Speaker Change: Perfusion and.

Speaker Change: And fatty livers and just the percentage of of donors that have fatty livers.

Speaker Change: And how dramatic of a difference there is in preservation ocs versus cold storage or even co.

Speaker Change: Cold paper.

Speaker Change: Hyper actionaid profusion, thanks for taking the questions. Thank you. Thank you Josh.

Waleed H. Hassanein: Thank you. Thank you, Josh. Thank you for asking the question. It's a very important question. Without running the risk of burning some of the key plenary session presentations at the upcoming ILTS, the community should be expecting that we will reveal data that shows clinical superiority of fatty livers using warm perfusion compared to any other modality. And I'll leave it at that. It doesn't make sense to put fatty livers on ice, whether through perfusion or controlled or non-controlled static cold storage. It just doesn't make any sense because fat cells with cold storage or any cold form of preservation congeal, and then the liver becomes more of a foreign object than a physiologic body.

Speaker Change: Thank you for asking the question, it's a very important question.

Speaker Change: Without running the risk of of burning some of the key planning session presentations at the upcoming out yes.

Speaker Change: The community should be expecting that we will reveal data that shows.

Speaker Change: Clinical superiority of fatty livers, using one perfusion compared to any other modality.

Speaker Change: And I'll leave it at that it doesn't make sense to put fatty livers on ice whether for perfusion or controlled or non controlled static cold storage. It just doesn't make any sense, because fat cells with cold storage or any cold.

Speaker Change: A formal preservation Congeals and then the liver becomes more of a foreign object than a physiologic body. So we're.

Joshua Thomas Jennings: So we're looking forward to our investigators and lead users presenting this data at the plenary session on Saturday.

Speaker Change: We're looking forward to the to our investigators and lead users to be presenting this data at the plenary session on Saturday.

Speaker Change: And sorry to sneak a follow up but just any help just thinking about the percentage of donor livers that are fatty imagine it's a sizable chunk of the donor pool. Thanks, a lot. It's very it's very it's a very sizable chunk and again the definition of fatty it's varied.

Waleed H. Hassanein: Sorry to sneak a follow-up in, but does it help to just think about the percentage of donor livers that are fatty? Imagine it's a sizable chunk of the donor pool. Thanks a lot. It's it's very, it's very, it's a

Joshua Thomas Jennings: It's a very sizable chunk. And again, the definition of fat is varied. Some people consider fatty liver anything greater than 15 percent. But we'll be presenting data on fatty liver greater than 25 percent or 30 percent even. So we experienced the full gamut. And again, there is tremendous evidence supporting warm perfusion on the OCS platform as having superior outcomes to any other modality for preservation of fatty livers. And I'll leave it at that, Josh.

Speaker Change: Some people consider fatty liver anything greater than 15% will be presenting data on that deliver greater than 25% or 30% EBIT. So.

Speaker Change: We experienced the full gamut and again, there's a tremendous.

Speaker Change:

Speaker Change: Evidence supporting warm perfusion on <unk> platform.

Speaker Change: Having superior outcomes to any other modality for preservation of fatty livers and I'll leave it at that Josh.

Joshua Thomas Jennings: Thanks, so much.

Joshua Thomas Jennings: Thank you and our next question comes from William <unk> with <unk>.

Operator: Thank you. And our next question comes from William Plovanic of Canaccord. Please go ahead.

William: Canaccord. Please go ahead.

William John Plovanic: Hey Waleed and Stephen, it's John on for Bill tonight. Thanks for taking our questions. I just wanted to first touch on aviation. You know, you said 80% was probably the terminal rate of US cases that could be supported by you. What services and what level of jets are needed to reach 80%, and when could we see that?

Joshua Thomas Jennings: Hey, Bob It's John on for Bill Tonight, Thanks for taking our questions I just wanted to first touch on aviation.

Speaker Change: You said, 80% would probably be the terminal rate of use cases that can be supported by you.

John: What services and what level of jets are needed to reach the 80% and when could we see that.

Waleed H. Hassanein: Thank you, thank you, John. At the current estimates, we think somewhere between 25 and 30 planes will get us there, but we fully expect to increase those estimates beyond 10,000. So that's what our expectation is. And the key for us is to build enough in this phase to continue to demonstrate growth. And as we need more, we will have more planes. But right now, we're hoping to end this year around 20, between 15 and 20 planes. And hopefully, by the end of next year, to be between 25 and 30. And then we'll assess it from there.

Speaker Change: Thank you. Thank you John.

Speaker Change: We think that you know the.

Speaker Change: At the current estimates.

Speaker Change: We think somewhere between 25, and 30 planes will get us there, but we fully expect to increase those estimates beyond 10000.

Speaker Change: So.

Speaker Change: That's our expectation and the key for US is to build enough in this phase two to.

Speaker Change: To continue to demonstrate the growth and as we need more we will we will have more planes, but.

Speaker Change: But right now we are hoping to end this year around 20.

Speaker Change: Between 15, and 20 planes and hopefully by end of next year to be between 25 and 30 and then we'll we'll assess from there.

Speaker Change: Great. Thanks.

William John Plovanic: Great, thanks. Maybe more for Stephen, but any operating profit cadence or guidance for the remainder of this year?

Speaker Change: Maybe more for Stephen but any operating profit cadence our guidance for the remainder of this year.

Steven Hum: Yeah, Hey, John This is Steven Hum.

Stephen Gordon: Yeah, hey, John, this is Stephen. I'm not prepared to give any guidance other than we're pleased with where we came out in Q1, and you know, we hope we're on the path to having sustainable profit going forward because we're a little bit ahead of where we thought we'd be. So, but that's about all I can say at this point.

Steven Hum: Not prepared to give any guidance other than we're pleased with where we came out in Q1, and we hope we're on path to having a sustainable.

Steven Hum: Profit going forward, because we are a little bit of ahead of where we thought we'd be so but that's about all I can say at this point.

William John Plovanic: Great, thanks. Maybe we can just squeeze one more in here. But Waleed, why limit the cold and oxygenated perfusion for the heart to only six hours, especially with the competitor cases that are notably going much longer than that? Thanks again for taking our questions. Thank you, John.

Speaker Change: Great. Thanks, maybe I can just squeeze one more in here, but while we'd wiper missed that Couldnt Akshay perfusion and Ferrara told me six hours, especially with a competitor cases, theyre, notably going much longer than that.

Speaker Change: Thanks again for taking my questions. Thank you John.

Waleed H. Hassanein: Thank you, John. John, you heard the outcomes with me. You know, they failed a trial in Europe, so why would I subject us to bad outcomes? And we are more sensible.

Speaker Change: John you heard you heard the outcomes with me.

Steven Hum: Failed that trial in Europe, So why would I subject.

Steven Hum: As to two bad outcomes, and we are more sensible, where we want to protect the outcome for the patient so and we were providing this as.

Operator: We want to protect the outcome for the patient, and we're providing this as a lower-cost solution for this small segment of the market that is below six hours. For longer hours, we hope to prove it based on the new HART program that warm perfusion is a better solution than cold perfusion. That's the rationale for why we're limiting it, at least based on an indication standpoint. And remember, all of the data that we heard at the ISHLT is not FDA-level data. They're all, you know, few centers, handful of cases, except for the European multicenter trial that failed the primary effectiveness endpoint.

Steven Hum: A lower cost solution for this small segment of the market that is below six hours.

Steven Hum: For longer hours, we hope to prove it based on the new heart program that won't perfusion is a better solution than coal perfusion.

Steven Hum: The rationale for why we're limiting it at least based on the indication standpoint, and remember all of the data that we heard that the ICT LTE is not an FDA level data for all you know fewer few centers to handful of cases.

Steven Hum: Except for that European Multicenter trial that failed the primary effectiveness endpoint.

Speaker Change: Got it thank you again.

Speaker Change: Thank you.

Suraj Kalia: Thank you. And our next question comes from Suraj Kalia on Oppenheimer. Please go ahead.

Speaker Change: Sure Suraj.

Steven Hum: Of Oppenheimer. Please go ahead.

Suraj: Well it can you hear me all right.

Waleed H. Hassanein: Waleed, can you hear me all right? Yeah.

Suraj: Yes.

Suraj Kalia: Gentlemen, congratulations again on a blockbuster quarter. So, Waleed, I just want to go back on one of the points that you made at our conference a month or so ago, and even on this call, you were talking about the next generation trial. So, Waleed, please stratify for us the standard criteria DVD hearts that are technically off-label for you all today, just so that people can compare and contrast as to what the denominator should be in terms of market penetration. Also, Waleed, the trial that you mentioned that would be beginning early next year, that is cold perfusion, but would it also have physiologic beats?

Oppenheimer: Gentlemen, congrats again on a blockbuster quarter. So just wanted to go back on one of the points that you made at a conference a month or so ago and even on this call. You you were talking about the next generation trial. So we'll stratify for us the standard criteria DVD Hearts.

Oppenheimer: That are technically off label for you all today, just so that people can compare and contrast that to what the denominator should be in terms of market penetration.

Oppenheimer: So we'll eat the trial that you mentioned that would be beginning I believe you said next year early next year.

Oppenheimer: That is called perfusion, but would it also have physiologic beats.

Speaker Change: Thank you Suraj for the question so.

Speaker Change: Let me address.

Waleed H. Hassanein: Thank you, Suraj, for the question. Let me address, you know, address this in multiple, multiple points.

Speaker Change: Okay addressed this in multiple multiple points first right now our FDA approved indication does not cover standard criteria DVD Hearts.

Waleed H. Hassanein: First, right now, our FDA-approved indication does not cover standard criteria, DBD heart. Our plan is to have a new indication to cover that. Is it four hours? Is it six hours?

Speaker Change: Our plan is to have and new indication to cover that.

Speaker Change:

Waleed H. Hassanein: The market segment of between, you know, less than four hours is about 900. If you go down to up to six hours, about, you know, maybe 1200 transplants, plus or minus. At least that's based on last year's number.

Speaker Change: Is it four hours six hours the market segment.

Speaker Change: But less than four hours is about 900.

Speaker Change: If you go down to up to six hours is about maybe 1200 transplants.

Speaker Change: Plus or minus.

Speaker Change: A piece that is based on last year's number but the reality is we want to access this segment of the market no matter, how big or how small it is.

Waleed H. Hassanein: The reality is we want to access this segment of the market, no matter how big or how small it is. We want to be two years from now, and every heart transplanted in this country should be preserved using TransMedics technology; whether cold perfusion or warm perfusion, it will be TransMedics technology. And we want to have the full gamut of FDA indications, like we have it for lung cancer, and we have it for liver. So that's number one. Number two, we have two hard programs.

Waleed H. Hassanein: One warm, focusing on therapeutic and optimization modalities for DBD donors, and one cold. The warm, we expect to start before year-end this year. The cold, because it requires a full-blown new system and full new circuitry, will start in the first half or beginning of 2025. And that is the one that is focused on the new FDA clinical indication. I hope I addressed the question.

Speaker Change: We want to be two years from now every heart transplanted in this country should be preserved.

Suraj Kalia: And there was one segment, I apologize, Suraj. Yes, it will be pulsatile, the cold perfusion will be pulsatile, which is a distinguishing factor that we have that nobody else has. Fair point. Okay. Stephen, I have one question for you, and I'll hop back in queue. One of the questions that frequently comes up in investor discussions is, and maybe you can quantify this a little better for everyone's consumption, and the question that comes up is, hey, how does TransMedics depreciate its planes? What are its all-in costs per hour for aviation? How are the margins where they are?

Speaker Change: On a transmit X technology.

Stephen Gordon: I would love for you to take all of this and wrap it up into some numeric or numbers that people can slice and dice. Gentlemen, congrats again. Thank you for taking our questions. Thanks, Suraj. The question I can answer is...

Speaker Change: Weather cold perfusion.

Speaker Change: Or warm perfusion it will be at transplant X technology, and we want to have the full gamut of FDA indications like we have it for lung and we have it for liver.

Speaker Change: So that's number one number two we have two heart programs, one warm focusing on therapeutic and optimization modalities for DVD donors and one called the warm we expect to start before year end. This year the cold because it requires a full blown new.

Speaker Change: System and full new.

Speaker Change: Circuitry will start in the first half or beginning of 2025 and that is the one that is focused in the new FDA clinical indications I hope I address the question.

Speaker Change: Yes fair enough.

Speaker Change: Oh, and there was that one segment I apologize suraj.

Suraj: Yes, it will be pulsatile the.

Speaker Change: The code confusion will be pulsatile, which is a distinguishing factor that we have that nobody else has.

Speaker Change: Fair point, Okay. Keith one question for you and I'll hop back in Q1 of the questions that frequently comes up in Investor discussions is and maybe you can quantify this a little better.

Keith: Everyone's consumption and the question that comes up is hey, how does <unk> depreciate explains what are its all in cost per hour for aviation how are the margins where they are.

Keith: I would love for you to take all of these and wrap it up into.

Keith: Numeric.

Keith: No numbers that people can slice and dice. This gentlemen, congrats again. Thank you for taking my questions. Thanks Suraj was the question I can answer is how we depreciate so.

Operator: Thanks, Suraj. The question I can answer is how we depreciate. So, we depreciate the planes over 10 years with a 50 percent residual value. So, that has been moving clear from day one. That's in our Qs and Ks. But we haven't talked about the margin of aviation versus the margin of the service. But, you know, all in, we're at that 36 percent, and we expect some improvement. You know, certainly, I can say the aviation is a bit on the lower side versus the service, which is a bit on the higher side, but we haven't talked about anything more detailed than that. So, that's how I can answer that question.

Keith: I appreciate the planes over 10 years with a 50%.

Keith: Our residual value. So that has been we've been clear from day, one that's without accusing case, we haven't talked about the margin of the aviation versus the margin of the service, but all in we're at that 36% and we expect some improvement.

Speaker Change: Certainly I can say that the aviation is a bit on the lower side versus the service, which is a bit on the higher than that side, but we haven't talked about anything more detailed than that so that's what I can answer that question.

Speaker Change: Got it thank you.

Speaker Change: And our next question today comes from Ryan Daniels with William Blair. Please go ahead.

Ryan Scott Daniels: And our next question today comes from Ryan Daniels with William Blair. Please go ahead.

Speaker Change: Yeah, Hey, guys. This is Jack Samsung for Ryan Daniels. Thanks for taking my question and congrats on the strong start to the year can you share any general feedback from customers that have used <unk> aviation and maybe if or how that feedback has changed since you began integrating the aviation segment. Thanks.

Waleed H. Hassanein: Yeah, guys, this is Jack Thompson on behalf of Ryan Daniels. Thanks for taking the question and congrats on the strong start to the year. Can you share any general feedback from customers that have used TransMedics Aviation and maybe if or how that feedback has changed since you began integrating the aviation segment? Thanks.

Speaker Change: Thank you for the question.

Ryan Scott Daniels: Thank you for the question. I think the only thing that I can share publicly is just to point out the results. I point out the rapid pace by which we went from zero to one hundred and five customers using our TransMedics logistical services, and we expect to go deeper within these accounts. I leave it at that. I think centers are beginning or are actually witnessing the better structure, the more efficient cost structure, and the availability that is afforded by TransMedics logistics. And again, I point to the results.

Speaker Change: I think the only thing that I can share publicly is just I point out to the results I point out to the their rapid pace by which we went from zero to 105 customers.

Speaker Change: Using our transplant ex logistical services.

Speaker Change: And we expect to go deeper within these accounts.

Speaker Change: I'll leave it at that.

Speaker Change: I think centers are beginning or actually witnessing the the better structure, the more efficient cost structure and the availability that is afforded by transplant logistics.

Speaker Change: And again I point to the results.

Speaker Change: Understood. Thanks can you just provide an update you on what youre seeing in the international markets and kind of what the expectations are there.

Waleed H. Hassanein: Understood, thanks. Can you just provide an update too on what you're seeing in the international markets and kind of what the expectations are there? And just as a quick follow-up, then too, are there any encouraging opportunities following the ISHLT meetings that took place? Thanks.

Speaker Change: And just as a quick follow up. Thank you are there any like encouraging opportunities following the I S. H L. T meetings that took place.

Ryan Scott Daniels: Excellent question, and thank you for asking it. There is a tremendous focus on the success of NLP in the United States. Many major European countries are coming to TransMedics and offering to collaborate on establishing NLPs across Europe. We're seeing similar behavior in the Middle East, specifically in Saudi Arabia.

Speaker Change: Excellent question and thank you for asking it.

Speaker Change:

Speaker Change: There is a tremendous focus on the success of MLP in the United States that are many major.

Speaker Change: A major European countries are coming to transmit mix and offering to collaborate on establishing mlps across Europe.

Speaker Change: We're seeing similar.

Speaker Change: Behavior in the Middle East specifically in Saudi Arabia.

Waleed H. Hassanein: We had several discussions at the ISHLT. The way I want to characterize it is that we're absolutely focusing on replicating the success of the NLP because we believe the problem that the NLP solves for in the U.S. is exactly the same problem in the ex-U.S. However, we want to prioritize securing reimbursement first to make sure that our services will get reimbursed. And one final qualifier. When I talk about NOP-XUS, we're talking only about the clinical support service, no logistics and no surgical procurement, just for clarification purposes. So yes, there's a huge, huge momentum around NOP replication and OUS, and TransMedics fully expects to be ready to implement those once we are confident that our services will be reimbursed.

Speaker Change: We had several discussions with <unk> the way I want to characterize it is absolutely we're focusing on replicating the success of the MLP because we believe the problem that the MLP solves for in the U S is exactly the same problem X X U S. However, we want to prioritize.

Speaker Change: Securing reimbursement first to make sure that our services will get reimbursed.

Speaker Change: And one final qualifier.

Speaker Change: When I talk about MLP ex U S. We're talking only on the clinical support service not no logistics and no surgical procurement.

Speaker Change: Just for clarification purposes.

Speaker Change: So yes, there is a huge huge momentum.

Speaker Change: Around MLP, if application or U S.

Speaker Change: <unk> fully expect to to be a ready to implement those once we are confident that our services will be reimbursed.

Speaker Change: Perfect. Thanks, guys and congrats again.

Operator: Perfect. Thanks, guys, and congrats again.

Speaker Change: Thank you.

Matthew O'brien: And as a reminder, if you'd like to ask a question, please press star then 1. Our next question comes from Matthew O'Brien with Piper Sandberger. Please go ahead.

Speaker Change: As a reminder, if you wanted to ask a question. Please press Star then one.

Speaker Change: Question also loves me Obrien with Piper Sandler. Please go ahead.

Meagan O'Brien: Hi, this is demand for that thank you so much for taking our question.

Samantha: Hi, this is Samantha from format. Thank you so much for taking our question. I guess just to start off, if you could talk a little bit more about guidance and self-guidance for the rest of the year and kind of, you know, what's baked into the low end and the high end of that range?

Speaker Change: I guess just to start off if you could talk a little bit more about guidance for the rest of the year and kind of what's baked into that low end and the high end of that range.

Speaker Change: So Matthew this is Steven.

Stephen Gordon: Hi Samantha, this is Stephen. Yeah, I mean, you know, we think there's an opportunity to continue to kind of grow sequentially, as I mentioned in answer to the earlier call. And if we're able to, you know, add or go deeper in a few of our centers, where we should be able to get to that high end, some of these things will come to fruition. And so the low end is just being a little bit more conservative about the pace of how we do that. So, you know, it's a pretty narrow range, and we feel confident that we'll be able to meet it.

Steven Hum: Yeah. I mean, you know we think there's opportunity to continue to kind of grow sequentially as I've mentioned in answer to the earlier call and if we're able to you know.

Speaker Change: Uh huh.

Speaker Change: Or go deeper in a few of our.

Steven Hum: Centers, where we should be able to get to that high end and some of these things that will come to fruition.

Steven Hum: And so the low end is just being a little bit more conservative about the pace of how we do that so it's a pretty narrow range.

Steven Hum: We feel confident that we'll be able to meet them.

Speaker Change: Okay. Thank you and then just one more from US I know you talked a little bit in the past about the expected product service mix and how can we expect that to change rapidly articulate.

Samantha: Great, thank you. And then, just one more from us.

Samantha: I know you've talked a little bit in the past about the expected product-service mix. I definitely expect that to change throughout the year, particularly in the fall. Do more air crafts throughout the year.

Speaker Change:

Speaker Change: Yes.

Speaker Change: Do more yeah aircrafts throughout the year.

Stephen Gordon: Yeah, so it's a good question. We've been kind of keeping an eye on the product and service mix. It ended up at 36.7%. I think it's going to get a little bit more than that. It might be between, say, between 37 and potentially 39%. I think that's probably the top end. So it's a little higher than I had given a view earlier in the year based on the outcomes we're seeing, but we still think we're going to see overall gross margin continue to improve.

Speaker Change: Yeah. So it's a good question, we've been kind of keeping an eye on the product and service mix.

Stephen Gordon: Yeah, so it's a good question. We've been kind of...

Speaker Change: It ended up.

Speaker Change: 36, 7% service.

Speaker Change: Think it's going to get a little bit more than that it might be between say between 37 to potentially 39% I think that's probably the top end. So it's a little higher than I had given.

Speaker Change: Of you earlier in the year.

Speaker Change: Based on the outcomes we are seeing.

Speaker Change: But we still think we're going to see overall gross margin continuing to improve.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Yeah.

Operator: Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to Waleed Hassanein for closing remarks.

Speaker Change: Thank you and this concludes.

Speaker Change: A question and answer session.

Speaker Change: Turn the conference back over to Walter Hustling for closing remarks.

Waleed H. Hassanein: Thank you so much, Operator. Thank you so much, everybody, for joining us on this call this evening, and we're looking forward to our next call. Have a wonderful evening, everyone.

Walter Hustling: Thank you so much operator, thank you so much everybody for joining us on this call. This evening and we're looking forward to our next call have a wonderful evening everyone.

Walter Hustling: Thank you.

Operator: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Walter Hustling: This conference call we thank.

Speaker Change: Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yes.