Q2 2024 TransMedics Group Inc Earnings Call

July 31, 2024

Lane Morgan: The potential commercial opportunity for our products, services, and 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. Growth 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. Accordingly, you should not place undue reliance on these statements.

Good afternoon, and welcome to the TransMedics Second Quarter 2024 Earnings Conference Call.

Operator: I would now like to turn the call over to Lane Morgan from the Gilmartin Group for a few introductory comments. Thank you, Operator.

At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session toward 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.

Lane Morgan: Earlier today, TransMedics released financial results for the quarter ended June 30th, 2020. 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 of the call, that include forward-looking statements within the meaning of federal securities law. For example, any statements contained in this call that relate to the expectations or predictions of future events, results, or performance are forward-looking statements.

Lane Morgan: Thank you, Operator. Earlier today, TransMedics released financial results for the quarter ended June 30, 2024.

Lane Morgan: Additional information regarding these risks and uncertainties appears under the heading Risk Factors in our Form 10-Q, followed by the Securities and Exchange Commission on May 2, 2024. Our subsequent Form 10-Q filings and the forward-looking statements included in today's earnings press release, 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.

Lane Morgan: All forward-looking statements, including, without limitation, our examination of operating training, the potential commercial opportunity for our products, services, and 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 2020 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.

Speaker Change: A copy of the press release is available on the company's website.

Speaker Change: 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 include forward-looking statements within the meaning of federal securities laws.

Lane Morgan: Additional information regarding these risks and uncertainties appears under the heading risk factors in our form 10-Q filed with the Securities and Exchange Commission on May 2nd, 2024. Our subsequent form 10-Q filings and forward-looking statements, including today's earnings press release, which are available at www.sec.gov and 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.

Speaker Change: Any statements contained in this call that relate to the expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including without limitation, are examination of operating trends.

Speaker Change: The potential commercial opportunity for our products, services, and timing of new clinical programs, and our future financial expectations, which include expectations for growth in our organization and guidance.

Speaker Change: and or expectations for revenue.

Speaker Change: Growth 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.

Speaker Change: Accordingly, you should not place undue reliance on these statements.

Speaker Change: Additional information regarding these risks and uncertainties appears under the heading Risk Factors of our Form 10-Q followed by the Securities and Exchange Commission on May 2, 2024.

Speaker Change: our subsequent Form 10-Q filings, and the forward-looking statements including today's

Speaker Change: and our website at www.transmedics.com.

Speaker Change: TransMedics disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements.

Lane Morgan: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 31, 2024. And with that, I will now turn the call over to Waleed Hassanein, President and Chief Executive Officer. Thank you so much, Lane.

Lane Morgan: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 31st, 2024. And with that, I will now turn the call over to Waleed Hassanein, President and Chief Executive Officer. Thank you so much, Lane.

Speaker Change: 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, July 31st, 2024. And with that, I will now turn the call over to Waleed Hassanein, President and Chief Executive Officer.

Waleed H. Hassanein: Good afternoon, everyone, and welcome to TransMedics' second quarter 2024 earnings call. As always, joining me today is Stephen Gordon, our Chief Financial Officer. As we've stated previously, 2024 represents a critical year for TransMedics. We have been and remain laser focused on scaling our business, both in terms of revenue and operations, while also investing in our future product pipeline and infrastructure. To be specific, we are focused on three initiatives.

Waleed H. Hassanein: Thank you so much, Lane. Good afternoon, everyone, and welcome to TransMedics' second quarter 2024 earnings call.

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

Speaker Change: As we stated previously, 2024 represents a critical year for transmedics.

Waleed H. Hassanein: We have been, and remain, laser-focused on scaling our business, both in terms of revenue and operations, while also investing in our future product pipeline and infrastructure.

Waleed H. Hassanein: Completing the build-out of our TransMedics Aviation Fleet and Transplant Logistics Network to meet the growing demand for OCS NOP transplant missions. Two, continuing to drive both overall national transplant volume growth and market share expansion in existing transplants using OCS NOP technology and services. And three, preparing to launch three new cardiothoracic clinical programs designed to reinvigorate the OCS lung clinical adoption and expand our OCS heart franchise. Through Q2, we delivered another quarter of significant revenue and case growth, maintained profitability, and achieved positive free cash flow, which is a milestone for our business.

Waleed H. Hassanein: One, completing the build-out of our transmedics aviation fleet and transplant logistics network to meet the growing demand for OCS NOP transplant missions. Two, continuing to drive both overall national transplant volume growth and market share expansion in existing transplants using OCS NOP technology and services. And three, preparing to launch three new cardiothoracic clinical programs designed to reinvigorate the OCS lung clinical adoption and expand our OCS heart franchise. Through Q2, we delivered another quarter of significant revenue and case growth, maintained profitability, and achieved positive free cash flow, which is a milestone for our business.

Waleed H. Hassanein: To be specific, we are focused on three initiatives.

Waleed H. Hassanein: 1. Completing the build-out of our TransMedics Aviation Fleet and Transplant Logistics Network to meet the growing demand for OCS NOP transplant missions.

Waleed H. Hassanein: Two, continuing to drive both overall national transplant volume growth and market share expansion in the existing transplants using the OCS NOP technology and services.

Waleed H. Hassanein: And three, preparing to launch three new cardiothoracic clinical programs designed to reinvigorate the OCS lung clinical adoption and expand our OCS heart franchise.

Speaker Change: Through Q2, we delivered another quarter of significant revenue and case growth, maintained profitability and achieved positive free cash flow, which is a milestone for our business.

Waleed H. Hassanein: In addition, we built strong momentum across the above three key initiatives. Let me review key operational highlights. Total revenue for 2Q was $114.3 million, representing 118% growth from Q2 2023 and 18% sequential growth from Q1 2024.

Speaker Change: In addition, we built strong momentum across the above three key initiatives.

Speaker Change: Let me review key operational highlights.

Speaker Change: Total revenue for 2Q was $114.3 million, representing 118% growth from Q2 2023 and 18% sequential growth from Q1 2024.

Waleed H. Hassanein: Our results were driven by continued growth in both OCS products as well as TransMedics transplant logistics services revenue. We experienced significant growth in case volume across lung, heart, and liver OCS NOP cases compared to the same period last year, as well as sequentially in both heart and liver cases compared to Q1. We experienced substantial growth in both U.S. and O.U.S. Commercial revenues compared to the same period last year and sequentially over Q1 2024. TransMedics Transplant Logistics Service revenue for 2Q was $19.1 million, up from $14.5 million in Q1, representing approximately 32% growth quarter over quarter. Overall gross margins for 2Q were 61%, slightly down from 62% in Q1.

Waleed H. Hassanein: Our results were driven by continued growth in both OCS product as well as TransMedics transplant logistics services revenue. We experienced significant growth in case volume across lung, heart, and liver OCS NOP cases compared to the same period last year, as well as sequentially in both heart and liver cases compared to Q1. We experienced substantial growth in both U.S. and O.U.S. commercial revenues compared to the same period last year and sequentially over Q1 2024.

Speaker Change: Our results were driven by continued growth in both OCS product as well as TransMedics Transplant Logistics Services revenue.

Speaker Change: We experienced significant growth in case volume across lung, heart, and liver OCS NOP cases compared to the same period last year, as well as sequentially in both heart and liver cases compared to Q1.

Speaker Change: We experienced substantial growth in both U.S. and O.U.S. commercial revenues compared to the same period last year and sequentially over Q1 2024.

Waleed H. Hassanein: TransMedics Transplant Logistics Service revenue for 2Q was $19.1 million, up from $14.5 million in Q1. You're presenting approximately 32% growth quarter over quarter. Overall gross margins for 2Q were 61%, slightly down from 62% in Q1.

Speaker Change: TransMedics transplant logistics service revenue for 2Q was 19.1 million dollars up from 14.5 million dollars in Q1. You're presenting 30 approximately 32 percent growth Q quarter over quarter.

Speaker Change: Overall gross margins for 2Q was 61%, slightly down from 62% in Q1, 24.

Waleed H. Hassanein: As we've discussed previously, we believe we are still building the foundation of our business and therefore expect gross margins to fluctuate modestly over the next several quarters. For context, gross margins were 59% in 4Q2023. Importantly, we remain extremely confident. I repeat, we remain extremely confident that we will be able to improve gross margins over the next 12 to 18 months as we benefit from further scale in both product and service operations over time. And finally, we were pleased to deliver a GAAP operating profit of $12.5 million in Q2, representing 11% of total revenue. Net income was $12.2 million.

Speaker Change: As we've discussed previously, we believe we are still building the foundation of our business and therefore expect gross margins to fluctuate modestly over the next several quarters.

Speaker Change: For context, gross margins were 59% in 4Q2023.

Speaker Change: Importantly, we remain extremely confident, I repeat, we remain extremely confident that we will be able to improve gross margins over the next 12 to 18 months as we benefit from further scale in both product and service operations over time.

Speaker Change: And finally, we were pleased to deliver a GAAP operating profit of $12.5 million in Q2 representing 11% of total revenue. Net income was $12.2 million.

Waleed H. Hassanein: As mentioned earlier, we are very proud to have achieved our first positive free cash flow quarter with approximately $2 million of free cash generated despite purchasing a new aircraft during the quarter. Again, while we are expecting to remain profitable on an operating basis, we fully expect some fluctuation in free cash flow over the next 12 to 18 months as we are continuing to invest heavily in our business and product pipeline. Now, with that background, let me provide more detail on key operational metrics relating to building out our transplant logistics network. Through Q2, we continue to expand our fleet of owned aircraft, reaching 15 aircraft by the end of Q2. We also added two new aircraft in July, bringing our total owned TransMedics aircraft to 17 as of today.

Waleed H. Hassanein: As mentioned earlier, we are very proud to have achieved our first positive free cash flow quarter with approximately $2 million of free cash generated despite purchasing a new aircraft during the quarter. Again, while we are expecting to remain profitable on an operating basis, we fully expect some fluctuation in free cash flow over the next 12 to 18 months as we are continuing to invest heavily in our business and product pipeline. Now, with that background, let me provide more detail across key operational metrics relating to building out our transplant logistics network. Through Q2, we continue to expand our fleet of owned aircraft, reaching 15 aircraft by the end of Q2. We also added two new aircraft in July, bringing our total owned TransMedics aircraft to 17 as of today.

Speaker Change: As mentioned earlier, we are very proud to have achieved our first positive free cash flow quarter with approximately $2 million of free cash generated despite purchasing a new aircraft during the quarter.

Speaker Change: Again, while we are expecting to remain profitable on operating basis, we fully expect some fluctuation in free cash flow over the next 12 to 18 months, as we are continuing to invest heavily in our business and product pipelines.

Waleed H. Hassanein: We also made a significant investment in TransMedics aviation pilot head count in Q2, nearly doubling our pilot crew size over Q1. These investments were made to maximize the operational efficiency of our current and growing fleet. Importantly, these investments are being made to prepare for the expected growth in demand for OCS NOP missions in 2025 and beyond. To that end, the daily average number of active TransMedics aviation planes grew to approximately 11 aircraft compared to 9 in Q1 of 24.

Waleed H. Hassanein: We also made a significant investment in TransMedics aviation pilot headcount in Q2, nearly doubling our pilot crew size over Q1. These investments were made to maximize the operational efficiency of our current and growing fleet. Importantly, these investments are being made to prepare for the expected growth in demand for OCS NOP missions in 2025 and beyond. To that end, the daily average number of active TransMedics aviation planes grew to approximately 11 aircraft compared to 9 in Q1 of 24.

Speaker Change: Now, with that background, let me provide more detail across key operational metrics relating to building out our transplant logistics network.

Speaker Change: Through Q2, we continue to expand our fleet of owned aircraft, reaching 15 aircraft by end of Q2.

Speaker Change: We also added two new aircrafts in July , bringing our total owned TransMedics aircrafts to 17 as of today.

Speaker Change: We also made significant investment in TransMedics Aviation pilot headcount in Q2, nearly doubling our pilot crew size over Q1.

Speaker Change: These investments were made to maximize the operational efficiency of our current and growing fleet. Importantly, these investments are being made to prepare for the expected growth in demand for OCS NOP missions in 2025 and beyond.

Speaker Change: To that end, the daily average number of active TransMedics aviation planes grew to approximately 11 aircrafts compared to 9 in Q1 of 24.

Waleed H. Hassanein: We expect this number will continue to increase throughout the year as we remain on track to reaching approximately 20 operational aircraft by year end. Notably, our owned aircraft covered approximately 59% of our NOP flight missions in Q2, compared to 49% in Q1 of 2024. Let me take a moment to underscore the remaining long runway of additional growth ahead of us in this important area. At our current OCS NOP mission volume, we have room to grow our share of logistics.

Speaker Change: We expect this number will continue to increase throughout the year as we remain on track to reaching approximately 20 operational aircrafts by year-end.

Speaker Change: Notably, our owned aircraft covered approximately 59% of our NOP flight missions in Q2, compared to 49% in Q1 of 2024.

Speaker Change: Let me take a moment to underscore the remaining long runway of additional growth ahead of us in this important area.

Speaker Change: First.

Speaker Change: At our current OCS NOP mission volume, we have room to grow our share of logistics.

Waleed H. Hassanein: Second, we expect the overall OCS NLP volume to grow significantly over the next several years as we move closer to achieving our stated target of 10,000 transplants per year in the U.S. by 2028. At that level, logistics would represent a significant revenue opportunity for TransMedics, said differently. As much as we are very proud of the execution and growth of our transmedics transplant logistics to date, we have a long green field of growth ahead of us, and we are committed to capitalizing on this opportunity to its fullest.

Waleed H. Hassanein: Second, we expect the overall number of OCS NOPs to grow significantly over the next several years as we move closer to achieving our stated target of 10,000 transplants per year in the U.S. by 2028. At that level, logistics would represent a significant revenue opportunity for TransMedics. Said differently, as much as we are very proud of our execution and growth of our TransMedics transplant logistics to date, we have a long green field of growth ahead of us, and we are committed to capitalizing on this opportunity to its fullest.

Speaker Change: Second, we expect the overall OCS NOP volume to grow significantly over the next several years as we move closer to achieving our stated target of 10,000 transplants per year in the U.S. by 2028.

Speaker Change: At that level, logistics would represent a significant revenue opportunity for TransMedics.

Speaker Change: Said differently, as much as we are very proud of our execution and growth of our TransMedics transplant logistics to date, we have a long green field of growth ahead of us and we are committed to capitalizing on this opportunity to its fullest.

Waleed H. Hassanein: From a customer footprint perspective, we have also continued to grow the number of programs that are using our transplant logistics services. In Q2, approximately 126 U.S. transplant programs used transmedics logistics compared to approximately 105 in Q1 of 24.

Speaker Change: From a customer footprint perspective, we have also continued to grow the number of programs that are using our transplant logistic services.

Speaker Change: In Q2, approximately 126 U.S. transplant programs used transmedics logistics, compared to approximately 105 in Q1 of 24.

Waleed H. Hassanein: Now that we have achieved a critical mass of user programs, we are increasingly focused on going deeper within these existing programs while growing our overall transplant volumes to better meet their transplant and logistics needs. Based on the above performance, we have gained even greater conviction that our expanding transplant logistics services will continue to be a key catalyst for the near and long-term growth of the transmedics business. We see a clear line of sight to continued success through the balance of 24 and into 25 as we scale our air fleet and ground operations to support our growth plan.

Waleed H. Hassanein: Now that we have achieved a critical mass of user programs, we are increasingly focused on going deeper within these existing programs while growing our overall transplant volumes to better meet their transplant and logistics needs. Based on the above performance, we have gained even greater conviction that our expanding transplant logistics services will continue to be a key catalyst for the near and long-term growth of transmedics business. We see a clear line of sight to continued success through the balance of 24 and into 25 as we scale our air fleet and ground operations to support our growth plan.

Speaker Change: Now that we have achieved a critical mass of user programs, we are increasingly focused on going deeper within these existing programs while growing our overall transplant volumes to better meet their transplant and logistics needs.

Speaker Change: Based on the above performance, we have gained even greater conviction that our expanding transplant logistics services will continue to be a key catalyst for the near and long-term growth of the transplantics business.

Speaker Change: We see a clear line of sight to continued success through the balance of 24 and into 25 as we scale our air fleet and ground operations to support our growth plans.

Waleed H. Hassanein: Moving now to our clinical program, we continue to advance our new OCS lung and heart programs designed to reinvigorate the OCS lung market and expand our clinical indications and product offering for OCS heart. Importantly, we remain on track for the initiation of all three clinical programs in 2025. We are increasingly confident and excited about the potential clinical impact of our new OCS lung and OCS heart programs based on the following updates.

Waleed H. Hassanein: Moving now to our clinical program, we continue to advance our new OCS Lung and Heart Programs designed to reinvigorate the OCS Lung Market and expand our clinical indications and product offering for OCS Heart. Importantly, we remain on track for the initiation of all three clinical programs in 2025.

Speaker Change: Moving now to our clinical programs.

Speaker Change: We continue to advance our new OCS lung and heart programs designed to reinvigorate the OCS lung market and expand our clinical indications and product offering for OCS heart.

Speaker Change: Importantly, we remain on track for the initiation of all three clinical programs in 2025.

Waleed H. Hassanein: We are increasingly confident and excited about the potential clinical impact of our new OCS lung and OCS heart programs based on the following updates. First, we've made significant progress in developing our new OCS perfusion solution and new circuit designs for our OCS lung and heart clinical programs, which we expect to initiate, the first of which in early 2025. In the second quarter of 24, we concluded a significant number of preclinical testing to evaluate the impact of these new OCS lung and heart development.

Speaker Change: We are increasingly confident and excited about the potential clinical impact of our new OCS lung and OCS heart programs based on the following updates.

Waleed H. Hassanein: First, we've made significant progress in developing our new OCS perfusion solution and new circuit designs for our OCS lung and heart clinical programs, which we expect to initiate the first of which in early 2025. In the second quarter of 24, we concluded a significant number of preclinical testing to evaluate the impact of these new OCS lung and heart developments. The results demonstrate it. They are successful. Maintenance of donor lungs and hearts on OCS perfusion for more than 24 hours with significantly lower edema formation compared to controlled cold storage.

Speaker Change: First, we've made significant progress in developing our new OCS perfusion solution and new circuit designs for our OCS lung and heart clinical programs, which we expect to initiate the first of which in early 2025.

Speaker Change: In the second quarter of 24, we concluded a significant number of preclinical testing to evaluate the impact of these new OCS lung and heart developments.

Waleed H. Hassanein: The results demonstrate it. For example, successful maintenance of donor lungs and hearts on OCS perfusion for more than 24 hours, with significantly lower edema formation compared to controlled cold storage. This is a critical milestone towards enabling morning transplants for OCS lung and OCS heart, similar to what we have successfully achieved with OCS liver. We achieved this while demonstrating significant reduction of ischemia reperfusion injury histological markers for both OCS lung and heart compared to static cold storage, and significant improvement of the overall operational performance of the OCS Lung Circuit throughout 24 hours of perfusion due to our new circuit design.

Speaker Change: The results demonstrate it.

Speaker Change: Successful.

Speaker Change: Maintenance of donor lungs and hearts on OCS perfusion for more than 24 hours with significantly lower edema formation compared to controlled cold storage.

Waleed H. Hassanein: This is a critical milestone towards enabling morning transplants for OCS lung and OCS heart, similar to what we have successfully achieved with OCS liver. We achieved this while demonstrating significant reduction of ischemia reperfusion injury histological markers for both OCS lung and heart compared to static cold storage, and significant improvement of the overall operational performance of the OCS lung circuit throughout 24 hours of perfusion due to our new circuit design. Second, the development of our cold perfusion heart program is underway.

Speaker Change: This is a critical milestone towards enabling morning transplants for OCS lung and OCS heart, similar to what we have successfully achieved with OCS liver.

Speaker Change: We achieved this while demonstrating significant reduction of ischemia reperfusion injury histological markers for both OCS lung and heart compared to static cold storage.

Speaker Change: and significant improvement of the overall operational performance of the OCS lung circuit throughout 24 hours of perfusion due to our new circuit designs.

Waleed H. Hassanein: Second, the development of our cold perfusion heart program is underway. Again, we are very encouraged by the early preclinical results of this new concept, and we expect this program to clinically kick off in the second half of 2025. I'm looking forward to sharing our preclinical experience with this new product on future calls. For reference, the detailed preclinical results will be formally and publicly presented at the upcoming Heart and Lung Transplant Scientific Conferences in 2025.

Speaker Change: Second, development of our cold perfusion heart program is underway. Again, we are very encouraged by the early preclinical results of this new concept, and we expect this program to clinically kick off in the second half of 2025.

Waleed H. Hassanein: Again, we are very encouraged by the early preclinical results of this new concept, and we expect this program to clinically kick off in the second half of 2025. I'm looking forward to sharing our preclinical experience with this new product on future calls. For reference, the detailed preclinical results will be formally and publicly presented at the upcoming Heart and Lung Transplant Scientific Conferences in 2025. Again, we are very excited about our product pipeline and the potential transformative nature of these programs to catalyze mid and long-term growth of our OCS platform to drive more lung and heart transplant volumes nationally. Let me shift gears.

Speaker Change: I'm looking forward to sharing our preclinical experience with this new product on future calls.

Speaker Change: For reference, the detailed preclinical results will be formally and publicly presented at the upcoming Heart and Lung Transplant Scientific Conferences in 2025.

Waleed H. Hassanein: Again, we are very excited about our product pipeline and the potential transformative nature of these programs to catalyze mid and long-term growth of our OCS platform to drive more lung and heart transplant volumes nationally. Now, I will shift gears.

Speaker Change: Again, we are very excited about our product pipeline and the potential transformative nature of these programs to catalyze mid- and long-term growth of our OCS platform to drive more lung and heart transplant volumes nationally.

Waleed H. Hassanein: I would like to take a moment to mention that TransMedics has released its latest ESG data update, which was published this afternoon on our website. This data update supplements the information we provided in our inaugural report providing key data points and metrics about our ESG performance last year. In conclusion, we are encouraged by our H1 performance. We are now focused on continuing our strong execution throughout the second half of 2024 and preparing for the growth initiatives for 2025 and beyond.

Speaker Change: Let me shift gear.

Speaker Change: I would like to take a moment to mention that TransMedics has released its latest ESG data update, which was published this afternoon on our website.

Speaker Change: This data update supplements the information we provided in our inaugural report providing key data points and metrics about our ESG performance last year.

Speaker Change: In conclusion, we are encouraged by our H1 performance.

Speaker Change: We are now focused on continuing our strong execution throughout the second half of 2024 and preparing for the growth initiatives for 2025 and beyond.

Waleed H. Hassanein: Given our strong performance in the second quarter of 24, we are increasing our annual full-year revenue guidance to between $425 to $445 million, which represents $76 million in revenue, 84% growth over full year 2023 revenue. I'd like to note and underscore that this guidance contemplates the fact that a few of our aircraft will be down for routine scheduled maintenance in the second half of 2024, which could temporarily limit our pace of growth of our logistics revenue in H2.

Waleed H. Hassanein: Given our strong performance in the second quarter of 2024, we are increasing our annual full-year revenue guidance to between $425 million and $445 million, which represents $76 million to 84% growth over full-year 2023 revenue. I'd like to note and underscore that this guidance contemplates the fact that a few of our aircraft will be down for routine scheduled maintenance in the second half of 2024, which could temporarily limit our pace of growth of our logistics revenue in H2.

Speaker Change: Given our strong performance in second quarter of 2024, we are increasing our annual full-year revenue guidance to between $425 to $445 million, which represents $76 billion in revenue.

Speaker Change: to 84% growth over full year 2023 revenue.

Speaker Change: I'd like to note and underscore that this guidance contemplates the fact that a few of our aircrafts will be down for routine scheduled maintenance.

Speaker Change: The second half of 2024, which could temporarily limit our pace of growth of our logistics revenue in H2.

Waleed H. Hassanein: Also, it factors in some potential OUS revenue variability throughout the second half of this year. With that, let me turn the call over to Stephen to cover the detailed financial results and performance for the quarter. Thank you, Waleed.

Speaker Change: Also, it factors in some potential OUS revenue variability throughout the second half of this year.

Speaker Change: With that, let me turn the call to Stephen to cover the detailed financial results and performance for the quarter.

Stephen Gordon: I will now provide some additional detail on the second quarter results and other financial information for the quarter. Starting with revenue, for the second quarter of 2024, our total revenue was $114.3 million. This is an increase of 118% from the second quarter of 2023 and an 18% sequential increase from last quarter. The $114.3 million included $1.1 million related to our flight school, which would leave $113.2 million of transplant-related revenue. In the U.S., transplant revenue was $108.5 million.

Stephen Gordon: Thank you, Waleed. I will now provide some additional detail on the second quarter results and other financial information for the quarter.

Stephen Gordon: The U.S. revenue increased 122% from the second quarter of 2023 and also 18% sequentially from last quarter. Q2 2024 includes $19.1 million of logistics revenue. The organ breakdown on U.S. revenue was $77 million of liver, $27.2 million parts, and 4.3 million of loved ones.

Stephen Gordon: Starting with revenue, for the second quarter of 2024, our total revenue was $114.3 million.

Stephen Gordon: This is an increase of 118% from the second quarter of 2023 and an 18% sequential increase from last quarter.

Stephen Gordon: The $114.3 million included $1.1 million related to our flight school, which would leave $113.2 million of transplant-related revenue.

Stephen Gordon: In the U.S., transplant revenue was $108.5 million.

Stephen Gordon: So, U.S. revenue increased 122% from the second quarter of 2023 and also 18% sequentially from last quarter.

Stephen Gordon: Q2 2024 includes $19.1 million of logistics revenue.

Stephen Gordon: The organ breakdown on U.S. revenue was $77 million of liver.

Stephen Gordon: 27.2 million of hearts and $4.3 million of loans. All organs grew substantially over the second quarter of 2023. And XUS revenue was $4.7 million, a 34% increase from Q2 of 2023. The breakdown outside the U.S. was 4.3 million of hearts and 0.4 million of loved ones.

Speaker Change: 27.2 million apart.

Stephen Gordon: All organs grew substantially over the second quarter of 2020, and XUS revenue was $4.7 million, a 34% increase from Q2 of 2023. The breakdown outside the U.S. was 4.3 million apart, and 0.4 million of loved ones.

Speaker Change: and $4.3 million of loans.

Speaker Change: All organs grew substantially over the second quarter of 2023.

Speaker Change: And XUS revenue was $4.7 million, a 34% increase from Q2 of 2023.

Speaker Change: The breakdown outside the U.S. was 4.3 million of heart and 0.4 million of lung.

Stephen Gordon: Next, on the product and service rep. As a reminder, our service revenue includes the NOP Clinical Service of Surgical Procurement and Organ Management, the Logistics Revenue, and also the Flight School. NQ2 product revenue was $71.7 million, and service revenue was $42.6 million. The service portion was 37.3% of the total. Gross margin for the second quarter of 2024 was 61%, down from 70% in the second quarter of 2023 and slightly down from 62% last quarter.

Stephen Gordon: Next, on product and service revenue. As a reminder, our service revenue includes the NOP Clinical Service of Surgical Procurement and Organ Management, the Logistics Revenue, and also the Flight School. In Q2, product revenue was $71.7 million, and service revenue was $42.6 million.

Speaker Change: Next, on the product and service revenue.

Speaker Change: As a reminder, our service revenue includes the NOP Clinical Service of Surgical Procurement and Organ Management, the logistics revenue, and also the flight school revenue.

Speaker Change: NQ2 product revenue was $71.7 million and service revenue was $42.6 million.

Stephen Gordon: The service portion was 37.3% of the total. Gross margin for the second quarter of 2024 was 61%, down from 70% in the second quarter of 2023 and slightly down from 62% last quarter. In comparison to Q2 last year, the change reflects the higher service component of our business, which did not include logistics in the second quarter. Product margin was 80% in Q2. And this improved nicely from 77% last quarter and reflects a steady state product margin which should remain in the 79 to 80% range. On the service side, the margin was 28%, a decline from Q1 2024.

Speaker Change: The service portion was 37.3% of the total.

Speaker Change: Gross margin for the second quarter of 2024 was 61%, down from 70% in the second quarter of 2023, and slightly down from 62% last quarter.

Stephen Gordon: In comparison to Q2 last year, the change reflects the higher service component of our business, which did not include logistics in the second quarter of last year. Product margin was 80% in Q2, and this improved nicely from 77% last quarter and reflects a steady state product margin, which should remain in the 79 to 80% range. On the service side, margin was 28%, a decline from Q1 2024.

Speaker Change: In comparison to Q2 last year, the change reflects the higher service component of our business.

Speaker Change: which did not include logistics in the second quarter last year.

Speaker Change: Product margin was 80% in Q2.

Speaker Change: And this improved nicely from 77% last quarter and reflects a steady state product margin which should remain in the 79 to 80% range.

Speaker Change: On the service side, margin was 28%, a decline from Q1 2024.

Stephen Gordon: This decline was primarily driven by the significant investment in pilot hiring and training to accelerate our operational timeline for our new planes, and investment in aviation maintenance to ensure availability to maximize operational efficiency. As Waleed mentioned, we expect some variability in the service margin. stabilize by early 2026 as we gain more operational efficiency and leverage. Importantly, with the strong product gross margin and improving service margin, we are confident that our overall gross margin will improve over the next several quarters.

Stephen Gordon: This decline was primarily driven by the significant investment in pilot hiring and training to accelerate our operational timeline for our new planes, and investment in aviation maintenance to ensure availability to maximize operational efficiency. As Waleed mentioned, we expect some variability in the service margin, which will stabilize by early 2026 as we gain more operational efficiency and leverage. Importantly, with the strong product gross margin and improving service margin, we are confident that our overall gross margin will improve over the next several quarters.

Speaker Change: This decline was primarily driven by the significant investment in pilot hiring and training to accelerate our operational timeline for our new planes and investment in aviation maintenance to ensure availability to maximize operational efficiency.

Speaker Change: As Waleed mentioned, we expect some variability in the service margin.

Waleed H. Hassanein: which will stabilize by early 2026 as we gain more operational efficiency and leverage.

Waleed H. Hassanein: Importantly, with the strong product gross margin and improving service margin, we are confident that our overall gross margin will improve over the next several quarters.

Stephen Gordon: Total operating expenses for the quarter were $56.8 million, 51% above Q2 2023 operating expenses. This expense growth was driven by 67% growth in R&D related to investment in new product development and product quality and regulatory resources. SG&A grew 46%, primarily related to higher personnel costs and overall corporate infrastructure.

Waleed H. Hassanein: Total operating expenses for the quarter were $56.8 million, 51% above Q2 2023 operating expense.

Waleed H. Hassanein: This expense growth was driven by 67% growth in R&D related to investment in new product development and product quality and regulatory resources.

Waleed H. Hassanein: SG&A grew 46%, primarily related to higher personnel costs and overall corporate infrastructure.

Stephen Gordon: Moving forward, while I still expect expenses to grow, the rate of growth will be lower than what we have seen in the first half. Once again, we delivered GAAP operating profit of $12.5 million in the quarter, or 11% of revenue. Net income was $12.2 million.

Waleed H. Hassanein: Moving forward, while I still expect expenses to grow, the rate of growth will be lower than what we have seen in the first half of the year.

Waleed H. Hassanein: Once again, we delivered GAAP operating profit, $12.5 million in the quarter, or 11% of revenue. Net income was $12.2 million. These compare with an operating loss of $0.9 million and a net loss of $1 million in the second quarter of 2023.

Stephen Gordon: These compare with an operating loss of $0.9 million and a net loss of $1 million in the second quarter of 2023. And Q2 2024 earnings per share was $0.37, and diluted earnings per share was $0.35. Total cash at the end of the quarter was $362.8 million as of June 30, 2024.

Waleed H. Hassanein: And Q2 2024 earnings per share was 37 cents, and diluted earnings per share was 35 cents.

Waleed H. Hassanein: Total cash at the end of the quarter was $362.8 million as of June 30th, 2024. This is an increase of $12.5 million.

Stephen Gordon: This is an increase of $12.5 million from the balance at March 31st, 2024, and reflects $25.7 million of operating cash and, for the first time, $2 million of free cash flow. We purchased one jet in the second quarter, and then we purchased two additional jets in early Q3, bringing our total number of OJIS today to 17. The Basic Weighted Average Common Shares Outstanding for the quarter were $33.1 million, and the Diluted Weighted Average Common Shares Outstanding for the quarter were $35.3 million.

Stephen Gordon: This is an increase of $12.5 million from the balance at March 31, 2024, and reflects $25.7 million of operating cash and, for the first time, $2 million of free cash flow. We purchased one jet in the second quarter, and then we purchased two additional jets in early Q3. This brings our total number of OJIS today to 17. The basic weighted average common shares outstanding for the quarter were $33.1 million, and diluted weighted average common shares outstanding for the quarter were $35.3 million.

Speaker Change: from the ballots at March 31st, 2024.

Speaker Change: and reflects 25.7 million of operating cash and for the first time 2 million of free cash flow.

Speaker Change: We purchased one jet in the second quarter, and then we have purchased two additional jets in early Q3, bringing our total number of owned jets today to 17.

Speaker Change: Basic weighted average common shares outstanding for the quarter were 33.1 million and diluted weighted average common shares outstanding for the quarter were 35.3 million.

Stephen Gordon: In summary, Q2 was another very successful financial quarter for TransMedics. We continue to grow our revenue and have now consistently shown a positive operating profit. In this quarter, we also generated free cash flow, which is an early example of our cash generation capability as we scale.

Speaker Change: In summary, Q2 is another very successful financial quarter for TransMedics.

Speaker Change: We continue to grow our revenue and have now consistently shown a gap operating profit.

Speaker Change: In this quarter, we also generated free cash flow, which is an early example of our cash generation capability as we scale. That said, given current focus on investing in new planes, building our operational infrastructure and our product pipeline, we will see fluctuation in our free cash flow in the near term.

Stephen Gordon: That said, given our current focus on investing in new planes, building our operational infrastructure, and our product pipeline, we will see fluctuations in our free cash flow in the near future. Finally, just to repeat Waleed's earlier comment, we are updating our annual revenue guidance to be in the range of $425 million to $445 million, which represents 76 to 84 percent growth over the full year of 2020. Now I would like to turn the call back to Waleed for closing comments. Thank you, Stephen. Overall, we are humbled and proud of our first half performance.

Speaker Change: Finally, just to repeat Waleed's earlier comment, we are updating our annual revenue guidance to be in the range of 425 million to 445 million, which represents 76 to 84% growth over the full year of 2023.

Speaker Change: Now I would like to turn the call back to Waleed for closing comments.

Waleed H. Hassanein: Thank you, Stephen.

Waleed H. Hassanein: Overall, we are humbled and proud of our first half performance.

Waleed H. Hassanein: We're looking forward to continuing to execute on all the major initiatives throughout 2024 to drive broader and deeper adoption of OCS NOP and transmedics transplant logistics. Additionally, we're focused on growing our U.S. national transplant volumes for the second consecutive year to help patients in need of organ transplants in the U.S. and around the world. With that, I will now turn the call over 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: We're looking forward to continuing to execute on all the major initiatives throughout 2024 to drive broader and deeper adoption of OCS NOP and transmedics transplant logistics. Additionally, we're focused on growing our U.S. national transplant volumes for the second consecutive year to help patients in need of organ transplants in the U.S. and around the world. With that, I will now turn the call over 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.

Waleed H. Hassanein: Importantly, we're focused on growing our U.S. national transplant volumes for the second consecutive year to help patients in need for organ transplants in the U.S. and around the world. With that, I will now turn the call to the operator for Q&A. Operator?

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone.

Operator: If you are 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 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Allen Gong with J.P. Morgan. Please go ahead. Hi team.

Speaker Change: If you are 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 2.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

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

Allen Gong: Thank you for taking the question and congratulations on a really strong quarter. You know, I think the first question I just had was specifically for HEART. You know, I think this was a point of concern for investors in the last few quarters. You had even talked about how, you know, you were seeing some challenges in the market given the advent of some dependent technologies and the limited label, but you had a very strong second quarter here.

Allen Gong: Hi team, thank you for the question and congratulations on a really strong quarter. You know I think the first question I just had was

Allen Gong: specifically for heart.

Speaker Change: I think this was a point of concern for investors in the last few quarters, you had even talked about how.

Speaker Change: You know, you were seeing some challenges in the market given the advent of some competitive technologies and the limited label, but you had a very strong second quarter here. So can you just talk to some of the drivers of that strength and how we should think about that sustaining into the back half?

Allen Gong: So can you just talk about some of the drivers of that strength and how we should think about that sustaining into the back half? Thank you, Allen. I think you might, you might be thinking of a different comment.

Waleed H. Hassanein: We've never, we have never had any doubt about our heart franchise. There have been concerns from the street, but we've never once stated that we have any concerns about our heart franchise.

Speaker Change: Thank you, Allen. I think, Allen, you might be thinking of a different comment. We've never, we have never had any doubt about our heart franchise.

Speaker Change: There has been concerns from the street. We've never, once,

Waleed H. Hassanein: What we said was that we expected some epsom flows, given the different dynamics around the start of a cold perfusion trial in late 2023. I think that came to roost with the announcement of the European results of the same technology in the ISHLT, where they failed to meet their primary effectiveness endpoint. And I think what we're seeing in Q2 is the natural progression. The OCS remains the only FDA-approved heart perfusion technology that is delivering significant growth of DCD utilization and DBD utilization from extended criteria donors in the U.S. and around the world. And the outcomes speak for themselves.

Waleed H. Hassanein: What we said was that we expected some epsom flows, given the different dynamics around the start of a cold perfusion trial in late 2023. I think that came to roost with the announcement of the European results of the same technology in the IHLT, where they failed to meet their primary effectiveness endpoint. And I think what we're seeing in Q2 is the natural progression. The OCS remains the only FDA-approved heart perfusion technology that is delivering significant growth of DCD utilization and DBD utilization from extended criteria donors in the US. And around the world, and the outcomes speak for themselves.

Speaker Change: stated that we have any concern about our heart franchise.

Speaker Change: What we said is we expected some epsom flows, giving the different dynamics around the start of a cold perfusion trial in the late, late 2023.

Speaker Change: I think that came to roost with the announcement of the European results of the same technology in the ISHLT where they failed to meet their primary effectiveness endpoint.

Speaker Change: and I think what we're seeing in Q2 is the natural progression. The OCS remains to be the only FDA approved.

Speaker Change: Heart Perfusion Technology that is delivering significant growth of DCD utilization and DBD utilization from extended criteria donors in the U.S. and around the world.

Speaker Change: and the outcomes speaks for themselves. So, I think the community is now voting with their adoption, given the success of the OCS in meeting all the clinical challenges and all the clinical outcomes that we're facing in the marketplace.

Waleed H. Hassanein: So I think the community is now voting with their adoption, given the success of the OCS in meeting all the clinical challenges and all the clinical outcomes that we're facing in the marketplace. So we are very proud of our Q2 results, and we expect this to continue throughout this year. And next year, once we launch the heart programs, we expect this to accelerate even further. So we're proud of Q2 results, but stay tuned. We're not done yet.

Waleed H. Hassanein: So I think the community is now voting with their adoption, given the success of the OCS and meeting all the clinical challenges and all the clinical outcomes that we're facing in the marketplace. So we are very proud of our Q2 results, and we expect this to continue throughout this year. And next year, once we launch the heart programs, we expect this to accelerate even further. So we're proud of Q2 results, but stay tuned. We're not done yet.

Speaker Change: So, we are very proud of our Q2 results and we expect this to continue throughout this year and next year, once we launch the HEART programs, we expect this to even further accelerate. So, we're proud of Q2 results but, you know, stay tuned, we're not done yet. There's a lot in front of us to execute upon and even further accelerate the HEART growth.

Allen Gong: There's a lot in front of us to execute upon and even further accelerate heart growth with the OCS platform. Thanks. And then just a quick follow up on the guide.

Waleed H. Hassanein: There's a lot in front of us to execute upon and even further accelerate heart growth with the OCS platform. Thanks. And then just a quick follow up on the guide.

Speaker Change: with the OCS platform.

Speaker Change: Thanks. And then just a quick follow up on the guide. You know, when we think about the back half, you talked about how you're going to be maintaining some planes, so that'll be a little bit of a headwind to the business.

Speaker Change: But can you just help us think about the cadence, because...

Speaker Change: Your guidance at the midpoint implies roughly $112 million per quarter, so that implies a bit of a step down sequentially.

Speaker Change: So what cadence should we expect to see third quarter, fourth quarter, and why shouldn't you be able to outperform that given, you know, you're already at more planes relative to what you had in the first half of the year by a pretty significant margin? Thank you.

Waleed H. Hassanein: You know, when you think about the back half, you talked about how you're going to be maintaining some planes. So that'll be a little bit of a headwind for the business. But can you just help us think about the cadence?

Allen Gong: You know, when we think about the back half, you talked about how you're going to be maintaining some planes. So that'll be a little bit of a headwind for the business. But can you just help us think about the cadence?

Speaker Change: Thank you, Allen. I'll give you my perspective and Stephen will provide his as well. Listen, we do not expect to decelerate.

Stephen Gordon: Because your guidance at the midpoint implies, you know, roughly 112 million per quarter. So that implies a bit of a step down sequentially. So what cadence should we expect to see in the third quarter and fourth quarter?

Allen Gong: Because your guidance at the midpoint implies, you know, roughly 112 million per quarter. So that implies a bit of a step down sequentially. So what cadence should we expect to see in the third quarter and fourth quarter?

Speaker Change: We never do. However, what we always try to do with our guidance is to be practical and realistic, so there are no surprises whatsoever.

Stephen Gordon: Yes, we are at a higher number of operating aircraft, but we all know that when we buy an airplane, it doesn't go into service right away. It takes six to eight weeks, a minimum, to get operational.

Stephen Gordon: Yes, we doubled our crew size, but it takes them six to eight weeks to be fully trained and operational. So, there are some operational variabilities that we are factoring in our guidance.

Stephen Gordon: And why shouldn't you be able to outperform that given, you know, you're already at more planes relative to what you had in the first half of the year by a pretty significant margin? Thank you. Thank you, Allen. I would, at least from my perspective, I'll give you my perspective, and Stephen will provide his as well. Listen, we do not expect to decelerate. We never do.

Waleed H. Hassanein: And why shouldn't you be able to outperform that given, you know, you're already at more planes relative to what you had in the first half of the year by a pretty significant margin? Thank you. Thank you, Allen. I would, at least from my perspective, I'll give you my perspective, and Stephen will provide his as well. Listen, we do not expect to decelerate. We never do.

Stephen Gordon: That's at least my perspective and we always, we take guidance very seriously, as you know, and we have...

Waleed H. Hassanein: Unknown Attendee, Waleed Hassanein

Waleed H. Hassanein: However, what we always try to do with our guidance is to be practical and realistic. So, there are no surprises whatsoever. Yes, we are at a higher number of operating aircraft, but we all know that when we buy an airplane, it doesn't go into service right away. It takes six to eight weeks, at a minimum, to get operational.

Waleed H. Hassanein: Yes, we doubled our crew size, but it takes them six to eight weeks to be fully trained and operational. So, there are some operational variables that we are factoring in our guidance. That's at least my perspective.

Speaker Change: You know, as we mentioned, we're

Waleed H. Hassanein: We're hiring ahead on pilots. We're training them. We're putting maintenance programs together, all to try to speed up that pace of getting these planes going. But at the size we are now,

Stephen Gordon: We take guidance very seriously, as you know, and we have a tendency to be conservative to avoid any surprises. And then I'll turn it over to Stephen to give his perspective as well. Yeah, Allen, I would just echo what Waleed said, the nature of what we do, especially in logistics, is quite dynamic. As we mentioned, we're hiring ahead for pilots, we're training them, we're putting maintenance programs together, all to try to speed up that pace of getting these planes going.

Waleed H. Hassanein: We take guidance very seriously, as you know, and we have a tendency to be conservative to avoid any surprises. And then I'll turn it over to Stephen to give his perspective as well. Yeah, Allen, I would just echo what Waleed said, the nature of what we do, especially in logistics, is quite dynamic. As we mentioned, we're hiring ahead for pilots, we're training them, we're putting maintenance programs together, all to try to speed up that pace of getting these planes going.

Speaker Change: We know that there could be things that, you know, that could cause delays and so we don't want to assume that no delays will happen. So that's why we're being a little bit conservative. I think the pace, you know, certainly, you know, flattens to a little bit up over the second half is what we're looking at.

Stephen Gordon: But at the size we are now, we know that there could be things that could cause delays, and so we don't want to assume that no delays will happen. So that's why we're being a little bit conservative. I think the pace certainly flattens to a little bit higher over the second half. That's what we're looking at.

Waleed H. Hassanein: But at the size we are now, we know that there could be things that could cause delays, and so we don't want to assume that no delays will happen. So that's why we're being a little bit conservative. I think the pace certainly flattens to a little bit higher over the second half. That's what we're looking at.

Speaker Change: I agree.

Stephen Gordon: I agree. The next question comes from Bill Plovanic of Canaccord. Please go ahead.

Operator: I agree. The next question comes from Bill Plovanic of Canaccord. Please go ahead.

Speaker Change: The next question comes from Bill Plovanic with Canaccord. Please go ahead.

Bill Plovanic: Hey, great. Thanks. Good evening.

Operator: Hey, great. Thanks. Good evening.

Bill Plovanic: Thanks for taking my questions. You know, just first, if we could just go into the pipeline, especially for warm perfusion, you think you're expecting to start those programs early in 25. And it sounds like the cold perfusion will start later in 25. For the warm perfusion, if I remember correctly, it's the device and it's the solution. Are you design locked on those?

Bill Plovanic: Hey, great. Thanks. Good evening. Thanks for taking my questions. You know, just first, if we could just go into the pipeline, especially I think the warm perfusion, you think you're expecting to start those programs early 25, and it sounds like the cold perfusion later in 25.

Speaker Change: For the warm perfusion, if I remember correctly, it's device and it's solution. Are you design locked on those kind of where are you in that process in terms of

Waleed H. Hassanein: Kind of where are you in that process in terms of design lock on the product on the solution and kind of going through the process to get the approvals to start the trials. And then will you be generating revenue off those trials? Thank you, Bill, for asking the question. We are Locked and loaded.

Speaker Change: design lock on the product, on the solution, and kind of going through the process to get the approvals to start the trials. And then will you be generating revenue off those trials?

Speaker Change: Thank you, Bill, for asking the question.

Waleed H. Hassanein: We are really in the final stages, and, you know, the next phase, the second half of this year will be mainly interactions with FDA and, you know, implementing our regulatory strategy. So we like to keep that between us and FDA, and hopefully, by early next year, we'll have a lot to talk about. But from a design perspective, we're locked and loaded, and that's why we feel very confident in these preclinical results. And that's why we have actually already written them as abstracts for many of the early 2025 scientific conferences to be presented.

Waleed H. Hassanein: We are really in the final stages, and, you know, the next phase, the second half of this year will be mainly interactions with FDA and implementing our regulatory strategy. So we like to keep that between us and FDA, and hopefully, by early next year, we'll have a lot to talk about, but from a design perspective, we're locked and loaded, and that's why we feel very confident in these preclinical results, and that's why we actually have already written them as abstracts for many of the early 2025 scientific conferences where they will be presented. So there's no design or exploration going on right now. It's supply chain and V&V testing. And on the lung product, is that a negative pressure?

Speaker Change: Locked and loaded.

Speaker Change: We are really in the final stages and, you know, the next phase, the second half of this year will be

Speaker Change: mainly interactions with FDA and you know, exercising our regulatory strategy. So we like to keep that

Speaker Change: between us and FDA and hopefully by early next year we'll have...

Speaker Change: A lot to talk about, but from a design perspective, we're locked and loaded.

Speaker Change: And that's why we feel very confident in these preclinical results, and that's why we actually already written them as abstracts for many of the early 2025 scientific conferences to be presented.

Waleed H. Hassanein: So there's no design or exploration going on right now. It's supply chain and V&V testing. And on the lung product, is that a negative pressure?

Speaker Change: So there's no design or exploration going on right now. It's supply chain and V&V testing.

Bill Plovanic: And then the question, will you get reimbursed for those trials considering you already have FDA approval? Yes, these are, as you know, and many on the call know, that TransMedics has always, all of our trials have been revenue-generating trials. And these old trials, or any clinical program, whether it's pre-market or post-market, will be through the NLP program. So there's absolutely a revenue generation expectation for us and our users.

Bill Plovanic: And then the question of whether you will get reimbursed for those trials, considering you already have FDA approval? Yes, these are, as you know, and many on the call know, that TransMedics has always, all of our trials have been revenue-generating trials. And these old trials or any clinical program, whether it's pre-market or post-market, will be through the NLP program. So there's absolutely be revenue generation expectation for us and our users. So the answer is yes.

Speaker Change: And on the lung product, is that a negative pressure? And then the question on, will you get reimbursed for those trials, considering you already have FDA approval? Yes. These are, as you know, and many on the call know, that TransMedics has always, all of our trials have been revenue-generating trials, and these old trials or any clinical program, whether it's pre-market or post-market, will be through the NLP program, so there's absolutely be revenue generation expectation for us and our users, so the answer is yes.

Bill Plovanic: So the answer is yes. In device revenue, you also said NLP but not device specific. The NOP, it's a device, NOP is the disposable, and yes, the answer is yes. We never charge for the device, the hardware OCS during NOP.

Bill Plovanic: In device revenue also, you said NLP, but not device specific. We, the NOP, it's a device, NOP is the disposable, and yes, the answer is yes. We're not, we don't, we never charge for the device, the hardware OCS during NOP.

Speaker Change: and in device revenue also you said NLP but not device specifically.

Speaker Change: Unknown Attendee We the NOP, it's a device, NOP is the disposable. And yes, the answer is yes. We're not we don't we never charge for the for the device, the hardware OCS during NOP.

Waleed H. Hassanein: Okay, and then just to let you know, Sorry, go ahead. Go ahead. I just said the last clarification was just on, will the lung include negative pressure in this first? No, not, not, not, not in this turnaround. No, this is this is, no, not in this turnaround. Maybe in the future.

Waleed H. Hassanein: Okay, and then just to let you know, Sorry, go ahead. Go ahead. I just said the last clarification was just on whether or not the lung will include negative pressure in this first.

Speaker Change: Okay, and then just to let, sorry, go ahead. Go ahead. No, go ahead.

Speaker Change: I just say the last clarification was just on will the lung include negative pressure in this first generation? Not in this turnaround. No, this is no, not in this turnaround. Maybe in the future.

Bill Plovanic: No, not, not, not in this turnaround. No, this is this is no, not in this turnaround. Maybe in the future.

Bill Plovanic: Great, thanks for taking my questions. I'll jump back in. Thanks, Bill. The next question comes from Josh Jennings with Cohen. Please go ahead. Good afternoon. It's great to see you.

Waleed H. Hassanein: Great. Thanks for taking my questions. I'll jump back into queue.

Speaker Change: Great, thanks for taking my questions. I'll jump back into queue.

Joshua Thomas Jennings: Thanks, Bill. The next question comes from Josh Jennings on behalf of Cohen. Please go ahead. Good afternoon.

Bill: Thanks, Bill.

Bill: The next question comes from Josh Jennings with Cohen. Please go ahead.

Joshua Thomas Jennings: It's great to see the continued strong momentum in the business, congratulations on the quarter. Well, we wanted to ask about purchasing the Quad of Life Improvement, that the OCS, and then just the NOP is a forwarding transplant team.

Joshua Thomas Jennings: All right, good afternoon. It's great to see the continued strong momentum in the business. Congratulations on the quarter.

Joshua Thomas Jennings: Transcribed by https://otter.ai, Well, we wanted to ask about at the OCS, and then just the NOP is a forwarding transplant. Transcribed by https://otter.ai, It's been tough to recruit surgeons in transplant surgery, I think at the American Transplant Congress. The keynote from the president of that society, you know, talked about we're in a new era in terms of quality of life for these surgeons, and you're advancing morning surgeries in liver indication, attempting to get that more fully in play for heart and lung transplants.

Joshua Thomas Jennings: Waleed, I wanted to ask about

Joshua Thomas Jennings: [inaudible]

Joshua Thomas Jennings: Unknown Attendee, Waleed Hassanein, Unknown Attendee, Waleed Hassanein,

Speaker Change: OCS, and then just the NOP is Affording Transplant Teams.

Joshua Thomas Jennings: It's been tough to recruit surgeons into transplant surgery, I think at the American Transplant Congress. A keynote from the President of that Society, you know, talked about we're in a new era in terms of quality of life for these surgeons, and you're advancing morning surgeries and liver indication, moving, attempting to get that more fully in play for heart and lung transplants. My, I guess my question is, I mean, are we, do you expect more surgeons to move into transplant surgery out of medical school slash residency?

Speaker Change: It's been tough to recruit surgeons in the transplant surgery, I think at the American Transplant Congress.

Joshua Thomas Jennings: And then are you hearing from your customers that they're having trouble maintaining their transplant surgeon base if they don't, I guess not your customers, but non-customers, if they haven't adopted OCS, and then? Thank you for the question, Josh. I need to be very careful here.

Speaker Change: The keynote from the president of that society talked about we're in a new era.

Speaker Change: In terms of quality of life for these surgeons and your advancing morning surgeries.

Speaker Change: and Liver Indication, attempting to get that more fully in play for heart and lung transplants. I guess my question is, I mean, do you expect more surgeons to move into transplant surgery out of medical school slash residency?

Joshua Thomas Jennings: My, I guess my question is, I mean, do you expect more surgeons to move into transplant surgery out of medical school slash residency? And then are you hearing from your customers that they're having trouble maintaining their transplant surgeon base if they don't, I guess not your customers, but non-customers, if they haven't adopted OCS, and then? Thank you for the question, Josh. I need to be very careful here.

Speaker Change: And then are you hearing from your customers that they're having trouble maintaining their transplant surgeon base if they don't, I guess not your customers but non-customers if they haven't adopted?

Speaker Change: OCS and NOP.

Waleed H. Hassanein: I think all I can comment on are the facts that we know about the NOP that benefited the liver transplant community and the direct comments that were publicly made by many of the cardiothoracic transplanters at the last ISHLT about their hope that one day they could have heart and lung transplants as a scheduled procedure in the morning or semi-scheduled procedure in the morning hours. Like the liver community, at least 63% of the liver community that are using NOP have been experiencing side effects.

Speaker Change: Thank you for the question, Josh.

Speaker Change: I need to be very careful here. I think all I can comment on are the facts that we know about the NOP that afforded the liver transplant community and the direct comments that were publicly made by many of the cardiothoracic transplanters at the last ISHLT about their hope that one day they could have heart and lung transplants.

Speaker Change: as a scheduled procedure in the morning or semi-scheduled procedure in the morning hours. Like the liver community, at least 63% of the liver community that are using NOP have been experiencing.

Waleed H. Hassanein: So yes, that's why we're making these investments and that's why we are turning every stone to get the cardiothoracic franchise to be at that same level of maturity and safety with machine perfusion, with OCS perfusion to enable that to happen. Two, your comment about the ATC or the ASTS president is absolutely correct. There have been many public statements from leaders of the ASTS leadership and leaders in the field of organ transplantation about the fatigue issue in organ transplantation specialty and the challenge of recruiting new surgeons.

Speaker Change: So, yes, that's why we're making these investments and that's why we are moving, you know, we are turning every stone to get the cardiothoracic franchise to be at that same level of maturity and safety with machine perfusion, with OCS perfusion to enable that to happen.

Speaker Change: Two, your comment about the ATC or the ASTS president is absolutely correct. There has been many public statements from leadership of the ASTS, leadership and leaders in the field of organ transplant about

Speaker Change: the fatigue issue in organ transplantation specialty and the challenge of recruiting new surgeons.

Waleed H. Hassanein: We hope that the OCS and NOP provide a real sustainable solution for this on a national basis. That's why we've made that investment. And again, I can only speak for the results that we're seeing with the liver.

Waleed H. Hassanein: We hope that the OCS and NOP provide a real, sustained solution for this on a national basis. That's why we've made that investment, and again, I can only speak for the results that we're seeing with the liver. To see 63% of liver transplants being done during day hours is a huge accomplishment given that the NOP is really a young program that is less than 24 months old. So yes, the answer is we hope to be able to achieve that in the cardiothoracic arena.

Speaker Change: We hope that the OCS and NOP provides a real, sustained solution for this on a national basis. That's why we've made that investment. And again, I can only speak for the results that we're seeing with the liver. To see 63% of liver transplants being done on day hours, that's a huge accomplishment given that the NOP is really a young program that is less than 24 months old.

Waleed H. Hassanein: To see 63% of liver transplants being done during day hours is a huge accomplishment given that the NOP is really a young program that is less than 24 months old. So yes, the answer is we hope to be able to achieve that in the cardiothoracic arena. As far as other, you know, other programs, I can't really comment on programs that are not using NOP and the challenges of maintaining their surgical team. That's really something we cannot comment on. Thanks for that download!

Speaker Change: So yes, the answer is we hope to be able to achieve that in the cardiothoracic arena. As far as other, you know, other

Waleed H. Hassanein: As far as other, you know, other programs, I can't really comment on programs that are not using NOP and the challenges of maintaining their surgical team. That's really something we cannot comment on. Understood. Thanks for that download.

Speaker Change: I can't really comment on programs that are not using NOP and the challenges of maintaining their surgical team, that's really something we cannot comment on.

Joshua Thomas Jennings: And I wanted to ask about the international opportunity. I believe you've hired a couple executives to work on access, maybe even lead the commercial organization over there. Should we be thinking about more meaningful contributions?

Speaker Change: Understood. Thanks for that download and I wanted to ask about the international opportunity. I believe you've hired a couple executives to work on access and maybe even lead the commercial organization over there. Should we be thinking about more meaningful contributions?

Waleed H. Hassanein: from International Franchise in 2025 and beyond, and maybe just any updates you can share that would be helpful. Thanks for the question. Thank you, Josh.

Waleed H. Hassanein: from International Franchise in 2025 and beyond, and maybe just any updates you can share that would be helpful. Thanks for the question. Thank you, Josh. Excellent question. I think, you know, contribution from OUS, mainly European markets. We definitely wouldn't have made these hires if we didn't want to have that European opportunity start materializing.

Speaker Change: from International Franchise in 2025 and beyond, and maybe just any updates you can share that would be helpful. Thanks for the questions.

Waleed H. Hassanein: Excellent question. I think, you know, contribution from OUS, mainly European markets. We definitely wouldn't have made these hires if we didn't want to have that European opportunity start materializing.

Speaker Change: Thank you, Josh. Excellent question. I think, you know, contribution from OUS, mainly European markets, we definitely wouldn't have made these hires if we don't want to have that European opportunity starts materializing.

Waleed H. Hassanein: I'd just like to caution us that, you know, market access, OUS, is going to take the time it takes. And I hope that we could see early fruit of these efforts by the end of 25, but definitely into 26 and beyond. That's what we expect.

Waleed H. Hassanein: I just want to caution us that, you know, market access OUS is going to take the time it takes. And I hope that we could see early fruit of these efforts by the end of 25, but definitely into 26 and beyond. That's what we expect.

Speaker Change: I'd just like to caution us that, you know, market access, OUS, is going to take the time it takes. And I hope that we could see early fruit of these efforts by end of 2025, but definitely into 2026 and beyond. That's what we expect.

Waleed H. Hassanein: We're also selectively targeting, you know, smaller OUS opportunities. And the success of the NLP in the US has generated significant interest and excitement across the globe for TransMedics to try to replicate either all or a portion of the NLP model in these geographies. Stay tuned.

Speaker Change: We're also selectively targeting smaller OUS opportunities and the success of the NLP in the U.S. has generated significant interest and excitement across the globe, really, for TransMedics to try to replicate either all or a portion of the NLP model in these geographies. And stay tuned, we're in active dialogue, but we don't like to talk about...

Joshua Thomas Jennings: We're in active dialogue, but we don't like to talk about discussions until they actually materialize into actionable items. And that could negatively, or it could positively impact revenue generation. Understand. Appreciate it.

Speaker Change: , Unknown Attendee, Waleed Hassanein, Unknown Attendee, Waleed Hassanein, Unknown Attendee,

Joshua Thomas Jennings: Thank you. Thanks, Josh. The next question comes from Ryan Daniels with William Blair. Please go ahead. Hey, guys, this is Jack Sundt on behalf of Ryan. Congratulations on the solid quarter.

Waleed H. Hassanein: Thank you, Thanks, Josh. The next question comes from Ryan Daniels with William Blair. Please go ahead. Hey, guys, this is Jack Sandstein for Ryan.

Speaker Change: Understood, appreciate it, thank you.

Joshua Thomas Jennings: Thanks, Josh.

Joshua Thomas Jennings: The next question comes from Ryan Daniels with William Blair. Please go ahead.

Ryan Scott Daniels: Congratulations on the solid quarter. And thanks for taking the questions. In your prepared remarks, you mentioned that pilot headcount increased by nearly twofold. So I'm just curious, is this to keep up with the pace of plane acquisitions? And, just as a second part, are you at an okay pilot headcount level now going forward? You know, especially if you are more acquisitive on planes in 2025?

Ryan Scott Daniels: And thanks for taking the questions. In your prepared remarks, you mentioned that pilot headcount increased by nearly twofold. So I'm just curious, is this to keep up with the pace of plane acquisitions? And, just as a second part, are you at an okay pilot headcount level now going forward? You know, especially if you are more acquisitive on planes in 2025?

Jack Sundt: Hey guys, this is Jack Sundt on for Ryan, congrats on the solid quarter and thanks for taking the questions. In your prepared remarks, you mentioned that pilot headcount increased by nearly twofold. So I'm just curious, is this to keep up with the pace of plane acquisitions? And just as a second part, are you at an okay pilot headcount level now going forward, you know, especially if you are more accretive on planes in 2025, or is this kind of an area that you will, you know, kind of continue to add headcount as the year goes on? Thanks.

Jack Sundt: Or is this kind of an area that you will, you know, kind of continue to add headcount as the year goes on? Thanks. Thank you, Jack.

Waleed H. Hassanein: Or is this kind of an area that you will, you know, kind of continue to add headcount as the year goes on? Thanks. Thank you, Jack.

Waleed H. Hassanein: The pilot headcount represents two opportunities for us. One is to meet the growing number of active aircraft that we're adding to the fleet, but we will also continue to beef up our pilot crew to be able to increase the operational capacity by double shifting the plane. So the plane could actually be available around the clock rather than 12 hours per day. So it has a double positive impact. One, we need new pilots to man new aircraft, but additional pilots will be recruited to double shift each plane. So the plane could potentially be operational more than 12 hours a day.

Speaker Change: Thank you, Jack.

Speaker Change: The pilot headcount represents two opportunities for us. One is to meet the growing number of active aircrafts that we're adding to the fleet, but also we will continue to beef up our pilot crew to be able to increase the

Speaker Change: [inaudible]

Speaker Change: Unknown Attendee, Waleed Hassanein, Unknown Attendee, Waleed Hassanein, Unknown Attendee,

Waleed H. Hassanein: Ultimately, our goal is to eventually reach 24 hours around the clock, but that's going to take time. So, the answer is, we are, I would say, we are sort of in the middle or the, you know, the midpoint, and we will continue to evaluate the need for additional pilots as we grow our fleet and we grow utilization. We'll let the data dictate where we go on the number of planes and number of pilots, but right now, given what we know, given our operational success, we are, we've made these investments in anticipation of the growth we see in front of us for the second half of this year and into 2025. We could not enter 2025 in a starvation mode on pilots or planes.

Waleed H. Hassanein: Ultimately, our goal is to eventually reach 24 hours around the clock, but that's going to take time. So the answer is, we are, I would say we are sort of in the middle or the, you know, the midpoint. And we will continue to evaluate the need for additional pilots as we grow our fleet and we grow utilization. We'll let the data dictate where we go based on the number of planes and the number of pilots.

Speaker Change: Ultimately, our goal is to ultimately reach 24 hours around the clock.

Speaker Change: But that's going to take time.

Speaker Change: So, the answer is, we are, I would say, we are sort of in the middle or the, you know, the midpoint.

Speaker Change: We will continue to evaluate the need for additional pilots as we grow our fleet and we grow utilization. We will let the data dictate where we go on the number of planes and the number of pilots, but right now, given what we know, given our operational...

Waleed H. Hassanein: But right now, given what we know, given our operational success, we've made these investments in anticipation of the growth we see in front of us for the second half of this year and into 2025. We could not enter 2025 in a starvation mode for pilots or planes.

Speaker Change: We've made these investments in anticipation of the growth.

Speaker Change: We see in front of us for the second half of this year and into 2025. We could not enter 2025.

Waleed H. Hassanein: That's why we're making this infrastructure investment now. Okay, understood. Thanks. And then, just as a quick follow-up, can you just give us an update on where you are on capacity? I think last year you had some clean room bottlenecks. So are you starting to reinvest in clean rooms?

Waleed H. Hassanein: In a starvation mode on pilots or planes. That's why we're making this infrastructure investment now.

Jack Sandstein: Or do you have any expansion plans here? Thanks. Thanks, Jack. Nothing near term from a capacity constraints standpoint, but definitely within the next 12 to 18 months, we'll start strategic planning for business continuity, as I stated in some of the investor interactions we've had over the last quarter and a half or so. I would say over the next 12 to 18 months, we'll begin adding capacity from a business continuity risk management for business continuity standpoint, not for capacity constraints. Great, thank you guys. The next question comes from Matthew O'Brien with Piper Sandler. Please go ahead.

Speaker Change: Okay, understood. Thanks. And then just as a quick follow-up, can you just give us an update on where you're at on capacity? I think last year you had some clean room bottlenecks, so are you starting to reinvest in clean rooms, or do you have any expansion plans here? Thanks.

Jack Sundt: So are you starting to reinvest in clean rooms? Or do you have any expansion plans here? Thanks. Thanks, Jack. Nothing near-term from a capacity constraints standpoint, but definitely within the next 12 to 18 months, we'll start strategic planning for business continuity. As I stated in some of the, you know, investor interactions we've had over the last quarter and a half or so. So I would say over the next 12 to 18 months, we'll begin adding capacity from a business continuity risk management for business continuity standpoint, not for capacity constraints. Great, thank you guys. The next question comes from Matthew O'Brien with Piper Sandler. Please go ahead.

Speaker Change: Thanks, Jack. Nothing near term from a capacity constraint, but definitely within the next 12 to 18 months we'll start strategic planning for business continuity standpoint, as I stated in some of the...

Speaker Change: you know investor interactions we've had over the last quarter and a half or so. So I would say over the next 12 to 18 months we will begin adding capacity for my business continuity, risk management for business continuity standpoint, not for capacity constraint.

Speaker Change: Great, thank you guys.

Speaker Change: The next question comes from Matthew O'Brien with Piper Sandler. Please go ahead.

Matthew O'brien: Afternoon, thanks for taking my questions. Waleed, I'd like to go back to the heart commentary you started off with on the Q&A side. I mean, I understand the competitor, you know, that was working on a clinical study, but that sequential step up can't just be a clinical trial shutting down. There's something else fundamentally that's improving there. If you had to point to one or two things that are improving on the heart side, what would they be? And why aren't they durable, you know, in the next several quarters into 25? Yeah, um, thank you, Matt, for the question.

Speaker Change: Afternoon, thanks for taking the questions. Waleed, I'd like to go back to the heart commentary you started off with on the Q&A side. I mean, I understand the competitor, you know, that was working on a clinical study, but that sequential step-up...

Speaker Change: can't just be a clinical trial shutting down there's something else fundamentally that's that's improving there if you had to point to one or two things that are improving on the heart side what would they be and why aren't they durable you know the next several quarters into 25 and beyond

Waleed H. Hassanein: I'm not saying that the clinical trial is shutting down at all. I'm just saying that it's one of the impacts. The other, you know, so we expect this to be a durable, heartbeat, sustained, durable momentum. We don't expect this to be a flash in the pan at all.

Speaker Change: Thank you, Matt, for the question. I'm not saying that the clinical trial is shutting down at all. I'm just saying that it's one of the impacts. We expect this to be a durable, the heart sustained durable momentum. We don't expect this to be a flash in the pan at all. I was just clarifying for Allen's question that we've never doubted the heart. We just said, guys, this is just the ebbs and flows.

Waleed H. Hassanein: I was just clarifying for Allen's question that we've never doubted the heart. We just said, guys, this is just the ebbs and flows that go around. And, you know, there was this impact of this noise in the system about the cold perfusion trial and the impact and noise of the system of NRP, all of which have now been proven, as we predicted, to be nothing but noise.

Waleed H. Hassanein: I was just clarifying for Allen's question that we've never doubted the heart. We just said, guys, this is just the ebbs and flows that go around. And, you know, there was this impact of this noise in the system about the whole perfusion trial and the impact and noise of the system of NRP, all of which have now been proven, as we predicted, to be nothing but noise.

Speaker Change: that goes around and, you know, there was this impact of this noise in the system about the cold perfusion trial and the impact and noise of the system of NRP, all of which now have been proven as we have predicted.

Waleed H. Hassanein: And they did not deliver any meaningful value, clinical value to help grow the heart transplant volume like the OCS has been delivering quarter in and quarter out on utilization of DCD donors and utilization of extended criteria, DVD donors, and long-distance access to donors. And, you know, salvaging donors in remote areas in the country that no other cold static or cold perfusion technology could salvage. So we fully expect this to be sustained, and we expect to accelerate it by launching our two clinical programs early next year, one for warm heart and one for cold heart, in the second half of the year.

Speaker Change: to be nothing but noise and they did not deliver any meaningful value, clinical value to help grow the heart transplant volume like the OCS has been delivering quarter in and quarter out on utilization of DCD donors and utilization of extended criteria DBD donors and long distance access to donors and salvaging donors in remote areas in the country that no other cold static or cold perfusion technology could salvage. So we fully expect this to be sustained and we expect accelerating it by launching our two clinical programs early next year, one for warm heart and one

Waleed H. Hassanein: And they did not deliver any meaningful clinical value to help grow the heart transplant volume like the OCS has been, delivering quarter in and quarter out on utilization of DCD donors and utilization of extended criteria, DBD donors, and long-distance access to donors and, you know, salvaging donors in remote areas in the country that no other old static or cold perfusion technology could salvage. So we fully expect this to be sustained, and we expect to accelerate it by launching our two clinical programs early next year, one for warm heart and one for cold heart in the second half of the year. Got it. I appreciate that.

Matthew O'brien: Appreciate that. And then question for Stephen, not through the model yet, but is this close to the low watermark for operating margin here in Q2 for the full year? And then I think you've made some comments about, you know, eventually even exiting next year at 30% on that metric. How do you, is that, first of all, is that 30% number right? And then secondly, how do you, how do you, you know, where does the leverage really come from in the model to get you to that kind of Yeah, thanks, Matt.

Matthew O'brien: And then question for Stephen, not through the model yet, but is this this close to the low watermark for operating margin here in Q2 for the full year? And then I think you've made some comments about, you know, eventually even exiting next year at 30% on that metric. How do you feel about that first of all, that 30% number, right? And then secondly, how do you, how do you, you know, where does the leverage really come from in the model to get you to that kind of Yeah, thanks, Matt.

Speaker Change: for Cold Heart in the second half of the year.

Speaker Change: Got it. Appreciate that. And then question for Stephen, not through the model yet, but is this close to the low watermark for operating margin here in Q2 for the full year, and then

Speaker Change: I think you've made some comments about, you know, eventually even exiting next year at 30% on that metric. How do you, is that, first of all, is that 30% number right? And then secondly, how do you, how do you, you know, where does the leverage really come from in the model to get you to that kind of improvement? Thanks.

Stephen Gordon: No, I mean, I consistently have said that and that, you know, at that point, we'll have significant revenue. And that should allow us to drop down to that kind of margin, which is the model of the profit that we think this business can generate. You know, we're still in investment mode. So, as I mentioned, at least from a cash flow perspective, we will see some variability. We're not quite at that consistent trend level, but I do think we're at the point where we're going to be consistently positive operating profit. I don't see us going backwards. But from a kind of cash generation point of view, it could be variable.

Speaker Change: Yeah, thanks, Matt. No, I mean, I consistently have said that and that, you know, at that point, we'll have significant revenue.

Speaker Change: And that should allow us to drop down that kind of margin, which is the model that we think this business can generate.

Speaker Change: You know, we're still in investment mode, so...

Speaker Change: As I mentioned, at least on a cash flow perspective, we will see some...

Speaker Change: [inaudible]

Stephen Gordon: I do think we're at the point where we're going to have consistently positive operating profit; I don't see us going backwards. But from a kind of cash generation point of view, it could be variable. As far as the leverage, I think the leverage is coming from, you know, we're still growing investment, but just not at the pace that we were in the past, where we were probably, in some cases, growing spending, you know, not at the rate of revenue, but at a pretty fast pace. We've got the NLP organization at a, you know, very good critical mass. And so the increments to that are, are more nominal. Now, they're not, you know, major investments.

Speaker Change: positive operating profit. I don't see us going backwards. But from a kind of a cash generation, it could be variable. As far as the leverage, I think the leverage is coming from, you know, we're still growing investment, but just not at the pace that we were in the past, where we were probably in some cases growing spending, you know, not at the rate of revenue, but but at a pretty fast pace. Unknown Attendee

Stephen Gordon: As far as the leverage, I think the leverage is coming from, you know, we're still growing investment, but just not at the pace that we were in the past, where we were probably, in some cases, growing spending, you know, not at the rate of revenue, but at a pretty fast pace. We've got the NLP organization at a, you know, very good critical mass. And so the increments to that are, are more nominal. Now, they're not, you know, major investments.

Speaker Change: We've got the NOP organization in a...

Waleed H. Hassanein: Unknown Attendee, Waleed Hassanein

Stephen Gordon: The biggest investment we talked about is really in the service COGS area. So as that starts to really fill out, we'll really see that be a leverage point as well. So we have a lot of opportunities as the revenue grows here. It's a pretty highly leverageable model. Got it, thank you. The next question comes from Patrick Wood with Morgan Stanley. Please go ahead.

Speaker Change: fill out, we'll really see that be a leverage point as well. So we have a lot of opportunities as the revenue grows here. It's a pretty highly leverageable model.

Speaker Change: Got it. Thank you.

Speaker Change: The next question comes from Patrick Wood with Morgan Stanley. Please go ahead.

Patrick Wood: Thank you for taking questions. Um, maybe to start the 21 extra programs that came online for the logistics side, I'm just curious, you know, how are the conversations there? What do you think it was that tipped those programs over the edge?

Patrick Wood: Thank you for taking the questions. Um, maybe to start the 21 extra programs that came online for the logistics side, I'm just curious, you know, how are the conversations there? What do you think it was that tips those programs over the edge?

Patrick Wood: Amazing. Thank you for taking the questions. Maybe to start, the 21 extra programs that came online for the logistics side of things...

Patrick Wood: I'm just curious, you know, how are the conversations there? What do you think it was that tipped those programs over the edge? And, you know, there's obviously a difference between earlier adopters and, you know, the second wave. Have you noticed any difference in, you know, what people care about, what they're demanding in those conversations? Or has it been very consistent?

Patrick Wood: And, you know, there's obviously a difference between earlier adopters and, you know, the second wave. Have you noticed any difference in, you know, what people care about, what they're demanding of those conversations, or has it been very similar? Thank you so much, Patrick, for the question. I would characterize the conversations as, they're fairly similar.

Waleed H. Hassanein: And, you know, there's obviously a difference between earlier adopters and, you know, the second wave. Have you noticed any difference in, you know, what people care about, what they're demanding in those conversations? Or has it been very consistent?

Patrick Wood: Thank you so much, Patrick, for the question. I would characterize the conversations as fairly similar. They all want to understand the program, how our TransMedics logistics could help them, how our TransMedics logistics could actually be a cost-effective partner to them. The early adopters have demonstrated this in spades, and the recent institutions are coming based on three things. One, they're hearing from their peers and colleagues.

Speaker Change: Thank you so much, Patrick, for the question.

Waleed H. Hassanein: They all want to understand the program, how our TransMedics logistics could help them, and how our TransMedics logistics could actually be a cost-effective partner to them. The early adopters have demonstrated it in spades, and the recent institutions are coming based on three things. One, they're hearing from their peers and colleagues.

Speaker Change: I would characterize the conversations, they're fairly similar, they all want to understand

Speaker Change: What the program, how our transmedics logistics could help them, how our transmedics logistics could actually be a cost-effective

Speaker Change #104: partner to them. The early adopters have demonstrated it in spade and the recent institutions are coming based on three things. One, they're hearing from their peers and colleagues.

Waleed H. Hassanein: Three, they're seeing the growth and the reach that TransMedics logistics is providing. And the third element is we're getting them organs that are probably either from a further location that they would never anticipate, or they fail to secure a logistics partner in the middle of the night, and they reach out to us, and we were able to meet it. The bottom line is our financial offering and economic benefit is applicable to all. It's the same program across the country, so that makes it easy for us.

Waleed H. Hassanein: So we don't really see a difference in the, how do you call it, there's no difference in the way different programs experience the cost efficiency of the OCS or TransMedics logistics network because it's the same program across the board. And you know, again, we feel extremely proud and humbled by the huge success and the rapid adoption. Now it's time for us to dig in and go deeper and really secure these relationships and go deep deepening these relationships and grow our logistics network through these relationships going forward. Transcribed by https://otter.ai. Thanks.

Waleed H. Hassanein: So we don't really see a difference in the, how do you call it, there's no difference in the way different programs experience the cost efficiency of the OCS or TransMedics logistics network because it's the same program across the board. And you know, again, we feel extremely proud and humbled by the huge success and the rapid adoption. Now it's time for us to dig in and go deeper and really secure these relationships and go deep, deepening these relationships, and grow our logistics network through these relationships going forward.

Speaker Change #104: and grow our logistics network through these relationships going forward.

Waleed H. Hassanein: And then maybe just as a follow-up, you know, you're obviously investing in the new clinical programs, and it's a big focus for you guys. I mean, to take one example, DBD label expansion. Presumably, you had discussions with customers, right, and had some temperature checks on that side. Was there, you know, demand coming into you guys that kind of prompted you to think about it that way? Was that part of what pushed it?

Speaker Change #107: And then maybe just as a follow-up.

Speaker Change: You know, you're obviously investing in the new clinical programs and it's a big focus for you guys. I mean, to take one example, DbD label expansion.

Speaker Change: Unknown Speaker, the President of the United States. We appreciate you being here.

Speaker Change #105: Presumably, you had discussions with customers, right, and had some temperature checks on that side. Was there, you know, demand coming in to you guys that kind of prompted you to think about it that way? Was that partly what pushed it? Was it a sense that maybe it's being used occasionally off-label? Like, you know, how are those sort of conversations with customers on that side gone as well?

Patrick Wood: Was there a sense that maybe it's being used occasionally off-label, like, you know? How are those sort of conversations with customers on that side gone as well? Thanks. Thanks, Patrick. I think I would characterize this as something that TransMedics got here because we have been living, breathing, eating organ transplants for the last 25, 30 years. We see a dynamic, we saw a dynamic, we saw an opportunity, and we are trying to capitalize on it.

Waleed H. Hassanein: Thanks, Patrick. I think I would characterize this as something that TransMedics got here because we have been living, breathing, eating organ transplants for the last 25, 30 years. We see a dynamic, we saw a dynamic, we saw an opportunity, and we are trying to capitalize on it. We've always said this 20-25% segment of the heart market, the sub-3-hour, sub-4-hour heart preservation market, was something that we would get to when we're ready, and now we're ready. It's just a continuation of our strategy. This is not something that's being pushed on us by customers.

Speaker Change: Thanks. Thanks, Patrick. I think...

Speaker Change: We see a dynamic, we saw a dynamic, we saw an opportunity, and we are trying to capitalize on it.

Patrick Wood: We've always said this 20-25% segment of the heart market, the sub-3-hour, sub-4-hour heart preservation market, was something that we would get to when we're ready, and now we're ready. It's just a continuation of our strategy. This is not something that's being pushed on us by customers.

Speaker Change: We've always said this 20-25% segment of the heart market, the sub 3-hour, sub 4-hour heart preservation market was something that we will get to when we're ready, and now we're ready.

Speaker Change: So it's just a continuation of our strategy. This is not something that's being pushed on us by customers or.

Waleed Hassanein: We always know that this is an area in the heart market that we don't have an indication for, and we always plan to get to it, and we will get to it. Ultimately, it's going to help us really solidify our position in the heart franchise. Thanks for taking the question. Thank you. Thank you, Patrick. The next question comes from Suraj Kalia with Oppenheimer & Company. Please go ahead. Waleed, Stephen, Tamer, congrats on a blowout quarter.

Waleed H. Hassanein: We always know that this is an area in the heart market that we don't have an indication for, and we always plan to get to it, and we will get to it. Ultimately, it's going to help us really solidify our position in the heart franchise. Thanks for the question. Thank you. Thank you, Patrick. The next question comes from Suraj Kalia with Oppenheimer & Company. Please go ahead. Waleed, Stephen, and Tamer, congrats on a blowout quarter.

Waleed H. Hassanein: Unknown Attendee, Waleed Hassanein,

Speaker Change: We always know that this is an area in the heart market that we don't have an indication for and we always plan to get to it.

Speaker Change: and we will get to it and ultimately it's going to help us really solidify our position in the heart franchise.

Speaker Change #109: Thanks for taking the questions.

Speaker Change: Thank you. Thank you, Patrick.

Suraj Kalia: Thank you. Thank you, Suraj. So, Waleed, two multi-part questions, one for you, one for Stephen. Waleed, I want to piggyback on what Bill had asked earlier, like, if I heard you correctly, 24-hour perfusion for the heart, less edema, and some of the other comments you made. Waleed, what is the critical variable that you could share that is helping you get to that bogeyman? Is it perfusate mix, some free radical scavengers, temperature, or perfusion pressure?

Speaker Change: The next question comes from Suraj Kalia with Oppenheimer and Company. Please go ahead.

Suraj Kalia: Waleed, Stephen, Tamer, congrats on a blowout quarter.

Speaker Change #100: Thank you. Thank you, Suraj. So, Waleed, two multi-part questions, one for you, one for Stephen.

Suraj Kalia: So, Waleed, I want to piggyback on what Bill had asked earlier, like, if I heard you correctly, 24-hour perfusion for heart, less edema, and some of the other comments you made. Waleed, what is the critical variable?

Speaker Change #100: that you could share.

Speaker Change #100: that is helping you get to that bogey. Is it perfusate mix, some free radical scavengers, temperature, perfusion pressure? What are you specifically tweaking?

Suraj Kalia: What are you specifically tweaking? And the reason I ask is, if you can make an organ survive for 24 hours... and let's say organ dysfunction, PGD, everything is like within the normal band. Let's assume that. Then you have ethical and legal implications of not using such a device. So maybe if you could just kind of wrap your mind around, you know, what are you seeing?

Speaker Change: And the reason I ask is, if you can make an organ survive for 24 hours...

Speaker Change #101: And let's say organ dysfunction, PGD, everything is like within the normal band. Let's assume that. Then you have ethical, legal implications of not using such a device. So maybe if you can just kind of wrap around, you know, what are you seeing? How are you getting there?

Waleed H. Hassanein: How are you getting on? Thank you for the question, Suraj. The answer is yes. I can't speak right now on the specifics, but all of the above. We are going to take the heart and lung market by a storm. We have new circuits, we have new perfusion solutions, we have new, therapeutic agents that we will fully exercise to hopefully replicate the huge success we're seeing on the preclinical level in the clinical arena, and then we'll let the market, as you said, declare itself.

Speaker Change #101: Thank you for the question, Suraj. The answer is yes.

Speaker Change #103: I can't speak right now on the specific, but all of the above.

Speaker Change #102: We are going to take the heart and lung market by a storm.

Speaker Change #108: We have new circuits, we have new perfusion solutions, we have new, um, um, um,

Speaker Change #108: therapeutic agents that we will fully exercise to hopefully replicate the huge success we're seeing on the preclinical level in the clinical arena and then we'll let the market as you said declare itself.

Waleed H. Hassanein: We are committed to doing the hard work. We're committed to delivering the evidence, the unequivocal evidence, level one evidence, that, unfortunately, there's only one company that has been delivering that in the field of organ preservation for transplant, which is TransMedics. TransMedics spent two and a half years focusing on our commercial success. Now, we're going back to delivering more evidence to grow our franchise and deliver the best possible preservation technologies to the field of solid organ transplantation.

Speaker Change #108: We are, we are committed to doing the hard work. We're committed to delivering the evidence, the unequivocal evidence, level one evidence, that unfortunately, there's only one company that has been delivering that in the field of organ preservation for transplant, which is TransMedics.

Speaker Change #108: TransMedics.

Speaker Change #108: Spend two and a half years focusing on our commercial success.

Speaker Change #108: We're going back to delivering more evidence to grow our franchise and deliver the best possible outcome.

Waleed H. Hassanein: And we hope your assumption will actually pan out once we deliver that evidence. Our commitment is to deliver the evidence, and we'll let the market declare itself based on the outcome. Waleed, would the clinical trial compare it to normal thermodynamic, OCS, or cold storage?

Speaker Change #108: Preservation Technologies to the field of solid organ transplant and we hope your assumption would actually pan out once we deliver that evidence. Our commitment is to deliver the evidence and we'll let the market dictate itself, declare itself based on the outcomes.

Waleed H. Hassanein: Hey Waleed, would the clinical trial compare it to normal thermic, OCS, or cold storage?

Suraj Kalia: Suraj, we have to compare ourselves to the standard of care, and the standard of care, at least, as many as you've heard, I'm sure, in the last ISHLT. I'm going to only focus on cardiothoracic, because these are our upcoming clinical programs. You know, what we've been hearing in the ISHLT is the historical standard of care. People have already moved away from declaring cold static storage as the standard of care any longer, and they call it the historical standard of care.

Speaker Change #111: Suraj, we have to compare ourselves to the standard of care. And the standard of care, at least, as many as you've heard, I'm sure, in the last ISHLT, I'm gonna only focus on the cardiothoracic because these are our upcoming clinical programs. What we've been hearing in the ISHLT is the historical standard of care. People have already moved away from declaring cold static storage.

Suraj Kalia: So, you know, I don't want to, you know, I don't want to preempt any of our ongoing FDA discussions, but, you know, from a scientific standpoint, we would be comparing to the historical standard of care. That's the more meaningful comparator, at least, to prove the case.

Speaker Change #108: as the standard of care any longer and they call it the historical standard of care. So, you know, I don't want to, you know, I don't want to prefront any of our ongoing FDA discussions, but, you know, from a scientific standpoint, we would be comparing to the historical standard of care. That's the more meaningful comparator, at least, to prove the case.

Waleed H. Hassanein: Fair enough. Again, one multi-part question for you, if I may. You know, the leverageability and everything, you know, others have asked about the question. Maybe I'll rephrase and comment on it from a different angle. So the math is suggesting 126 sites. There were roughly 600 organ runs that utilized aviation. Maybe you can, if possible, you can give us what was the concentration in these 126 sites that used aviation?

Stephen Gordon: Fair enough. Stephen, again, one multi-part question for you if I may. You know, the leverageability and everything, you know, others have asked about the question. Maybe I'll rephrase and comment it from a different angle. So the math is suggesting 126 sites...

Speaker Change #126: There were roughly 600 organ runs that utilized aviation.

Speaker Change #113: Maybe you can, if possible, you can give us what was the concentration in these 126 sites that used aviation?

Suraj Kalia: And Stephen, the point made about the President of ASDS talking about, you know, physician life becoming easier with OCS. Does that give you all pricing power moving in 2025 and beyond? Gentlemen, congrats again.

Speaker Change #108: And Stephen, the point made about the President of ASDS talking about, you know, physician life becoming easier with OCS, does that give you a pricing power moving in 2025 and beyond? Gentlemen, congrats again. Thank you for taking my questions.

Stephen Gordon: Thank you for taking my call. Yes, Suraj, thanks for the question. Let me try to address it. First of all, we want to make sure it's clear that the 126 programs are spread across the same sites. So one site, one site could have multiple programs.

Speaker Change #110: Yes, Suraj, thanks for the question. Let me, let me try to address it. First of all, we want to make sure it's clear that the 126 programs, many of them are across the same site, so one site, one site could have multiple programs, so that's among the 126 is among heart, lung, and liver.

Stephen Gordon: So that's among the 126 is among heart, lung, and liver. The concentration is really diverse today, right? We're still only three-quarters into logistics. So there are a few sites that are using us on many, many cases for both OCS, NOP, and logistics. And then there are some sites that are just coming on and are just starting.

Speaker Change #110: The concentration is really diverse today, right? We're still only three-quarters in to logistics, so there are a few sites that are using us on many, many cases for both OCS, NOP, and logistics.

Stephen Gordon: So it's really, it's really difficult to give any kind of penetration number on logistics. All we can say is that you can see the growth in the revenue, it's getting more accepted, and programs are really seeing great value in using our program because it's much more efficient than the way that it's been done in the past. And then what was your third question? Suraj, I apologize.

Speaker Change #110: and then there are some sites that are just coming on and are just starting so it's really it's really diverse to give any kind of penetration number on logistics.

Speaker Change #110: All we can say is that you can see the growth in the revenue, it's getting more accepted, and it's, you know,

Speaker Change #110: Programs are really seeing great value in using our program because it's much more efficient than the way that's been done in the past.

Stephen Gordon: Pricing leverage in 2020. Oh, yeah. As far as pricing leverage is concerned, look, at the moment, we've got a pricing model that works. You know, as we, as we move out and grow, we need to determine what the right model is.

Speaker Change #115: and then what was your third question? Suraj, I apologize. Oh yeah, as far as pricing leverage, look at the moment you know we're we've got a pricing model that that works you know as we as we move out

Speaker Change #115: and Grow, we need to determine what the right model is. Maybe service has some levers there, but for now, we're not trying to gouge the system. We have a pricing model that works and we're gonna continue with that. We don't see any changes in the near future.

Stephen Gordon: Maybe service has some levers there, but for now, we're not trying to gouge the system. We have a pricing model that works, and we're gonna continue with that. We don't see any changes in the near future.

Waleed H. Hassanein: I want to echo what Stephen just said, and especially on the second part of your question, Suraj, which is an excellent question as always. Listen, we don't look at transplantation as an opportunity for pricing leverage. What we are focusing on is growing the overall national transplant volume. We're growing our portion, our market share in the existing transplant volume. We are comfortable with our current pricing model.

Speaker Change #112: I want to echo what Stephen just said, and especially on the second part of the question, Suraj, which is an excellent question as always. Listen, we don't look at transplantation as an opportunity for pricing leverage.

Speaker Change #114: What we are focusing on is growing the overall national transplant volume.

Speaker Change #114: We're growing our portion, our market share in the existing transplant volume. We are comfortable with our current pricing model.

Waleed H. Hassanein: We want to be a trusted partner to transplant programs. This is a very important aspect of our mission. We're not in this to just capitalize on leverage.

Speaker Change #114: We want to be a trusted partner.

Speaker Change #114: to transplant programs. This is a very important aspect of our mission.

Speaker Change #114: We're not in this to just provide, you know, capitalize and leverage. We know what our value is, but we have to be the trusted partner across all three organs and ultimately when we get to the kidney will be the fourth organ for all transplant programs in the U.S. and around the world.

Waleed H. Hassanein: We know what our value is, but we have to be the trusted partner across all three organs, and ultimately, when we get to the kidney, it will be the fourth organ for all transplant programs in the U.S. and around the world. So that's where we are. And we're proud of that.

Speaker Change #114: So, that's where we are. We're proud of that. And as Stephen said, the revenue speaks for itself, and we'll leave it at that.

Waleed H. Hassanein: And as Stephen said, the revenue speaks for itself, and we'll leave it at that. Again, if you have a question, please press star, then 1. The next question comes from George Sellers with Stevens Inc. Please go ahead.

Stephen Gordon: Thank you.

Speaker Change #121: Again, if you have a question, please press star then 1.

Speaker Change #121: The next question comes from George Sellers with Stevens Inc. Please go ahead.

George Sellers: Hey, good afternoon. Thanks for taking the time to ask the question. Congratulations on a really strong quarter. Maybe to revisit that last question a little bit, I'm just curious if maybe you could share a little detail on what that share could look like over time based on, for instance, the distance maybe that most of those organs are having to travel at those centers. And then secondly, could you give us some color on what the strategy is to drive deeper penetration into those different programs, if that's a more aggressive commercialization strategy or just some of the clinical work that you're working on? How should we think about that specific strategy?

George Sellers: Hey, good afternoon. Thanks for taking the question and congrats on a really strong quarter.

George Sellers: Maybe to revisit that last question a little bit, I'm just curious if maybe you could share a little detail on what that share at the 126 U.S. transplant programs that you mentioned, what that share could look like over time.

Speaker Change #123: Based on, for instance, the distance, maybe, that most of those organs are having to travel at those centers. And then, secondly, you know, could you give us some color on...

Speaker Change #116: What the strategy is to drive deeper penetration in those different programs, if that's a more aggressive commercialization strategy or just some of the clinical work that you're working on. How should we think about that?

George Sellers: Thanks for taking the question. Thank you, George. To address the first part of the question, our strategy, it has always been our stated goal is to take 80 plus percent of the NOP cases to be done on our planes and our logistics network. That is our stated public goal, and that is what we're marching towards. We're far from there.

Speaker Change #120: specific strategy. Thanks for taking the question.

Speaker Change #118: Thank you, George. To address the first part of the question, our strategy has always been, our stated goal is to take 80 plus percent of the NOP cases to be done on our planes and our logistics network.

Waleed H. Hassanein: As I stated, we only covered 59 percent of the NOP missions at the current Q2 volume, so we have a long way to go. I can't comment on anything that we haven't discussed publicly before. On the second part, listen. There are a variety of different ways to increase market share and grow. Again, it's not just about increasing market share. It's about increasing market share and overall growing the transplant volume at these institutions.

Speaker Change #118: That is our stated public goal and that is what we're marching towards. We're far from there.

Speaker Change #118: As I stated, we only covered 59% of the NOP missions at the current Q2 volume.

Speaker Change #118: So we have a long way to go.

Speaker Change #118: So that's, I can't comment on anything that we haven't discussed publicly before.

Waleed H. Hassanein: We focus on the fundamentals, we focus on delivering value, we focus on proving the case, we focus on outcomes and outcome measures, and the rest will take care of itself. Transplantation is black and white; it's a life-saving procedure. So one, we need to demonstrate that we can get them their organs in the best possible shape. Two, we can get them more organs.

Speaker Change #119: We focus on the fundamental. We focus on delivering the value. We are focusing on proving the case. We're focusing on

Speaker Change #119: The outcomes and the outcome measures.

Speaker Change #119: and the rest will take care of itself.

Speaker Change #122: Transplantation is a black and white, it's a life-saving procedure. So, one, we need to demonstrate that we can get their organs in the best possible shape. Two, we can get them more organs.

Waleed H. Hassanein: Three, we can address some of their logistical issues in the middle of the night, and all of that will give us market share. Three, we provide the most economical way of managing organ transplants since the invention of organ transplants. The way our logistics network is operating is providing significant cost efficiency to every major transplant program that is working with us to protect them against DCD, lack of progressions, and all sorts of additional expenses that, with the historical model, they're liable for. With transmedics and NOP and transmedic logistics, we share in these expenses.

Speaker Change #119: Three, we can address some of their logistical issues in the middle of the night and all of that will give us market share. Three, we provide the most economical way of managing organ transplants since the invention of organ transplants.

Speaker Change #119: The way our logistics network is operating is providing significant cost efficiency to every major transplant program that is working with us.

Speaker Change #118: to protect them against DCD, lack of progressions, and all sorts of additional expenses that with the historical model, they're liable for with TransMedics and NOP and TransMedics Logistics.

Waleed H. Hassanein: So that is how we're gonna get the lion's share of the market with these approaches, just focusing on the fundamentals and providing good clinical outcomes or the best clinical outcomes and the most cost-effective way of managing organ transplantation for these programs. Okay, that was really helpful, Keller. I appreciate it.

Speaker Change #118: we share in these expenses. So that is how we're gonna get the lion's share of the market with these approaches. Just focusing on the fundamentals and providing good clinical outcomes or the best clinical outcomes and the most cost-effective way of managing organ transplant for these programs.

George Sellers: And then sticking with NOP, one benefit that was mentioned a little bit earlier on the call is the sort of improved quality of life for these surgeons that, you know, don't have to go and collect the organ and for the liver with the procedure time being a more normal time of day. But could you speak to someone within the transmedics, clinical support, and surgical procurement folks, you know, what's the risk of burnout for those folks? And then maybe, how are you mitigating that risk?

Culler: Okay, that was really helpful, Culler. I appreciate it. And then sticking with NOP, one benefit that was mentioned a little bit earlier on the call is to the transplant centers is the sort of improved quality of life for these surgeons that, you know, don't have to go and collect the organ and for the liver with the procedure time.

Speaker Change #130: being a more normal time of day, but could you speak to within the transmedics, clinical support and surgical procurement folks, you know, what's the risk of burnout for those folks and then maybe how are you mitigating that risk?

Waleed H. Hassanein: That's an excellent question, George. So let me, let me, and thank you for asking that question because it allows me to clarify a point made earlier by Josh. It's more than the quality of life for the transplant surgeons, guys. It's really providing the best quality of the surgical procedure for the recipient. We don't do brain aneurysm surgery at 3 o'clock in the morning, yet we do heart, lung, and liver transplants at 3 o'clock in the morning. We don't even do cardiac bypass surgery at 3 o'clock in the morning.

Speaker Change #127: That's an excellent question, George. So let me, and thank you for asking that question because it allows me to clarify a point made earlier by Josh.

Speaker Change #128: It's more than the quality of life for the transplant surgeons, guys. It's really providing the best quality of the surgical procedure for the recipient.

Speaker Change #125: We don't do brain aneurysm surgery at 3 o'clock in the morning, yet we do a heart, lung, and liver transplants at 3 o'clock in the morning. We don't do even a cardiac bypass at 3 o'clock in the morning.

Waleed H. Hassanein: So this is what we are; this is where the value is, okay? It's making sure that we have the best quality of the surgical procedure in the form of an arrested surgeon, the A-team of clinical and surgical support staff in the operating room providing the best quality of care for the patient. So that's number one.

Speaker Change #118: So this is where the value is.

Speaker Change #118: Okay, it's making sure that we have the best quality of the surgical procedure in the form of arrested surgeon, the A-team of clinical and surgical support staff in the operating room providing the best quality of care for the patient.

Waleed H. Hassanein: Number two, the huge impact on hospital resource management. At 3 o'clock in the morning, the hospital needs to find support staff, probably not transplant-focused support staff, and pay them one and a half, double time, or even more. So that is all normalized and more efficientized by using an NOP case.

Speaker Change #118: So that's number one. Number two, the huge impact on hospital resource management.

Speaker Change #118: At 3 o'clock in the morning, the hospital needs to find support staff, probably are not transplant-focused support staff, and pay them one and a half, double time, or even more. So that is all normalized and more efficientized by using an NOP case.

Waleed H. Hassanein: Now, let me go to the crux of your question, which is, how do we mitigate burnout on our team? As the operator of the largest national network for this kind of service, which is the NOP, we have developed numerous models over the last 18 to 24 months to ensure that our staff is well-rested, and we run it through shifts, we run it through, we have different programs to ensure that our staff is the most well-rested and taken care of, and again, to maximize the quality of care for that organ.

Speaker Change #133: Now let me go to the crux of your question, which is how do we medicate burnout for our team?

Speaker Change #132: As the operator of the largest national network for this kind of service, which is the NLP, we have developed numerous models over the last 18-24 months to ensure that our staff is well rested.

Speaker Change #118: and we run it through SHIFT.

Speaker Change #118: We run it through, we have different programs to ensure that our staff is the most well-rested and taken care of, and again, to maximize the quality of care for that organ.

Waleed H. Hassanein: That's why we have the largest group of surgeons on our payroll, you know, senior experienced surgeons, and sometimes we double-team the case if we think it's going to take longer. So we have maximum flexibility, and we have programs and quality programs that are constantly being evaluated to minimize burnout. And, you know, it's not just to answer your question. We have one of the lowest turnover rates in the NOP team because of that, and we monitor that very, very routinely to make sure that our team is fresh because we want our team to deliver the best quality of care for these organs that we're taking care of.

Speaker Change #129: That's why we have the largest group of surgeons on our payroll and you know senior experienced surgeons.

Speaker Change #129: and sometimes we double team the case if we think it's going to take longer. So we have maximum flexibility and we have programs and quality programs that are constantly being evaluated to minimize burnout. And it's not just to answer your question. We have one of the lowest turnover rates in the NOP team because of that. And we monitor that very, very routinely to make sure that our team is fresh because we want our team to deliver the best quality of care for these organs that we're taking care of.

Speaker Change #134: Okay, great. Thanks for all of that detail and for taking the questions.

George Sellers: Thank you, George.

George Sellers: Okay, great. Thanks for all of that detail and for taking the questions. Thank you, George. This concludes our question and answer session. I would like to turn the conference back over to Waleed Hassanein, CEO, for any closing remarks. Thank you. Thank you so much for joining us this evening. We appreciate your time, and we look forward to speaking again on the Q3 call. Have a wonderful evening, everyone. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Speaker Change #118: This concludes our question and answer session. I would like to turn the conference back over to Waleed Hassanein, CEO , for any closing remarks.

Waleed H. Hassanein: Thank you. Thank you so much for joining us this evening. We appreciate your time and we look forward to speaking again in Q3 call. Have a wonderful evening everyone. Thank you.

Speaker Change #131: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Operator: Transcription by Trans-Expert at Fiverr.com; transcription by Transcription Outsourcing, LLC. Transcription by Trans-Expert at Fiverr.com; transcription by Transcription Outsourcing, LLC. Transcribed by https://otter.ai

Q2 2024 TransMedics Group Inc Earnings Call

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