TransMedics Group, Inc.

Good afternoon, and welcome to Transmedic's second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. And now I'd like to turn it over to Brian Johnston from the Gromont Group for a few introductory comments.

Thank you. Earlier today, Transmedic's released financial results for the quarter ended June 30th, 2023. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call, including during this question and answer section, that include forward-looking statements within the meaning of federal securities laws. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including without limitation, are examination of operating trends, the potential commercial opportunity for our products, and our future financial expectations, which include expectations for growth in our organization and guidance and or expectations for revenue, gross margins and operating expenses in 2023 are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results over events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. Additional information regarding these risks and uncertainties appears under the heading risk factors on our form 10-K filed with the Securities and Exchange Commission on February 27, 2023, and our subsequent filings with the Securities and Exchange Commission, which are available at www.sec.gov and on our website at www.transmedics.com. Transmedics explains any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 3rd, 2023. And with that, I will now turn the call over to Waleed Hassanian, President and Chief Executive Officer.

Thank you, Brian. Good afternoon, everyone, and welcome to Transmedic's second quarter 2023 earnings call. As always, joining me today is Stephen Gordon, our Chief Financial Officer. The first half of 2023 was an important period for Transmedics, as we successfully executed on several operational and strategic growth initiatives. Our efforts have culminated in 2Q being our highest revenue quarter to date. We also bust our balance sheet with a successful convertible debt offering. And earlier this week, we entered into agreements for two acquisitions, that will propel us further on our growth trajectory, both short and long term. In 2Q, we demonstrated significant commercial momentum and accelerated clinical adoption through NOP across all three organs. Operationally, we opened our new clean room on schedule and secured a second large sterilization partnership, further enhancing our production and throughput capacity. This will better position us to meet the high and growing demand for OCS. Now let me cover the specifics of our 2Q performance. In the second quarter, we achieved total revenue of $52.5 million, representing 156% year-over-year growth and 26% growth over 1Q23. U.S. sales represented $49 million in revenue growing 170% year-over-year, with OUS sales up 48% to $3.5 million. We also demonstrated continued improvement down the P&L as we benefit from increasing operating leverage. Stephen will cover the detail in his section of today's call. Importantly, we buttressed our balance sheet by issuing convertible debt at highly favorable terms, which provided a net of approximately $393 million to enable us to invest in standing up the Transmedics Aviation and Logistics Network. 2Q also represented another new high watermark for case volume, driven by growth across all three organs for the first quarter and many quarters. We saw growth in liver, heart, and lungs, Liver and heart increased sequentially for the sixth consecutive quarter. Meanwhile, lung volume was the highest we've achieved in the past eight quarters. We are planning to continue to build on this early lung momentum and hope to see continued growth going forward. In line with our outline growth strategy, we also grew the number of liver, heart, and lung transplant programs using OCS and NOP. In 2Q, 35 liver programs used OCS and NOP, 20 of which were active users. For heart, there were 40 programs that used OCS and NOP, 12 of which were active users. There were 13 lung programs that used OCS and NOP, 5 of which were repeat users. We're encouraged by the early signs of recovery of our lung program. However, we remain focused on continuing to grow the lung segment of our business over the next 12 to 18 months. In terms of NOP contribution, approximately 93% of our total U.S. case volume came from NOP. On a per-organ basis, approximately 98% of liver, 81% of heart, and 97% of lung cases were from NOP. As we stated before, we expect the NOP to continue to drive the lion's share of our revenue in the US going forward. In 2Q, we initiated production in our new clean room right on schedule, adding more capacity to meet demand for OCS. We are currently building up and training the first and second shift for the new clean room space. We expect to produce over 10,000 OCS perfusion modules per year in this new clean room once it's fully staffed. Finally, in 2Q, we're able to add significant sterilization capacity by qualifying a second large sterilization partner. This will further enhance our throughput capacity going forward. Our 2Q results have once again demonstrated the growth trajectory of our business. As we described in our one call, our experience operating the NOP model in the United States over the past 18 months have shown us how inefficient and unscalable the current industry model for organ transportation logistics is. Transmedics is committed to developing a more efficient national model for organ transplantation in the US by launching Transmedics Aviation, as the first national transplant-dedicated logistics network. Our goal is to control the entire end-to-end process of donor-to-recipient logistics to directly manage all NLP transplant volume in the U.S. by the second half of 2024. This will help remove a critical bottleneck to our growth and to the U.S. transplant volumes broadly. We are making this investment because we are seeing NOP volumes starting to outpace the capacity, the availability, and importantly, the limited flight radius of the fragmented older transplant air charter that is being used today. To that end, I am delighted that we recently signed a definitive agreement to acquire Summit Aviation, one of the premier U.S. flight charter operators. This acquisition represents a cornerstone element of our strategy, designed to create a dedicated national transplant logistics network to expand the NOP reach and capacity. These allow me to provide more color on this important acquisition and how we envision the next steps to getting our aviation service operational over the next several months. From a timing perspective or a timeline perspective, this acquisition is expected to close in Q3 2023. And subject to fulfillment of satisfactory closing conditions, we intend for Ben Walton to the current president of Summit and a veteran of the assume the role of VP of Transmedics Aviation Services. We also intend to maintain and transition the entire operations team and the majority of the pilots from Summit to Transmedics. Further, the Transmedics Logistics Team here in Andover is currently establishing a National Digital Command and Dispatch Center that will be located in Andover, Massachusetts. This center will efficiently deploy the Transmedics Aviation Fleet from approximately eight dedicated aviation hubs capable of covering 100% of the continental U.S. We will use a data-driven approach to continue to refine the National Transmedics Transplant Logistical Network to maximize coverage and efficiency of the operations. We have also begun the process of acquiring several additional aircrafts to expand the transmedics fleet to reach our target goal of initially having 10 to 15 operational airplanes by first half of 2024. Subject to the closing, we intend to maintain some existing flight school operations for the foreseeable future. to ensure future supply of trained pilots to support the Transmedics fleet. We strongly believe this is an important strategic advantage for our long-term success. As part of our agreement with Summit, we will have a short transition period during which we intend to wind down all private charter and aircraft management operations to transition to 100% Transmedics aviation transplant-focused operations. And finally, we intend to maintain the dispatch operations in Bozeman, Montana, to complement our Andover National Transplant Dispatch and Command Center. As we are continuing to grow the NOP footprint and reach in the U.S., we must also continue to invest in expanding the NOP infrastructure to meet the significant growth in front of us. Specially or specifically, we intend to grow our surgical and field clinical staffing throughout the next 18 to 24 months to meet the growing demand for our NOP clinical services across the US. Meanwhile, our logistics team is working on revamping and scaling the NOP workflow and logistics dispatch to maximize coverage and efficiency of the process. As I've stated publicly before, We at Transmedics are focusing on growing our NOP transplant volume to reach 10,000 transplants per year over the next five years. To achieve this goal, we devised a multifaceted strategy which goes as follows. First, maintain technological leadership in the field by developing a next-gen OCS platform that is optimized for NOP workflow and clinical management. This will enable scalability of the clinical case volume. Second, expand our clinical indications for the OCS platform. And finally, expand the overall Transmedics product offering. To execute on the above strategy, we recently acquired assets and IP related to two perfusion technologies from Bridge to Life. The first was warm perfusion EVOS technology for lung and heart transplant, and the second was cold perfusion LifeCreator for heart transplant. We plan to use unique elements of these technologies to supplement our OCS platform to accelerate the OCS NextGen product development, Expand our OCS heart clinical indications to cover standard criteria hearts that are currently preserved today using merely cold static storage. We believe that there may be a better advantage to using cold perfusion technology. Support our broad long-term effort to reignite the momentum for machine perfusion for lung transplant in the U.S. and worldwide. And then finally, expand the breadth and value of our intellectual property portfolio. We hope to have more to share about these technology development programs in the near future. Our commercial performance over the past six quarter quarters have demonstrated the significant and growing demand for OCS and NOP. We have successfully demonstrated our ability to significantly grow our annual transplant volume and revenue in 2022, and we are on track to deliver similar results again in 2023. It is important to note that we strongly believe that this is only the beginning. and we are determined to reach our goal of 10,000 transplants over the next five years. We must, however, take the time to scale and buttress our NOP infrastructure and allow the time for integration of the aviation and logistics operation to grow our NOP capacity to the next level. I can best describe it as the following. On the path to a very high transmedics growth summit, we must stage or pace ourselves to allow for acclimatization and integration to ensure achieving our long-term growth target. We see the next four to six months as the critical time needed to be ready for our next growth stage or wave in 2024 and beyond. Giving our strong 2Q and H123 results, balanced with potential scalability challenges, we are increasing our annual revenue guidance for the full year 2023 to be between $180 and $190 million. up from our previously communicated guidance of $160 to $170 million, and representing a 93 to 103 growth over a full year of 2022 total revenue. With that, let me turn the call to Stephen Gordon to cover the detailed financial results for the quarter.